UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐TRANSITION REPORT PURSUANT TO 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)
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
Science Park, Juli Road,
Xushui District, Baoding City
Hebei Province, The People’s Republic
of China072550
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code: (86)312-8698215
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 ITP NYSE American
Securities registered pursuant to section 12(g)
of the Act:
Common Stock
(Title of class)
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
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, a 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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the voting and non-voting
common stock of the registrant held by non-affiliates as of June 28, 2024 was approximately $2,190,567 based upon 9,524,204 shares of
common stock held by non-affiliates and the closing price of the common stock of $0.23 per share on June 28, 2024.
As of April 11, 2025, there were 10,065,920 shares
of the registrant’s common stock, par value $0.001, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
Page
PART I
Item 1. BUSINESS 1
Item 1A. RISK FACTORS 23
Item 1B. UNRESOLVED STAFF COMMENTS 45
Item 1C CYBERSECURITY 45
Item 2. PROPERTIES 45
Item 3. LEGAL PROCEEDINGS 46
Item 4. MINE SAFETY DISCLOSURES 46
PART II
Item 6. [RESERVED] 47
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 60
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 60
Item 9A. CONTROLS AND PROCEDURES 61
Item 9B. OTHER INFORMATION 61
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION. 61
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 62
Item 11. EXECUTIVE COMPENSATION 66
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 70
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 71
SIGNATURES 75
i
INTRODUCTION
All references to “we,”
“us,” “our,” or similar terms used in this annual report refer to IT Tech Packaging, Inc., a Nevada corporation,
including its wholly-owned subsidiaries, and, in the context of describing our operations and consolidated financial information, our
variable interest entity in China, Hebei Baoding Dongfang Paper Milling Company Limited, or Dongfang Paper. “IT Tech Packaging”
refers to IT Tech Packaging, Inc. “VIE” or “Dongfang Paper” refers to our variable interest entity in China. “Baoding
Shengde” refers to our wholly-owned subsidiary, Baoding Shengde Paper Co., Ltd, a PRC company. “Qianrong”, refers to
our indirect wholly-owned subsidiary, QianrongQianhui Hebei Technology Co., Ltd, a PRC company. “Tengsheng Paper” refers to
the subsidiary of Dongfang Paper, Hebei Tengsheng Paper Co., Ltd., a PRC company.
All references to “PRC”
or “China” refers to the People’s Republic of China, including, for the purpose of this annual report, Taiwan, Hong
Kong and Macau; all references to “RMB” or “Renminbi” refer to the legal currency of China; all references to
“US$,” “dollars,” “U.S. dollars” and “$” refer to the legal currency of the United States.
This annual report on Form
10-K includes our audited consolidated statements of income and comprehensive income and our audited consolidated balance sheets as of
December 31, 2024 and 2023.
FORWARD LOOKING STATEMENTS
This Annual Report on Form
10-K contains “forward-looking statements.” These statements are made under the “safe harbor” provisions of the
U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terms such as “may,”
“will,” “expects,” “anticipates,” “future,” “intend,” “plan,”
“believe,” “estimate,” “is/are likely to” and similar expressions. These statements involve known
and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences in results
and outcomes include, without limitation, our anticipated revenues from the corrugating medium paper business segment and offset printing
paper business, our ability to implement the planned capacity expansion of tissue paper, our ability to introduce new products, market
acceptance of new products, general economic and business conditions, the ability to attract or retain qualified senior management personnel
and research and development staff, and those specifically addressed under the headings “Risks Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” The forward-looking statements made in this annual report
relate only to events as of the date on which the statements are made. We undertake no obligation, beyond any than as required by law,
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, even though
our situation changes in the future.
We operate in an emerging
and evolving environment. New risk factors emerge from time to time and it is impossible for our management to predict all risk factors,
nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking statement.
ii
PART I
Item 1. Business
IT Tech Packaging, Inc.
(the “Company,” “IT Tech Packaging,” or “ITP”) is not an operating company but a Nevada holding company
with operations primarily conducted by its subsidiaries and through contractual arrangements with Hebei Baoding Dongfang Paper Milling
Company Limited, a People’s Republic of China company (“Dongfang Paper”), the variable interest entity, or VIE, based
in China. IT Tech Packaging operated its business in China through its wholly-owned PRC subsidiaries, namely Baoding Shengde Paper Co.,
Ltd., a People’s Republic of China company (“Baoding Shengde”) and QianrongQianhui Hebei Technology Co., Ltd., a People’s
Republic of China company (“Qianrong”) (together with Baoding Shengde, the “PRC Subsidiaries”), and Dongfang Paper,
which we refer to as our VIE in this annual report, and rely on contractual arrangements that establish the VIE structure among Baoding
Shengde, the VIE and VIE’s shareholders to operate our business in China.
IT Tech Packaging is a Nevada
holding company with no operations of its own. Operations in China are primarily conducted through Dongfang Paper, the consolidated VIE.
Dongfang Paper is consolidated for accounting purposes but is not an entity in which you own equity.
Investors in our common
stock should be aware that they may never directly hold equity interests in the Chinese operating entities, but rather purchasing equity
solely in IT Tech Packaging Inc., our Nevada holding company, which does not directly own substantially all of our business in China conducted
by our PRC Subsidiaries and VIE. As a holding company with no material operations of our own, we conduct our operations through the VIE
established in the PRC. We do not have any equity ownership of the VIE; instead, we control and receive the economic benefits of the VIE’s
business operations through the VIE Agreements, and we consolidate the VIE for accounting purposes only because we met the conditions
under the U.S. GAAP to consolidate the VIE. The VIE Agreements are used to provide contractual exposure to foreign investment in China-based
companies where Chinese law prohibits direct foreign investment in the Chinese operating companies. Pursuant to the VIE Agreements, the
VIE pays service fees equal to 80% of its total annual net profits to Baoding Shengde, while Baoding Shengde has the power to direct the
activities of the VIE that can significantly impact the VIE’s economic performance and has the right to receive substantially all
of the economic benefits of the VIE. Such contractual arrangements are designed so that the operations of the VIE are solely for the benefit
of Baoding Shengde and ultimately, ITP. As such, under the U.S. GAAP, ITP is deemed to have a controlling financial interest in, and be
the primary beneficiary of, the VIE for accounting purposes and must consolidate the VIE.
As a result of the prohibitions
on direct investments by foreign enterprises, we conduct our production and distribution of paper products and medical face masks in China
primarily through a series of VIE Agreements among Baoding Shende, the VIE and the VIE’s shareholders. Substantially all of the
VIE’s operations are conducted in China in the paper making industry, over which the Chinese government exercises significant oversight
and discretion. Due to PRC legal restrictions on foreign ownership in the paper making industry, ITP is unable to own any equity interest
in the consolidated VIE. The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where
PRC laws restrict direct foreign investment in certain aspects of the paper making industry in which the VIE operates. As a result, you
are not directly investing in and may never hold equity interests in the VIE in China. The VIE structure involves unique risks to investors.
The VIE Agreements have not been tested in a court of law and may not be effective in providing control over the VIE as would direct equity
ownership. We are subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC
regarding the consolidated VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies
through a special purpose vehicle and the validity and enforcement of the contractual arrangements with the consolidated VIE. We are also
subject to the risk that the Chinese regulatory authorities could disallow the VIE structure, which could result in a material change
in the operations of us, the consolidated VIE and the value of ITP’s securities could decline or become worthless.
We have evaluated the guidance
in FASB ASC 810 and determined that the Baoding Shengde is the primary beneficiary of the VIE that is party to the relevant VIE Agreements
for accounting purposes, because, pursuant to the VIE Agreements, shareholders of the VIE lack the right to receive any expected residual
returns from the VIE, shareholders of the VIE lack the ability to make decisions about the activities of the VIE that have a significant
effect on their operation and substantially all of the VIE’s businesses are conducted on behalf of ITP or its subsidiaries. Such
contractual arrangements are designed so that the operations of the VIE are solely for the benefit of Baoding Shengde and, ultimately,
ITP. ITP has indirect ownership in 100% of the equity in Baoding Shengde. Accordingly, under U.S. GAAP, we treat the VIE as a consolidated
affiliated entity and have consolidated its financial results in our financial statements. As used in this annual report, “we,”
“ITP,” “us,” “our company” and “our” refers to ITP and its subsidiaries, and, in the context
of describing the operations and consolidated financial information, “we, the consolidated VIE and its subsidiary”.
1
We are also subject to legal
and operational risks associated with being based in and having the majority of the Company’s operations in China. These risks may
result in a material change in our operations, or a complete hindrance of our ability to offer or continue to offer our securities to
investors, and could cause the value of such securities to significantly decline or become worthless. Recently, the PRC government initiated
a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance
notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed
overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly
enforcement. We do not believe that these regulatory actions or statements impact our ability to conduct our business, accept foreign
investments, or list on a U.S. or other foreign exchange. But because these statements and regulatory actions are new, it is highly uncertain
how soon legislative or administrative regulation making bodies in China will respond to them, or what existing or new laws or regulations
will be modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on the consolidated
VIE’s daily business operations or ITP’s ability to accept foreign investments and remain listed on the NYSE American. For
a description of relevant risks related to our corporate structure, see “Risk Factors – Risks Relating to Doing Business
in China” and “Risk Factors – Risks Relating to Our Corporate Structure.”
Corporate History
IT Tech Packaging was incorporated
in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described below, we became
the holding company with operations primarily conducted by our subsidiaries and our VIE, Dongfang Paper, a producer and distributor of
paper products in China, on October 29, 2007. Effective on August 1, 2018, we changed our corporate name to “IT Tech Packaging,
Inc.” The name change was effected through a parent/subsidiary short-form merger of IT Tech Packaging, Inc., our wholly-owned Nevada
subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity. In connection with the name
change, our common stock began being traded under a new NYSE symbol, “ITP,” at such time.
On October 29, 2007, pursuant
to an agreement and plan of merger (the “Merger Agreement”), the Company acquired Dongfang Zhiye 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 shares of our common stock (as adjusted for a four-for-one reverse stock split effected in
November 2009), 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. Zhenyong Liu, Mr. Xiaodong 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, and holds a wholly-owned
subsidiary, Baoding Shengde, a limited liability company organized under the laws of the PRC on June 1, 2009. Because Baoding Shengde
is a wholly-owned subsidiary of Shengde Holdings Inc., it is regarded as a wholly foreign-owned entity under PRC law.
2
Effective June 24, 2009,
Baoding Shengde, Dongfang Paper and the original shareholders of Dongfang Paper entered into a number of contractual arrangements, as
subsequently amended on February 10, 2010, pursuant to which Baoding Shengde acts as the management company for Dongfang Paper, and Dongfang
Paper conducts the principal operations of the business. The contractual arrangements, as amended, effectively transferred the preponderance
of the economic benefits of Dongfang Paper to Baoding Shengde, and as a result, Baoding Shengde assumed effective control and management
over, is considered the primary beneficiary of Dongfang Paper for accounting purposes and we consolidate Dongfang Paper’s operating
results in IT Tech Packaging’s financial statements under U.S. GAAP. The contractual arrangements, as amended, include the following:
(i) Exclusive Technical Service and Business Consulting Agreement
The exclusive technical
service and business consulting agreement, entered into by and between Baoding Shengde and Dongfang Paper, 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. The agreement is terminable upon mutual written agreement.
(ii) Call Option Agreement
The call option agreement,
entered into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the shareholders of
Dongfang Paper irrevocably grant to Baoding Shengde an option to purchase all or part of each shareholder’s equity interest in Dongfang
Paper. The exercise price for the options shall be RMB yuan for each of the shareholders’ equity interests, or if at any time there
are PRC laws regulating the minimum exercise price of such options, then to the extent permitted under PRC Law. The call option agreement
contains covenants from Dongfang Paper and its shareholders that they will refrain from taking certain actions without Baoding Shengde’s
consent that would materially affect Dongfang Paper’s operations and asset value, including (i) supplementing or amending its articles
of association or bylaws, (ii) changing Dongfang Paper’s registered capital or shareholding structure, (iii) selling, transferring,
mortgaging or disposing of any interests in Dongfang Paper’s assets or income, or encumbering Dongfang Paper’s assets or income
in a way that would approve a security interest on such assets, (iv) incurring or guaranteeing any debts not incurred in its normal business
operations, (v) entering into any material contract or urging Dongfang Paper management to dispose of any Dongfang Paper assets, unless
it is within the company’s normal business operations; (vi) providing any loan or guarantee to any third party; (vii) appointing
or removing any management personnel or directors that can be changed upon Dongfang Paper shareholder approval; (viii) declaring or distributing
any dividends to the stockholders. The agreement remains effective until Baoding Shengde or its designees have acquired 100% of the equity
interests of Dongfang Paper underlying the options.
(iii) Share Pledge Agreement
The share pledge agreement
entered into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the Dongfang Paper shareholders
will pledge all of their equity interests in Dongfang Paper to Baoding Shengde as security for their obligations under the other management
agreements described in this section. Specifically, Baoding Shengde is entitled to dispose of the pledged equity interests in the event
that the Dongfang Paper shareholders or Dongfang Paper fails to pay the service fees to Baoding Shengde pursuant to the exclusive technical
service and business consulting agreement or fails to perform their other obligations under the other management agreement. The agreement
contains covenants from Dongfang Paper’s shareholders that they will refrain from taking certain actions without Baoding Shengde’s
prior written consent, such as transferring or assigning their equity interests, or creating or permitting the creation of any pledges
which may have an adverse effect on the rights or benefits of Baoding Shengde under the agreement. The Dongfang Paper shareholders also
promise to comply with the laws and regulations relevant to the pledges under the agreement and to facilitate in good faith the protection
of the ability of Baoding Shengde to exercise its rights under the agreement. The terms of the share pledge agreement remains in effect
until all the obligations under the other management agreements have been fulfilled, whether or not the terms of the other management
agreements have expired.
(iv) Proxy Agreement
The proxy agreement, entered
into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the Dongfang Paper shareholders
shall irrevocably entrust a designee of Baoding Shengde with such shareholder’s voting rights and the right to represent such shareholder
to exercise his or her rights at any shareholder’s meeting of Dongfang Paper or with respect to any shareholder 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 the Dongfang Paper shareholders continue to hold any equity interest in Dongfang Paper. Dongfang Paper shareholder will
cease to be a party to the agreement once it transfers its equity interests with the prior approval of Baoding Shengde.
3
On June 24, 2009, Zhao Tianqing,
the sole shareholder of Shengde Holdings Inc., assigned to the Company, for good and valuable consideration, 100 shares representing 100%
of the issued and outstanding shares of Shengde Holdings Inc. As a result of this assignment and the restructuring transactions described
above, Shengde Holdings Inc., Baoding Shengde, and Dongfang Paper became directly and indirectly controlled by the Company, and Dongfang
Paper continued to function as the Company’s operating entity.
In addition to controlling
the operations and beneficial ownership of Dongfang Paper, Baoding Shengde also acquired a digital photo paper production line (including
two photo paper coating lines and ancillary equipment) in an asset acquisition transaction on November 25, 2009 and began directly conducting
business in the PRC. We suspended production of photo paper in June 2016 and now are upgrading the production line to produce more competitive
photo paper products.
An agreement was entered
into among Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper on December 31, 2010, reiterating that Baoding Shengde
is entitled to the distributable profit of Dongfang Paper, pursuant to the above mentioned Exclusive Technical Service and Business Consulting
Agreement. In addition, Dongfang Paper and the shareholders of Dongfang Paper agreed that they would not declare any of Dongfang Paper’s
unappropriated earnings, including any earnings of Dongfang Paper from its establishment to 2010 and thereafter, as dividend.
The contractual agreements described above have not been tested
in a court of law.
The diagram below illustrates
our corporate structure and contractual arrangements with respect to each of our subsidiaries and consolidated VIE and the place of incorporation
of each named entity as of the date of this annual report:
4
The following diagram sets forth the current ownership of
Dongfang Paper:
Our subsidiaries and the VIE in which our operations are conducted
include:
5
Recent Regulatory Developments
On January 4, 2022, the
Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace Security Review (the “Revised Measures”),
which came into effect on February 15, 2022. Under the Revised Measures, any “network platform operator” controlling personal
information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity
review.
We do not believe we are
“network platform operator” who control over one million personal information as mentioned above; as such, we believe we are
currently not be subject to the cybersecurity review by the CAC. However, the definition of “network platform operator” is
unclear and it is also unclear on how it will be interpreted and implemented by the relevant PRC governmental authorities. See “Risk
factors — Risk Factors Relating to Doing Business in China — Our business may be subject to a variety of PRC laws and
other obligations regarding cybersecurity and data protection.”
On July 6, 2021, the relevant
PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas
listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems
to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance
and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. See
“Risk Factors — Risk Factors Relating to Doing Business in China — While the approval and/or other requirements of
the CSRC or other PRC governmental authorities are currently not required, they may be required, in connection with our oversea listing
under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval.”
As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding listing abroad or offshore
offering from the CSRC or any other PRC governmental authorities.
Based on our understanding
of the current PRC law, we believe that we are currently not required to obtain any permission or approval from the China Securities Regulatory
Commission (“CSRC”) and Cyberspace Administration of China (“CAC”) in the PRC to issue securities to foreign investors
or continue listing of our company’s securities on the NYSE American. However, there is no guarantee that this will continue to
be the case in the future in relation to any future offerings of our company or the continued listing of our company’s securities
on the NYSE American, or even in the event such permission or approval is required and obtained, it will not be subsequently revoked or
rescinded. If we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable
laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation
by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a
material adverse change in our operations and the value of our securities, significantly limit or completely hinder our ability to offer
or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
On February 17, 2023, the
CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies
(the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures,
domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures
and report relevant information to the CSRC. If a domestic company fails to complete the filing procedures or conceals any material fact
or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties by the CSRC,
such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other
directly liable persons may also be subject to administrative penalties, such as warnings and fines. As a listed company, we believe that
we, all of our PRC Subsidiaries, the consolidated VIE and its subsidiary are not required to fulfill filing procedures and obtain approvals
from the CSRC to continue to offer our securities or operate business of the consolidated VIE and its subsidiary as of the date of this
annual report. In addition, to date, none of us, our PRC Subsidiaries, the consolidated VIE and its subsidiary has received any filing
or compliance requirements from CSRC for the listing of the Company at NYSE American and all of its overseas offerings. Furthermore, based
on our understanding of the current PRC laws, we believe that the CSRC’s approval is not required to be obtained for the Company’s
listing on NYSE American; however, there are substantial uncertainties regarding the interpretation and application of the Regulation
on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”), other PRC Laws and future PRC laws
and regulations, and there can be no assurance that any governmental agency will not take a view that is contrary to or otherwise different
from our belief stated herein. See “Risk Factors — Risk Factors Relating to Doing Business in China — The
CSRC has released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the “Trial
Measures”). While such rules have become into effect, the Chinese government may exert more oversight and control over offerings
that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability
to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless”
6
On December 24, 2021, the
Standing Committee of the National People’s Congress issued Law of the People’s Republic of China on the Prevention and Control
of Noise Pollution (the “Prevention and Control of Noise Pollution Law”), which became effective on June 5, 2022. According
to the Prevention and Control of Noise Pollution Law, entities subject to the pollutant discharge licensing management requirements shall
not emit industrial noise without a pollutant discharge permit and shall prevent and control noise pollution according to the requirements
of the pollutant discharge permit. The noise pollution has been included in the Pollution Discharge Permit, and we conduct quarterly test
on the noise through qualified testing institutions to comply with the laws, which is required by laws.
Consolidation
We conduct substantially
all of our business in China through contractual arrangements with Dongfang Paper, the VIE, due to PRC legal restrictions of foreign ownership
in certain sectors. Substantially most of IT Tech Packaging’s revenues, costs and net income in China are directly or indirectly
generated through the VIE. IT Tech Packaging, through Baoding Shengde, has signed various agreements with the VIE and shareholders of
the VIE to allow the transfer of economic benefits from the VIE to Baoding Shengde and to direct the activities of the VIE.
Total assets and liabilities
presented on IT Tech Packaging’s consolidated balance sheets and revenue, expense, net income presented on consolidated statement
of operations and comprehensive income as well as the cash flow from operating, investing and financing activities presented on the consolidated
statement of cash flows are substantially the financial position, operation and cash flow of the VIE. As of December 31, 2024, our variable
interest entity accounted for an aggregate of 96.07% and 78.97% of our total assets and total liabilities. As of December 31, 2023, our
variable interest entity accounted for an aggregate of 94.81% and 75.92% of our total assets and total liabilities. As of December 31,
2024 and 2023, $6,948,799 and $3,705,111 of cash and cash equivalents were denominated in RMB, respectively.
IT Tech Packaging and its
directly owned subsidiary, Shengde Holding, do not have any substantial assets or liabilities or result of operations. The following table
sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents of the VIE, which were included in the
Company’s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions
eliminated:
As of
December 31, December 31,
For the Fiscal Year Ended
December 31,
Net cash (used in) provided by financing activities $ (2,529,263 ) $ 3,965,631
7
Distributions and Other Transfers of Cash through our Organization
We are a holding company,
although other means are available for us to obtain financing at the holding company level, we may receive dividends and other distributions
on equity paid by our subsidiaries established in China for our cash needs, including the funds necessary to pay dividends and other cash
distributions to our shareholders to the extent we choose to do so, to service any debt we may incur and to pay our operating expenses.
Our PRC Subsidiaries, consolidated VIE and its subsidiary in China are subject to restrictions on making dividends and other payments
to us. Baoding Shengde’s income in turn depends on the service and other fees paid by the consolidated VIE and its subsidiary. ITP,
its subsidiaries, the consolidated VIE and its subsidiary may also transfer cash to each other as part of the group cash management. If
any of our subsidiaries, the consolidated VIE and its subsidiary incurs debt on its own behalf in the future, the instruments governing
such debt may restrict their ability to pay dividends or make other payments to us. Current PRC regulations permit our PRC Subsidiaries
in China to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards
and regulations. In addition, under the applicable requirements of PRC law, our PRC Subsidiaries, consolidated VIE and its subsidiary
incorporated as companies may only distribute dividends after they have made allowances to fund certain statutory reserves. These reserves
are not distributable as cash dividends.
IT Tech Packaging conducts
its business operations in China through its PRC Subsidiaries and Dongfang Paper, the VIE. If needed, IT Tech Packaging can transfer cash
to the PRC Subsidiaries through loans and/or capital contributions, and the PRC Subsidiaries can transfer cash to IT Tech Packaging through
issuing dividends or other distributions. The PRC Subsidiaries can transfer cash to the VIE through intercompany loans and capital contributions,
and the VIE can transfer cash to the PRC Subsidiaries as services fees under the VIE contractual arrangements. For the year ended December
31, 2024, the major cash flows occurred between IT Tech Packaging, its subsidiaries and the VIE included (i) loans in the total amount
of $1,059,480 provided by Dongfang Paper to Baoding Shengde; and (ii) repayment of shareholder loans in the total amount of $727,433 on
behalf of IT Tech Packaging Inc. We do not have an established cash management policy that dictates how funds are transferred between
us, our subsidiaries, consolidated VIE and its subsidiary. We do not, at this time, intend to distribute earnings or settle amounts owed
under the VIE Agreements.
Current PRC regulations
permit the PRC Subsidiaries to pay dividends to its shareholders only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. The PRC Subsidiaries are required to set aside 10% of its after-tax profits to fund a statutory
reserve until such reserve reaches 50% of its registered capital if it distributes its after-tax profits for the current financial year.
For details, see “Risk Factors — Risk Factors Relating to Doing Business in China — We may rely on dividends and
other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation
on the ability of our PRC Subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.“
In addition, cash transfers from IT Tech Packaging are subject to applicable PRC laws and regulations on loans and direct investment.
For details, see “Risk Factors — Risk Factors Relating to Doing Business in China — PRC regulation of loans to and
direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making
loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.”
8
In addition, the PRC government
imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of
China. IT Tech Packaging receives a significant portion of its revenues in Renminbi. Under IT Tech Packaging’s current corporate
structure, IT Tech Packaging’s Nevada holding company may rely on dividend payments from the PRC Subsidiaries to fund any cash and
financing requirements it may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without
prior approval of State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval
from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted
out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain
SAFE approval to use cash generated from the operations of the PRC Subsidiaries and VIE to pay off their respective debt in a currency
other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than
Renminbi. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency
demands, we may not be able to pay dividends in foreign currencies to its shareholders. See “Risk Factors — Risk Factors
Relating to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our revenues
effectively and affect the value of your investment”. In order to secure the amounts owed under the VIE agreements, the VIE
and its shareholders entered into a share pledge agreement with Baoding Shengde, pursuant to which if the VIE fails to pay the service
fees to the Baoding Shengde pursuant to the exclusive technical service and business consulting agreement or fails to perform their other
obligations under the other management agreement, Baoding Shengde is entitled to dispose of the pledged equity interests in the VIE.
IT Tech Packaging declared
and paid four quarterly cash dividends to its U.S. investors in April 2012 and November 2013. As of the date of this annual report, other
than those cash dividends, none of IT Tech Packaging’s subsidiaries have ever issued any dividends or made other distributions to
IT Tech Packaging or their respective holding companies nor has IT Tech Packaging or any of IT Tech Packaging’s subsidiaries ever
paid dividends or made other distributions to U.S. investors. IT Tech Packaging currently intend to retain all future earnings to finance
its operations and to expand its business. As a result, IT Tech Packaging does not expect to pay any cash dividends in the foreseeable
future.
Holding Foreign Company Accountable Act (“HFCAA”)
Our common stock may be
delisted from the NYSE American under the Holding Foreign Companies Accountable Act (“HFCAA”), if the PCAOB is unable to adequately
inspect audit documentation located in China, or investigate our auditor. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating
Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amends the HFCAA and requires the SEC to prohibit
an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive
years instead of three. Our auditor, GGF CPA Limited, is a China-based accounting firm registered with the PCAOB, and is subject to laws
in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. On August 26, 2022, the PCAOB signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing
inspections and investigations of audit firms based in mainland China and Hong Kong. The Protocol remains unpublished and is subject to
further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall
have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information
to the SEC. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered
public accounting firms headquartered in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations
that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and
Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting
firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s
control. The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and is already making plans
to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations
as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.
Therefore, the PCAOB in the future may determine that it is unable to inspect or investigate completely registered public accounting firms
in mainland China and Hong Kong. Our auditor’s working papers related to us and the consolidated VIE and its subsidiary are located
in China. If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived
of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to
our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting
of our securities from the NYSE American.
9
See “Risk Factors—Risks
Associated with Our Company— Our common stock may be delisted from the NYSE American under the Holding Foreign Companies Accountable
Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our common stock, or the threat
of their being delisted, may materially and adversely affect the value of your investment.”
Summary of Risk Factors
Investing in our securities
involves significant risks and uncertainties. You should carefully consider all of the information in this annual report before making
an investment in our securities. Below please find a summary of the principal risks we face, organized under relevant headings. These
risks are discussed more fully in the section titled “Risk Factors.”
Risks Relating to our Business
● We may not be able to effectively control and manage our growth.
● We are responsible for the indemnification of our officers and directors.
● Our operating results may fluctuate as a result of factors beyond our control.
● We face risks related to product liability claims.
10
● If we are unable to respond to pricing pressures, our business may be harmed.
Risks Related To Doing Business in the PRC
11
● The fluctuation of the Renminbi may harm your investment.
Risks Related to Our Corporate Structure
12
Risks Related to Our Common Stock
● Future financings may dilute stockholders or impair our financial condition.
13
Our Business
We, through our PRC Subsidiaries
and VIE, engage in production and distribution of three categories of paper products: corrugating medium paper, offset printing paper,
tissue paper products and medical face masks in China.
Our principal executive offices are located at Science
Park, Juli Road, Xushui District, Baoding City, Hebei Province, People’s Republic of China.
Our telephone number is (86) 312-869-8215. Our website is
located at https://www.itpackaging.cn.
Manufacturing Process
Corrugating Medium Paper and Offset Printing Paper
Our current products (excluding
tissue paper products) generally undergo two stages of manufacturing: (1) creating pulp from recycled paper products, and (2) treating
the pulp and molding it into the desired types of paper products. A brief overview of the pulp and papermaking process is provided below.
Pulping
The recycled waste paper
is first sorted by machine, and then broken down and beaten or smashed into small pieces using water and mechanical energy. It is then
put through a course screening drum, followed by a fine screening drum to separate different grades of pulp, a process that we refer as
“concentration”. In order to purify the pulp further, an approach flow system is used to filter out any impurities or inconsistencies,
such as sand, in the pulp.
Paper Making
The pulp is sieved to remove
the excess water and molded into a specific size. The moisture content is further reduced by applying hydraulic pressure to the pulp.
The pulp then enters the drying section where it is rolled over by heated cylinders. The dried paper is then coated with a mixture of
clay, white pigment and binder to produce a surface on which ink can sit without being fully absorbed, enabling crisper, and more consistent
print quality.
The paper goes through a
process called calendaring, which flattens and smoothens the paper into long sheets. The paper is then wound onto a reel that is mounted
in a roll-slitting machine for rewinding, during which cutters are used to cut the paper into the desired widths. Upon completion, the
rolls are fitted with sleeves and labeled, and then sent to quality control before shipment or storage.
14
Base Tissue Paper
While we make tissue paper products, we currently
purchase paper pulp from suppliers and use it to manufacture base tissue paper directly.
Products
Corrugating medium paper
Corrugating medium paper,
or CMP is used in the manufacturing of cardboard. Since the launch of our new Paper Machine (“PM6”) production line in December
2011, corrugating medium paper has become a major product of the Company. For the year ended December 31, 2024, corrugating medium paper
comprised approximately 100% of our total paper production quantities and roughly 99.82% of our total revenue. Raw materials used in the
production of corrugating medium paper include recycled paper board (or Old Corrugating Cardboard or “OCC,” as it is commonly
referred to in the United States) and certain supplementary agents. In January 2013, we suspended the operation of our PM1 production
line for renovation, which was then used to produce corrugating medium paper. In May 2014, we launched the commercial production of a
renovated PM1 production line. The renovated PM1 production line produces light-weight corrugating medium paper with a specification of
40 to 80 grams per square meter (“g/s/m”). PM1’s light-weight corrugating medium paper products have a wide range of
commercial applications. For example, they can be used as a construction material for wall and floor insulation or to manufacture moisture-proof
packaging materials for the transportation of books and magazines by the publishing industry. It can also be used as corrugating medium
to make corrugating cardboard for packaging that requires light-weight boxes. The manufacturing process of light-weight corrugating medium
paper is similar to that of the regular corrugating medium paper and also uses recycled paper boards as a major source of raw material.
We now have two corrugating medium paper production lines, PM6 and PM1. We refer to products produced from the PM6 production line as
Regular CMP and products produced from the PM1 production line as Light-Weight CMP.
Offset printing paper
Offset printing paper is used for offset printing
in the publishing industry. Production of offset printing paper was suspended during the year ended December 31, 2024. Raw materials used
in making offset printing paper include recycled white scrap paper, fluorescent whitening agent and sizing agent. We currently have two
production lines, PM2 and PM3, for the production of offset printing paper.
Tissue Paper Products
We began the commercial
production of tissue paper products in Wei County Industry Park in June 2015. We process base tissue paper purchased from long-term cooperative
third party and produce finished tissue paper products, including toilet paper, boxed and soft-packed tissues, handkerchief tissues and
paper napkins, as well as bathroom and kitchen paper towels that are marketed and sold under the Dongfang Paper brand. In December 2018
and November 2019, we completed the construction, installation and test of operation of PM8 and PM9, respectively, and commercially launched
tissue paper production of PM8 and PM9 at such time. On May 5, 2020, we announced we planned the commercial launch of a new tissue paper
production line PM10 and we entered into an agreement to purchase paper machine with paper machine supplier. We expected the new tissue
paper production line to be launched after the completion of trial run. The machine supplier was delayed because the supplier extended
the production schedule. We are closely following up the provider for further actions. Tissue paper production was suspended during the
year ended December 31, 2024.
Face Masks
On April 29, 2020, we launched
a production line of non-medical single-use face masks, following the completion of raw materials preparation, trial run of the equipment
and the sample products inspection. In May 2021, the Company obtained the license for its new single-use surgical masks from local food
and drug administration in Hebei province, and began commercial production in November 2021. Face mask production was suspended during
the year ended December 31, 2024.
15
Market for our Products
The PRC Paper Making Industry
According to the 2023 China
Paper Industry Annual Report, issued by the China Paper Association, there were approximately 2,500 paper and paper board manufacturers
in China, with a total output of 129.65 million tonnes, up by 4.35% from 124.25 million tonnes in 2022. Total domestic consumption was
131.65 million tonnes in 2023, up by 6.14% from 124.03 million tonnes in 2022.
The output of paper and
paper board maintained an average growth rate of approximately 2.40% during the ten-year period from 2014 to 2023, while consumption increased
at an average annual rate of 3.02%. The growth is expected to continue. It is estimated that China currently has the largest paper and
paper board products output and consumption in the world. (Data source: 2023 Annual Report of China Paper Manufacturing, May 2024,China
Paper Association)
Unit: Million tons
Data source: 2023 Annual Report of China’s
Paper Industry, May 2024, China Paper Association
Corrugating medium paper
production in China totaled 29.15 million tonnes in 2023, a 5.23% increase from 2022. Consumption of corrugating medium paper in China
amounted to 32.72 million tonnes in 2023, an increase of 8.70% as compared to 2022.