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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

(16) Commitments and Contingencies

Xushui Land Lease

The Company leases 32.95 acres of land from a local government in Xushui District, Baoding City, Hebei, China through a real estate lease with a 30-year term, which expires on December 31, 2031. The lease requires an annual rental payment of approximately $16,902 (RMB120,000). This lease is renewable at the end of the 30-year term.

On August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively. Sales of the LUR and the Industrial Buildings were completed in year 2013.

In connection with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use with an annual rental payment of approximately $145,745 (RMB1,000,000). The lease was recorded in lease assets and liabilities in the consolidated balance sheet as of March 31, 2023. See ‘Operating lease’ under note (6).

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

March 31,		Amount
2024			17,463
2025			17,463
2026			17,463
2027			17,463
2028			17,463
Thereafter			65,486
Total operating lease payments		$	152,801

Sale of Headquarters Compound Real Properties

On August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively. Sales of the LUR and the Industrial Buildings were completed in year 2013.

In connection with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use with an annual rental payment of approximately $147,988 (RMB1,000,000). The lease was recorded in lease assets and liabilities in the consolidated balance sheet as of December 31, 2022.

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

March 31,		Amount
2024			145,524
2025			145,524
2026			145,524
2027			145,524
2028			145,524
Thereafter			145,524
Total operating lease payments		$	873,146
Less: Interest			(191,329	)
Present value of lease liabilities			681,817
Less: current portion, record in current liabilities			(93,979	)
Present value of lease liabilities			587,838

Capital commitment

As of March 31, 2023, the Company has entered into several contracts for the purchase of paper machine of a new tissue paper production line PM10, and the improvement of Industrial Buildings. Total outstanding commitments under these contracts were $5,930,832 and $4,329,279 as of March 31, 2023 and December 31, 2022, respectively. The Company expected to pay off all the balances within 1-3 years.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun Trading Co., a major supplier of raw materials, to guarantee certain obligations of this third party, and as of March 31, 2023 and December 31, 2022, the Company guaranteed its long-term loan from financial institutions amounting to $4,511,256 (RMB31,000,000), that matured at various times in 2018-2023. If Huanrun Trading Co., were to become insolvent, the Company could be materially adversely affected.