Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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 June 30, 2023

☐ 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 incorporation or organization)		(IRS Employer identification No.)

Science Park, Juli Rd, Xushui District, Baoding City

Hebei Province, The People’s Republic of China 072550

(Address of principal executive offices and Zip Code)

011 - (86) 312-8698215

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		ITP		NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

As of August 10, 2023, there were 10,065,920 shares of the registrant’s common stock, par value $0.001, outstanding.

TABLE OF CONTENTS

Part I. - FINANCIAL INFORMATION	1

Item 1. Financial Statements	1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3. Quantitative and Qualitative Disclosures About Market Risk	41

Item 4. Controls and Procedures	41

Part II. - OTHER INFORMATION	42

Item 1. Legal Proceedings	42

Item 1A. Risk Factors	42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3. Defaults Upon Senior Securities	42

Item 4. Mine Safety Disclosures	42

Item 5. Other Information	42

Item 6. Exhibits	42

SIGNATURES	43

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2023 AND DECEMBER 31, 2022

(unaudited)

	June 30,			December 31,
	2023			2022
ASSETS

Current Assets
Cash and bank balances	$	11,980,759		$	9,524,868
Restricted cash		-			-
Accounts receivable (net of allowance for doubtful accounts of $48,646 and $881,878 as of June 30, 2023 and December 31, 2022, respectively)		2,416,572			-
Inventories		6,569,323			2,872,622
Prepayments and other current assets		19,263,853			27,207,127
Due from related parties		7,459,079			7,561,858

Total current assets		47,689,586			47,166,475

Prepayment on property, plant and equipment		2,668,992			1,031,502
Operating lease right-of-use assets, net		648,404			672,722
Finance lease right-of-use assets, net		1,796,034			1,939,970
Property, plant, and equipment, net		142,023,762			151,569,898
Value-added tax recoverable		1,916,111			2,066,666
Deferred tax asset non-current		-			-

Total Assets	$	196,742,889		$	204,447,233

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Short-term bank loans	$	5,741,925		$	5,598,311
Current portion of long-term loans		3,761,521			4,835,884
Lease liability		108,227			224,497
Accounts payable		127,543			5,025
Advance from customers		10,192			-
Due to related parties		810,631			727,462
Accrued payroll and employee benefits		308,903			165,986
Other payables and accrued liabilities		6,095,806			5,665,558
Income taxes payable		337,681			417,906

Total current liabilities		17,302,429			17,640,629

Long-term loans		7,437,239			4,204,118
Deferred gain on sale-leaseback		7,203			52,314
Lease liability - non-current		559,031			579,997
Derivative liability		660,692			646,283

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $19,100,011 and $16,784,878 as of June 30, 2023 and December 31, 2022, respectively)		25,966,594			23,123,341

Commitments and Contingencies

Stockholders’ Equity
Common stock, 50,000,000 shares authorized, $0.001 par value per share, 10,065,920 shares issued and outstanding as of June 30, 2023 and December, 31, 2022.		10,066			10,066
Additional paid-in capital		89,172,771			89,172,771
Statutory earnings reserve		6,080,574			6,080,574
Accumulated other comprehensive loss		(14,075,479	)		(7,514,540	)
Retained earnings		89,588,363			93,575,021

Total stockholders’ equity		170,776,295			181,323,892

Total Liabilities and Stockholders’ Equity	$	196,742,889		$	204,447,233

See accompanying notes to condensed consolidated financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022

Revenues	$	30,019,914		$	31,788,884		$	49,810,791		$	47,270,502
Cost of sales		(28,840,056	)		(31,154,847	)		(48,907,932	)		(46,326,020	)

Gross Profit		1,179,858			634,037			902,859			944,482
Selling, general and administrative expenses		(1,323,405	)		(1,869,802	)		(3,818,767	)		(5,170,683	)
Loss on impairment of assets		(375,136	)		-			(375,136	)		-

Loss from Operations		(518,683	)		(1,235,765	)		(3,291,044	)		(4,226,201	)

Other Income (Expense):
Interest income		53,637			4,924			189,905			8,379
Interest expense		(270,681	)		(259,106	)		(519,850	)		(529,919	)
Gain on acquisition		-			(1,840	)		-			32,163
Gain (Loss) on derivative liability		(166,506	)		960,045			(14,409	)		1,346,633

Loss before Income Taxes		(902,233	)		(531,742	)		(3,635,398	)		(3,368,945	)
Provision for Income Taxes		(351,260	)		243,829			(351,260	)		592,818

Net Loss		(1,253,493	)		(287,913	)		(3,986,658	)		(2,776,127	)

Other Comprehensive Loss
Foreign currency translation adjustment		(9,063,695	)		(11,524,747	)		(6,560,939	)		(10,598,609	)

Total Comprehensive Loss	$	(10,317,188	)	$	(11,812,660	)	$	(10,547,597	)	$	(13,374,736	)

Losses Per Share:

Basic and Diluted Losses per Share	$	(0.12	)	$	(0.03	)	$	(0.40	)	$	(0.28	)

Outstanding – Basic and Diluted		10,065,920			9,915,920			10,065,920			9,915,920

See accompanying notes to condensed consolidated financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

	Six Months Ended
	June 30,
	2023			2022

Cash Flows from Operating Activities:
Net income	$	(3,986,658	)	$	(2,776,127	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,150,057			7,592,319
(Gain) Loss on derivative liability		14,409			(1,346,633	)
(Gain) Loss from disposal and impairment of property, plant and equipment		501,934			-
Allowance for bad debts		(830,847	)		(14,731	)
Gain on acquisition		-			(33,178	)
Deferred tax		-			(821,225	)
Changes in operating assets and liabilities:
Accounts receivable		(1,674,665	)		845,450
Prepayments and other current assets		7,634,922			1,963,348
Inventories		(3,940,417	)		(1,111,160	)
Accounts payable		127,215			7,588
Advance from customers		10,567			-
Related parties		(90,617	)		-
Accrued payroll and employee benefits		154,398			(49,534	)
Other payables and accrued liabilities		743,936			553,308
Income taxes payable		(67,515	)		(859,643	)
Net Cash Provided by Operating Activities		5,746,719			3,949,782

Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(5,565,713	)		(681,640	)
Acquisition of land		-			(6,642,665	)

Net Cash Used in Investing Activities		(5,565,713	)		(7,324,305	)

Cash Flows from Financing Activities:
Proceeds from short term bank loans		860,919			-
Proceeds from long term loans		2,582,756			-
Repayment of bank loans		(507,942	)		-
Payment of capital lease obligation		(112,136	)		(102,902	)
Loan to a related party (net)		-			6,776,889

Net Cash Provided by Financing Activities		2,823,597			6,673,987

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(548,712	)		(156,999	)

Net Increase in Cash and Cash Equivalents		2,455,891			3,142,465

Cash, Cash Equivalents and Restricted Cash - Beginning of Period		9,524,868			11,201,612

Cash, Cash Equivalents and Restricted Cash - End of Period	$	11,980,759		$	14,344,077

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of capitalized interest cost	$	199,014		$	165,629
Cash paid for income taxes	$	418,775		$	1,088,049

Cash and bank balances		11,980,759			14,344,077
Restricted cash		-			-
Total cash, cash equivalents and restricted cash shown in the statement of cash flows		11,980,759			14,344,077

See accompanying notes to condensed consolidated financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

									Accumulated
					Additional		Statutory		Other
	Common Stock				Paid-in		Earnings		Comprehensive			Retained
	Shares		Amount		Capital		Reserve		Income (loss)			Earnings			Total

Balance at December 31, 2021		9,915,920	$	9,916	$	89,016,921	$	6,080,574	$	10,496,168		$	110,146,329		$	215,749,908
Foreign currency translation adjustment										(10,598,609	)					(10,598,609	)
Net loss													(2,776,127	)		(2,776,127	)
Balance at June 30, 2022		9,915,920	$	9,916	$	89,016,921	$	6,080,574	$	(102,441	)	$	107,370,202		$	202,375,172

Balance at December 31, 2022		10,065,920	$	10,066	$	89,172,771	$	6,080,574	$	(7,514,540	)	$	93,575,021		$	181,323,892
Issuance of shares to officer and directors		-		-		-										-
Foreign currency translation adjustment										(6,560,939	)					(6,560,939	)
Net income													(3,986,658	)		(3,986,658	)
Balance at June 30, 2023		10,065,920	$	10,066	$	89,172,771	$	6,080,574	$	(14,075,479	)	$	89,588,363		$	170,776,295

See accompanying notes to condensed consolidated financial statements.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Organization and Business Background

IT Tech Packaging, Inc. (the “Company”) was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described immediately below, we became the holding company for Hebei Baoding Dongfang Paper Milling Company Limited (“Dongfang Paper”), a producer and distributor of paper products in China, on October 29, 2007.

On August 1, 2018, we changed our corporate name to IT Tech Packaging, Inc.. The name change was effected through a parent/subsidiary short-form merger of IT Tech Packaging, Inc., our wholly-owned Nevada subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity. In connection with the name change, our common stock began being traded under a new NYSE symbol, “ITP”.

On June 9, 2022, the Board of Directors of the Company approved a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-10 (the “Reverse Stock Split”). The Reverse Stock Split became effective on July 7, 2022 (the “Effective Date”), and the shares began trading on the split-adjusted basis on the NYSE American under the Company’s existing trading symbol “ITP” at market open on July 8, 2022. The new CUSIP number following the Reverse Stock Split is 46527C 209. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Reverse Stock Split.

On October 29, 2007, pursuant to an agreement and plan of merger (the “Merger Agreement”), the Company acquired DongfangZhiye Holding Limited (“Dongfang Holding”), a corporation formed on November 13, 2006 under the laws of the British Virgin Islands, and issued the shareholders of Dongfang Holding an aggregate of 7,450,497 (as adjusted for a four-for-one reverse stock split effected in November 2009) shares of our common stock, which shares were distributed pro-rata to the shareholders of Dongfang Holding in accordance with their respective ownership interests in Dongfang Holding. At the time of the Merger Agreement, Dongfang Holding owned all of the issued and outstanding stock and ownership of Dongfang Paper and such shares of Dongfang Paper were held in trust with Zhenyong Liu, Xiaodong Liu and Shuangxi Zhao, for Mr. Liu, Mr. Liu and Mr. Zhao (the original shareholders of Dongfang Paper) to exercise control over the disposition of Dongfang Holding’s shares in Dongfang Paper on Dongfang Holding’s behalf until Dongfang Holding successfully completed the change in registration of Dongfang Paper’s capital with the relevant PRC Administration of Industry and Commerce as the 100% owner of Dongfang Paper’s shares. As a result of the merger transaction, Dongfang Holding became a wholly owned subsidiary of the Company, and Dongfang Holding’s wholly owned subsidiary, Dongfang Paper, became an indirectly owned subsidiary of the Company.

Dongfang Holding, as the 100% owner of Dongfang Paper, was unable to complete the registration of Dongfang Paper’s capital under its name within the proper time limits set forth under PRC law. In connection with the consummation of the restructuring transactions described below, Dongfang Holding directed the trustees to return the shares of Dongfang Paper to their original shareholders, and the original Dongfang Paper shareholders entered into certain agreements with Baoding Shengde Paper Co., Ltd. (“Baoding Shengde”) to transfer the control of Dongfang Paper over to Baoding Shengde.

On June 24, 2009, the Company consummated a number of restructuring transactions pursuant to which it acquired all of the issued and outstanding shares of Shengde Holdings Inc., a Nevada corporation. Shengde Holdings Inc. was incorporated in the State of Nevada on February 25, 2009. On June 1, 2009, Shengde Holdings Inc. incorporated Baoding Shengde, a limited liability company organized under the laws of the PRC. Because Baoding Shengde is a wholly-owned subsidiary of Shengde Holdings Inc., it is regarded as a wholly foreign-owned entity under PRC law.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

To ensure proper compliance of the Company’s control over the ownership and operations of Dongfang Paper with certain PRC regulations, on June 24, 2009, the Company entered into a series of contractual agreements (the “Contractual Agreements”) with Dongfang Paper and Dongfang Paper Equity Owners via the Company’s wholly owned subsidiary Shengde Holdings Inc. (“Shengde Holdings”) a Nevada corporation and Baoding Shengde Paper Co., Ltd. (“Baoding Shengde”), a wholly foreign-owned enterprise in the PRC with an original registered capital of $10,000,000 (subsequently increased to $60,000,000 in June 2010). Baoding Shengde is mainly engaged in production and distribution of digital photo paper and single-use face masks and is 100% owned by Shengde Holdings. Prior to February 10, 2010, the Contractual Agreements included (i) Exclusive Technical Service and Business Consulting Agreement, which generally provides that Baoding Shengde shall provide exclusive technical, business and management consulting services to Dongfang Paper, in exchange for service fees including a fee equivalent to 80% of Dongfang Paper’s total annual net profits; (ii) Loan Agreement, which provides that Baoding Shengde will make a loan in the aggregate principal amount of $10,000,000 to Dongfang Paper Equity Owners in exchange for each such shareholder agreeing to contribute all of its proceeds from the loan to the registered capital of Dongfang Paper; (iii) Call Option Agreement, which generally provides, among other things, that Dongfang Paper Equity Owners irrevocably grant to Baoding Shengde an option to purchase all or part of each owner’s equity interest in Dongfang Paper. The exercise price for the options shall be RMB1 which Baoding Shengde should pay to each of Dongfang Paper Equity Owner for all their equity interests in Dongfang Paper; (iv) Share Pledge Agreement, which provides that Dongfang Paper Equity Owners will pledge all of their equity interests in Dongfang Paper to Baoding Shengde as security for their obligations under the other agreements described in this section. Specifically, Baoding Shengde is entitled to dispose of the pledged equity interests in the event that Dongfang Paper Equity Owners breach their obligations under the Loan Agreement or Dongfang Paper fails to pay the service fees to Baoding Shengde pursuant to the Exclusive Technical Service and Business Consulting Agreement; and (v) Proxy Agreement, which provides that Dongfang Paper Equity Owners shall irrevocably entrust a designee of Baoding Shengde with such shareholder’s voting rights and the right to represent such shareholder to exercise such owner’s rights at any equity owners’ meeting of Dongfang Paper or with respect to any equity owner action to be taken in accordance with the laws and Dongfang Paper’s Articles of Association. The terms of the agreement are binding on the parties for as long as Dongfang Paper Equity Owners continue to hold any equity interest in Dongfang Paper. A Dongfang Paper Equity Owner will cease to be a party to the agreement once it transfers its equity interests with the prior approval of Baoding Shengde. As the Company had controlled Dongfang Paper since July 16, 2007 through Dongfang Holding and the trust until June 24, 2009 and continued to control Dongfang Paper through Baoding Shengde and the Contractual Agreements, the execution of the Contractual Agreements is considered as a business combination under common control.

On February 10, 2010, Baoding Shengde and the Dongfang Paper Equity Owners entered into a Termination of Loan Agreement to terminate the above-mentioned $10,000,000 Loan Agreement. Because of the Company’s decision to fund future business expansions through Baoding Shengde instead of Dongfang Paper, the $10,000,000 loan contemplated was never made prior to the point of termination. The parties believe the termination of the Loan Agreement does not in itself compromise the effective control of the Company over Dongfang Paper and its businesses in the PRC.

An agreement was also entered into among Baoding Shengde, Dongfang Paper and the Dongfang Paper Equity Owners on December 31, 2010, reiterating that Baoding Shengde is entitled to 100% of the distributable profit of Dongfang Paper, pursuant to the above- mentioned Contractual Agreements. In addition, Dongfang Paper and the Dongfang Paper Equity Owners shall not declare any of Dongfang Paper’s unappropriated earnings as dividend, including the unappropriated earnings of Dongfang Paper from its establishment to 2010 and thereafter.

On June 25, 2019, Dongfang Paper entered into an acquisition agreement with the shareholder of Tengsheng Paper Co., Ltd. (“Tengsheng Paper”), a limited liability company organized under the laws of the PRC, pursuant to which Dongfang Paper would acquire Tengsheng Paper. Full payment of the consideration in the amount of RMB320 million (approximately $45 million) was made on February 23, 2022.

QianrongQianhui Hebei Technology Co., Ltd, a wholly owned subsidiary of Shengde holding, was incorporated on July 15, 2021. It is a service provider of high quality material solutions for textile, cosmetics and paper production.

The Company has no direct equity interest in Dongfang Paper. However, through the Contractual Agreements described above, the Company is found to be the primary beneficiary (the “Primary Beneficiary”) of Dongfang Paper and is deemed to have the effective control over Dongfang Paper’s activities that most significantly affect its economic performance, resulting in Dongfang Paper and its subsidiary, being treated as a controlled variable interest entity of the Company in accordance with Topic 810 - Consolidation of the Accounting Standards Codification (the “ASC”) issued by the Financial Accounting Standard Board (the “FASB”). The revenue generated from Dongfang Paper and Tengsheng Paper for the three months ended June 30, 2023 and 2022 was accounted for 99.72% and 99.73% of the Company’s total revenue, respectively. The revenue generated from Dongfang Paper and Tengsheng Paper for the six months ended June 30, 2023 and 2022 was accounted for 99.84% and 99.70% of the Company’s total revenue, respectively.Dongfang Paper and Tengsheng Paper also accounted for 91.04% and 93.76% of the total assets of the Company as of June 30, 2023 and December 31, 2022, respectively.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2023 and December 31, 2022, details of the Company’s subsidiaries and variable interest entities are as follows:

	Date of	Place of
	Incorporation	Incorporation or	Percentage of
Name	or Establishment	Establishment	Ownership	Principal Activity
Subsidiary:
Dongfang Holding	November 13, 2006	BVI	100%	Inactive investment holding
Shengde Holdings	February 25, 2009	State of Nevada	100%	Investment holding
Baoding Shengde	June 1, 2009	PRC	100%	Paper production and distribution
***Qianrong	July 15, 2021	PRC	100%	New material technology service

Variable interest entity (“VIE”):
Dongfang Paper	March 10, 1996	PRC	Control*	Paper production and distribution
Tengsheng Paper	April 07, 2011	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.

***

Qianrong is a wholly owned subsidiary of ShengdeHolding.

However, uncertainties in the PRC legal system could cause the Company’s current ownership structure to be found to be in violation of any existing and/or future PRC laws or regulations and could limit the Company’s ability, through its subsidiary, to enforce its rights under these contractual arrangements. Furthermore, shareholders of the VIE may have interests that are different than those of the Company, which could potentially increase the risk that they would seek to act contrary to the terms of the aforementioned agreements.

In addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future PRC law, the Company may be subject to penalties, which may include, but not be limited to, the cancellation or revocation of the Company’s business and operating licenses, being required to restructure the Company’s operations or being required to discontinue the Company’s operating activities. The imposition of any of these or other penalties may result in a material and adverse effect on the Company’s ability to conduct its operations. In such case, the Company may not be able to operate or control the VIE, which may result in deconsolidation of the VIE. The Company believes the possibility that it will no longer be able to control and consolidate its VIE will occur as a result of the aforementioned risks and uncertainties is remote.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company has aggregated the financial information of Dongfang Paper in the table below. The aggregate carrying value of Dongfang Paper’s assets and liabilities (after elimination of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 are as follows:

The Company and its consolidated subsidiaries are not required to provide financial support to the VIE, and no creditor (or beneficial interest holders) of the VIE have recourse to the assets of Company unless the Company separately agrees to be subject to such claims. There are no terms in any agreements or arrangements, implicit or explicit, which require the Company or its subsidiaries to provide financial support to the VIE. However, if the VIE does require financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIE.

	June 30,		December 31,
	2023		2022

ASSETS

Current Assets
Cash and bank balances	$	6,167,612	$	3,427,717
Restricted cash		-		-
Accounts receivable		2,416,572		-
Inventories		6,090,692		2,852,553
Prepayments and other current assets		16,588,442		20,134,386
Due from related parties		7,320,686		7,418,274

Total current assets		38,584,004		33,832,930

Prepayment on property, plant and equipment		2,668,992		1,031,502
Operating lease right-of-use assets, net		648,404		672,722
Finance lease right-of-use assets, net		1,796,034		1,939,970
Property, plant, and equipment, net		135,415,381		143,534,690

Total Assets	$	179,112,815	$	181,011,814

LIABILITIES

Current Liabilities
Short-term bank loans	$	5,326,746	$	5,598,311
Current portion of long-term loans		1,547,234		4,835,885
Lease liability		108,227		224,497
Accounts payable		127,543		5,025
Advance from customers		10,192		-
Due to related parties		81,790		-
Accrued payroll and employee benefits		266,741		143,156
Other payables and accrued liabilities		5,089,492		4,887,584
Income taxes payable		337,681		417,906

Total current liabilities		12,895,646		16,112,364

Long-term loans		5,638,131		40,203
Deferred gain on sale-leaseback		7,203		52,314
Lease liability - non-current		559,031		579,997

Total liabilities	$	19,100,011	$	16,784,878

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2) Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and notes required by the United States of America generally accepted accounting principles (“GAAP”) for annual financial statements are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 of the Company, and its subsidiaries and variable interest entity (which we sometimes refer to collectively as “the Company”, “we”, “us” or “our”).

Principles of Consolidation

Our unaudited condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. Such adjustments are of a normal recurring nature, unless otherwise noted. The balance sheet as of June 30, 2023 and the results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for any future period.

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. Actual results could differ materially from those estimates.

Reverse stock split

On June 9, 2022, the Board of Directors of the Company approved the Reverse Stock Split, at a ratio of 1-for-10, pursuant to Section 78.207 of the Nevada Revised Statutes (“NRS”). The Reverse Stock Split was effected by the Company filing of a Certificate of Change Pursuant to NRS 78.209 with the Secretary of State of the State of Nevada on July 7, 2022. The par value per share of our stock remains unchanged at $0.001 per share after the Reverse Stock Split. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Reverse Stock Split.

Valuation of long-lived asset

The Company reviews the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset and intangible assets. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets and intangible assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

Fair Value Measurements

The Company has adopted ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. It establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts that the Company could realize in a current market exchange. As of June 30, 2023 and December 31, 2022, the carrying value of the Company’s short term financial instruments, such as cash and cash equivalents, accounts receivable, accounts and notes payable, short-term bank loans, balance due to a related party and obligation under capital lease, approximate at their fair values because of the short maturity of these instruments; while loans from credit union and loans from a related party approximate at their fair value as the interest rates thereon are close to the market rates of interest published by the People’s Bank of China.

Management determined that liabilities created by beneficial conversion features associated with the issuance of certain warrants (see “Derivative liabilities” under Note (10)), meet the criteria of derivatives and are required to be measured at fair value. The fair value of these derivative liabilities was determined based on management’s estimate of the expected future cash flows required to settle the liabilities. This valuation technique involves management’s estimates and judgment based on unobservable inputs and is classified in level 3.

Non-Recurring Fair Value Measurements

The Company reviews long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate the possibility of impairment. For the continuing operations, long-lived assets are measured at fair value on a nonrecurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. For discontinued operations, long-lived assets are measured at the lower of carrying amount or fair value less cost to sell. The fair value of these assets were determined using models with significant unobservable inputs which were classified as Level 3 inputs, primarily the discounted future cash flow.

Share-Based Compensation

The Company uses the fair value recognition provision of ASC Topic 718, Compensation-Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

The Company also applies the provisions of ASC Topic 505-50, Equity Based Payments to Non-Employees to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3) Inventories

Raw materials inventory includes mainly recycled paper board and recycled white scrap paper. Finished goods include mainly products of corrugating medium paper, offset printing paper and tissue paper products. Inventories consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Raw Materials
Recycled paper board	$	4,871,125	$	1,258,161
Recycled white scrap paper		10,436		10,809
Gas		142,533		42,237
Base paper and other raw materials		483,057		160,229
		5,507,151		1,471,436
Semi-finished Goods		395,327		132,810
Finished Goods		666,845		1,268,376
Total inventory, gross		6,569,323		2,872,622
Inventory reserve		-		-
Total inventory, net	$	6,569,323	$	2,872,622

(4) Prepayments and other current assets

Prepayments and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Prepaid land lease	$	166,072	$	172,300
Prepayment for purchase of materials		4,860,289		12,941,951
Value-added tax recoverable		13,343,141		13,640,868
Prepaid gas		763		27,462
Others		893,588		424,546
	$	19,263,853	$	27,207,127

(5) Property, plant and equipment, net

As of June 30, 2023 and December 31, 2022, property, plant and equipment consisted of the following:

	June 30,			December 31,
	2023			2022
Property, Plant, and Equipment:
Land use rights	$	58,651,394		$	57,686,220
Building and improvements		65,834,138			68,300,987
Machinery and equipment		152,565,658			158,498,316
Vehicles		656,978			681,617
Construction in progress		1,505,889			1,239,698
Totals		279,214,057			286,406,838
Less: accumulated depreciation and amortization		(137,190,295	)		(134,836,940	)
Property, Plant and Equipment, net	$	142,023,762		$	151,569,898

As of June 30, 2023 and December 31, 2022, land use rights represented twenty-three parcels of state-owned lands located in Xushui District and Wei County of Hebei Province in China, with lease terms of 50 years expiring in 2061 and 2068, respectively.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2023 and December 31, 2022, certain property, plant and equipment of Dongfang Paper with net values of $59,048 and $280,466, respectively, have been pledged pursuant to a long-term loan from credit union of Dongfang Paper. Land use right of Dongfang Paper with net values of $4,098,523 and $4,301,204, respectively, as of June 30, 2023 and December 31, 2022 was pledged for the bank loan from Industrial & Commercial Bank of China (“ICBC”). Land use right of Tengsheng Paper with net value of $4,869,528 and $5,111,014, respectively, as of June 30, 2023 and December 31, 2022 was pledged for a long-term loan from credit union of Baoding Shengde. In addition, land use right of Tengsheng Paper with net value of $3,756,342 and $3,948,953, respectively, as of June 30, 2023 and December 31, 2022 was pledged for another long-term loan from credit union of Baoding Shengde. Land use right of Dongfang Paper with net value of $5,099,089 as of June 30, 2023 was pledged for a long-term loan from credit union of Tengsheng Paper. See “Short-term bank loans” under Note (7), Loans Payable, for details of the transaction and asset collaterals.

An impairment loss of $375,136 was recognized for property, plant and equipment of Baoding Shengde for the three and six months ended June 30, 2023.

Depreciation and amortization of property, plant and equipment was $3,686,243 and $3,819,083 for the three months ended June 30, 2023 and 2022, respectively. Depreciation and amortization of property, plant and equipment was $7,150,057 and $7,592,319 for the six months ended June 30, 2023 and 2022, respectively.

(6) Leases

Financing with Sale-Leaseback

The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.5 million). Under the sale-leaseback arrangement, Tengsheng Paper sold the Leased Equipment to TLCL for RMB 16 million (approximately US$2.5 million). Concurrent with the sale of equipment, Tengsheng Paper leases back the equipment sold to TLCL for a lease term of three years. At the end of the lease term, Tengsheng Paper may pay a nominal purchase price of RMB 100 (approximately US$16) to TLCL and buy back the Leased Equipment. The Leased Equipment in amount of $2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of 15.6% per annum and stated at $567,099 at the inception of the lease on August 17, 2020.

Tengsheng Paper made payments due according to the schedule. The balance of Leased Equipment net of amortization was $1,796,034 and $1,939,970 as of June 30, 2023 and December 31, 2022, respectively. The lease liability was $18,854 and $131,772, and its current portion in the amount of $18,854 and $131,772 as of June 30, 2023 and December 31, 2022, respectively.

Amortization of the Leased Equipment was $37,661 and $39,972 for the three months ended June 30, 2023 and 2022. Amortization of the Leased Equipment was $76,526 and $81,978 for the six months ended June 30, 2023 and 2022. Total interest expenses for the sale-leaseback arrangement was $2,182 and $10,862 for the three months ended June 30, 2023 and 2022. Total interest expenses for the sale-leaseback arrangement was $6,671 and $24,369 for the six months ended June 30, 2023 and 2022.

As a result of the sale and leaseback, a deferred gain in the amount of $430,695 was recorded. The deferred gain is amortized over the lease term and as an offset to amortization of the Leased Equipment.

The future minimum lease payments of the capital lease as of June 30, 2023 were as follows:

June 30,	Amount
2023		19,098
Less: unearned discount		(244	)
		18,854
Less: Current portion lease liability		(18,854	)
	$	-

Operating lease

The Company leases space under non-cancelable operating leases for office and manufacturing locations. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.

The leases include option to renew in condition that it is agreed by the landlord before expiry. Therefore, the majority of renewals to extend the lease terms are not included in its right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluate the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.

As the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of the Company’s lease expense are as follows:

	Six Months Ended
	June 30, 2023
	RMB

Operating lease cost		69,196
Short-term lease cost		-
Lease cost		69,196

Supplemental cash flow information related to its operating leases was as follows for the period ended June 30, 2023:

			Six Months Ended
			June 30, 2023
			RMB
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases			-

Maturities of its lease liabilities for all operating leases are as follows as of June 30, 2023:

June 30,	Amount
2024		138,393
2025		138,393
2026		276,786
2027		-
2028		138,393
Thereafter		138,393
Total operating lease payments	$	830,358
Less: Interest		(181,954	)
Present value of lease liabilities		648,404
Less: current portion, record in current liabilities		(89,373	)
Present value of lease liabilities		559,031

The weighted average remaining lease terms and discount rates for all of its operating leases were as follows as of June 30, 2023:

	June 30,
	2023
	RMB
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		5.1
Weighted average discount rate		7.56	%

(7) Loans Payable

Short-term bank loans

	June 30,		December 31,
	2023		2022
Industrial and Commercial Bank of China (“ICBC”) Loan 1	$	4,773,174	$	5,023,978
ICBC Loan 2		-		287,167
ICBC Loan 3		-		143,583
ICBC Loan 4		415,179		-
China Construction Bank Loan		138,393		143,583
ICBC Loan 5		415,179		-
Total short-term bank loans	$	5,741,925	$	5,598,311

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On November 10, 2022, the Company entered into a working capital loan agreement with the ICBC, with a balance of $4,773,174 and $5,023,978 as of June 30, 2023 and December 31, 2022, respectively. The working capital loan was secured by the land use right of Dongfang Paper as collateral for the benefit of the bank and guaranteed by Mr. Liu. The loan bears a fixed interest rate of 4.785% per annum. The company repaid $71,743 in May 2023 and the balance of the loan will be due by November 13, 2023.

On November 30, 2022, the Company entered into a working capital loan agreement with the ICBC, with a balance of $nil and $287,167 as of June 30, 2023 and December 31, 2022, respectively. The loan bore an interest rate of 4.25% per annum. The loan was repaid in May 2023.

On November 30, 2022, the Company entered into a working capital loan agreement with the ICBC, with a balance of $nil and $143,583 as of June 30, 2023 and December 31, 2022, respectively. The loan bore an interest rate of 4.25% per annum. The loan was repaid in May 2023.

On May 29, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $415,179 as of June 30, 2023. The loan bears a fixed interest rate of 4.25% per annum. The loan will be due by November 25, 2023.

On July 29, 2022, the Company entered into a working capital loan agreement with the China Construction Bank, with a balance of $138,393 and $143,583 as of June 30, 2023 and December 31, 2022, respectively. The loan bears a fixed interest rate of 3.95% per annum. The loan will be due by July 29, 2023.

On June 29, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $415,179 as of June 30, 2023. The loan bears a fixed interest rate of 3.55% per annum. The loan will be due by June 28, 2024.

As of June 30, 2023, there were guaranteed short-term borrowings of $4,773,174 and unsecured bank loans of $968,751. As of December 31, 2022, there were guaranteed short-term borrowings of $5,023,978 and unsecured bank loans of $574,333.

The average short-term borrowing rates for the three months ended June 30, 2023 and 2022 were approximately 4.83% and 4.79%. The average short-term borrowing rates for the six months ended June 30, 2023 and 2022 were approximately 4.77% and 4.79%.

Long-term loans

As of June 30, 2023 and December 31, 2022, long-term loans were $11,198,760 and $9,040,002, respectively.

	June 30,			December 31,
	2023			2022
Rural Credit Union of Xushui District Loan 1	$	1,190,180		$	1,234,816
Rural Credit Union of Xushui District Loan 2		3,459,824			3,589,582
Rural Credit Union of Xushui District Loan 3		2,214,288			2,297,332
Rural Credit Union of Xushui District Loan 4		1,799,109			1,866,582
Rural Credit Union of Xushui District Loan 5		2,491,073			-
Yujiangna		44,286			51,690
Total		11,198,760			9,040,002
Less: Current portion of long-term loans		(3,761,521	)		(4,835,884	)
Long-term loans	$	7,437,239		$	4,204,118

As of June 30, 2023, the Company’s long-term debt repayments for the next coming years were as follows:

Fiscal year
Remainder of 2023	$	3,761,521
2024		3,955,271
2025 & after		3,481,968
Total		11,198,760

On April 16, 2014, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally duein various installments from June 21, 2014 to November 18, 2018. The loan is guaranteed by an independent third party. Interest payment is duequarterly and bore a rate of 7.68% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. On November 6, 2018, the loan was renewed for additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023. As of June 30, 2023 and December 31, 2022, total outstanding loan balance was $1,190,180 and$1,234,816, respectively, which are presented as current liabilities in the consolidated balance sheet.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On July 15, 2013, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due and payable in various installments from December 21, 2013 to July 26, 2018. On June 21, 2018, the loan was extended for additional 5 years andwas due and payable in various installments from December 21, 2018 to June 20, 2023.On June 19, 2023, the loan was extended for another 5 years and will be due and payable on June 20, 2028.The loan is secured by certain of the Company’s manufacturing equipment with net book value of $59,048 and $280,466 as of June 30, 2023 and December 31, 2022, respectively. Interest payment is due quarterly and bore arate of 7.68% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $3,459,824 and $3,589,582, respectively, which are presented as non-current liabilities and current liabilities in the consolidated balance sheet, respectively.

On April 17, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which was due and payable in various installments from August 21, 2019 to April 16, 2021. The loan was renewed on March 22, 2021 and December 24, 2021 and extended for additional 3 years in total, which will be due on April 16, 2024 according to the new schedule. The loan is secured by Tengsheng Paper with its land use right as collateral for the benefit of the credit union. Interest payment is due quarterly and bore a rate of 7.68% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $2,214,288 and $2,297,332, respectively, which are presented as current liabilities and non-current liabilities in the consolidated balance sheet as of June 30, 2023 and December 31, 2022, respectively.

On December 12, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which is due and payable in various installments from June 21, 2020 to December 11, 2021. The loan was renewed on March 22, 2021 and December 24, 2021 and extended for additional 3 years in total, which will be due on December 11, 2024 according to the new schedule. The loan is secured by Tengsheng Paper with its land use right as collateral for the benefit of the credit union. Interest payment is due monthly and bore a rate of 7.56% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $1,799,109 and $1,866,582, respectively, which are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2023 and December 31, 2022, respectively.

On February 26, 2023, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which is due and payable in various installments from August 21, 2023 to February 24, 2025. The loan is secured by Dongfang Paper with its land use right as collateral for the benefit of the credit union. Interest payment is due monthly and bore a rate of 7% per annum. As of June 30, 2023, the total outstanding loan balance was $2,491,073. Out of the total outstanding loan balance, current portion amounted was $345,982, which is presented as current liabilities in the consolidated balance sheet and the remaining balance of $2,145,092 is presented as non-current liabilities in the consolidated balance sheet as of June 30, 2023.

On July 1, 2022, the Company entered into a loan agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB 400,000 (approximately US$55,357) from Jiangna Yu for a term of five years. The loan is payable in monthly installment of RMB10,667 (approximately US$1,531) from July 2022 to July 2027. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $44,286 and$51,690, respectively. Out of the total outstanding loan balance, current portion amounted were $11,072 and $11,486, which are presented as current liabilities and the remaining balance of $33,214 and $40,204 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2023 and December 31, 2022, respectively.

Total interest expenses for the short-term bank loans and long-term loans for the three months ended June 30, 2023 and 2022 were $268,499 and $248,244, respectively. Total interest expenses for the short-term bank loans and long-term loans for the six months ended June 30, 2023 and 2022 were $513,179 and $505,550, respectively.

(8) Related Party Transactions

Mr. Zhenyong Liu, the Company’s CEO has loaned money to Dongfang Paper for working capital purposes over a period of time. On January 1, 2013, Dongfang Paper and Mr. Zhenyong Liu renewed the three-year term loan previously entered on January 1, 2010, and extended the maturity date further to December 31, 2015. On December 31, 2015, the Company paid off the loan of $2,249,279, together with interest of $391,374 for the period from 2013 to 2015. Approximately $354,748 and $368,052 of interest were outstanding to Mr. Zhenyong Liu, which were recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet as of June 30, 2023 and December 31, 2022, respectively.

On December 10, 2014, Mr. Zhenyong Liu provided a loan to the Company, amounted to $8,742,278 to Dongfang Paper for working capital purpose with an interest rate of 4.35% per annum, which was based on the primary lending rate of People’s Bank of China. The unsecured loan was provided on December 10, 2014, and would be originally due on December 10, 2017. During the year of 2016, the Company repaid $6,012,416 to Mr. Zhenyong Liu, together with interest of $288,596. In February 2018, the company paid off the remaining balance, together with interest of $20,400. As of June 30, 2023 and December 31, 2022, approximately $41,518 and $43,075 of interest, respectively were outstanding to Mr. Zhenyong Liu, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet.

On March 1, 2015, the Company entered an agreement with Mr. Zhenyong Liu which allows Dongfang Paper to borrow from Mr. Zhengyong Liu an amount up to $17,201,342 (RMB120,000,000) for working capital purposes. The advances or funding under the agreement are due three years from the date each amount is funded. The loan is unsecured and carries an annual interest rate set on the basis of the primary lending rate of the People’s Bank of China at the time of the borrowing. On July 13, 2015, an unsecured amount of $4,324,636 was drawn from the facility. On October 14, 2016 an unsecured amount of $2,883,091 was drawn from the facility. In February 2018, the Company repaid $1,507,432 to Mr. Zhenyong Liu. The loan would be originally due on July 12, 2018. Mr. Zhenyong Liu agreed to extend the loan for additional 3 years and the remaining balance was due on July 12, 2021. On November 23, 2018, the Company repaid $3,768,579 to Mr. Zhenyong Liu, together with interest of $158,651. In December 2019, the Company paid off the remaining balance, together with interest of 94,636. As of June 30, 2023 and December 31, 2022, the outstanding interest was $190,204 and $197,338, respectively, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2023 and December 31, 2022, total amount of loans due to Mr. Zhenyong Liu were $nil. The interest expense incurred for such related party loans were $nil for the three and six months ended June 30, 2023 and 2022. The accrued interest owing to Mr. Zhenyong Liu was approximately $586,470 and $608,465 as of June 30, 2023 and December 31, 2022, respectively, which was recorded in other payables and accrued liabilities.

On December 8, 2021, the Company entered into an agreement with Mr. Zhenyong Liu, which allows Mr. Zhenyong Liu to borrow from the Company an amount of $6,507,431 (RMB44,089,085). The loan is unsecured and carries a fixed interest rate of 3% per annum. The loan was repaid by Mr. Zhenyong Liu in February 2022.

In October 2022 and November 2022, the Company entered into two agreements with Mr. Zhenyong Liu, which allowed Mr. Zhenyong Liu to borrow from theCompany an amount of $7,276,220 (RMB50,000,000) in total. The loans were unsecured and carried a fixed interest rate of 4.35% per annum. The loan will be repaid by the end of August 2023. Interest income of the loan for the six months ended June 30, 2023 was $176,847.

As of June 30, 2023 and December 31, 2022, amount due to shareholder was $727,433, which represents funds from shareholders to pay for various expenses incurred in the U.S. The amount is due on demand with interest free.

(9) Other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

	June 30,		December 31,
	2023		2022
Accrued electricity	$	110,803	$	3,036
Accrued rental		123,795		56,646
Value-added tax payable		173,171		69,053
Accrued interest to a related party		586,470		608,465
Payable for purchase of equipment		3,093,355		3,294,940
Accrued commission to salesmen		16,155		19,524
Accrued bank loan interest		1,847,131		1,595,354
Others		144,926		18,540
Totals	$	6,095,806	$	5,665,558

(10) Derivative Liabilities

The Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability since the warrant becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined its derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2023. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used in the June 30, 2023:

			Six months ended
			June 30, 2023
Expected term			1.18 - 2.75
Expected average volatility			85% - 235%
Expected dividend yield			-
Risk-free interest rate			0.19% - 4.49%

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2023:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance at December 31, 2022	$	646,283
Addition of new derivatives recognized as warrant		-
Addition of new derivatives recognized as loss on derivatives		-
Exercise of warrants		-
Change in fair value of derivative liability		14,409
Balance at June 30, 2023	$	660,692

(11) Common Stock

Issuance of common stock to investors

On January 20, 2021, the Company offered and sold to certain institutional investors an aggregate of 2,618,182 shares of common stock and 2,618,182 warrants to purchase up to 2,618,182 shares of common stock in a best-efforts public offering for gross proceeds of approximately $14.4 million. The purchase price for each share of common stock and the corresponding warrant was $5.5. The exercise price of the warrant was $5.5 per share.

On March 1, 2021, the Company offered and sold to the public investors an aggregate of 2,927,786 shares of common stock and 1,463,893 warrants to purchase up to 1,463,893 shares of common stock in a firm commitment underwritten public offering for gross proceeds of approximately $21.9 million. The purchase price for each share of common stock and accompanying warrant was $7.5. The exercise price of the warrant was $7.5 per share.

Reverse stock split

Issuance of common stock pursuant to the 2021 Incentive Stock Plan

On August 15, 2022, the Company granted an aggregate of 150,000 shares of common stock under its compensatory incentive plans to fifteen employees, as awards under the 2021 Incentive Stock Plan. Please see Note (15), Stock Incentive Plans for more details. Total fair value of the stock was calculated at $156,000 as of the date of grant.

(12) Warrants

On April 29, 2020, the Company and certain institutional investors entered into a securities purchase agreement, as amended on May 4, 2020 (the “2020 Purchase Agreement”), pursuant to which the Company agreed to sell to such investors an aggregate of 440,000 shares of common stock and warrants to purchase up to 440,000 shares of common stock in a concurrent private placement (the “May 2020 Warrants”). The exercise price of the May 2020 Warrant is $7.425 per share. These warrants become exercisable on July 23, 2020 and have a term of exercise equal to five years and six months from the date of issuance till July 23, 2025. 88,000 May 2020 Warrants were exercised in February 2021 at the exercise price of $7.425 per share and 352,000 May 2020 Warrants were outstanding as of June 30, 2023. The Company classified warrant as liabilities and accounted for the issuance of the May 2020 Warrants as a derivative.

On January 20, 2021, the Company offered and sold to certain institutional investors an aggregate of 2,618,182 shares of common stock and 2,618,182 warrants to purchase up to 2,618,182 shares of common stock (the “January 2021 Warrants”). The January 2021 Warrants became exercisable on January 20, 2021 at an exercise price of $5.5 and will expire on January 20, 2026. 1,410,690 January 2021 Warrants were exercised in January and February of 2021 at the exercise price of $5.5 per share. 1,207,492 January 2021 Warrants were outstanding as of June 30, 2023.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On March 1, 2021, the Company offered and sold to the public investors an aggregate of 2,927,786 shares of common stock and 1,463,893 warrants to purchase up to 1,463,893 shares of common stock (the “March 2021 Warrants”). The March 2021 Warrants became exercisable on March 1, 2021 at an exercise price of $7.5 and will expire on March 1, 2026. 6,750 March 2021 Warrants were exercised in January and March 2021 at the exercise price of $7.5 per share and 1,457,143 March 2021 Warrants were outstanding as of June 30, 2023.

The Company classified warrants as liabilities and accounted for the issuance of the warrants as a derivative.

A summary of stock warrant activities is as below:

	Six Months Ended June 30, 2023
	Number		Weight average exercise price
Outstanding and exercisable at beginning of the period		3,016,635	$	6.6907
Issued during the period		-
Exercised during the period		-
Outstanding and exercisable at end of the period		3,016,635	$	6.6907

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2023.

Warrants Outstanding						Warrants Exercisable
Number of Shares		Weighted Average Remaining Contractual life (in years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
	3,016,635		2.59	$	6.6907		3,016,635	$	6.6907

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at June 30, 2023 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). The intrinsic value of the warrants as of June 30, 2023 and December 31, 2022 are nil.

(13) Earnings Per Share

For the three months ended June 30, 2023 and 2022, basic and diluted net income per share are calculated as follows:

	Three Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.12	)	$	(0.03	)

Diluted income per share
Net income for the period- numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.12	)	$	(0.03	)

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Six Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.40	)	$	(0.28	)

Diluted loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.40	)	$	(0.28	)

For the three andsix months ended June 30, 2023 and 2022 there were no securities with dilutive effect issued and outstanding.

(14) Income Taxes

United States

The Company may be subject to the United States of America Tax laws at a tax rate of 21%. No provision for the US federal income taxes has been made as the Company had no US taxable income for the six months ended June 30, 2023 and 2022, and management believes that its earnings are permanently invested in the PRC.

PRC

Dongfang Paper and Baoding Shengde are PRC operating companies and are subject to PRC Enterprise Income Tax. Pursuant to the PRC New Enterprise Income Tax Law, Enterprise Income Tax is generally imposed at a statutory rate of 25%.

The provisions for income taxes for three months ended June 30, 2023 and 2022 were as follows:

	Three Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(472,236	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(243,829	)

The provisions for income taxes for six months ended June 30, 2023 and 2022 were as follows:

	Six Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(821,225	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(592,818	)

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition to the reversible future PRC income tax benefits stemming from the timing differences of items such as recognition of asset disposal gain or loss and asset depreciation, the Company was incorporated in the United States and incurred net operating losses of approximately $530,581 and $761,881 for U.S. income tax purposes for the years ended December 31, 2022 and 2021, respectively. The net operating loss carried forward may be available to reduce future years’ taxable income. These carry forwards would expire, if not utilized, during the period of 2030 through 2035. As of June 30, 2023, management believed that the realization of all the U.S. income tax benefits from these losses, which generally would generate a deferred tax asset if it can be expected to be utilized in the future, appears not more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, As of June 30, 2023 and December 31, 2022, the Company provided a 100% valuation allowance on the U.S. deferred tax asset benefit to reduce the total deferred tax asset to the amount realizable for the PRC income tax purposes. Management reviews this valuation allowance periodically and will make adjustments as warranted. A summary of the otherwise deductible (or taxable) deferred tax items is as follows:

	June 30,			December 31,
	2023			2022
Deferred tax assets (liabilities)
Depreciation and amortization of property, plant and equipment	$	15,256,619		$	15,474,485
Impairment of property, plant and equipment		803,050			796,559
Miscellaneous		519,603			615,436
Net operating loss carryover of PRC company		227,972			213,620
Total deferred tax assets		16,807,244			17,100,100
Less: Valuation allowance		(16,807,244	)		(17,100,100	)
Total deferred tax assets, net	$	-			-

	Three Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(121.4	)%		20.9	%
Change in valuation allowance		57.5	%		-
Effective income tax rate		(38.9	)%		45.9	%

	Six Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(42.7	)%		(7.4	)%
Change in valuation allowance		8.0	%		-
Effective income tax rate		(9.7	)%		17.6	%

During the three months ended June 30, 2023 and 2022, the effective income tax rate was estimated by the Company to be -38.9% and 45.9%, respectively.

During the six months ended June 30, 2023 and 2022, the effective income tax rate was estimated by the Company to be -9.7% and 17.6%, respectively.

As of June 30, 2023, except for the one-time transition tax under the 2017 TCJA which imposes a U.S. tax liability on all unrepatriated foreign E&Ps, the Company does not believe that its future dividend policy and the available U.S. tax deductions and net operating losses will cause the Company to recognize any other substantial current U.S. federal or state corporate income tax liability in the near future. Nor does it believe that the amount of the repatriation of the VIE’s earnings and profits for purposes of paying dividends will change the Company’s position that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper are considered or are expected to be indefinitely reinvested offshore to support our future capacity expansion. If these earnings are repatriated to the U.S. resulting in U.S. taxable income in the future, or if it is determined that such earnings are to be remitted in the foreseeable future, additional tax provisions would be required.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company has adopted ASC Topic 740-10-05, Income Taxes. To date, the adoption of this interpretation has not impacted the Company’s financial position, results of operations, or cash flows. The Company performed self-assessment and the Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed, which in the PRC is usually 5 years. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of June 30, 2023 and December 31, 2022, management considered that the Company had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and will continue to evaluate for any uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s consolidated financial statements for the three and six months ended June 30, 2023 and 2022, respectively. The Company’s tax positions related to open tax years are subject to examination by the relevant tax authorities and the major one is the China Tax Authority.

(15) Stock Incentive Plans

2021 Incentive Stock Plan

On November 12, 2021, the Company’s Annual General Meeting adopted and approved the 2021 Omnibus Equity Incentive Plan of IT Tech Packaging, Inc.(the”2021 Plan”). Under the 2021 ISP, the Company has reserved a total of 150,000 shares of common stock for issuance as or under awards to be made to the directors, officers, employees and/or consultants of the Company and its subsidiaries. On August 15, 2022, the Company granted an aggregate of 150,000 shares of common stock under its compensatory incentive plans to fifteen employees. Total fair value of the stock was calculated at $156,000 as of the date of grant.

(16) Commitments and Contingencies

Xushui Land Lease

The Company leases 32.95 acres of land from a local government in Xushui District, Baoding City, Hebei, China through a real estate lease with a 30-year term, which expires on December 31, 2031. The lease requires an annual rental payment of approximately $17,218 (RMB120,000). This lease is renewable at the end of the 30-year term.

Sale of Headquarters Compound Real Properties

In connection with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use with an annual rental payment of approximately $143,486 (RMB1,000,000). The lease was recorded in lease assets and liabilities in the consolidated balance sheet as of June 30, 2023. See ‘Operating lease’ under note (6).

Future minimum lease payments of the land lease is as follows:

June 30,	Amount
2024		16,607
2025		16,607
2026		16,607
2027		16,607
2028		16,607
Thereafter		58,125
Total operating lease payments		141,161

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Capital commitment

As of June 30, 2023, the Company has entered into several contracts for the purchase of paper machine of a new tissue paper production line PM10, and the improvement of Industrial Buildings. Total outstanding commitments under these contracts were $3,889,576 and $4,329,279 as of June 30, 2023 and December 31, 2022, respectively. The Company expected to pay off all the balances within 1-3 years.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun Trading Co., a major supplier of raw materials, to guarantee certain obligations of this third party, and as of June 30, 2023 and December 31, 2022, the Company guaranteed its long-term loan from financial institutions amounting to $4,290,182 (RMB31,000,000), that matured at various times in 2028. If Huanrun Trading Co., were to become insolvent, the Company could be materially adversely affected.

(17) Segment Reporting

Since March 10, 2010, Baoding Shengde started its operations and thereafter the Company manages its operations through three business operating segments: Dongfang Paper and Tengsheng Paper, which produces offset printing paper, corrugating medium paper and tissue paper, and Baoding Shengde, which produces face masks and digital photo paper. They are managed separately because each business requires different technology and marketing strategies.

The Company evaluates performance of its operating segments based on net income. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated among the operating segments based on gross revenue generated. The operating segments do share facilities in Xushui County, Baoding City, Hebei Province, China. All sales were sold to customers located in the PRC.

Summarized financial information for the three reportable segments is as follows:

	Three Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination of		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			Inter-segment		consolidated

Revenues	$	29,631,400	$	344,268		$	44,246		$	-		$	-	$	30,019,914
Gross profit		1,893,087		(709,660	)		(3,569	)		-			-		1,179,858
Depreciation and amortization		996,939		2,071,666			395,209			-			-		3,463,814
Loss on impairment of assets		-		-			375,136			-			-		375,136
Interest income		47,763		844			4,486			544			-		53,637
Interest expense		144,083		53,991			72,607			-			-		270,681
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		937,333		(1,487,869	)		(443,841	)		(259,116	)		-		(1,253,493	)

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended
	June 30, 2022
	Dongfang Paper		Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment			Enterprise-wide, consolidated

Revenues	$	31,289,918	$	411,388		$	87,578		$	-	$	-		$	31,788,884
Gross profit		1,430,181		(814,347	)		18,203			-		-			634,037
Depreciation and amortization		1,210,646		2,188,973			419,464			-		-			3,819,083
Interest income		1,787		226			2,911			-		-			4,924
Interest expense		167,431		10,862			80,813			-		-			259,106
Income tax expense(benefit)		134,982		(379,460	)		649			-		-			(243,829	)
Net income (loss)		650,767		(2,003,653	)		(52,758	)		1,119,571		(1,840	)		(287,913	)

	Six Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			of Inter-segment		consolidated

Revenues	$	49,159,596		571,312			79,883			-			-		49,810,791
Gross profit		2,332,167		(1,422,900	)		(6,408	)		-			-		902,859
Depreciation and amortization		2,137,405		4,209,594			803,058			-			-		7,150,057
Loss on impairment of assets		-		--			375,136			-			-		375,136
Interest income		180,946		1,537			5,721			1,701			-		189,905
Interest expense		290,785		82,565			146,500			-			-		519,850
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		367,869		(3,407,989	)		(543,126	)		(403,412	)		-		(3,986,658	)

	Six Months Ended
	June 30, 2022
	Dongfang Paper			Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated

Revenues	$	46,316,551			809,776			144,175			-		-		47,270,502
Gross profit		2,287,725			(1,378,124	)		34,881			-		-		944,482
Depreciation and amortization		2,481,138			4,250,910			860,271			-		-		7,592,319
Interest income		3,743			396			4,240			-		-		8,379
Interest expense		340,620			24,369			164,930			-		-		529,919
Income tax expense(benefit)		54,583			(790,651	)		143,250			-		-		(592,818	)
Net income (loss)		(53,906	)		(3,609,095	)		(284,648	)		1,139,359		32,163		(2,776,127	)

	As of June 30, 2023
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	68,995,988		110,116,827		13,287,358		4,342,716		-		196,742,889

	As of December 31, 2022
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	63,365,986		117,645,828		17,945,969		5,489,450		-		204,447,233

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(18) Concentration and Major Customers and Suppliers

For the three months ended June 30, 2023 and 2022, the Company had no single customer contributed over 10% of total sales.

For the six months ended June 30, 2023 and 2022, the Company had no single customer contributed over 10% of total sales.

For the three months ended June 30, 2023, the Company had three major suppliers accounted for 74%, 16% and 6% of total purchases. For the three months ended June 30, 2022, the Company had three major suppliers accounted for 77%, 16% and 5% of total purchases.

For the six months ended June 30, 2023, the Company had three major suppliers accounted for 67%, 13% and 10%of total purchases. For the six months ended June 30, 2022, the Company had three major suppliers accounted for 77%, 15% and 5% of total purchases.

(19) Concentration of Credit Risk

Financial instruments for which the Company is potentially subject to concentration of credit risk consist principally of cash. The Company places its cash in reputable financial institutions in the PRC and the United States. Although it is generally understood that the PRC central government stands behind all of the banks in China in the event of bank failure, there is no deposit insurance system in China that is similar to the protection provided by the Federal Deposit Insurance Corporation (“FDIC”) of the United States as of as of June 30, 2023 and December 31, 2022. On May 1, 2015, the new “Deposit Insurance Regulations” was effective in the PRC that the maximum protection would be up to RMB500,000 ($69,196) per depositor per insured financial intuition, including both principal and interest. For the cash placed in financial institutions in the United States, the Company’s U.S. bank accounts are all fully covered by the FDIC insurance as of June 30, 2023 and December 31, 2022, while for the cash placed in financial institutions in the PRC, the balances exceeding the maximum coverage of RMB500,000 amounted to RMB77,162,745 ($10,678,782) as of June 30, 2023.

(20) Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, foreign currency exchange rates, and operating in the PRC under its various laws and restrictions.

(21) Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The new amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

(22) Subsequent Event

None.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Notice Regarding Forward-Looking Statements

The following discussion of the financial condition and results of operations of the Company for the periods ended June 30, 2023 and 2022 should be read in conjunction with the financial statements and the notes to the financial statements that are included elsewhere in this quarterly report.

In this quarterly report, references to “the Company,” “we,” “our” and “us” refer to IT Tech Packaging, Inc. and its PRC subsidiary and variable interest entity unless the context requires otherwise.

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our products, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “target”, “can”, “could”, “may”, “should”, “will”, “would”, and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions may prove to be incorrect. Our actual results and financial position may vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the Securities and Exchange Commission (the “SEC”) should be considered in evaluating forward-looking statements. In evaluating the forward-looking statements contained in this report, you should consider various factors, including, without limitation, the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitably, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, and (d) whether we are able to successfully fulfill our primary requirements for cash. We assume no obligation to update forward-looking statements, except as otherwise required under federal securities laws.

Results of Operations

Comparison of the Three months ended June 30, 2023 and 2022

Revenue for the three months ended June 30, 2023 was $30,019,914, a decrease of $1,768,970, or 5.56%, from $31,788,884 for the same period in the previous year. This was mainly due to the decrease of average selling prices of corrugating medium paper (“CMP”), partially offset by the increase in sales volume of CMP and offset printing paper.

Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products

Revenue from sales of offset printing paper, CMP and tissue paper products for the three months ended June 30, 2023 was $29,975,733, representing a decrease of $1,725,572, or 5.44%, from $31,701,305 for the second quarter of 2022. Total offset printing paper, CMP and tissue paper products sold during the three months ended June 30, 2023 amounted to 78,636 tonnes, representing an increase of 12,668 tonnes, or 19.20%, compared to 65,968 tonnes sold in the comparable period in the previous year. Production of offset printing paper was resumed in May 2023. The changes in revenue dollar amount and in quantity sold for the three months ended June 30, 2023 and 2022 are summarized as follows:

	Three Months Ended June 30, 2023				Three Months Ended June 30, 2022				Change in						Percentage Change
Sales Revenue	Quantity (Tonne)		Amount		Quantity (Tonne)		Amount		Quantity (Tonne)			Amount			Quantity			Amount

Regular CMP		60,063	$	21,931,330		53,943	$	25,853,442		6,120		$	(3,922,112	)		11.35	%		-15.17	%
Light-Weight CMP		12,877	$	4,544,189		11,642	$	5,436,476		1,235		$	(892,287	)		10.61	%		-16.41	%
Total CMP		72,940	$	26,475,519		65,585	$	31,289,918		7,355		$	(4,814,399	)		11.21	%		-15.39	%
Offset Printing Paper		5,403	$	3,155,882		-	$	-		5,403		$	3,155,882			%			%
Tissue Paper Products		293	$	344,332		383	$	411,387		(90	)	$	(67,055	)		-23.50	%		-16.30	%
Total CMP, Offset Printing Paper and Tissue Paper Revenue		78,636	$	29,975,733		65,968	$	31,701,305		12,668		$	(1,725,572	)		19.20	%		-5.44	%

Monthly sales revenue for the 24 months ended June 30, 2023, are summarized below:

The Average Selling Prices (ASPs) for our main products in the three months ended June 30, 2023 and 2022 are summarized as follows:

	Offset Printing Paper ASP		Regular CMP ASP			Light-Weight CMP ASP			Tissue Paper Products ASP
Three Months ended June 30, 2022	$	-	$	479		$	467		$	1,074
Three Months ended June 30, 2023	$	584	$	365		$	353		$	1,175
Increase (Decrease) from comparable period in the previous year	$	584	$	(114	)	$	(114	)	$	101
Increase (Decrease) by percentage		-		-23.80	%		-24.41	%		9.40	%

The following chart shows the month-by-month ASPs for the 24-month period ended June 30, 2023:

Corrugating Medium Paper

Revenue from CMP amounted to $26,475,519 (88.32% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended June 30, 2023, representing a decrease of $4,814,399, or 15.39%, from $31,289,918 for the comparable period in 2022.

We sold 72,940 tonnes of CMP in the three months ended June 30, 2023 as compared to 65,585 tonnes for the same period in 2022, representing a11.21% increase in quantity sold.

ASP for regular CMP decreasedfrom $479/tonne for the three months ended June 30, 2022 to $365/tonne for the three months ended June 30, 2023, representing a 23.80% decrease. ASP in RMB for regular CMP for the second quarter of 2022 and 2023 was RMB3,156 and RMB2,574, respectively, representing a 18.44% decrease. The quantity of regular CMP sold increased by 6,120 tonnes, from 53,943 tonnes in the second quarter of 2022 to 60,063 tonnes in the second quarter of 2023.

ASP for light-weight CMP decreased from $467/tonne for the three months ended June 30, 2022 to $353/tonne for the three months ended June 30, 2023, representing a 24.41% decrease. ASP in RMB for light-weight CMP for the second quarter of 2022 and 2023 was RMB3,064 and RMB2,485, respectively, representing a 18.90% decrease. The quantity of light-weight CMP sold increased by 1,235 tonnes, from 11,642 tonnes in the second quarter of 2022, to 12,877 tonnes in the second quarter of 2023.

Our PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year. The utilization rates for the second quarter of 2023 and 2022 were 66.61% and 58.98%, respectively, representing an increase of 7.63%.

Quantities sold for regular CMP that was produced by the PM6 production line from July 2021 to June 2023 are as follows:

Offset printing paper

Revenue from offset printing paper was $3,155,882 (representing10.53% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended June 30, 2023, representing an increase of $3,155,882, or 100%, from $nil for the three months ended June 30, 2022. We resumed production in May 2023 and sold 5,403 tonnes of offset printing paper in the second quarter of 2023.

Tissue Paper Products

Revenue from tissue paper products was $344,332 (representing1.15% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended June 30, 2023, representing a decrease of $67,055, or 16.30%, from $411,387 for the three months ended June 30, 2022. We sold 293 tonnes of tissue paper in the second quarter of 2023, as compared to 383 tonnes in the comparable period of 2022, representing a decrease of 90 tonnes, or 23.50%.

ASP for tissue paper products increased from $1,074/tonne for the three months ended June 30, 2022 to $1,175/tonne for the three months ended June 30, 2023, representing a 9.4% increase. ASP in RMB for tissue paper products for the second quarter of 2022 and 2023 was RMB7,153 and RMB8,269, respectively, representing a 15.60% increase.

Revenue of Face Mask

Revenue generated from selling face mask were $44,246 and $87,579 for the three months ended June 30, 2023 and 2022, respectively, representing a decrease of $43,333, or 49.48%. We sold 1,411 thousand pieces of face masks in the second quarter of 2023, as compared to 1,852 thousand pieces in the comparable period of 2022, a decrease of 441 thousand pieces, or 23.81%.

Cost of Sales

Total cost of sales for CMP, offset printing paper and tissue paper products for the quarter ended June 30, 2023 was $28,792,189, a decrease of $2,293,283, or 7.38%, from $31,085,472 for the comparable period in 2022. This was mainly due to thedecrease in unit material costs of CMP, partially offset by the increase in sales quantity of CMP and offset printing paper.

Cost of sales for CMP was $24,658,830 for the quarter ended June 30, 2023, as compared to $29,859,737 for the comparable period in 2022. The decrease in the cost of sales of $5,200,907 for CMP was mainly due to the decrease in average unit cost of sales, partially offset by increase in sales volume of CMP and offset printing paper. Average cost of sales per tonne for CMP decreased by 25.71%, from $455 in the second quarter of 2022 to $338 in the second quarter of 2023. The decrease in average cost of sales was mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board in the second quarter of 2023 compared to the second quarter of 2022.

Cost of sales for tissue paper products was $1,053,874 for the quarter ended June 30, 2023, as compared to $1,225,735 for the comparable period in 2022. The decrease in the cost of sales of $171,861 for tissue paper products was mainly due to the decrease in sales volume of tissue paper products, partially offset by the increase in average cost of sales. Average cost of sales per tonne of tissue paper products increased by 12.41%, from $3,200 in the three months ended June 30, 2022, to $3,597 for the comparable period in 2023. This is mainly due to the increase in cost of tissue base paper.

Changes in cost of sales and cost per tonne by product for the quarters ended June 30, 2023 and 2022 are summarized below:

	Three Months Ended				Three Months Ended										Change in
	June 30, 2023				June 30, 2022				Change in						percentage
	Cost of Sales		Cost per Tonne		Cost of Sales		Cost per Tonne		Cost of Sales			Cost per Tonne			Cost of Sales			Cost per Tone
Regular CMP	$	20,438,880	$	340	$	24,746,689	$	459	$	(4,307,809	)	$	(119	)		-17.41	%		-25.93	%
Light-Weight CMP	$	4,219,950	$	328	$	5,113,048	$	439	$	(893,098	)	$	(111	)		-17.47	%		-25.28	%
Total CMP	$	24,658,830	$	338	$	29,859,737	$	455	$	(5,200,907	)	$	(117	)		-17.42	%		-25.71	%
Offset Printing Paper	$	3,079,485	$	570	$	-	$	-	$	3,079,485		$	570				%			%
Tissue Paper Products	$	1,053,874	$	3,597		1,225,735	$	3,200	$	(171,861	)	$	397			-14.02	%		12.41	%
Total CMP, Offset Printing Paper and Tissue Paper	$	28,792,189	$	n/a	$	31,085,472	$	n/a	$	(2,293,283	)	$	n/a			-7.38	%		n/a

Our average unit purchase costs (net of applicable value added tax) of recycled paper board in the three months ended June 30, 2023 were RMB 1,340/tonne (approximately $192/tonne), as compared to RMB 1,776/tonne (approximately $273/tonne) for the three months ended June 30, 2022. These changes (in US dollars) represent a year-over-year decrease of 29.67% for the recycled paper board. The average unit purchase costs (net of applicable value added tax) of tissue base paper was RMB 10,012/tonne (approximately $1,437/tonne) in the three months ended June 30, 2023, as compared to RMB 6,968/tonne (approximately $1,071/tonne) for the three months ended June 30, 2012. We use domestic recycled paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively. Although we do not rely on imported recycled paper, the pricing of which tends to be more volatile than domestic recycled paper, our experience suggests that the pricing of domestic recycled paper bears some correlation to the pricing of imported recycled paper.

The pricing trends of our major raw materials for the 24-month period from July 2021 to June 2023 are shown below:

Electricity and gas are our two main energy sources. Electricity and gas accounted for approximately 5% and 14.9% of total sales in the second quarter of 2023, respectively, compared to 4% and 15.4% of total sales in the second quarter of 2022. The monthly energy cost as a percentage of total monthly sales of our main paper products for the 24 months ended June 30, 2023 are summarized as follows:

Gross Profit (Loss)

Gross profit for the three months ended June 30, 2023 was $1,179,858 (representing 3.93% of the total revenue), representing an increase of $545,821, or 86.09%, from the gross profit of $634,037 (representing 1.99% of the total revenue) for the three months ended June 30, 2022, as a result of factors described above.

Offset Printing Paper, CMP and Tissue Paper Products

Gross profit for offset printing paper, CMP and tissue paper products for the three months ended June 30, 2023 was $1,183,544, representing an increase of $567,711, or 92.19%, from the gross profit of $615,833 for the three months ended June 30, 2022. The increase was mainly the result of the factors discussed above.

The overall gross profit margin for offset printing paper, CMP and tissue paper products increased by 2.01 percentage points, from 1.94% for the three months ended June 30, 2022, to 3.95% for the three months ended June 30, 2023.

Gross profit margin for regular CMP for the three months ended June 30, 2023 was 6.81%, or 2.53 percentage points higher, as compared to gross profit margin of 4.28% for the three months ended June 30, 2022. Such increase was mainly due to the decrease in cost of recycled paper board, partially offset by the decrease in of ASP of regular CMP in the second quarter of 2023.

Gross profit margin for light-weight CMP for the three months ended June 30, 2023 was 7.14%, or 1.19 percentage points higher, as compared to gross profit margin of 5.95% for the three months ended June 30, 2022. The increase was mainly due to the decrease of cost of recycled paper board, partially offset by the decrease in ASP of light-weight CMP in the second quarter of 2023.

Gross profit margin for offset printing paper was 2.42% for the three months ended June 30, 2023.

Gross profit margin for tissue paper products for the three months ended June 30, 2023 was -206.06%, or 8.11 percentage points lower, as compared to gross profit margin of -197.95% for the three months ended June 30, 2022. The increase in gross loss was mainly due to the increase in cost of base paper, partially offset by the increase in ASP of tissue paper products.

Monthly gross profit margins on the sales of our CMP and offset printing paper for the 24-month period ended June 30, 2023 are as follows:

Face Masks

Gross loss for face masks for the three months ended June 30, 2023 and 2022 were $3,569 and a gross profit of $18,204, representing a gross margin of -8.07% and 20.79%, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2023 were $1,323,405, a decrease of $546,397, or 29.22% from $1,869,802 for the three months ended June 30, 2022. The decrease was mainly due to the reversal of doubtful debt loss.

Loss from Operations

Operating loss for the quarter ended June 30, 2023 was $518,683, a decrease of $717,082, or 58.03%, from $1,235,765 for the quarter ended June 30, 2022. The decrease in loss from operations was primarily due to the increase in gross profit, decrease in selling, general and administrative expenses, partially offset by the recognition of impairment loss on assets.

Other Income and Expenses

Interest expense for the three months ended June 30, 2023 increased by $11,575, from $259,106 in the three months ended June 30, 2022, to $270,681. The Company had short-term and long-term interest-bearing loans, related party loans and leasing obligations that aggregated $17,607,943 as of June 30, 2023, as compared to $15,530,449 as of June 30, 2022.

Gain on derivative liability

The Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability. ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item. The change in fair value of derivative liability for the three months ended June 30, 2023 and 2022 was a loss of $166,506 and a gain of $960,045, respectively.

Net Loss

As a result and the factors discussed above, net loss was $1,253,493 for the quarter ended June 30, 2023, representing an increase of loss of $965,580, or 335.37%, from $287,913 for the quarter ended June 30, 2022.

Comparison of the six months ended June 30, 2023 and 2022

Revenue for the six months ended June 30, 2023 was $49,810,791, representing an increase of $2,540,289, or 5.37%, from $47,270,502 for the same period in the previous year. This was mainly due to the increase in sales volume of CMP and offset printing paper and tissue paper products, partially offset by the decrease in ASP of CMP.

Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products

Revenue from sales of offset printing paper, CMP and tissue paper products for the six months ended June 30, 2023 was $49,726,882, an increase of $2,600,555, or 5.52%, from $47,126,327 for the six months ended June 30, 2022. This was mainly due to the increase in sales volume of regular CMP, light-weight CMP and offset printing paper, partially offset by the decrease in ASPs of CMP. Total quantities of offset printing paper, CMP and tissue paper products sold during the six months ended June 30, 2023 amounted to 128,509 tonnes, an increase of 33,058 tonnes, or 34.63%, compared to 95,451 tonnes sold during the six months ended June 30, 2022. Total quantities of CMP and offset printing paper sold increased by 33,354 tonnes in the six months of 2023 as compared to the same period of 2022. We sold 484 tonnes of tissue paper products in the six months of 2023 as opposed to 780 tonnes in the same period of 2022. Production of offset printing paper was resumed in May 2023. The changes in revenue and quantity sold for the six months ended June 30, 2023 and 2022 are summarized as follows:

	Six Months Ended				Six Months Ended										Percentage
	June 30, 2023				June 30, 2022				Change in						Change
Sales Revenue	Quantity (Tonne)		Amount		Quantity (Tonne)		Amount		Quantity (Tonne)			Amount			Quantity			Amount

Regular CMP		101,726	$	38,399,299		79,188	$	38,952,663		22,538		$	(553,364	)		28.46	%		-1.42	%
Light-Weight CMP		20,896	$	7,604,416		15,483	$	7,363,888		5,413		$	240,528			34.96	%		3.27	%
Total CMP		122,622	$	46,003,715		94,671	$	46,316,551		27,951		$	(312,836	)		29.52	%		-0.68	%
Offset Printing Paper		5,403	$	3,155,882		-	$	-		5,403		$	3,155,882			-	%		-	%
Tissue Paper Products		484	$	567,285		780	$	809,776		(296	)	$	(242,491	)		-37.95	%		-29.95	%
Total CMP, Offset Printing Paper and Tissue Paper Revenue		128,509	$	49,726,882		95,451	$	47,126,327		33,058		$	2,600,555			34.63	%		5.52	%

ASPs for our main products in the six-month period ended June 30, 2023 and 2022 are summarized as follows:

	Offset Printing Paper ASP		Regular CMP ASP			Light-Weight CMP ASP			Tissue Paper Products ASP
Six Months Ended June 30, 2022	$	-	$	492		$	476		$	1038
Six Months Ended June 30, 2023	$	584	$	377		$	364		$	1172
Increase (Decrease) from comparable period in the previous year	$	584	$	-115		$	-112		$	134
Increase (Decrease) by percentage		-		-23.37	%		-23.53	%		12.91	%

Revenue of Face Masks

Revenue generated from selling face masks were $79,883 and $144,175 for the six months ended June 30, 2023 and 2022. We sold 2,516 thousand pieces of face masks for the six months ended June 30, 2023, as compared to 3,012 thousand pieces in the comparable period of 2022, a decrease of 496 thousand pieces, or 16.47%.

Cost of Sales

Total cost of sales for CMP, offset printing paper and tissue paper products in the six months ended June 30, 2023 was $48,810,569, an increase of $2,593,842, or 5.61%, from $46,216,727 for the six months ended June 30, 2022. This was mainly a result of the increase in sales volume of CMP and offset printing paper, partially offset by the decrease of material costs of CMP. Cost of sales for CMP was $43,747,945 for the six months ended June 30, 2023, as compared to $44,028,827 in the same period of 2022. The decrease in the cost of sales of $280,882 for CMP was mainly due to the decrease in average cost of sales, partially offset by the increase in the quantities of regular CMP sold in the six months of 2023. Average cost of sales per tonne for CMP decreased by 23.23%, from $465 for the six months ended June 30, 2022, to $357 in the same period of 2023.This is mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board. Cost of sales for tissue paper products was $1,983,139 for the six months ended June 30, 2023, as compared to $2,187,900 in the same period of 2022. The decrease was mainly due to the decrease in sales quantity of tissue paper products, partially offset by the increase in cost of tissue base paper. Average cost of sales per tonne of tissue paper products increased by 46.06%, from $2,805 for the six months ended June 30, 2022, to $4,097 for the same period of 2023.

Changes in cost of sales and cost per tonne by product for the six months ended June 30, 2023 and 2022 are summarized below:

	Six Months Ended				Six Months Ended										Change in
	June 30, 2023				June 30, 2022				Change in						percentage
	Cost of Sales		Cost per Tonne		Cost of Sales		Cost per tonne		Cost of Sales			Cost per Tonne			Cost of Sales			Cost per Tone
Regular CMP	$	36,588,828	$	360	$	37,145,391	$	469	$	(556,563	)	$	(109	)		-1.50	%		-23.24	%
Light-Weight CMP	$	7,159,117	$	343	$	6,883,436	$	445	$	275,681		$	(102	)		4.00	%		-22.92	%
Total CMP	$	43,747,945	$	357	$	44,028,827	$	465	$	(280,882	)	$	(108	)		-0.64	%		-23.23	%
Offset Printing Paper	$	3,079,485	$	570	$	-	$	-	$	3,079,485		$	-			-			-
Tissue Paper Products	$	1,983,139	$	4,097	$	2,187,900	$	2,805	$	(204,761	)	$	1,292			-9.36	%		46.06	%
Total CMP, Offset Printing Paper and Tissue Paper Revenue	$	48,810,569	$	n/a	$	46,216,727	$	n/a	$	2,593,842		$	n/a			5.61	%		n/a	%

Gross Profit

Gross profit for the six months ended June 30, 2023 was $902,859 (representing1.81% of the total revenue), representing a decrease of $41,623, or 4.41%, from the gross profit of $944,482 (representing 2.00% of the total revenue) for the six months ended June 30, 2022.

Offset Printing Paper, CMP and Tissue Paper Products

Gross profit for offset printing paper, CMP and tissue paper products for the six months ended June 30, 2023 was $916,313, an increase of $6,713, or 0.74%, from the gross profit of $909,600 for the six months ended June 30, 2022.

The overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 0.09 percentage points, from 1.93% for the six months ended June 30, 2022, to 1.84% for the six months ended June 30, 2023.

Gross profit margin for regular CMP for the six months ended June 30, 2023 was 4.71%, or 0.07 percentage points higher, as compared to gross profit margin of 4.64% for the six months ended June 30, 2022.

Gross profit margin for light-weight CMP for the six months ended June 30, 2023 was 5.86%, or 0.66 percentage points lower, as compared to gross profit margin of 6.52% for the six months ended June 30, 2022.

Gross profit margin for offset printing paper was 2.42% for the six months ended June 30, 2023.

Gross profit margin for tissue paper products was -249.58% for the six months ended June 30, 2023, a decrease of 79.39 percentage points, as compared to -170.19% for the six months ended June 30, 2022. The decrease was mainly due to the increase in cost of tissue base paper.

Face Masks

Gross loss for face mask for the six months ended June 30, 2023 was $6,407, representing a gross margin of -8.02% compared with a gross profit of $34,882, representing a gross margin of 24.19%, for the six months ended June 30, 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2023 were $3,818,767, a decrease of $1,351,916, or 26.15% from $5,170,683 for the six months ended June 30, 2022. The decrease was mainly due to the reversal of doubtful debt loss and decrease in depreciation of idle fixed assets during production suspension.

Loss from Operations

Operating loss for the six months ended June 30, 2023 was $3,291,044, a decrease of $935,157or 22.13%, from $4,226,201 for the six months ended June 30, 2022. The decrease was primarily due to the decrease in selling, general and administrative expenses, partially offset by the recognition of impairment loss on assets.

Other Income and Expenses

Interest expense for the six months ended June 30, 2023 decreased by $10,069, from $529,919 for the six months ended June 30, 2022, to $519,850. The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $17,607,943 as of June 30, 2023, as compared to $15,530,449 as of June 30, 2022.

Gain on derivative liability

The Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability. ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item. The change in fair value of derivative liability for the sixmonths ended June 30, 2023 and 2022 was a loss of $14,409 and a gain of $1,346,633, respectively.

Net Loss

As a result of the above, net loss was $3,986,658 for the six months ended June 30, 2023, representing an increase of loss of $1,210,531, or 43.61%, from $2,776,127 for the six months ended June 30, 2022.

Accounts Receivable

Net accounts receivable was $2,416,572 as of June 30, 2023, as compared with $nil as of December 31, 2022. We usually collect accounts receivable within 30 days of delivery and completion of sales.

Inventories

Inventories consist of raw materials (accounting for 83.83% of total value of inventory as of June 30, 2023), semi-finished goods and finished goods. As of June 30, 2023, the recorded value of inventory increased by 128.69% to $6,569,323 from $2,872,622 as of December 31, 2022. As of June 30, 2023, the inventory of recycled paper board, which is the main raw material for the production of CMP, was $4,871,125, approximately $3,612,964, or 287.16%, higher than the balance as of December 31, 2022. As a result of better control over stock turnover and volatility of recycled paper board price, inventory was kept in a minimum level as of December 31, 2022.

A summary of changes in major inventory items is as follows:

	June 30,		December 31,
	2023		2022		$ Change		% Change
Raw Materials
Recycled paper board	$	4,871,125	$	1,258,161		3,612,964		287.16	%
Recycled white scrap paper		10,436		10,809		-373		-3.45	%
Tissue base paper		273,903		60,660		213,243		351.54	%
Gas		142,533		42,237		100,296		237.46	%
Mask fabric and other raw materials		209,154		99,569		109,585		110.06	%
Total Raw Materials		5,507,151		1,471,436		4,035,715		274.27	%

Semi-finished Goods		395,327		132,810		262,517		197.66	%
Finished Goods		666,845		1,268,376		-601,531		-47.43	%
Total inventory, gross		6,569,323		2,872,622		3,696,701		128.69	%
Inventory reserve		-		-		-
Total inventory, net	$	6,569,323	$	2,872,622		3,696,701		128.69	%

Renewal of operating lease

On August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively. In connection with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use for a term of up to three years, with an annual rental payment of approximately $143,486 (RMB1,000,000). The lease agreement was renewed in August 2022 with a term of six years with the same rental payments as provided for in the original lease agreement.

Capital Expenditure Commitment as of June 30, 2023

On May 5, 2020, the Company announced it planned the commercial launch of a new tissue paper production line PM10 and the Company signed an agreement to purchase paper machine with paper machine supplier. The Company expected the new tissue paper production line to be launched after the completion of trial run.

As of June 30, 2023, we had approximately $3.9 million in capital expenditure commitments that were mainly related to the purchase of paper machine of PM10. The infrastructure work of PM10 has been completed and the associated ancillary facilities are working in progress. These commitments are expected to be financed by bank loans and cash flows generated from our business operations.

Financing with Sale-Leaseback

The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.5 million). Under the sale-leaseback arrangement, Tengsheng Paper sold the Leased Equipment to TLCL for 16 million (approximately US$2.5 million). Concurrent with the sale of equipment, Tengsheng Paper leases back the equipment sold to TLCL for a lease term of three years. At the end of the lease term, Tengsheng Paper may pay a nominal purchase price of RMB 100 (approximately $16) to TLCL and buy back the Leased Equipment. The Leased Equipment in amount of $2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of 15.6% per annum and stated at $567,099 at the inception of the lease on August 17, 2020.

Cash and Cash Equivalents

Our cash, cash equivalents and restricted cash as of June 30, 2023 was $11,980,759, an increase of $2,455,891, from $9,524,868 as of December 31, 2022. The increase of cash and cash equivalents for the six months ended June 30, 2023 was attributable to a number of factors including:

i. Net cash provided by (used in) operating activities

Net cash provided by operating activities was $5,746,719 for the six months ended June 30, 2023. The balance represented an increase of cash of $1,796,937, or 45.49%, from $3,949,782 provided for the six months ended June 30, 2022. Net loss for the six months ended June 30, 2023 was $3,986,658, representing an increase of loss of $1,210,531, or 43.61%, from a net loss of $2,776,127 for the six months ended June 30, 2022. Changes in various asset and liability account balances throughout the six months ended June 30, 2023 also contributed to the net change in cash from operating activities in six months ended June 30, 2023. Chief among such changes is the increase of accounts receivable in the amount of $1,674,665 during the six months of 2023. There was also an increase of $3,940,417 in the ending inventory balance as of June 30, 2023 (a decrease to net cash for the six months ended June 30, 2023 cash flow purposes). In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of $7,150,057, reversal of allowance of bad debts of $830,847 and loss from disposal of $126,797 and impairment of $375,136 on property, plant and equipment. The Company also had a net decrease of $7,634,922 in prepayment and other current assets (an increase to net cash) and a net increase of $807,717 in other payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income tax payable of $67,515 (a decrease to net cash) during the six months ended June 30, 2023.

ii. Net cash used in investing activities

We incurred $5,565,713 in net cash expenditures for investing activities during the six months ended June 30, 2023, as compared to $7,324,305 for the same period of 2022.

iii. Net cash provided by financing activities

Net cash provided by financing activities was $2,823,597 for the six months ended June 30, 2023, as compared to net cash provided by financing activities in the amount of $6,673,987 for the six months ended June 30, 2022.

Short-term bank loans

	June 30,		December 31,
	2023		2022
Industrial and Commercial Bank of China (“ICBC”) Loan 1	$	4,773,174	$	5,023,978
ICBC Loan 2		-		287,167
ICBC Loan 3		-		143,583
ICBC Loan 4		415,179		-
China Construction Bank Loan		138,393		143,583
ICBC Loan 5		415,179		-
Total short-term bank loans	$	5,741,925	$	5,598,311

Long-term loans

As of June 30, 2023 and December 31, 2022, long-term loans were $11,198,760 and $9,040,002, respectively.

On April 16, 2014, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due in various installments from June 21, 2014 to November 18, 2018. The loan is guaranteed by an independent third party. Interest payment is duequarterly and bore a rate of 7.68% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. On November 6, 2018, the loan was renewed for additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023. As of June 30, 2023 and December 31, 2022, total outstanding loan balance was $1,190,180 and $1,234,816, respectively, which are presented as current liabilities in the consolidated balance sheet.

On July 15, 2013, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due and payable in various installments from December 21, 2013 to July 26, 2018. On June 21, 2018, the loan was extended for additional 5 years andwas due and payable in various installments from December 21, 2018 to June 20, 2023. On June 19, 2023, the loan was extended for another 5 years and will be due and payable on June 20, 2028. The loan is secured by certain of the Company’s manufacturing equipment with net book value of $59,048 and $280,466 as of June 30, 2023 and December 31, 2022, respectively. Interest payment is due quarterly and bore a rate of 7.68% per annum. Effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $3,459,824 and $3,589,582, respectively, which are presented as non-current liabilities and current liabilities in the consolidated balance sheet, respectively.

On July 1, 2022, the Company entered into a loan agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB 400,000 from Jiangna Yu for a term of five years. The loan is payable in monthly installment of RMB10,667 from July 2022 to July 2027. As of June 30, 2023 and December 31, 2022, the total outstanding loan balance was $44,286 and $51,690, respectively. Out of the total outstanding loan balance, current portion amounted were $11,072 and $11,486, which are presented as current liabilities and the remaining balance of $33,214 and $40,204 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2023 and December 31, 2022, respectively.

Shareholder Loans

On March 1, 2015, the Company entered an agreement with Mr. Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount up to $17,201,342 (RMB120,000,000) for working capital purposes. The advances or funding under the agreement are due three years from the date each amount is funded. The loan is unsecured and carries an annual interest rate set on the basis of the primary lending rate of the People’s Bank of China at the time of the borrowing. On July 13, 2015, an unsecured amount of $4,324,636 was drawn from the facility. On October 14, 2016 an unsecured amount of $2,883,091 was drawn from the facility. In February 2018, the company repaid $1,507,432 to Mr. Zhenyong Liu. The loan would be originally due on July 12, 2018. Mr. Zhenyong Liu agreed to extend the loan for additional 3 years and the remaining balance was due on July 12, 2021. On November 23, 2018, the Company repaid $3,768,579 to Mr. Zhenyong Liu, together with interest of $158,651. In December 2019, the Company paid off the remaining balance, together with interest of 94,636. As of June 30, 2023 and December 31, 2022, the outstanding interest was $190,204 and $197,338, respectively, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet.

As of June 30, 2023 and December 31, 2022, total amount of loans due to Mr. Zhenyong Liu were $nil. The interest expense incurred for such related party loans were $nil for the three and six months ended June 30, 2023 and 2022. The accrued interest owing to Mr. Zhenyong Liu was approximately $586,470 and $608,465, as of June 30, 2023 and December 31, 2022, respectively, which was recorded in other payables and accrued liabilities.

In October 2022 and November 2022, the Company entered into two agreements with Mr. Zhenyong Liu, which allowed Mr. Zhenyong Liu to borrow from the Company an amount of $6,919,649 (RMB50,000,000) in total. The loans were unsecured and carried a fixed interest rate of 4.35% per annum. The loan will be repaid by the end of August 2023. Interest income of the loan for the six months ended June 30, 2023 was $176,847.

Critical Accounting Policies and Estimates

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates. The most critical accounting policies are listed below:

Revenue Recognition Policy

The Company recognizes revenue when goods are delivered and a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability is reasonably assured. Goods are considered delivered when the customer’s truck picks up goods at our finished goods inventory warehouse.

Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. In such circumstances, those assets are written down to estimated fair value. Our judgments regarding the existence of impairment indicators are based on market conditions, assumptions for operational performance of our businesses, and possible government policy toward operating efficiency of the Chinese paper manufacturing industry. For the three months ended June 30, 2023 and 2022, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required. We are currently not aware of any events or circumstances that may indicate any need to record such impairment in the future.

Foreign Currency Translation

The functional currency of Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (“RMB”). Under ASC Topic 830-30, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period. The current exchange rates used by the Company as of June 30, 2023 and December 31, 2022 to translate the Chinese RMB to the U.S. Dollars are 7.2258:1 and 6.9646:1, respectively. Revenues and expenses are translated using the prevailing average exchange rates at 6.9693:1 and 6.5058:1 for the six months ended June 30, 2023 and 2022, respectively. Translation adjustments are included in other comprehensive income (loss).

Off-Balance Sheet Arrangements

We were the guarantor for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,290,182 (RMB31,000,000), which matures at various times in 2028. Baoding Huanrun Trading Co. is one of our major suppliers of raw materials. This helps us to maintain a good relationship with the supplier and negotiate for better terms in payment for materials. If Huanrun Trading Co. were to become insolvent, the Company could be materially adversely affected. Except as aforesaid, we have no material off-balance sheet transactions.

Recent Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Foreign Exchange Risk

While our reporting currency is the US dollar, almost all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. All of our assets are denominated in RMB except for some cash and cash equivalents and accounts receivables. As a result, we are exposed to foreign exchange risks as our revenues and results of operations may be affected by fluctuations in the exchange rate between US dollar and RMB. If the RMB depreciates against the US dollar, the value of our RMB revenues, earnings and assets as expressed in our US dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

Inflation

Although we are generally able to pass along minor incremental cost inflation to our customers, inflation such as increases in the costs of our products and overhead costs may adversely affect our operating results. We do not believe that inflation in China has had a material impact on our financial position or results of operations to date, however, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling and distribution, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase in line with the increased costs.

Item 4. Controls and Procedures.

As required by Rule 13a-15 of the Securities Exchange Act, as amended (the “Exchange Act”), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, which were designed to provide reasonable assurance of achieving their objectives. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of June 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level to ensure (1) that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (2) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes with respect to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting in the quarterly period ended June 30, 2023.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Exhibits

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Schema Document
101.CAL		Inline XBRL Calculation Linkbase Document
101.DEF		Inline XBRL Definition Linkbase Document
101.LAB		Inline XBRL Label Linkbase Document
101.PRE		Inline XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File The cover page iXBRL tags are embedded within the inline

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IT TECH PACKAGING, INC.

Date: August 10, 2023	/s/ Zhenyong Liu
	Name:	Zhenyong Liu
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Date: August 10, 2023	/s/ Jing Hao
	Name:	Jing Hao
	Title:	Chief Financial Officer
		(Principal Financial Officer)

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Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Zhenyong Liu, certify that:

I have reviewed this Quarterly Report on Form 10-Q of IT Tech Packaging, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: August 10, 2023

	By:	/s/ Zhenyong Liu
		Zhenyong Liu
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jing Hao, certify that:

I have reviewed this Quarterly Report on Form 10-Q of IT Tech Packaging, Inc.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: August 10, 2023

	By:	/s/ Jing Hao
		Jing Hao
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of IT Tech Packaging, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhenyong Liu, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Dated: August 10, 2023

	By:	/s/ Zhenyong Liu
		Zhenyong Liu
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of IT Tech Packaging, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jing Hao, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 10, 2023

	By:	/s/ Jing Hao
		Jing Hao
		Chief Financial Officer
		(Principal Financial Officer)

Document And Entity Information - shares	6 Months Ended
Document And Entity Information - shares	Jun. 30, 2023	Aug. 10, 2023
Document Information Line Items
Entity Registrant Name	IT TECH PACKAGING, INC.
Trading Symbol	ITP
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		10,065,920
Amendment Flag	false
Entity Central Index Key	0001358190
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-34577
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	20-4158835
Entity Address, Address Line One	Science Park
Entity Address, Address Line Two	Juli Rd
Entity Address, Address Line Three	Xushui District
Entity Address, City or Town	Baoding City
Entity Address, Country	CN
Entity Address, Postal Zip Code	072550
City Area Code	(86)
Local Phone Number	312-8698215
Title of 12(b) Security	Common Stock, par value $0.001
Security Exchange Name	NYSE
Entity Interactive Data Current	Yes

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current Assets
Cash and bank balances	$ 11,980,759	$ 9,524,868
Restricted cash
Accounts receivable (net of allowance for doubtful accounts of $48,646 and $881,878 as of June 30, 2023 and December 31, 2022, respectively)	2,416,572
Inventories	6,569,323	2,872,622
Prepayments and other current assets	19,263,853	27,207,127
Due from related parties	7,459,079	7,561,858
Total current assets	47,689,586	47,166,475
Prepayment on property, plant and equipment	2,668,992	1,031,502
Operating lease right-of-use assets, net	648,404	672,722
Finance lease right-of-use assets, net	1,796,034	1,939,970
Property, plant, and equipment, net	142,023,762	151,569,898
Value-added tax recoverable	1,916,111	2,066,666
Deferred tax asset non-current
Total Assets	196,742,889	204,447,233
Current Liabilities
Short-term bank loans	5,741,925	5,598,311
Current portion of long-term loans	3,761,521	4,835,884
Lease liability	108,227	224,497
Accounts payable	127,543	5,025
Advance from customers	10,192
Due to related parties	810,631	727,462
Accrued payroll and employee benefits	308,903	165,986
Other payables and accrued liabilities	6,095,806	5,665,558
Income taxes payable	337,681	417,906
Total current liabilities	17,302,429	17,640,629
Long-term loans	7,437,239	4,204,118
Deferred gain on sale-leaseback	7,203	52,314
Lease liability - non-current	559,031	579,997
Derivative liability	660,692	646,283
Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $19,100,011 and $16,784,878 as of June 30, 2023 and December 31, 2022, respectively)	25,966,594	23,123,341
Commitments and Contingencies
Stockholders’ Equity
Common stock, 50,000,000 shares authorized, $0.001 par value per share, 10,065,920 shares issued and outstanding as of June 30, 2023 and December, 31, 2022.	10,066	10,066
Additional paid-in capital	89,172,771	89,172,771
Statutory earnings reserve	6,080,574	6,080,574
Accumulated other comprehensive loss	(14,075,479)	(7,514,540)
Retained earnings	89,588,363	93,575,021
Total stockholders’ equity	170,776,295	181,323,892
Total Liabilities and Stockholders’ Equity	$ 196,742,889	$ 204,447,233

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Allowance for doubtful accounts (in Dollars)	$ 48,646	$ 881,878
Consolidated VIE, liabilities (in Dollars)	$ 19,100,011	$ 16,784,878
Common stock, shares authorized	50,000,000	50,000,000
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares issued	10,065,920	10,065,920
Common stock, shares outstanding	10,065,920	10,065,920

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenues	$ 30,019,914	$ 31,788,884	$ 49,810,791	$ 47,270,502
Cost of sales	(28,840,056)	(31,154,847)	(48,907,932)	(46,326,020)
Gross Profit	1,179,858	634,037	902,859	944,482
Selling, general and administrative expenses	(1,323,405)	(1,869,802)	(3,818,767)	(5,170,683)
Loss on impairment of assets	(375,136)		(375,136)
Loss from Operations	(518,683)	(1,235,765)	(3,291,044)	(4,226,201)
Other Income (Expense):
Interest income	53,637	4,924	189,905	8,379
Interest expense	(270,681)	(259,106)	(519,850)	(529,919)
Gain on acquisition		(1,840)		32,163
Gain (Loss) on derivative liability	(166,506)	960,045	(14,409)	1,346,633
Loss before Income Taxes	(902,233)	(531,742)	(3,635,398)	(3,368,945)
Provision for Income Taxes	(351,260)	243,829	(351,260)	592,818
Net Loss	(1,253,493)	(287,913)	(3,986,658)	(2,776,127)
Other Comprehensive Loss
Foreign currency translation adjustment	(9,063,695)	(11,524,747)	(6,560,939)	(10,598,609)
Total Comprehensive Loss	$ (10,317,188)	$ (11,812,660)	$ (10,547,597)	$ (13,374,736)
Basic and Diluted Losses per Share (in Dollars per share)	$ (0.12)	$ (0.03)	$ (0.4)	$ (0.28)
Outstanding – Basic and Diluted (in Shares)	10,065,920	9,915,920	10,065,920	9,915,920

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) (Parentheticals) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Diluted Losses per Share	$ (0.12)	$ (0.03)	$ (0.40)	$ (0.28)
Outstanding – Diluted	10,065,920	9,915,920	10,065,920	9,915,920

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash Flows from Operating Activities:
Net income	$ (3,986,658)	$ (2,776,127)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,150,057	7,592,319
(Gain) Loss on derivative liability	14,409	(1,346,633)
(Gain) Loss from disposal and impairment of property, plant and equipment	501,934
Allowance for bad debts	(830,847)	(14,731)
Gain on acquisition		(33,178)
Deferred tax		(821,225)
Changes in operating assets and liabilities:
Accounts receivable	(1,674,665)	845,450
Prepayments and other current assets	7,634,922	1,963,348
Inventories	(3,940,417)	(1,111,160)
Accounts payable	127,215	7,588
Advance from customers	10,567
Related parties	(90,617)
Accrued payroll and employee benefits	154,398	(49,534)
Other payables and accrued liabilities	743,936	553,308
Income taxes payable	(67,515)	(859,643)
Net Cash Provided by Operating Activities	5,746,719	3,949,782
Cash Flows from Investing Activities:
Purchases of property, plant and equipment	(5,565,713)	(681,640)
Acquisition of land		(6,642,665)
Net Cash Used in Investing Activities	(5,565,713)	(7,324,305)
Cash Flows from Financing Activities:
Proceeds from short term bank loans	860,919
Proceeds from long term loans	2,582,756
Repayment of bank loans	(507,942)
Payment of capital lease obligation	(112,136)	(102,902)
Loan to a related party (net)		6,776,889
Net Cash Provided by Financing Activities	2,823,597	6,673,987
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(548,712)	(156,999)
Net Increase in Cash and Cash Equivalents	2,455,891	3,142,465
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	9,524,868	11,201,612
Cash, Cash Equivalents and Restricted Cash - End of Period	11,980,759	14,344,077
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of capitalized interest cost	199,014	165,629
Cash paid for income taxes	418,775	1,088,049
Cash and bank balances	11,980,759	14,344,077
Restricted cash
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 11,980,759	$ 14,344,077

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-in Capital	Statutory Earnings Reserve	Accumulated Other Comprehensive Income (loss)	Retained Earnings	Total
Balance at Dec. 31, 2021	$ 9,916	$ 89,016,921	$ 6,080,574	$ 10,496,168	$ 110,146,329	$ 215,749,908
Balance (in Shares) at Dec. 31, 2021	9,915,920
Foreign currency translation adjustment				(10,598,609)		(10,598,609)
Net income (loss)					(2,776,127)	(2,776,127)
Balance at Jun. 30, 2022	$ 9,916	89,016,921	6,080,574	(102,441)	107,370,202	202,375,172
Balance (in Shares) at Jun. 30, 2022	9,915,920
Balance at Dec. 31, 2022	$ 10,066	89,172,771	6,080,574	(7,514,540)	93,575,021	181,323,892
Balance (in Shares) at Dec. 31, 2022	10,065,920
Issuance of shares to officer and directors
Foreign currency translation adjustment				(6,560,939)		(6,560,939)
Net income (loss)					(3,986,658)	(3,986,658)
Balance at Jun. 30, 2023	$ 10,066	$ 89,172,771	$ 6,080,574	$ (14,075,479)	$ 89,588,363	$ 170,776,295
Balance (in Shares) at Jun. 30, 2023	10,065,920

Organization and Business Background

6 Months Ended

Jun. 30, 2023

Organization and Business Background [Abstract]

Organization and Business Background

(1) Organization and Business Background

As of June 30, 2023 and December 31, 2022, details of the Company’s subsidiaries and variable interest entities are as follows:

	Date of	Place of
	Incorporation	Incorporation or	Percentage of
Name	or Establishment	Establishment	Ownership	Principal Activity
Subsidiary:
Dongfang Holding	November 13, 2006	BVI	100%	Inactive investment holding
Shengde Holdings	February 25, 2009	State of Nevada	100%	Investment holding
Baoding Shengde	June 1, 2009	PRC	100%	Paper production and distribution
***Qianrong	July 15, 2021	PRC	100%	New material technology service

Variable interest entity (“VIE”):
Dongfang Paper	March 10, 1996	PRC	Control*	Paper production and distribution
Tengsheng Paper	April 07, 2011	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.

***

Qianrong is a wholly owned subsidiary of ShengdeHolding.

	June 30,		December 31,
	2023		2022

ASSETS

Current Assets
Cash and bank balances	$	6,167,612	$	3,427,717
Restricted cash		-		-
Accounts receivable		2,416,572		-
Inventories		6,090,692		2,852,553
Prepayments and other current assets		16,588,442		20,134,386
Due from related parties		7,320,686		7,418,274

Total current assets		38,584,004		33,832,930

Prepayment on property, plant and equipment		2,668,992		1,031,502
Operating lease right-of-use assets, net		648,404		672,722
Finance lease right-of-use assets, net		1,796,034		1,939,970
Property, plant, and equipment, net		135,415,381		143,534,690

Total Assets	$	179,112,815	$	181,011,814

LIABILITIES

Current Liabilities
Short-term bank loans	$	5,326,746	$	5,598,311
Current portion of long-term loans		1,547,234		4,835,885
Lease liability		108,227		224,497
Accounts payable		127,543		5,025
Advance from customers		10,192		-
Due to related parties		81,790		-
Accrued payroll and employee benefits		266,741		143,156
Other payables and accrued liabilities		5,089,492		4,887,584
Income taxes payable		337,681		417,906

Total current liabilities		12,895,646		16,112,364

Long-term loans		5,638,131		40,203
Deferred gain on sale-leaseback		7,203		52,314
Lease liability - non-current		559,031		579,997

Total liabilities	$	19,100,011	$	16,784,878

Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

(2) Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

Reverse stock split

Valuation of long-lived asset

Fair Value Measurements

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

Non-Recurring Fair Value Measurements

Share-Based Compensation

Inventories

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

Inventories

(3) Inventories

	June 30,		December 31,
	2023		2022
Raw Materials
Recycled paper board	$	4,871,125	$	1,258,161
Recycled white scrap paper		10,436		10,809
Gas		142,533		42,237
Base paper and other raw materials		483,057		160,229
		5,507,151		1,471,436
Semi-finished Goods		395,327		132,810
Finished Goods		666,845		1,268,376
Total inventory, gross		6,569,323		2,872,622
Inventory reserve		-		-
Total inventory, net	$	6,569,323	$	2,872,622

Prepayments and Other Current Assets

6 Months Ended

Jun. 30, 2023

Prepayments and Other Current Assets [Abstract]

Prepayments and other current assets

(4) Prepayments and other current assets

Prepayments and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Prepaid land lease	$	166,072	$	172,300
Prepayment for purchase of materials		4,860,289		12,941,951
Value-added tax recoverable		13,343,141		13,640,868
Prepaid gas		763		27,462
Others		893,588		424,546
	$	19,263,853	$	27,207,127

Property, plant and equipment, net

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

Property, plant and equipment, net

(5) Property, plant and equipment, net

As of June 30, 2023 and December 31, 2022, property, plant and equipment consisted of the following:

	June 30,			December 31,
	2023			2022
Property, Plant, and Equipment:
Land use rights	$	58,651,394		$	57,686,220
Building and improvements		65,834,138			68,300,987
Machinery and equipment		152,565,658			158,498,316
Vehicles		656,978			681,617
Construction in progress		1,505,889			1,239,698
Totals		279,214,057			286,406,838
Less: accumulated depreciation and amortization		(137,190,295	)		(134,836,940	)
Property, Plant and Equipment, net	$	142,023,762		$	151,569,898

An impairment loss of $375,136 was recognized for property, plant and equipment of Baoding Shengde for the three and six months ended June 30, 2023.

Leases

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Leases

(6) Leases

Financing with Sale-Leaseback

The future minimum lease payments of the capital lease as of June 30, 2023 were as follows:

June 30,	Amount
2023		19,098
Less: unearned discount		(244	)
		18,854
Less: Current portion lease liability		(18,854	)
	$	-

Operating lease

The components of the Company’s lease expense are as follows:

	Six Months Ended
	June 30, 2023
	RMB

Operating lease cost		69,196
Short-term lease cost		-
Lease cost		69,196

Supplemental cash flow information related to its operating leases was as follows for the period ended June 30, 2023:

			Six Months Ended
			June 30, 2023
			RMB
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases			-

Maturities of its lease liabilities for all operating leases are as follows as of June 30, 2023:

June 30,	Amount
2024		138,393
2025		138,393
2026		276,786
2027		-
2028		138,393
Thereafter		138,393
Total operating lease payments	$	830,358
Less: Interest		(181,954	)
Present value of lease liabilities		648,404
Less: current portion, record in current liabilities		(89,373	)
Present value of lease liabilities		559,031

The weighted average remaining lease terms and discount rates for all of its operating leases were as follows as of June 30, 2023:

	June 30,
	2023
	RMB
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		5.1
Weighted average discount rate		7.56	%

Loans Payable

6 Months Ended

Jun. 30, 2023

Loans Payable [Abstract]

Loans Payable

(7) Loans Payable

Short-term bank loans

	June 30,		December 31,
	2023		2022
Industrial and Commercial Bank of China (“ICBC”) Loan 1	$	4,773,174	$	5,023,978
ICBC Loan 2		-		287,167
ICBC Loan 3		-		143,583
ICBC Loan 4		415,179		-
China Construction Bank Loan		138,393		143,583
ICBC Loan 5		415,179		-
Total short-term bank loans	$	5,741,925	$	5,598,311

Long-term loans

As of June 30, 2023 and December 31, 2022, long-term loans were $11,198,760 and $9,040,002, respectively.

	June 30,			December 31,
	2023			2022
Rural Credit Union of Xushui District Loan 1	$	1,190,180		$	1,234,816
Rural Credit Union of Xushui District Loan 2		3,459,824			3,589,582
Rural Credit Union of Xushui District Loan 3		2,214,288			2,297,332
Rural Credit Union of Xushui District Loan 4		1,799,109			1,866,582
Rural Credit Union of Xushui District Loan 5		2,491,073			-
Yujiangna		44,286			51,690
Total		11,198,760			9,040,002
Less: Current portion of long-term loans		(3,761,521	)		(4,835,884	)
Long-term loans	$	7,437,239		$	4,204,118

As of June 30, 2023, the Company’s long-term debt repayments for the next coming years were as follows:

Fiscal year
Remainder of 2023	$	3,761,521
2024		3,955,271
2025 & after		3,481,968
Total		11,198,760

Related Party Transactions

6 Months Ended

Jun. 30, 2023

Related Party Transactions

(8) Related Party Transactions

Other Payables and Accrued Liabilities

6 Months Ended

Jun. 30, 2023

Other Payables and Accrued Liabilities [Abstract]

Other payables and accrued liabilities

(9) Other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

	June 30,		December 31,
	2023		2022
Accrued electricity	$	110,803	$	3,036
Accrued rental		123,795		56,646
Value-added tax payable		173,171		69,053
Accrued interest to a related party		586,470		608,465
Payable for purchase of equipment		3,093,355		3,294,940
Accrued commission to salesmen		16,155		19,524
Accrued bank loan interest		1,847,131		1,595,354
Others		144,926		18,540
Totals	$	6,095,806	$	5,665,558

Derivative Liabilities

6 Months Ended

Jun. 30, 2023

Derivative Liabilities [Abstract]

Derivative Liabilities

(10) Derivative Liabilities

The Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability since the warrant becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

			Six months ended
			June 30, 2023
Expected term			1.18 - 2.75
Expected average volatility			85% - 235%
Expected dividend yield			-
Risk-free interest rate			0.19% - 4.49%

The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2023:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance at December 31, 2022	$	646,283
Addition of new derivatives recognized as warrant		-
Addition of new derivatives recognized as loss on derivatives		-
Exercise of warrants		-
Change in fair value of derivative liability		14,409
Balance at June 30, 2023	$	660,692

Common Stock

6 Months Ended

Jun. 30, 2023

Common Stock [Abstract]

Common Stock

(11) Common Stock

Issuance of common stock to investors

Reverse stock split

Issuance of common stock pursuant to the 2021 Incentive Stock Plan

Warrants

6 Months Ended

Jun. 30, 2023

Warrants [Abstract]

Warrants

(12) Warrants

On January 20, 2021, the Company offered and sold to certain institutional investors an aggregate of 2,618,182 shares of common stock and 2,618,182 warrants to purchase up to 2,618,182 shares of common stock (the “January 2021 Warrants”). The January 2021 Warrants became exercisable on January 20, 2021 at an exercise price of $5.5 and will expire on January 20, 2026. 1,410,690 January 2021 Warrants were exercised in January and February of 2021 at the exercise price of $5.5 per share. 1,207,492 January 2021 Warrants were outstanding as of June 30, 2023.

On March 1, 2021, the Company offered and sold to the public investors an aggregate of 2,927,786 shares of common stock and 1,463,893 warrants to purchase up to 1,463,893 shares of common stock (the “March 2021 Warrants”). The March 2021 Warrants became exercisable on March 1, 2021 at an exercise price of $7.5 and will expire on March 1, 2026. 6,750 March 2021 Warrants were exercised in January and March 2021 at the exercise price of $7.5 per share and 1,457,143 March 2021 Warrants were outstanding as of June 30, 2023.

The Company classified warrants as liabilities and accounted for the issuance of the warrants as a derivative.

A summary of stock warrant activities is as below:

	Six Months Ended June 30, 2023
	Number		Weight average exercise price
Outstanding and exercisable at beginning of the period		3,016,635	$	6.6907
Issued during the period		-
Exercised during the period		-
Outstanding and exercisable at end of the period		3,016,635	$	6.6907

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2023.

Warrants Outstanding						Warrants Exercisable
Number of Shares		Weighted Average Remaining Contractual life (in years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
	3,016,635		2.59	$	6.6907		3,016,635	$	6.6907

Earnings Per Share

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Earnings Per Share

(13) Earnings Per Share

For the three months ended June 30, 2023 and 2022, basic and diluted net income per share are calculated as follows:

	Three Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.12	)	$	(0.03	)

Diluted income per share
Net income for the period- numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.12	)	$	(0.03	)

	Six Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.40	)	$	(0.28	)

Diluted loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.40	)	$	(0.28	)

For the three andsix months ended June 30, 2023 and 2022 there were no securities with dilutive effect issued and outstanding.

Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

(14) Income Taxes

United States

PRC

The provisions for income taxes for three months ended June 30, 2023 and 2022 were as follows:

	Three Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(472,236	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(243,829	)

The provisions for income taxes for six months ended June 30, 2023 and 2022 were as follows:

	Six Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(821,225	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(592,818	)

	June 30,			December 31,
	2023			2022
Deferred tax assets (liabilities)
Depreciation and amortization of property, plant and equipment	$	15,256,619		$	15,474,485
Impairment of property, plant and equipment		803,050			796,559
Miscellaneous		519,603			615,436
Net operating loss carryover of PRC company		227,972			213,620
Total deferred tax assets		16,807,244			17,100,100
Less: Valuation allowance		(16,807,244	)		(17,100,100	)
Total deferred tax assets, net	$	-			-

	Three Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(121.4	)%		20.9	%
Change in valuation allowance		57.5	%		-
Effective income tax rate		(38.9	)%		45.9	%

	Six Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(42.7	)%		(7.4	)%
Change in valuation allowance		8.0	%		-
Effective income tax rate		(9.7	)%		17.6	%

During the three months ended June 30, 2023 and 2022, the effective income tax rate was estimated by the Company to be -38.9% and 45.9%, respectively.

During the six months ended June 30, 2023 and 2022, the effective income tax rate was estimated by the Company to be -9.7% and 17.6%, respectively.

Stock Incentive Plans

6 Months Ended

Jun. 30, 2023

Stock Incentive Plans [Abstract]

Stock Incentive Plans

(15) Stock Incentive Plans

2021 Incentive Stock Plan

Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(16) Commitments and Contingencies

Xushui Land Lease

Sale of Headquarters Compound Real Properties

Future minimum lease payments of the land lease is as follows:

June 30,	Amount
2024		16,607
2025		16,607
2026		16,607
2027		16,607
2028		16,607
Thereafter		58,125
Total operating lease payments		141,161

Capital commitment

Guarantees and Indemnities

Segment Reporting

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Segment Reporting

(17) Segment Reporting

Summarized financial information for the three reportable segments is as follows:

	Three Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination of		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			Inter-segment		consolidated

Revenues	$	29,631,400	$	344,268		$	44,246		$	-		$	-	$	30,019,914
Gross profit		1,893,087		(709,660	)		(3,569	)		-			-		1,179,858
Depreciation and amortization		996,939		2,071,666			395,209			-			-		3,463,814
Loss on impairment of assets		-		-			375,136			-			-		375,136
Interest income		47,763		844			4,486			544			-		53,637
Interest expense		144,083		53,991			72,607			-			-		270,681
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		937,333		(1,487,869	)		(443,841	)		(259,116	)		-		(1,253,493	)

	Three Months Ended
	June 30, 2022
	Dongfang Paper		Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment			Enterprise-wide, consolidated

Revenues	$	31,289,918	$	411,388		$	87,578		$	-	$	-		$	31,788,884
Gross profit		1,430,181		(814,347	)		18,203			-		-			634,037
Depreciation and amortization		1,210,646		2,188,973			419,464			-		-			3,819,083
Interest income		1,787		226			2,911			-		-			4,924
Interest expense		167,431		10,862			80,813			-		-			259,106
Income tax expense(benefit)		134,982		(379,460	)		649			-		-			(243,829	)
Net income (loss)		650,767		(2,003,653	)		(52,758	)		1,119,571		(1,840	)		(287,913	)

	Six Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			of Inter-segment		consolidated

Revenues	$	49,159,596		571,312			79,883			-			-		49,810,791
Gross profit		2,332,167		(1,422,900	)		(6,408	)		-			-		902,859
Depreciation and amortization		2,137,405		4,209,594			803,058			-			-		7,150,057
Loss on impairment of assets		-		--			375,136			-			-		375,136
Interest income		180,946		1,537			5,721			1,701			-		189,905
Interest expense		290,785		82,565			146,500			-			-		519,850
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		367,869		(3,407,989	)		(543,126	)		(403,412	)		-		(3,986,658	)

	Six Months Ended
	June 30, 2022
	Dongfang Paper			Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated

Revenues	$	46,316,551			809,776			144,175			-		-		47,270,502
Gross profit		2,287,725			(1,378,124	)		34,881			-		-		944,482
Depreciation and amortization		2,481,138			4,250,910			860,271			-		-		7,592,319
Interest income		3,743			396			4,240			-		-		8,379
Interest expense		340,620			24,369			164,930			-		-		529,919
Income tax expense(benefit)		54,583			(790,651	)		143,250			-		-		(592,818	)
Net income (loss)		(53,906	)		(3,609,095	)		(284,648	)		1,139,359		32,163		(2,776,127	)

	As of June 30, 2023
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	68,995,988		110,116,827		13,287,358		4,342,716		-		196,742,889

	As of December 31, 2022
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	63,365,986		117,645,828		17,945,969		5,489,450		-		204,447,233

Concentration and Major Customers and Suppliers

6 Months Ended

Jun. 30, 2023

Concentration and Major Customers and Suppliers [Abstract]

Concentration and Major Customers and Suppliers

(18) Concentration and Major Customers and Suppliers

For the three months ended June 30, 2023 and 2022, the Company had no single customer contributed over 10% of total sales.

For the six months ended June 30, 2023 and 2022, the Company had no single customer contributed over 10% of total sales.

Concentration of Credit Risk

6 Months Ended

Jun. 30, 2023

Concentration of Credit Risk [Abstract]

Concentration of Credit Risk

(19) Concentration of Credit Risk

Risks and Uncertainties

6 Months Ended

Jun. 30, 2023

Risks and Uncertainties [Abstract]

Risks and Uncertainties

(20) Risks and Uncertainties

Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2023

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

(21) Recent Accounting Pronouncements

Subsequent Event

6 Months Ended

Jun. 30, 2023

Subsequent Event [Abstract]

Subsequent Event

(22) Subsequent Event

None.

Accounting Policies, by Policy (Policies)	6 Months Ended
Accounting Policies, by Policy (Policies)	Jun. 30, 2023
Accounting Policies [Abstract]
Principles of Consolidation	Principles of Consolidation Our unaudited condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. Such adjustments are of a normal recurring nature, unless otherwise noted. The balance sheet as of June 30, 2023 and the results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for any future period. Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. Actual results could differ materially from those estimates.
Reverse stock split	Reverse stock split On June 9, 2022, the Board of Directors of the Company approved the Reverse Stock Split, at a ratio of 1-for-10, pursuant to Section 78.207 of the Nevada Revised Statutes (“NRS”). The Reverse Stock Split was effected by the Company filing of a Certificate of Change Pursuant to NRS 78.209 with the Secretary of State of the State of Nevada on July 7, 2022. The par value per share of our stock remains unchanged at $0.001 per share after the Reverse Stock Split. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Reverse Stock Split.
Valuation of long-lived asset	Valuation of long-lived asset The Company reviews the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset and intangible assets. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets and intangible assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost to dispose.
Fair Value Measurements	Fair Value Measurements The Company has adopted ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. It establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts that the Company could realize in a current market exchange. As of June 30, 2023 and December 31, 2022, the carrying value of the Company’s short term financial instruments, such as cash and cash equivalents, accounts receivable, accounts and notes payable, short-term bank loans, balance due to a related party and obligation under capital lease, approximate at their fair values because of the short maturity of these instruments; while loans from credit union and loans from a related party approximate at their fair value as the interest rates thereon are close to the market rates of interest published by the People’s Bank of China. Management determined that liabilities created by beneficial conversion features associated with the issuance of certain warrants (see “Derivative liabilities” under Note (10)), meet the criteria of derivatives and are required to be measured at fair value. The fair value of these derivative liabilities was determined based on management’s estimate of the expected future cash flows required to settle the liabilities. This valuation technique involves management’s estimates and judgment based on unobservable inputs and is classified in level 3.
Non-Recurring Fair Value Measurements	Non-Recurring Fair Value Measurements The Company reviews long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate the possibility of impairment. For the continuing operations, long-lived assets are measured at fair value on a nonrecurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. For discontinued operations, long-lived assets are measured at the lower of carrying amount or fair value less cost to sell. The fair value of these assets were determined using models with significant unobservable inputs which were classified as Level 3 inputs, primarily the discounted future cash flow.
Share-Based Compensation	Share-Based Compensation The Company uses the fair value recognition provision of ASC Topic 718, Compensation-Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period. The Company also applies the provisions of ASC Topic 505-50, Equity Based Payments to Non-Employees to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

Organization and Business Background (Tables)

6 Months Ended

Jun. 30, 2023

Organization and Business Background [Abstract]

Schedule of subsidiaries and variable interest entities

As of June 30, 2023 and December 31, 2022, details of the Company’s subsidiaries and variable interest entities are as follows:

	Date of	Place of
	Incorporation	Incorporation or	Percentage of
Name	or Establishment	Establishment	Ownership	Principal Activity
Subsidiary:
Dongfang Holding	November 13, 2006	BVI	100%	Inactive investment holding
Shengde Holdings	February 25, 2009	State of Nevada	100%	Investment holding
Baoding Shengde	June 1, 2009	PRC	100%	Paper production and distribution
***Qianrong	July 15, 2021	PRC	100%	New material technology service

Variable interest entity (“VIE”):
Dongfang Paper	March 10, 1996	PRC	Control*	Paper production and distribution
Tengsheng Paper	April 07, 2011	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.

***

Qianrong is a wholly owned subsidiary of ShengdeHolding.

Schedule of aggregate carrying value of Dongfang Paper’s assets and liabilities

However, if the VIE does require financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIE.

	June 30,		December 31,
	2023		2022

ASSETS

Current Assets
Cash and bank balances	$	6,167,612	$	3,427,717
Restricted cash		-		-
Accounts receivable		2,416,572		-
Inventories		6,090,692		2,852,553
Prepayments and other current assets		16,588,442		20,134,386
Due from related parties		7,320,686		7,418,274

Total current assets		38,584,004		33,832,930

Prepayment on property, plant and equipment		2,668,992		1,031,502
Operating lease right-of-use assets, net		648,404		672,722
Finance lease right-of-use assets, net		1,796,034		1,939,970
Property, plant, and equipment, net		135,415,381		143,534,690

Total Assets	$	179,112,815	$	181,011,814

LIABILITIES

Current Liabilities
Short-term bank loans	$	5,326,746	$	5,598,311
Current portion of long-term loans		1,547,234		4,835,885
Lease liability		108,227		224,497
Accounts payable		127,543		5,025
Advance from customers		10,192		-
Due to related parties		81,790		-
Accrued payroll and employee benefits		266,741		143,156
Other payables and accrued liabilities		5,089,492		4,887,584
Income taxes payable		337,681		417,906

Total current liabilities		12,895,646		16,112,364

Long-term loans		5,638,131		40,203
Deferred gain on sale-leaseback		7,203		52,314
Lease liability - non-current		559,031		579,997

Total liabilities	$	19,100,011	$	16,784,878

Inventories (Tables)

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Raw Materials
Recycled paper board	$	4,871,125	$	1,258,161
Recycled white scrap paper		10,436		10,809
Gas		142,533		42,237
Base paper and other raw materials		483,057		160,229
		5,507,151		1,471,436
Semi-finished Goods		395,327		132,810
Finished Goods		666,845		1,268,376
Total inventory, gross		6,569,323		2,872,622
Inventory reserve		-		-
Total inventory, net	$	6,569,323	$	2,872,622

Prepayments and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2023

Prepayments and Other Current Assets [Abstract]

Schedule of prepayments and other current assets

Prepayments and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Prepaid land lease	$	166,072	$	172,300
Prepayment for purchase of materials		4,860,289		12,941,951
Value-added tax recoverable		13,343,141		13,640,868
Prepaid gas		763		27,462
Others		893,588		424,546
	$	19,263,853	$	27,207,127

Property, plant and equipment, net (Tables)

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

As of June 30, 2023 and December 31, 2022, property, plant and equipment consisted of the following:

	June 30,			December 31,
	2023			2022
Property, Plant, and Equipment:
Land use rights	$	58,651,394		$	57,686,220
Building and improvements		65,834,138			68,300,987
Machinery and equipment		152,565,658			158,498,316
Vehicles		656,978			681,617
Construction in progress		1,505,889			1,239,698
Totals		279,214,057			286,406,838
Less: accumulated depreciation and amortization		(137,190,295	)		(134,836,940	)
Property, Plant and Equipment, net	$	142,023,762		$	151,569,898

Leases (Tables)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Schedule of future minimum lease payments of the capital lease

The future minimum lease payments of the capital lease as of June 30, 2023 were as follows:

June 30,	Amount
2023		19,098
Less: unearned discount		(244	)
		18,854
Less: Current portion lease liability		(18,854	)
	$	-

Schedule of lease expense

The components of the Company’s lease expense are as follows:

	Six Months Ended
	June 30, 2023
	RMB

Operating lease cost		69,196
Short-term lease cost		-
Lease cost		69,196

Schedule operating leases

Supplemental cash flow information related to its operating leases was as follows for the period ended June 30, 2023:

			Six Months Ended
			June 30, 2023
			RMB
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases			-

Schedule of maturities of its lease liabilities

Maturities of its lease liabilities for all operating leases are as follows as of June 30, 2023:

June 30,	Amount
2024		138,393
2025		138,393
2026		276,786
2027		-
2028		138,393
Thereafter		138,393
Total operating lease payments	$	830,358
Less: Interest		(181,954	)
Present value of lease liabilities		648,404
Less: current portion, record in current liabilities		(89,373	)
Present value of lease liabilities		559,031

Schedule of weighted average remaining lease terms and discount rates

The weighted average remaining lease terms and discount rates for all of its operating leases were as follows as of June 30, 2023:

	June 30,
	2023
	RMB
Remaining lease term and discount rate:
Weighted average remaining lease term (years)		5.1
Weighted average discount rate		7.56	%

Loans Payable (Tables)

6 Months Ended

Jun. 30, 2023

Loans Payable [Abstract]

Schedule of short-term bank loans

Short-term bank loans

	June 30,		December 31,
	2023		2022
Industrial and Commercial Bank of China (“ICBC”) Loan 1	$	4,773,174	$	5,023,978
ICBC Loan 2		-		287,167
ICBC Loan 3		-		143,583
ICBC Loan 4		415,179		-
China Construction Bank Loan		138,393		143,583
ICBC Loan 5		415,179		-
Total short-term bank loans	$	5,741,925	$	5,598,311

Schedule of long term loans

As of June 30, 2023 and December 31, 2022, long-term loans were $11,198,760 and $9,040,002, respectively.

	June 30,			December 31,
	2023			2022
Rural Credit Union of Xushui District Loan 1	$	1,190,180		$	1,234,816
Rural Credit Union of Xushui District Loan 2		3,459,824			3,589,582
Rural Credit Union of Xushui District Loan 3		2,214,288			2,297,332
Rural Credit Union of Xushui District Loan 4		1,799,109			1,866,582
Rural Credit Union of Xushui District Loan 5		2,491,073			-
Yujiangna		44,286			51,690
Total		11,198,760			9,040,002
Less: Current portion of long-term loans		(3,761,521	)		(4,835,884	)
Long-term loans	$	7,437,239		$	4,204,118

Schedule of long-term debt repayments

As of June 30, 2023, the Company’s long-term debt repayments for the next coming years were as follows:

Fiscal year
Remainder of 2023	$	3,761,521
2024		3,955,271
2025 & after		3,481,968
Total		11,198,760

Other Payables and Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2023

Other Payables and Accrued Liabilities [Abstract]

Schedule of other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

	June 30,		December 31,
	2023		2022
Accrued electricity	$	110,803	$	3,036
Accrued rental		123,795		56,646
Value-added tax payable		173,171		69,053
Accrued interest to a related party		586,470		608,465
Payable for purchase of equipment		3,093,355		3,294,940
Accrued commission to salesmen		16,155		19,524
Accrued bank loan interest		1,847,131		1,595,354
Others		144,926		18,540
Totals	$	6,095,806	$	5,665,558

Derivative Liabilities (Tables)

6 Months Ended

Jun. 30, 2023

Derivative Liabilities [Abstract]

Schedule of fair value warrant estimated valuation weighted average assumptions

The following weighted-average assumptions were used in the June 30, 2023:

			Six months ended
			June 30, 2023
Expected term			1.18 - 2.75
Expected average volatility			85% - 235%
Expected dividend yield			-
Risk-free interest rate			0.19% - 4.49%

Schedule of changes in the derivative liabilities

The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2023:

Balance at December 31, 2022	$	646,283
Addition of new derivatives recognized as warrant		-
Addition of new derivatives recognized as loss on derivatives		-
Exercise of warrants		-
Change in fair value of derivative liability		14,409
Balance at June 30, 2023	$	660,692

Warrants (Tables)

6 Months Ended

Jun. 30, 2023

Warrants [Abstract]

Schedule of stock warrant activities

A summary of stock warrant activities is as below:

	Six Months Ended June 30, 2023
	Number		Weight average exercise price
Outstanding and exercisable at beginning of the period		3,016,635	$	6.6907
Issued during the period		-
Exercised during the period		-
Outstanding and exercisable at end of the period		3,016,635	$	6.6907

Schedule of outstanding and exercisable warrants

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2023.

Warrants Outstanding						Warrants Exercisable
Number of Shares		Weighted Average Remaining Contractual life (in years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
	3,016,635		2.59	$	6.6907		3,016,635	$	6.6907

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Schedule of basic and diluted net income per share

basic and diluted net income per share are calculated as follows:

	Three Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.12	)	$	(0.03	)

Diluted income per share
Net income for the period- numerator	$	(1,253,493	)	$	(287,913	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.12	)	$	(0.03	)

	Six Months Ended June 30,
	2023			2022
Basic loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Net loss per share	$	(0.40	)	$	(0.28	)

Diluted loss per share
Net loss for the period - numerator	$	(3,986,658	)	$	(2,776,127	)
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Effect of dilution		-			-
Weighted average common stock outstanding - denominator		10,065,920			9,915,920

Diluted loss per share	$	(0.40	)	$	(0.28	)

Income Taxes (Tables)

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Schedule of provisions for income taxes

The provisions for income taxes for three months ended June 30, 2023 and 2022 were as follows:

	Three Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(472,236	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(243,829	)

	Six Months Ended
	June 30,
	2023		2022
Provision for Income Taxes
Current Tax Provision U.S.	$	-	$	-
Current Tax Provision PRC		351,260		228,407
Deferred Tax Provision PRC		-		(821,225	)
Total Provision for (Deferred tax benefit)/ Income Taxes	$	351,260	$	(592,818	)

Schedule of deferred tax

A summary of the otherwise deductible (or taxable) deferred tax items is as follows:

	June 30,			December 31,
	2023			2022
Deferred tax assets (liabilities)
Depreciation and amortization of property, plant and equipment	$	15,256,619		$	15,474,485
Impairment of property, plant and equipment		803,050			796,559
Miscellaneous		519,603			615,436
Net operating loss carryover of PRC company		227,972			213,620
Total deferred tax assets		16,807,244			17,100,100
Less: Valuation allowance		(16,807,244	)		(17,100,100	)
Total deferred tax assets, net	$	-			-

Schedule of reconciles the statutory rates effective tax rates

	Three Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(121.4	)%		20.9	%
Change in valuation allowance		57.5	%		-
Effective income tax rate		(38.9	)%		45.9	%

	Six Months Ended
	June 30,
	2023			2022
PRC Statutory rate		25.0	%		25.0	%
Effect of tax and book difference		(42.7	)%		(7.4	)%
Change in valuation allowance		8.0	%		-
Effective income tax rate		(9.7	)%		17.6	%

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies [Abstract]

Schedule of future minimum lease payments

Future minimum lease payments of the land lease is as follows:

June 30,	Amount
2024		16,607
2025		16,607
2026		16,607
2027		16,607
2028		16,607
Thereafter		58,125
Total operating lease payments		141,161

Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Schedule of financial information for reportable segments

Summarized financial information for the three reportable segments is as follows:

	Three Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination of		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			Inter-segment		consolidated

Revenues	$	29,631,400	$	344,268		$	44,246		$	-		$	-	$	30,019,914
Gross profit		1,893,087		(709,660	)		(3,569	)		-			-		1,179,858
Depreciation and amortization		996,939		2,071,666			395,209			-			-		3,463,814
Loss on impairment of assets		-		-			375,136			-			-		375,136
Interest income		47,763		844			4,486			544			-		53,637
Interest expense		144,083		53,991			72,607			-			-		270,681
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		937,333		(1,487,869	)		(443,841	)		(259,116	)		-		(1,253,493	)

	Three Months Ended
	June 30, 2022
	Dongfang Paper		Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment			Enterprise-wide, consolidated

Revenues	$	31,289,918	$	411,388		$	87,578		$	-	$	-		$	31,788,884
Gross profit		1,430,181		(814,347	)		18,203			-		-			634,037
Depreciation and amortization		1,210,646		2,188,973			419,464			-		-			3,819,083
Interest income		1,787		226			2,911			-		-			4,924
Interest expense		167,431		10,862			80,813			-		-			259,106
Income tax expense(benefit)		134,982		(379,460	)		649			-		-			(243,829	)
Net income (loss)		650,767		(2,003,653	)		(52,758	)		1,119,571		(1,840	)		(287,913	)

	Six Months Ended
	June 30, 2023
	Dongfang		Tengsheng			Baoding			Not Attributable			Elimination		Enterprise-wide,
	Paper		Paper			Shengde			to Segments			of Inter-segment		consolidated

Revenues	$	49,159,596		571,312			79,883			-			-		49,810,791
Gross profit		2,332,167		(1,422,900	)		(6,408	)		-			-		902,859
Depreciation and amortization		2,137,405		4,209,594			803,058			-			-		7,150,057
Loss on impairment of assets		-		--			375,136			-			-		375,136
Interest income		180,946		1,537			5,721			1,701			-		189,905
Interest expense		290,785		82,565			146,500			-			-		519,850
Income tax expense(benefit)		351,260		-			-			-			-		351,260
Net income (loss)		367,869		(3,407,989	)		(543,126	)		(403,412	)		-		(3,986,658	)

	Six Months Ended
	June 30, 2022
	Dongfang Paper			Tengsheng Paper			Baoding Shengde			Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated

Revenues	$	46,316,551			809,776			144,175			-		-		47,270,502
Gross profit		2,287,725			(1,378,124	)		34,881			-		-		944,482
Depreciation and amortization		2,481,138			4,250,910			860,271			-		-		7,592,319
Interest income		3,743			396			4,240			-		-		8,379
Interest expense		340,620			24,369			164,930			-		-		529,919
Income tax expense(benefit)		54,583			(790,651	)		143,250			-		-		(592,818	)
Net income (loss)		(53,906	)		(3,609,095	)		(284,648	)		1,139,359		32,163		(2,776,127	)

	As of June 30, 2023
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	68,995,988		110,116,827		13,287,358		4,342,716		-		196,742,889

	As of December 31, 2022
	Dongfang Paper		Tengsheng Paper		Baoding Shengde		Not Attributable to Segments		Elimination of Inter-segment		Enterprise-wide, consolidated
Total assets	$	63,365,986		117,645,828		17,945,969		5,489,450		-		204,447,233

Organization and Business Background (Details) ¥ / shares in Units, $ / shares in Units, ¥ in Millions			3 Months Ended		6 Months Ended
	Feb. 23, 2022 USD ($)	Feb. 23, 2022 CNY (¥)	Jun. 30, 2023 USD ($)	Jun. 30, 2022	Jun. 30, 2023 USD ($) ¥ / shares shares	Jun. 30, 2022	Dec. 31, 2022	Jun. 09, 2022 $ / shares	Dec. 31, 2010	Jun. 30, 2010 USD ($)	Feb. 10, 2010 USD ($)
Organization and Business Background (Details) [Line Items]
Common stock, par value (in Dollars per share) \| $ / shares								$ 0.001
Percentage of ownership					100.00%
Registered capital (in Dollars)										$ 60,000,000
Exercise price per share (in Yuan Renminbi per share) \| ¥ / shares					¥ 1
Percentage of distributable profit									100.00%
Percentage of revenue				99.73%	99.84%	99.70%
Dongfang Holding [Member]
Organization and Business Background (Details) [Line Items]
Aggregate shares of common stock (in Shares) \| shares					7,450,497
Percentage of ownership					100.00%
Baoding Shengde [Member]
Organization and Business Background (Details) [Line Items]
Percentage of ownership					100.00%
Registered capital (in Dollars)			$ 10,000,000		¥ 10,000,000
Loan agreement to terminate (in Dollars)											$ 10,000,000
Dongfang Paper [Member]
Organization and Business Background (Details) [Line Items]
Percentage of annual net profits			80.00%		80.00%
Principal amount (in Dollars)			$ 10,000,000		¥ 10,000,000
Loan amount (in Dollars)											$ 10,000,000
Percentage of distributable profit			100.00%		100.00%
Percentage of total assets			91.04%		91.04%		93.76%
Dongfang Paper [Member] \| Revenue [Member]
Organization and Business Background (Details) [Line Items]
Percentage of revenue			99.72%
Hebei Tengsheng [Member]
Organization and Business Background (Details) [Line Items]
Consideration amount	$ 45,000,000	¥ 320
Tengsheng Paper [Member]
Organization and Business Background (Details) [Line Items]
Percentage of distributable profit			100.00%		100.00%

Organization and Business Background (Details) - Schedule of subsidiaries and variable interest entities

6 Months Ended

Jun. 30, 2023

Dongfang Holding [Member]

Subsidiary:

Date of Incorporation or Establishment

November 13, 2006

Place of Incorporation or Establishment

BVI

Percentage of Ownership

100.00%

Principal Activity

Inactive investment holding

Shengde Holdings [Member]

Subsidiary:

Date of Incorporation or Establishment

February 25, 2009

Place of Incorporation or Establishment

State of Nevada

Percentage of Ownership

100.00%

Principal Activity

Investment holding

Baoding Shengde [Member]

Subsidiary:

Date of Incorporation or Establishment

June 1, 2009

Place of Incorporation or Establishment

PRC

Percentage of Ownership

100.00%

Principal Activity

Paper production and distribution

Qianrong [Member]

Subsidiary:

Date of Incorporation or Establishment

July 15, 2021

^[1]

Place of Incorporation or Establishment

PRC

^[1]

Percentage of Ownership

100.00%

^[1]

Principal Activity

New material technology service

^[1]

Dongfang Paper [Member]

Subsidiary:

Date of Incorporation or Establishment

March 10, 1996

Place of Incorporation or Establishment

PRC

Percentage of Ownership

^[2]

Principal Activity

Paper production and distribution

Tengsheng Paper [Member]

Subsidiary:

Date of Incorporation or Establishment

April 07, 2011

Place of Incorporation or Establishment

PRC

Percentage of Ownership

^[3]

Principal Activity

Paper production and distribution

[1]	Qianrong is a wholly owned subsidiary of ShengdeHolding.
[2]	Dongfang Paper is treated as a 100% controlled variable interest entity of the Company.
[3]	Tengsheng Paper is 100% subsidiary of Dongfang Paper.

Organization and Business Background (Details) - Schedule of aggregate carrying value of Dongfang Paper’s assets and liabilities - VIE [Member] - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current Assets
Cash and bank balances	$ 6,167,612	$ 3,427,717
Restricted cash
Accounts receivable	2,416,572
Inventories	6,090,692	2,852,553
Prepayments and other current assets	16,588,442	20,134,386
Due from related parties	7,320,686	7,418,274
Total current assets	38,584,004	33,832,930
Prepayment on property, plant and equipment	2,668,992	1,031,502
Operating lease right-of-use assets, net	648,404	672,722
Finance lease right-of-use assets, net	1,796,034	1,939,970
Property, plant, and equipment, net	135,415,381	143,534,690
Total Assets	179,112,815	181,011,814
Current Liabilities
Short-term bank loans	5,326,746	5,598,311
Current portion of long-term loans	1,547,234	4,835,885
Lease liability	108,227	224,497
Accounts payable	127,543	5,025
Advance from customers	10,192
Due to related parties	81,790
Accrued payroll and employee benefits	266,741	143,156
Other payables and accrued liabilities	5,089,492	4,887,584
Income taxes payable	337,681	417,906
Total current liabilities	12,895,646	16,112,364
Long-term loans	5,638,131	40,203
Deferred gain on sale-leaseback	7,203	52,314
Lease liability - non-current	559,031	579,997
Total liabilities	$ 19,100,011	$ 16,784,878

Basis of Presentation and Significant Accounting Policies (Details)	Jun. 09, 2022 $ / shares
Accounting Policies [Abstract]
Par value per share of stock.	$ 0.001

Inventories (Details) - Schedule of inventories - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Raw Materials
Raw materials	$ 5,507,151	$ 1,471,436
Semi-finished Goods	395,327	132,810
Finished Goods	666,845	1,268,376
Total inventory, gross	6,569,323	2,872,622
Inventory reserve
Total inventory, net	6,569,323	2,872,622
Recycled Paper Board [Member]
Raw Materials
Raw materials	4,871,125	1,258,161
Recycled White Scrap Paper [Member]
Raw Materials
Raw materials	10,436	10,809
Gas [Member]
Raw Materials
Raw materials	142,533	42,237
Base Paper and Other Raw Materials [Member]
Raw Materials
Raw materials	$ 483,057	$ 160,229

Prepayments and Other Current Assets (Details) - Schedule of prepayments and other current assets - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Schedule of Prepayments and Other Current Assets [Abstract]
Prepaid land lease	$ 166,072	$ 172,300
Prepayment for purchase of materials	4,860,289	12,941,951
Value-added tax recoverable	13,343,141	13,640,868
Prepaid gas	763	27,462
Others	893,588	424,546
Total	$ 19,263,853	$ 27,207,127

Property, plant and equipment, net (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
Property, plant and equipment, net (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Property, plant and equipment, net (Details) [Line Items]
Term of lease, description			As of June 30, 2023 and December 31, 2022, land use rights represented twenty-three parcels of state-owned lands located in Xushui District and Wei County of Hebei Province in China, with lease terms of 50 years expiring in 2061 and 2068, respectively.
Property, plant and equipment net value	$ 59,048		$ 59,048
Land use right net values	4,098,523		4,098,523		$ 4,301,204
Value of land use right pledged for bank loan	3,756,342		3,756,342		3,948,953
Land use right			5,099,089
Impairment loss	375,136		375,136
Depreciation and amortization	$ 3,686,243	$ 3,819,083	$ 7,150,057	$ 7,592,319
Dongfang Paper [Member]
Property, plant and equipment, net (Details) [Line Items]
Property, plant and equipment net value					$ 280,466
Hebei Tengsheng [Member]
Property, plant and equipment, net (Details) [Line Items]
Land use right net value			$4,869,528		$5,111,014

Property, plant and equipment, net (Details) - Schedule of property, plant and equipment - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Totals	$ 279,214,057	$ 286,406,838
Less: accumulated depreciation and amortization	(137,190,295)	(134,836,940)
Property, Plant and Equipment, net	142,023,762	151,569,898
Land use rights [Member]
Property, Plant and Equipment [Line Items]
Totals	58,651,394	57,686,220
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Totals	65,834,138	68,300,987
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Totals	152,565,658	158,498,316
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Totals	656,978	681,617
Construction in progress [Member]
Property, Plant and Equipment [Line Items]
Totals	$ 1,505,889	$ 1,239,698

Leases (Details)			3 Months Ended		6 Months Ended
Leases (Details)	Aug. 06, 2020 USD ($)	Aug. 06, 2020 CNY (¥)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 CNY (¥)	Jun. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)	Aug. 17, 2020 USD ($)
Leases (Details) [Line Items]
Sale of lease equipment \| ¥		¥ 16,000,000
Right-of-use assets			$ 1,796,034		$ 1,796,034			$ 1,939,970
Implicit interest rate									15.60%
Inception of lease									$ 567,099
Leased equipment net			1,796,034		1,796,034			1,939,970
Lease liability			18,854		18,854			131,772
Current portion amount			18,854		18,854			$ 131,772
Interest expenses			2,182	$ 10,862	6,671		$ 24,369
Deferred gain amount					430,695
Equipment [Member]
Leases (Details) [Line Items]
Amortization of leased asset			$ 37,661	$ 39,972	76,526		$ 81,978
TLCL [Member]
Leases (Details) [Line Items]
Right-of-use assets									$ 2,349,452
Hebei Tengsheng [Member]
Leases (Details) [Line Items]
Finance proceeding amount	$ 2,500,000	¥ 16,000,000
TLCL [Member]
Leases (Details) [Line Items]
Sale of lease equipment	$ 2,500,000
Purchase price					$ 16	¥ 100

Leases (Details) - Schedule of future minimum lease payments of the capital lease	Dec. 31, 2023 USD ($)
Schedule of future minimum lease payments of the capital lease [Abstract]
2023	$ 19,098
Less: unearned discount	(244)
Lease payment gross	18,854
Less: Current portion lease liability	(18,854)
Lease payment net

Leases (Details) - Schedule of lease expense	6 Months Ended
Leases (Details) - Schedule of lease expense	Jun. 30, 2023 CNY (¥)
Schedule of lease expense [Abstract]
Operating lease cost	¥ 69,196
Short-term lease cost
Lease cost	¥ 69,196

Leases (Details) - Schedule operating leases	6 Months Ended
Leases (Details) - Schedule operating leases	Jun. 30, 2023 CNY (¥)
Schedule operating leases [Abstract]
Operating cash outflow from operating leases

Leases (Details) - Schedule of maturities of its lease liabilities - Operating Lease [Member]	6 Months Ended
	Jun. 30, 2023 USD ($)
Schedule of maturities of its lease liabilities [Abstract]
2024	$ 138,393
2025	138,393
2026	276,786
2027
2028	138,393
Thereafter	138,393
Total operating lease payments	830,358
Less: Interest	(181,954)
Present value of lease liabilities	648,404
Less: current portion, record in current liabilities	(89,373)
Present value of lease liabilities	$ 559,031

Leases (Details) - Schedule of weighted average remaining lease terms and discount rates	Jun. 30, 2023
Schedule of weighted average remaining lease terms and discount rates [Abstract]
Weighted average remaining lease term (years)	5 years 1 month 6 days
Weighted average discount rate	7.56%

Loans Payable (Details)					1 Months Ended		3 Months Ended		6 Months Ended
Loans Payable (Details)	Feb. 26, 2023	Dec. 12, 2019	Nov. 06, 2018	Jul. 15, 2013	Apr. 17, 2019	Apr. 16, 2014	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 19, 2023	May 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Nov. 15, 2022	Jul. 01, 2022 USD ($)	Jul. 01, 2022 CNY (¥)
Loans Payable (Details) [Line Items]
Short-term bank loans							$ 5,741,925		$ 5,741,925				$ 5,598,311
Repaid loan												$ 71,743
Short-term borrowings							4,773,174		4,773,174				5,023,978
Unsecured bank loans							$ 968,751		$ 968,751				574,333
Average short-term borrowing rates							4.83%	4.79%	4.77%	4.79%
Long-term loan							$ 11,198,760		$ 11,198,760				9,040,002
Manufacturing equipment with net book value							142,023,762		142,023,762				151,569,898
Interest expense							$ 268,499	$ 248,244	$ 513,179	$ 505,550
Rural Credit Union of Xushui District [Member]
Loans Payable (Details) [Line Items]
Installment repayment, description						the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally duein various installments from June 21, 2014 to November 18, 2018.
Rural Credit Union of Xushui District Loan 1 [Member]
Loans Payable (Details) [Line Items]
Installment repayment, description			the loan was renewed for additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023.
Rural Credit Union of Xushui District Loan 1 [Member]
Loans Payable (Details) [Line Items]
Interest payment percent							7.68%		7.68%
Interest rate percentage														7.00%
Total outstanding loan current							$ 1,190,180		$ 1,190,180				1,234,816
Rural Credit Union of Xushui District Loan 2 [Member]
Loans Payable (Details) [Line Items]
Installment repayment, description				On July 15, 2013, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due and payable in various installments from December 21, 2013 to July 26, 2018. On June 21, 2018, the loan was extended for additional 5 years andwas due and payable in various installments from December 21, 2018 to June 20, 2023.
Interest payment percent							7.68%		7.68%
Interest rate percentage														7.00%
Total outstanding loan current							$ 3,459,824		$ 3,459,824				3,589,582
Loan extended											5 years
Manufacturing equipment with net book value							$ 59,048		$ 59,048				280,466
Rural Credit Union of Xushui District Loan 3 [Member]
Loans Payable (Details) [Line Items]
Installment repayment, description					On April 17, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which was due and payable in various installments from August 21, 2019 to April 16, 2021. The loan was renewed on March 22, 2021 and December 24, 2021 and extended for additional 3 years in total, which will be due on April 16, 2024 according to the new schedule.
Interest payment percent							7.68%		7.68%
Interest rate percentage														7.00%
Total outstanding loan current							$ 2,214,288		$ 2,214,288				2,297,332
Rural Credit Union of Xushui District Loan 4 [Member]
Loans Payable (Details) [Line Items]
Installment repayment, description		On December 12, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which is due and payable in various installments from June 21, 2020 to December 11, 2021. The loan was renewed on March 22, 2021 and December 24, 2021 and extended for additional 3 years in total, which will be due on December 11, 2024 according to the new schedule.
Interest payment percent							7.56%		7.56%
Interest rate percentage														7.00%
Total outstanding loan current							$ 1,799,109		$ 1,799,109				1,866,582
Rural Credit Union of Xushui District Loan 5 [Member]
Loans Payable (Details) [Line Items]
Interest rate percentage							7.00%		7.00%
Total outstanding loan current							$ 2,491,073		$ 2,491,073
Lease term	2 years
Total outstanding loan balance							345,982		345,982
Other Liabilities, Noncurrent							2,145,092		2,145,092
Jiangna Yu [Member]
Loans Payable (Details) [Line Items]
Total outstanding loan current							33,214		33,214				40,204
Borrowed amount															$ 55,357	¥ 400,000
Loan payable							11,072		11,072				11,486		$ 1,531	¥ 10,667
Total outstanding loan balance							44,286		44,286				51,690
Industrial and Commercial Bank of China (“ICBC”) [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans							$ 4,773,174		$ 4,773,174				5,023,978
Loans fixed interest rate							4.785%		4.785%
Industrial and Commercial Bank of China (“ICBC”) Loan 1 [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans													287,167
Loans fixed interest rate							4.25%		4.25%
Industrial and Commercial Bank of China (“ICBC”) Loan 2 [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans													143,583
Loans fixed interest rate							4.25%		4.25%
Industrial and Commercial Bank of China (“ICBC”) Loan 3 [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans							$ 415,179		$ 415,179
Loans fixed interest rate							4.25%		4.25%
Industrial and Commercial Bank of China (“ICBC”) Loan 4 [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans							$ 138,393		$ 138,393				$ 143,583
Loans fixed interest rate							3.95%		3.95%
Industrial and Commercial Bank of China (“ICBC”) Loan 5 [Member]
Loans Payable (Details) [Line Items]
Short-term bank loans							$ 415,179		$ 415,179
Loans fixed interest rate							3.55%		3.55%

Loans Payable (Details) - Schedule of short-term bank loans - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Short-Term Debt [Line Items]
Total short-term bank loans	$ 5,741,925	$ 5,598,311
Industrial and Commercial Bank of China (“ICBC”) Loan 1 [Member]
Short-Term Debt [Line Items]
Total short-term bank loans	4,773,174	5,023,978
ICBC Loan 2 [Member]
Short-Term Debt [Line Items]
Total short-term bank loans		287,167
ICBC Loan 3 [Member]
Short-Term Debt [Line Items]
Total short-term bank loans		143,583
ICBC Loan 4 [Member]
Short-Term Debt [Line Items]
Total short-term bank loans	415,179
China Construction Bank Loan [Member]
Short-Term Debt [Line Items]
Total short-term bank loans	138,393	143,583
ICBC Loan 5 [Member]
Short-Term Debt [Line Items]
Total short-term bank loans	$ 415,179

Loans Payable (Details) - Schedule of long term loans - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Total	$ 11,198,760	$ 9,040,002
Less: Current portion of long-term loans	(3,761,521)	(4,835,884)
Long-term loans	7,437,239	4,204,118
Rural Credit Union of Xushui District Loan 1 [Member]
Debt Instrument [Line Items]
Total	1,190,180	1,234,816
Rural Credit Union of Xushui District Loan 2 [Member]
Debt Instrument [Line Items]
Total	3,459,824	3,589,582
Rural Credit Union of Xushui District Loan 3 [Member]
Debt Instrument [Line Items]
Total	2,214,288	2,297,332
Rural Credit Union of Xushui District Loan 4 [Member]
Debt Instrument [Line Items]
Total	1,799,109	1,866,582
Rural Credit Union of Xushui District Loan 5 [Member]
Debt Instrument [Line Items]
Total	2,491,073
Yujiangna [Member]
Debt Instrument [Line Items]
Total	$ 44,286	$ 51,690

Loans Payable (Details) - Schedule of long-term debt repayments	Jun. 30, 2023 USD ($)
Schedule of Long Term Debt Repayments [Abstract]
Remainder of 2023	$ 3,761,521
2024	3,955,271
2025 & after	3,481,968
Total	$ 11,198,760

Related Party Transactions (Details)		1 Months Ended				3 Months Ended	6 Months Ended	12 Months Ended
Related Party Transactions (Details)	Dec. 10, 2014 USD ($)	Dec. 31, 2019 USD ($)	Nov. 23, 2018 USD ($)	Feb. 28, 2018 USD ($)	Dec. 31, 2015 USD ($)	Mar. 31, 2022 USD ($)	Jun. 30, 2023 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2022 USD ($)	Nov. 30, 2022 USD ($)	Nov. 30, 2022 CNY (¥)	Oct. 31, 2022 USD ($)	Oct. 31, 2022 CNY (¥)	Dec. 08, 2021 USD ($)	Dec. 08, 2021 CNY (¥)	Oct. 14, 2016 USD ($)	Jul. 13, 2015 USD ($)	Mar. 01, 2015 USD ($)	Mar. 01, 2015 CNY (¥)
Related Party Transactions (Details) [Line Items]
Interest amount		$ 94,636		$ 20,400	$ 2,249,279
Amount due to shareholder							$ 810,631		$ 727,462
Due amount							7,459,079		7,561,858
Due date	Dec. 10, 2017
Outstanding loan balance							$ 190,204
Loan due description							Mr. Zhenyong Liu agreed to extend the loan for additional 3 years and the remaining balance was due on July 12, 2021.
Loans amount
Interest expense
Accrued interest							144,926		18,540
Borrowing amount										$ 7,276,220	¥ 50,000,000	$ 7,276,220	¥ 50,000,000
Interest income							176,847
Chief Executive Officer [Member]
Related Party Transactions (Details) [Line Items]
Due amount																$ 2,883,091	$ 4,324,636	$ 17,201,342	¥ 120,000,000
Outstanding loan balance									197,338
Related Party [Member]
Related Party Transactions (Details) [Line Items]
Amount due to shareholder					$ 391,374
Due amount							727,433		727,433
Mr Zhenyong Liu [Member]
Related Party Transactions (Details) [Line Items]
Due amount								$ 6,012,416						$ 6,507,431	¥ 44,089,085
Due date				Jul. 12, 2018
Interest paid								$ 288,596
Outstanding loan balance							$ 41,518		43,075
Fixed interest rate							4.35%							3.00%	3.00%
Mr Zhenyong Liu [Member] \| Dongfang Paper [Member]
Related Party Transactions (Details) [Line Items]
Interest amount			$ 158,651
Other payables and accrued liabilities							$ 354,748		368,052
Due amount	$ 8,742,278
Interest rate on loans	4.35%
Repayment of related party loans			$ 3,768,579	$ 1,507,432
Mr Zhenyong Liu [Member] \| Chief Executive Officer [Member]
Related Party Transactions (Details) [Line Items]
Accrued interest							$ 586,470		$ 608,465

Other Payables and Accrued Liabilities (Details) - Schedule of other payables and accrued liabilities - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Schedule of Other Payables and Accrued Liabilities [Abstract]
Accrued electricity	$ 110,803	$ 3,036
Accrued rental	123,795	56,646
Value-added tax payable	173,171	69,053
Accrued interest to a related party	586,470	608,465
Payable for purchase of equipment	3,093,355	3,294,940
Accrued commission to salesmen	16,155	19,524
Accrued bank loan interest	1,847,131	1,595,354
Others	144,926	18,540
Totals	$ 6,095,806	$ 5,665,558

Derivative Liabilities (Details) - Schedule of fair value warrant estimated valuation weighted average assumptions	6 Months Ended
	Jun. 30, 2023
Product Warranty Liability [Line Items]
Expected dividend yield
Minimum [Member]
Product Warranty Liability [Line Items]
Expected term	1 year 2 months 4 days
Expected average volatility	85.00%
Risk-free interest rate	0.19%
Maximum [Member]
Product Warranty Liability [Line Items]
Expected term	2 years 9 months
Expected average volatility	235.00%
Risk-free interest rate	4.49%

Derivative Liabilities (Details) - Schedule of changes in the derivative liabilities	6 Months Ended
	Jun. 30, 2023 USD ($)
Schedule of Changes in the Derivative Liabilities [Abstract]
Balance at December 31, 2022	$ 646,283
Addition of new derivatives recognized as warrant
Addition of new derivatives recognized as loss on derivatives
Exercise of warrants
Change in fair value of derivative liability	14,409
Balance at June 30, 2023	$ 660,692

Common Stock (Details) - USD ($)					1 Months Ended	6 Months Ended
Common Stock (Details) - USD ($)	Aug. 15, 2022	Jun. 09, 2022	Jun. 09, 2022	Mar. 01, 2021	Jan. 20, 2021	Jun. 30, 2023
Common Stock [Abstract]
Aggregate shares					2,618,182
Warrants purchase					2,618,182
Common stock and warrants					2,618,182
Gross proceeds (in Dollars per share)					$ 14,400,000
Corresponding price per share (in Dollars per share)						$ 5.5
Exercise price of warrants (in Dollars per share)						5.5
Aggregate shares of common stock				2,927,786
Warrants to purchase shares				1,463,893
Shares of common stock	150,000			1,463,893
Public offering for gross proceeds (in Dollars)				$ 21,900,000
Warrant Price (in Dollars per share)						7.5
Exercise price warrant (in Dollars per share)						$ 7.5
Reverse stock split, per share (in Dollars per share)		$ 0.001
Total fair value of stock of grant (in Dollars)	$ 156,000
Reverse stock split			1-for-10

Warrants (Details) - $ / shares		1 Months Ended
Warrants (Details) - $ / shares	Mar. 01, 2021	Jan. 20, 2021	Apr. 29, 2020
Warrants (Details) [Line Items]
Issuance of common stock and warrants		2,618,182
Warrant term, description	The March 2021 Warrants became exercisable on March 1, 2021 at an exercise price of $7.5 and will expire on March 1, 2026. 6,750 March 2021 Warrants were exercised in January and March 2021 at the exercise price of $7.5 per share and 1,457,143 March 2021 Warrants were outstanding as of June 30, 2023.	The January 2021 Warrants became exercisable on January 20, 2021 at an exercise price of $5.5 and will expire on January 20, 2026. 1,410,690 January 2021 Warrants were exercised in January and February of 2021 at the exercise price of $5.5 per share. 1,207,492 January 2021 Warrants were outstanding as of June 30, 2023.	These warrants become exercisable on July 23, 2020 and have a term of exercise equal to five years and six months from the date of issuance till July 23, 2025. 88,000 May 2020 Warrants were exercised in February 2021 at the exercise price of $7.425 per share and 352,000 May 2020 Warrants were outstanding as of June 30, 2023.
Warrants to purchase shares of common stock	1,463,893	2,618,182
Private Placement [Member]
Warrants (Details) [Line Items]
Issuance of common stock and warrants			440,000
Warrant [Member]
Warrants (Details) [Line Items]
Issuance of common stock and warrants	2,927,786		440,000
Exercise price (in Dollars per share)			$ 7.425
Warrants to purchase shares of common stock	1,463,893	2,618,182

Warrants (Details) - Schedule of stock warrant activities	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Schedule of Stock Warrant Activities [Abstract]
Number of Outstanding and exercisable at beginning of the period	3,016,635
Weight average exercise price of Outstanding and exercisable at beginning of the period (in Dollars per share) \| $ / shares	$ 6.6907
Number of Issued during the period
Number of Exercised during the period
Number of Outstanding and exercisable at end of the period	3,016,635
Weight average exercise price of Outstanding and exercisable at end of the period (in Dollars per share) \| $ / shares	$ 6.6907

Warrants (Details) - Schedule of outstanding and exercisable warrants - Warrant [Member]	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Warrants (Details) - Schedule of outstanding and exercisable warrants [Line Items]
Warrants Outstanding, Number of Shares \| shares	3,016,635
Warrants Outstanding, Weighted Average Remaining Contractual life (in years)	2 years 7 months 2 days
Warrants Outstanding, Weighted Average Exercise Price \| $ / shares	$ 6.6907
Warrants Exercisable, Number of Shares \| shares	3,016,635
Warrants Exercisable, Weighted Average Exercise Price \| $ / shares	$ 6.6907

Earnings Per Share (Details) - Schedule of basic and diluted net income per share - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Basic loss per share
Net loss for the period - numerator	$ (1,253,493)	$ (287,913)	$ (3,986,658)	$ (2,776,127)
Weighted average common stock outstanding - denominator	10,065,920	9,915,920	10,065,920	9,915,920
Net loss per share	$ (0.12)	$ (0.03)	$ (0.4)	$ (0.28)
Diluted income per share
Net income for the period- numerator	$ (1,253,493)	$ (287,913)	$ (3,986,658)	$ (2,776,127)
Weighted average common stock outstanding - denominator	10,065,920	9,915,920	10,065,920	9,915,920
Effect of dilution
Diluted loss per share	$ (0.12)	$ (0.03)	$ (0.4)	$ (0.28)

Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
Income Taxes (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Income Taxes (Details) [Line Items]
Statutory tax rate	25.00%	25.00%	25.00%	25.00%
Description of carry forwards expire			These carry forwards would expire, if not utilized, during the period of 2030 through 2035.
Percentage of valuation allowance	100.00%		100.00%		100.00%
Effective income tax rate	(38.90%)	45.90%	(9.70%)	17.60%
Income tax, statute of limitations period			5 years
United States [Member]
Income Taxes (Details) [Line Items]
Statutory tax rate			21.00%
China [Member]
Income Taxes (Details) [Line Items]
Net operating losses (in Dollars)					$ 530,581	$ 761,881

Income Taxes (Details) - Schedule of provisions for income taxes - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Schedule Of Provisions For Income Taxes Abstract
Current Tax Provision U.S.
Current Tax Provision PRC	351,260	228,407	351,260	228,407
Deferred Tax Provision PRC		(472,236)		(821,225)
Total Provision for (Deferred tax benefit)/ Income Taxes	$ 351,260	$ (243,829)	$ 351,260	$ (592,818)

Income Taxes (Details) - Schedule of deferred tax - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Deferred tax assets (liabilities)
Depreciation and amortization of property, plant and equipment	$ 15,256,619	$ 15,474,485
Impairment of property, plant and equipment	803,050	796,559
Miscellaneous	519,603	615,436
Net operating loss carryover of PRC company	227,972	213,620
Total deferred tax assets	16,807,244	17,100,100
Less: Valuation allowance	(16,807,244)	(17,100,100)
Total deferred tax assets, net

Income Taxes (Details) - Schedule of reconciles the statutory rates effective tax rates	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Schedule of Reconciles the Statutory Rates Effective Tax Rates [Abstract]
PRC Statutory rate	25.00%	25.00%	25.00%	25.00%
Effect of tax and book difference	(121.40%)	20.90%	(42.70%)	(7.40%)
Change in valuation allowance	57.50%		8.00%
Effective income tax rate	(38.90%)	45.90%	(9.70%)	17.60%

Stock Incentive Plans (Details) - USD ($)	Jun. 30, 2023	Aug. 15, 2022	Nov. 12, 2021
Stock Incentive Plans [Abstract]
Number of shares			150,000
Aggregate shares		150,000
Fair value of stock (in Dollars)	$ 156,000

Commitments and Contingencies (Details)		6 Months Ended
Commitments and Contingencies (Details)	Aug. 07, 2013	Jun. 30, 2023 USD ($) m²	Jun. 30, 2023 CNY (¥) m²	Dec. 31, 2022 USD ($)	Dec. 31, 2022 CNY (¥)
Commitments and Contingencies (Details) [Line Items]
Cash prices, description	the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively
Annual rental total		$ 143,486	¥ 1,000,000
Outstanding commitments amount		$ 3,889,576		$ 4,329,279
Performance holdback on new tissue paper payment, description		The Company expected to pay off all the balances within 1-3 years.
Long-term loan from financial institutions		$ 4,290,182			¥ 31,000,000
Xushui Land Lease [Member]
Commitments and Contingencies (Details) [Line Items]
Area of land (in Square Meters) \| m²		32.95	32.95
Lease expiration period		30 years
Annual rental payment		$ 17,218
Annual rental (in Yuan Renminbi) \| ¥			¥ 120,000

Commitments and Contingencies (Details) - Schedule of future minimum lease payments - Land lease [Member]	Jun. 30, 2023 USD ($)
Commitments and Contingencies (Details) - Schedule of future minimum lease payments [Line Items]
2024	$ 16,607
2025	16,607
2026	16,607
2027	16,607
2028	16,607
Thereafter	58,125
Total operating lease payments	$ 141,161

Segment Reporting (Details) - Schedule of financial information for reportable segments - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Dongfang Paper [Member]
Segment Reporting Information [Line Items]
Revenues	$ 29,631,400	$ 31,289,918	$ 49,159,596	$ 46,316,551
Gross profit	1,893,087	1,430,181	2,332,167	2,287,725
Depreciation and amortization	996,939	1,210,646	2,137,405	2,481,138
Interest income	47,763	1,787	180,946	3,743
Interest expense	144,083	167,431	290,785	340,620
Income tax expense(benefit)	351,260	134,982	351,260	54,583
Net income (loss)	937,333	650,767	367,869	(53,906)
Total assets	68,995,988		68,995,988		$ 63,365,986
Tengsheng Paper [Member]
Segment Reporting Information [Line Items]
Revenues	344,268	411,388	571,312	809,776
Gross profit	(709,660)	(814,347)	(1,422,900)	(1,378,124)
Depreciation and amortization	2,071,666	2,188,973	4,209,594	4,250,910
Interest income	844	226	1,537	396
Interest expense	53,991	10,862	82,565	24,369
Income tax expense(benefit)		(379,460)		(790,651)
Net income (loss)	(1,487,869)	(2,003,653)	(3,407,989)	(3,609,095)
Total assets	110,116,827		110,116,827		117,645,828
Baoding Shengde [Member]
Segment Reporting Information [Line Items]
Revenues	44,246	87,578	79,883	144,175
Gross profit	(3,569)	18,203	(6,408)	34,881
Depreciation and amortization	395,209	419,464	803,058	860,271
Loss on impairment of assets	375,136		375,136
Interest income	4,486	2,911	5,721	4,240
Interest expense	72,607	80,813	146,500	164,930
Income tax expense(benefit)		649		143,250
Net income (loss)	(443,841)	(52,758)	(543,126)	(284,648)
Total assets	13,287,358		13,287,358		17,945,969
Not Attributable to Segments [Member]
Segment Reporting Information [Line Items]
Revenues
Gross profit
Depreciation and amortization
Interest income	544		1,701
Interest expense
Income tax expense(benefit)
Net income (loss)	(259,116)	1,119,571	(403,412)	1,139,359
Total assets	4,342,716		4,342,716		5,489,450
Elimination of Inter-segment [Member]
Segment Reporting Information [Line Items]
Revenues
Gross profit
Depreciation and amortization
Interest income
Interest expense
Income tax expense(benefit)
Net income (loss)		(1,840)		32,163
Total assets
Enterprise-wide, consolidated [Member]
Segment Reporting Information [Line Items]
Revenues	30,019,914	31,788,884	49,810,791	47,270,502
Gross profit	1,179,858	634,037	902,859	944,482
Depreciation and amortization	3,463,814	3,819,083	7,150,057	7,592,319
Loss on impairment of assets	375,136		375,136
Interest income	53,637	4,924	189,905	8,379
Interest expense	270,681	259,106	519,850	529,919
Income tax expense(benefit)	351,260	(243,829)	351,260	(592,818)
Net income (loss)	(1,253,493)	$ (287,913)	(3,986,658)	$ (2,776,127)
Total assets	$ 196,742,889		$ 196,742,889		$ 204,447,233

Concentration and Major Customers and Suppliers (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Total Sales [Member]
Concentration and Major Customers and Suppliers (Details) [Line Items]
Concentration credit risk, percentage	10.00%	10.00%	10.00%	10.00%
One Supplier [Member]
Concentration and Major Customers and Suppliers (Details) [Line Items]
Concentration credit risk, percentage	74.00%	77.00%	67.00%	77.00%
Two Suppliers [Member]
Concentration and Major Customers and Suppliers (Details) [Line Items]
Concentration credit risk, percentage	16.00%	16.00%	13.00%	15.00%
Three Suppliers [Member]
Concentration and Major Customers and Suppliers (Details) [Line Items]
Concentration credit risk, percentage	6.00%	5.00%	10.00%	5.00%

Concentration of Credit Risk (Details)	May 01, 2015 USD ($)	May 01, 2015 CNY (¥)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 CNY (¥)
Concentration of Credit Risk (Details) [Line Items]
Per depositor per insured financial intuition	$ 69,196	¥ 500,000
Maximum coverage from FDIC \| $			$ 10,678,782
Minimum [Member]
Concentration of Credit Risk (Details) [Line Items]
Maximum coverage from FDIC				¥ 500,000
Maximum [Member]
Concentration of Credit Risk (Details) [Line Items]
Maximum coverage from FDIC				¥ 77,162,745