IT Tech Packaging, Inc. Announces First Quarter 2019 Unaudited Financial Results

BAODING,China,May 10,2019 --IT Tech Packaging,Inc. (NYSE MKT: ITP) ("IT Tech Packaging" or the "Company"),a leading manufacturer and distributor of diversified paper products in North China,announcedtoday its unaudited financial results for the three months ended March31,2019.

For the Three Months Ended March 31,

($ millions)

2019

2018

% Change

Revenues

17.45

1.89

824.2%

Regular Corrugating Medium Paper ("CMP")*

12.22

0.91

1246.8%

Light-Weight CMP**

3.37

0.65

416.2%

Offset Printing Paper

0.00

0.33

-100.0%

Tissue Paper Products

1.86

0.00

NM

Gross loss

-0.19

-0.70

-72.3%

Gross profit (loss) margin

-1.1%

-36.8%

35.7 pp

Regular Corrugating Medium Paper ("CMP")*

-0.4%

-20.2%

19.9 pp

Light-Weight CMP**

-5.3%

-59.5%

54.1 pp

Offset Printing Paper

NM

-37.7%

NM

Tissue Paper Products

1.8%

NM

NM

Operating loss

-3.17

-4.52

29.8%

Net loss

-2.72

-4.09

33.4%

EBITDA

0.81

-0.49

NM

Basic and Diluted earnings (loss) per share

-0.12

-0.19

36.8%

* Products from PM6

** Products from PM1

*** pp represents percentage points

Revenue for the first quarter of 2019 increased by 824.2% to $17.45 million,primarily due to the increase in sales volume of corrugating medium paper ("CMP") and tissue paper products,partially offset by the decrease in average selling price ("ASP") of CMP. Gross loss for the first quarter of 2019 was $0.19 million,compared to $0.70 million for the same period of last year. Gross loss margin was 1.1% for the first quarter of 2019,compared to 36.8% for the same period of last year. Net loss was $2.72 million,or loss per share of $0.12,compared to net loss of $4.09 million,or loss per share of $0.19,for the same period of last year. Earnings before interest,taxes,depreciation and amortization ("EBITDA") was positive $0.81 million for the first quarter of 2019,compared to negative $0.49 million for the same period of last year.

Mr. Zhenyong Liu,Chairman and Chief Executive Officer of the Company,commented,"Our financial results of the first quarter 2019 showed significant improvement versus the same period last year mainly as government-mandated restrictions on natural gas supply caused production suspension from late January to mid-March of last year. However,on a sequentially basis,our first quarter 2019 revenue of $17.45 million decreased from the levels of the prior three quarters,highlighting the seasonal effect of the Chinese New Year as well as the continued challenges facing our CMP business. Sales of tissue paper products were the bright spot in the first quarter of 2019,contributing $1.86 million in revenue,or 10.7% of total revenue,thanks to the newly launched tissue paper production line at PM8. With the offset printing paper resuming production in April 2019,the Company has all the production lines in operation. As such,we expect to improve the overall performance in the coming quarters. For the remainder of the year,we expect no big swings in both market demand and ASP for our products."

First Quarter 2019 Financial Results

Revenue

For the first quarter of 2019,total revenue increased by $15.56 million,or 824.2%,to $17.45 million from $1.89 million for the same period of last year. The increase in total revenue was mainly due to the increase in both sales volume of CMP and tissue paper products,partially offset by the decrease in ASP of CMP. The following table summarizes revenue,volume and ASP by product for the first quarter of 2019 and 2018,respectively:

For the Three Months Ended March 31,

2019

2018

Revenue

($'000)

Volume

(tonne)

ASP

($/tonne)

Revenue

($'000)

Volume

(tonne)

ASP

($/tonne)

Regular CMP

12,225

26,293

465

908

1,672

543

Light-Weight CMP

3,365

7,425

453

652

1,251

521

Offset Printing Paper

-

-

-

329

379

867

Tissue Paper Products

1,860

1,603

1,160

-

-

-

Total

17,450

35,321

494

1,888

3,302

572

Revenue from CMP,including both regular CMP and Light-Weight CMP,increased by $14.03 million,or 899.6%,to $15.59 million and accounted for 89.3% of total revenue for the first quarter of 2019,compared to $1.56 million,or 82.6% of total revenue,for the same period of last year. The Company sold 33,718 tonnes of CMP at an ASP of $462/tonne in the first quarter of 2019,compared to 2,923 tonnes at an ASP of $534/tonne in the same period of last year.

Of the total CMP sales,revenue from regular CMP increased by $11.32 million,or 1,246.8%,to $12.22 million,resulting from sales of 26,293 tonnes at an ASP of $465/tonne,during the first quarter of 2019,compared to revenue of $0.91 million,resulting from sales of 1,672 tonnes at an ASP of $543/tonne,for the same period of last year. Revenue from light-weight CMP increased by $2.71 million,or 416.2%,to $3.37 million,resulting from sales of 7,425 tonnes at an ASP of $453/tonne for the first quarter of 2019,compared to revenue of $0.65 million,251 tonnes at an ASP of $521/tonne for the same period of last year.

Production of offset printing paper was suspended from August 2018 to March 2019 due to equipment maintenance and restriction on production volume by the government attributable to environmental concerns. Production of offset printing paper was resumed in April 2019. As a result,revenue from offset printing paper was $nil for the first quarter of 2019,compared to $0.33 million for the same period of last year. The Company didn't sell any offset printing paper in the first quarter of 2019,compared to sale volume of 379 tonnes at an ASP of $867/tonne in the same period of last year.

We process base tissue paper purchased from a long-term supplier 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,we completed the construction and installation and test of operation of PM8 and announced the commercial launch of tissue paper production. Revenue from tissue paper products was $1.86 million,603 tonnes at an ASP of $1,160/tonne,for the first quarter of 2019.

Gross Loss and Gross Loss Margin

Total cost of sales increased by $15.06 million,or 582.9%,to $17.64 million for the first quarter of 2019,from $2.58 million for the same period of last year. The increase in total cost of sales was mainly due to the increase in sales volume of CMP and tissue paper products,partially offset by a decrease in unit material purchase costs. Cost of sales per tonne was $499 for the first quarter of 2019,compared to $782 per tonne for the same period of last year. Costs of sales per tonne for regular CMP,light-weight CMP,offset printing paper and tissue paper products were $467,$477,$nil and $1,140,respectively,for the first quarter of 2019,compared to $653,$831,$1,194 and $nil per tonne,for the same period of last year. Average unit purchase costs of recycled paper board,major raw material used for our production,was approximately $242/tonne for the first quarter of 2019,compared to $325/tonne for the same period of last year.

Total gross loss decreased by $0.50 million,or 72.3%,to $0.19 million for the first quarter of 2019 from $0.70 million for the same period of last year as a result of factors described above. Overall gross loss margin was 1.1% for the first quarter of 2019,compared to 36.8% for the same period of last year. Gross profit (loss) margins for regular CMP,offset printing paper and tissue paper products were -0.4%,-5.4%,nil% and 1.8%,compared to -20.2%,-59.5%,-37.7% and nil%,for the same period of last year.

Selling,General and Administrative Expenses

Selling,general and administrative expenses ("SG&A") decreased by $0.83 million,or 21.8%,to $2.98 million for the first quarter of 2019 from $3.81 million for the same period of last year. The decrease in SG&A was mainly due to additional repair and maintenance costs incurred during the production suspension period in 2018. As a percentage of total revenue,SG&A was 17.1% for the first quarter of 2019,compared to 202.0% for the same period of last year.

Loss from Operations

Loss from operations was $3.17 million for the first quarter of 2019,compared to $4.52 million for the same period of last year. Operating loss margin was 18.2% for the first quarter of 2019,compared to 239.4% for the same period of last year.

Net Loss and Net Loss per Share

Net loss decreased by $1.36 million,or 33.4%,to $2.72 million for the first quarter of 2019 from $4.09 million for the same period of last year.

Net loss per basic and diluted share improved by $0.07,or 36.8%,to $0.12 for the first quarter of 2019 from $0.19 for the same period of last year.

EBITDA

EBITDA was positive $0.81 million for the first quarter of 2019,compared to negative $0.49 millionfor the same period of the prior year.

Note 1: Non-GAAP Financial Measures

In addition to our U.S. GAAP results,this press release includes a discussion of EBITDA,a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest,income taxes,depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations,the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies,and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

For the Three Months Ended March 31,

($ millions)

2019

2018

Net income (loss)

-2.72

-4.09

Add: Income tax

-0.65

-0.54

Net interest expense

0.26

0.40

Depreciation and amortization

3.93

3.73

EBITDA

0.81

-0.49

Cash,Liquidity and Financial Position

As of March 31,2019,the Company had cash and bank balances,short-term debt (including bank loans,current portion of long-term loans from credit union and related party loans),notes payable and long-term debt (including related party loans) of $2.63 million,$9.22 million,$nil million and $7.02 million,compared to $8.47 million,$14.29 million,$3.64 million and $6.89 million,at the end of 2018. Net accounts receivable was $2.41 million as of March 31,compared to $2.88 million as of December 31,2018. Net inventory was $4.16 million as of March 31,compared to $2.92 million at the end of 2018. As of March 31,the Company had current assets of $15.41 million and current liabilities of $20.41 million,resulting in a working capital deficit of $5.01 million. This was compared to current assets of $24.16 million,current liabilities of $29.63 million and working capital deficit of $5.48 million at the end of 2018.

Net cash used in operating activities was $3.05 million for the first quarter of 2019,compared to $4.86 million for the same period of last year. Net cash used in investing activities was $1.42 million for the first quarter of 2019,compared to $0.71 million for the same period of last year. Net cash used in financing activities was $5.37 million for the first quarter of 2019,compared to net cash provided by financing activities of $0.79 million for the same period of last year.

Earnings Conference Call

The Company's management will host a conference call to discuss its first quarter 2019 financial results at8:00 am US Eastern Time (5:00 am US Pacific Time/8:00 pm Beijing Time)onFriday,2019.

To attend the conference call,please dial in using the information below. When prompted upon dialing-in,please provide the conference ID or ask for the "IT Tech Packaging First Quarter 2019 Earnings Conference Call."

Date:

Friday,2019

Time:

8:00 am ET

International Toll Free:

United States: +1-855-500-8701

Mainland China: 400-120-0654

Hong Kong: 800-906-606

International: +65-6713-5440

Conference ID:

5348189

This conference call will be broadcast live on the Internet and can be accessed by all interested parties at:https://edge.media-server.com/m6/p/erqyht32.

Please access the link at least fifteen minutes prior to the start of the call to register,download,and install any necessary audio software.

A playback will be available through 11:00 am ET on May 10,2019 to 9:59 am ET on May 18,2019. To listen,please dial+1-855-452-5696 if calling from the United States,or +61-290-034-211 if calling internationally. Use the passcode 5348189 to access the replay.

About IT Tech Packaging,Inc.

Founded in 1996,IT Tech Packaging,Inc. is a leading manufacturer and distributor of diversified paper products in North China. Using recycled paper as its primary raw material (with the exception of its tissue paper products),the Company produces and distributes three categories of paper products: corrugating medium paper,offset printing paper and tissue paper products. With production based in Baoding,Xingtai and Wei County in North China's Hebei Province,the Company is located strategically close to the Beijing and Tianjin region,home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. The Company has been listed on the NYSE MKT since December 2009.

Safe Harbor Statements

This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated,including risks outlined in the Company's public filings with the Securities and Exchange Commission,including the Company's latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law,the Company undertakes no obligation to update or revise its forward-looking statements.

For more information,please contact:

Investor Relations:

Tony Tian,CFA

Weitian Group LLC

Email: ttian@weitianco.com

Phone: +1-732-910-9692

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31,2019 AND DECEMBER 31,2018

(Unaudited)

March 31,

December 31,

2019

2018

ASSETS

Current Assets

Cash and bank balances

$

2,625,059

$

8,474,809

Restricted cash

-

3,642,616

Accounts receivable (net of allowance for doubtful accounts of $49,173 and $58,707

as of March 31,2019 and December 2018,respectively)

2,409,458

2,876,632

Inventories

4,156,848

2,923,516

Prepayments and other current assets

6,213,819

6,241,299

Total current assets

15,405,184

24,158,872

Property,plant,and equipment,net

167,245,378

167,829,716

Value-added tax recoverable

2,824,809

2,810,331

Deferred tax asset non-current

9,081,933

8,277,091

Total Assets

$

194,557,304

$

203,076,010

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Short-term bank loans

$

6,683,003

$

11,802,075

Current portion of long-term loans from credit union

2,539,541

2,491,549

Accounts payable

1,647,286

629,054

Notes payable

3,616

Due to related parties

513,423

413,336

Accrued payroll and employee benefits

305,148

213,536

Other payables and accrued liabilities

8,723,322

10,222,796

Income taxes payable

-

219,305

Total current liabilities

20,411,723

29,634,267

Loans from credit union

4,796,911

4,706,259

Loans from a related party

2,227,668

2,185,569

Total liabilities (including amounts of the consolidated VIE without recourse to the

Company of $24,815,967 and $34,008,908 as of March 31,2019 and December 31,

2018,respectively)

27,436,302

36,526,095

Commitments and Contingencies

Stockholders' Equity

Common stock,500,000,000 shares authorized,$0.001 par value per share,2

2,022,316 and 21,450,316 shares issued and outstanding as of March 31,2019 and

December 31,2018,respectively

22,360

22,360

Additional paid-in capital

51,137,319

51,319

Statutory earnings reserve

6,080,574

6,574

Accumulated other comprehensive income (loss)

29,728

(3,263,952)

Retained earnings

109,851,021

112,573,614

Total stockholders' equity

167,121,002

166,549,915

Total Liabilities and Stockholders' Equity

$

194,010

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31,2019 AND 2018

(Unaudited)

Three Months Ended

March 31,

2019

2018

Revenues

$

17,292

$

1,888,194

Cost of sales

(17,758)

(2,583,502)

Gross Loss

(192,466)

(695,308)

Selling,general and administrative expenses

(2,981,473)

(3,813,794)

Loss from disposal of property,plant and equipment

-

(10,376)

Loss from Operations

(3,173,939)

(4,519,478)

Other Income (Expense):

Interest income

58,818

44,763

Subsidy income

-

253,281

Interest expense

(255,269)

(403,811)

Loss before Income Taxes

(3,370,390)

(4,245)

Provision for Income Taxes

647,795

538,969

Net Loss

(2,722,595)

(4,086,276)

Other Comprehensive Income

Foreign currency translation adjustment

3,293,680

7,375,558

Total Comprehensive Income

$

571,085

$

3,289,282

Losses Per Share:

Basic and Diluted Losses per Share

$

(0.12)

$

(0.19)

Outstanding – Basic and Diluted

22,316

21,316

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

2019

2018

Cash Flows from Operating Activities:

Net income

$

(2,595)

$

(4,276)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

3,930,060

3,730,585

Loss from disposal and impairment of property,plant and equipment

-

10,376

Allowance for bad debts

(10,704)

(22,297)

Share-based compensation expenses

-

-

Deferred tax

(647,795)

(538,969)

Changes in operating assets and liabilities:

Accounts receivable

535,220

1,114,843

Prepayments and other current assets

187,711

(2,535,170)

Inventories

(1,181,371)

(202,692)

Accounts payable

1,009,834

(129,770)

Advance from customers

-

-

Notes payable

(3,726,504)

(2,374,507)

Due to related parties

37,265

39,575

Accrued payroll and employee benefits

87,823

66,867

Other payables and accrued liabilities

(326,741)

69,841

Income taxes payable

(224,355)

-

Net Cash Used in Operating Activities

(3,052,152)

(4,857,594)

Cash Flows from Investing Activities:

Purchases of property,plant and equipment

(1,415,761)

(707,162)

Net Cash Used in Investing Activities

(1,162)

Cash Flows from Financing Activities:

Proceeds from related party loans

-

4,749,015

Repayments of related party loans

-

(9,498,029)

Proceeds from short term bank loans

4,024,625

9,972,931

Repayment of bank loans

(9,390,791)

(4,432,414)

Net Cash (Used in) Provided by Financing Activities

(5,366,166)

791,503

Effect of Exchange Rate Changes on Cash and Cash Equivalents

341,713

471,899

Net Decrease in Cash and Cash Equivalents

(9,492,366)

(4,301,354)

Cash,Cash Equivalents and Restricted Cash - Beginning of Period

12,117,425

9,017,427

Cash,Cash Equivalents and Restricted Cash - End of Period

$

2,059

$

4,716,073

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest,net of capitalized interest cost

$

230,953

$

787,353

Cash paid for income taxes

$

224,355

$

-

Cash and bank balances

2,059

740,309

Restricted cash

-

3,975,764

Total cash,cash equivalents and restricted cash shown in the statement of cash

flows

2,059

4,073

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