IT Tech Packaging, Inc. Announces First Quarter 2023 Unaudited Financial Results

BAODING,China,May 12,2023 -- IT Tech Packaging,Inc. (NYSE American: ITP) ("IT Tech Packaging" or the "Company"),a leading manufacturer and distributor of diversified paper products inNorth China,today announced its unaudited financial results for the firstquarter endedMarch 31,2023.

Mr. Zhenyong Liu,Chairman and Chief Executive Officer of the Company,commented,"In the first quarter of 2023,we had the revenue increased by 27.83% to approximately $19.79 million. As the Chinese government carried out a serious economic stimulus and support policies,this will definitely improve the demand and overall operating environment for paper-making industry. We will seize the chance by taking management measures,such as optimizing raw material procurement,diversifying the product structure and reducing cost to improve the profitability and prepare for the market recovery."

First Quarter 2023Unaudited Financial Results

For the Three Months Ended March 31,

($ millions)

2023

2022

% Change

Revenues

19.79

15.48

27.83%

Regular Corrugating Medium Paper ("CMP")*

16.47

13.10

25.72%

Light-Weight CMP**

3.06

1.93

58.77%

Offset Printing Paper

-

-

-

Tissue Paper Products

0.22

0.40

-44.04%

Face Masks

0.04

0.06

-37.03%

Gross profit (Loss)

-0.28

0.31

-189.23%

Gross profit (loss) margin

-1.40%

2.01%

-3.41 pp****

Regular Corrugating Medium Paper ("CMP")*

1.93%

5.35%

-3.42pp****

Light-Weight CMP**

3.96%

8.15%

-4.19 pp****

Offset Printing Paper

-

-

-

Tissue Paper Products***

-316.80%

-141.51%

-175.29 pp****

Face Masks

-7.97%

29.47%

-37.44pp****

Operating loss

-2.77

-2.99

-7.29%

Net loss

-2.73

-2.49

-9.84%

EBITDA

1.21

1.20

0.83%

Basic and Diluted loss per share

-0.27

-0.25

-0.08%

* Products from PM6

** Products from PM1

*** Products from PM8 and PM9

**** pp represents percentage points

Revenue increased by 27.83% to approximately $19.79 million,mainly due to the increase in sales volume of corrugating medium paper ("CMP"),partially offset by the decrease of average selling prices of CMP.

Gross loss was approximately $0.28 million,compared with gross profit of $0.31 for the same period of last year. Total gross loss margin decreased by 3.41 percentage point to negative 1.40%.

Loss from operations was approximately $2.77 million,compared to approximately $2.99 million for the same period of last year.

Net loss was approximately $2.73 million,or loss per share of $0.27,compared to approximately $2.49 million,or loss per share of $0.25,for the same period of last year.

Earnings before interest,taxes,depreciation and amortization ("EBITDA") was approximately $1.21 million,compared to$1.20 million for the same period of last year.

Revenue

For the first quarter of 2023,total revenue increased by 27.83%,to approximately $19.79 million from approximately $15.48 million for the same period of last year. This was mainly due to the increase in sales volume of corrugating medium paper ("CMP"),partially offset by the decrease of average selling prices of CMP.

The following table summarizes revenue,volume and ASP by product for the first quarter of 2023 and 2022,respectively:

For the Three Months Ended March 31,

2023

2022

Revenue

($'000)

Volume

(tonne)

ASP

($/tonne)

Revenue

($'000)

Volume

(tonne)

ASP

($/tonne)

Regular CMP

16,468

41,663

395

13,099

25,245

519

Light-Weight CMP

3,060

8,019

382

1,927

3,841

502

Offset Printing Paper

-

-

-

-

-

-

Tissue Paper Products

223

191

1,167

398

397

1,003

Total

19,751

49,873

396

15,425

29,483

523

Revenue

($'000)

Volume

(thousand

pieces)

ASP

($/thousand

pieces)

Revenue

($'000)

Volume

(thousand

pieces)

ASP

($/thousand

pieces)

Face Masks

35

1,105

32

57

1,160

49

Revenue from CMP,including both regular CMP and light-Weight CMP,increased by 29.96%,to approximately $19.53 million and accounted for 98.67% of total revenue for the first quarter of 2023,compared to approximately $15.03 million,or 97.06% of total revenue for the same period of last year. The Company sold 49,682 tonnes of CMP at an ASP of$393/tonne in the first quarter of 2023,compared to 29,086tonnes at an ASP of$517/tonne in the same period of last year.

Of the total CMP sales,revenue from regular CMPincreased by 25.72%,to approximately $16.47 million for the first quarter of 2023,compared to revenue of approximately $13.10 million for the same period of last year. The Company sold 41,663 tonnes of regular CMPat an ASP of$395/tonne during the first quarter of 2023,compared to 25,245 tonnes at an ASP of $519/tonne for the same period of last year. Revenue from light-weight CMP increased by 58.77%,to approximately $3.06 million for the first quarter of 2023,compared to revenue of approximately $1.93 million for the same period of last year. The Company sold 8,019 tonnes of light-weight CMP at an ASP of$382/tonne for the first quarter of 2023,compared to3,841 tonnes at an ASP of $502/tonne for the same period of last year.

Revenue from offset printing paper was $nil for the first quarter of 2023 and 2022.

Revenue from tissue paper products decreased by 44.04%,to approximately $0.22 million for the first quarter of 2023,from approximately $0.40 million for the same period of last year. The Company sold 191 tonnes of tissue paper products at an ASP of $1,167/tonne for the first quarter of 2023,compared to 397 tonnes at an ASP of $1,003/tonne for the same period of last year.

Revenue from face masks decreased by 37.03%,to approximately $35,637 for the first quarter ended March 31,2023,from $56,596 for the same period of last year. The Company sold 1,105 thousand pieces of face masks for the first quarter of 2023,compared to1,160 thousand pieces of face masks for the same period of last year.

Gross Profit (Loss) and Gross Margin

Total cost of sales increased by 32.30%,to approximately $20.02 million for the first quarter of 2023 from approximately $15.13 million for the same period of last year. The increase in overall cost of sales was mainly due to the increase in sales quantity of CMP,partially offset by the decrease in material costs of CMP. Costs of sales per tonne for regular CMP,light-weight CMP,offset printing paper,and tissue paper products were $388,$367,$nil and $4,865,respectively,for the first quarter of 2023,compared to $491,$461,$nil and $2,424,for the same period of last year.

Total gross loss was approximately $0.28 millionfor the first quarter of 2023,compared to the gross profit ofapproximately $0.31 millionfor the same period of last year as a result of factors described above. Overall gross loss margin was 1.40% for the first quarter of 2023,compared to gross profit margin that was 2.01% for the same period of last year. Grossprofit (loss) margins for regular CMP,tissue paper products and face mask products were 1.93%,3.96%,nil%,-316.80% and -7.97%,compared to 5.35%,8.15%,-141.51% and 29.47%,for the same period of last year.

Selling,General and Administrative Expenses

Selling,general and administrative expenses ("SG&A") decreased by 24.40%,to approximately $2.50 million for the first quarter of 2023 from approximately $3.30 million for the same period of last year.

Loss from Operations

Loss from operations was approximately $2.77 million for the first quarter of 2023,a decrease of 7.29%,from $2.99 million for the same period of last year. Operating loss margin was 14.01% for the first quarter of 2023,compared to 19.32% for the same period of last year.

Net Loss

Net loss was approximately $2.73 million,or loss per share of $0.27 for the first quarter of 2023,compared to $2.49 million,or loss per share of $0.25 for the same period of last year.

EBITDA

EBITDA was approximately $1.21 million for the first quarter of 2023,compared to $1.20 million for the same period of last 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.

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

For the Three Months Ended March 31,

($ millions)

2023

2022

Net loss

-2.73

-2.49

Add: Income tax

-

-0.35

Net interest expense

0.25

0.27

Depreciation and amortization

3.69

3.77

EBITDA

1.21

1.20

Cash,Liquidity and Financial Position

As of March 31,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),and long-term debt (including related party loans) of approximately $16.75 million,$11.67 million and $6.51 million,compared to approximately $9.52 million,$11.16 million and $4.20 million,as of December 31,2022.

Net accounts receivable was approximately $2.23 million as of March 31,compared to approximately $nil million as of December 31,2022. Net inventory was approximately $5.97 million as of March 31,compared to approximately $2.87 million as of December 31,2022. As of March 31,the Company had current assets of approximately $51.48 million and current liabilities of approximately $18.13 million,resulting in a working capital of approximately $33.35 million. This was compared to current assets of approximately $47.17 million and current liabilities of approximately $17.64 million,resulting in a working capital of approximately $29.53 million as of December 31,2022.

Net cash provided by operating activities was approximately $4.81million for the first quarter of 2023,compared to approximately $4.41 million for the same period of last year. Net cash used in investing activities was approximately $0.30 million for the first quarter of 2023,compared to approximately $7.18 million for the same period of last year. Net cash provided by financing activities was approximately $2.56 million for the first quarter of 2023,compared to approximately $6.89 for the same period of last year.

About IT Tech Packaging,Inc.

Founded in 1996,IT Tech Packaging,Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks inNorth China. Using recycled paper as its primary raw material (with the exception of its tissue paper products),ITP produces and distributes three categories of paper products: corrugating medium paper,offset printing paper and tissue paper products. With production based in Baoding and Xingtai inNorth China'sHebei Province,ITP is located strategically close to theBeijingandTianjinregion,home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. ITP has been listed on the NYSE American sinceDecember 2009. For more information,please visit:http://www.itpackaging.cn/.

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.

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31,2023 AND DECEMBER 31,2022

March 31,

December 31,

2023

2022

ASSETS

Current Assets

Cash and bank balances

$

16,750,940

$

9,524,868

Restricted cash

-

-

Accounts receivable (net of allowance for doubtful accounts of

$647,787 and $881,878 as of March 31,2023 and December 31,2022,

respectively)

2,231,924

-

Inventories

5,969,604

2,872,622

Prepayments and other current assets

18,734,461

27,207,127

Due from related parties

7,795,442

7,561,858

Total current assets

51,482,371

47,166,475

Prepayment on property,plant and equipment

881,878

1,031,502

Operating lease right-of-use assets,net

681,817

672,722

Finance lease right-of-use assets,net

1,927,390

1,939,970

Property,plant,and equipment,net

149,822,883

151,569,898

Value-added tax recoverable

2,053,290

2,066,666

Deferred tax asset non-current

-

-

Total Assets

$

206,849,629

$

204,447,233

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Short-term bank loans

$

5,673,996

$

5,598,311

Current portion of long-term loans

5,265,073

4,835,884

Lease liability

171,768

224,497

Accounts payable

-

5,025

Due to related parties

730,387

727,462

Accrued payroll and employee benefits

295,024

165,986

Other payables and accrued liabilities

5,993,904

5,665,558

Income taxes payable

-

417,906

Total current liabilities

18,130,152

17,640,629

Long-term loans

6,513,672

4,204,118

Deferred gain on sale-leaseback

30,298

52,314

Lease liability - non-current

587,838

579,997

Derivative liability

494,186

646,283

Total liabilities (including amounts of the consolidated VIE without

recourse to the Company of $19,412,310 and $16,784,878 as of March

31,respectively)

25,756,146

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 March 31,2023

and December,31,2022.

10,066

10,066

Additional paid-in capital

89,172,771

89,771

Statutory earnings reserve

6,080,574

6,574

Accumulated other comprehensive loss

(5,011,784)

(7,514,540)

Retained earnings

90,841,856

93,575,021

Total stockholders' equity

181,093,483

181,323,892

Total Liabilities and Stockholders' Equity

$

206,233

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31,2023 AND 2022

(Unaudited)

Three Months Ended

March 31,

2023

2022

Revenues

$

19,790,877

$

15,481,618

Cost of sales

(20,067,876)

(15,171,173)

Gross (Loss) Profit

(276,999)

310,445

Selling,general and administrative expenses

(2,495,362)

(3,300,881)

Loss from Operations

(2,772,361)

(2,990,436)

Other Income (Expense):

Interest income

136,268

3,455

Subsidy income

-

-

Interest expense

(249,169)

(270,813)

Gain on acquisition

-

34,003

Gain (Loss) on derivative liability

152,097

386,588

Loss before Income Taxes

(2,733,165)

(2,837,203)

Provision for Income Taxes

-

348,989

Net Loss

(2,488,214)

Other Comprehensive Income

Foreign currency translation adjustment

2,502,756

926,138

Total Comprehensive Loss

$

(230,409)

$

(1,562,076)

Losses Per Share:

Basic and Diluted Losses per Share

$

(0.27)

$

(0.25)

Outstanding – Basic and Diluted

10,920

9,915,920

IT TECH PACKAGING,INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

2023

2022

Cash Flows from Operating Activities:

Net income

$

(2,165)

$

(2,214)

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

Depreciation and amortization

3,686,243

3,773,236

(Gain) Loss on derivative liability

(152,097)

(386,588)

(Gain) Loss from disposal and impairment of property,plant and equipment

12,926

-

(Recovery from) Allowance for bad debts

(246,386)

4,211

Gain on acquisition

-

(34,001)

Deferred tax

-

(348,989)

Changes in operating assets and liabilities:

Accounts receivable

(1,988,921)

(98,921)

Prepayments and other current assets

9,461,336

3,056,189

Inventories

(3,062,782)

1,515,515

Accounts payable

(5,101)

62,315

Related parties

(128,625)

-

Accrued payroll and employee benefits

126,986

(14,181)

Other payables and accrued liabilities

263,712

483,666

Income taxes payable

(424,198)

(1,112,820)

Net Cash Provided by Operating Activities

4,809,928

4,411,418

Cash Flows from Investing Activities:

Purchases of property,plant and equipment

(295,018)

(368,504)

Acquisition of land

-

(6,807,468)

Net Cash Used in Investing Activities

(295,018)

(7,175,972)

Cash Flows from Financing Activities:

Proceeds from long term loans

2,623,410

-

Repayment of bank loans

(2,915)

-

Payment of capital lease obligation

(55,849)

(51,708)

Loan to a related party (net)

-

6,945,022

Net Cash Provided by Financing Activities

2,564,646

6,893,314

Effect of Exchange Rate Changes on Cash and Cash Equivalents

146,516

28,071

Net Increase in Cash and Cash Equivalents

7,226,072

4,156,831

Cash,Cash Equivalents and Restricted Cash - Beginning of Period

9,868

11,201,612

Cash,Cash Equivalents and Restricted Cash - End of Period

$

16,940

$

15,358,443

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest,net of capitalized interest cost

$

84,040

$

85,094

Cash paid for income taxes

$

424,198

$

1,820

Cash and bank balances

16,940

15,443

Restricted cash

-

-

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

flows

16,443