1358190--3/29/2010--Orient_Paper

related topics

{regulation, change, law}

{stock, price, operating}

{control, financial, internal}

{interest, director, officer}

{product, market, service}

{acquisition, growth, future}

{operation, international, foreign}

{cost, regulation, environmental}

{personnel, key, retain}

{customer, product, revenue}

{stock, price, share}

{property, intellectual, protect}

{condition, economic, financial}

{operation, natural, condition}

{loss, insurance, financial}

{cost, contract, operation}

{product, liability, claim}

Risks Relating to our Business In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership. If the PRC government determines that our agreements with these companies are not in compliance with applicable regulations, our business in the PRC could be materially adversely affected. We rely on contractual arrangements with HBOP for our operations, which may not be as effective in providing control over these entities as direct ownership. The shareholders of HBOP may have potential conflicts of interests with us, which may adversely affect our business. Our arrangements with HBOP and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses. The exercise of our option to purchase part or all of the equity interests in HBOP under the Call Option Agreement might be subject to approval by the PRC government. Our failure to obtain this approval may impair our ability to substantially control HBOP and could result in actions by HBOP that conflict with our interests. Our operating history may not serve as an adequate basis to judge our future prospects and results of operations. HBOP s failure to compete effectively may adversely affect our ability to generate revenue. Baoding Shengde does not have any operating history and has never competed in the digital photo paper market. If HBOP fails to comply with covenants in its loan agreements, its lenders may allege a breach of a covenant and seek to accelerate the loan or exercise other remedies, which could strain our cash flow and harm our business, liquidity and financial condition. We may not be able to effectively control and manage the growth of HBOP. We, through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume contingent liabilities. We are responsible for the indemnification of our officers and directors. We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations. We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected. If we fail to increase our brand recognition, we may face difficulty in obtaining new customers and business partners. Our operating results may fluctuate as a result of factors beyond our control. We face risks related to product liability claims. We face risks relating to difficulty in defending intellectual property rights from infringement. Our operating results also depend on the availability and pricing of energy and raw materials. A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income. Our certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated. If we are unable to make necessary capital investments or respond to pricing pressures, our business may be harmed. If we fail to introduce enhancements to our existing products or to develop new products, our business and results of operations could be adversely affected. Risks Related To Doing Business in The PRC Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business. The PRC laws and regulations governing our current business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations may harm our business. Our contractual arrangements with HBOP and its shareholders may not be as effective in providing control over HBOP as direct ownership. Because we may rely on the consulting services agreement with HBOP for essentially all of our revenue and cash flows, any difficulty for HBOP to pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect on our operations. A slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products. Governmental control of currency conversion may affect the value of your investment. The fluctuation of the Renminbi may harm your investment. Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us. The PRC s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors. Any recurrence of Severe Acute Respiratory Syndrome, or SARS, or another widespread public health problem, could harm our operations. Because our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult for you to enforce your rights based on U.S. federal securities laws against us and our officers or to enforce U.S. court judgment against us or them in the PRC. The relative lack of public company experience of our management team may put us at a competitive disadvantage. We may be required to broaden the coverage of the mandatory social security insurance programs under the New Labor Law of the PRC Risks Related to Our Common Stock Our officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders. We are not likely to pay cash dividends in the foreseeable future. If we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline. Our common stock may be affected by limited trading volume and may fluctuate significantly. Future financings may dilute stockholders or impair our financial condition.

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1358190--3/29/2010--Orient_Paper_Inc.