UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549

FORM 10-Q

(Mark One)


| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| | x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934 
| |   |                                                                                     
| |   | For the quarterly period ended March 31,
  2009                                     
| |   |                                                                                     
| | o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
| |   |                                                                                     
| |   | For the transition period from _______ to
  _______                                 

Commission file number: 000-52639

|                                                                   
|-------------------------------------------------------------------
|ORIENT PAPER, INC.                                                 
|                                                                   
|(Exact name of small business issuer as
  specified in its charter)

|                                                 |  |                                  
|------------------------------------------------ |  | ---------------------------------
|Nevada                                           |  | 20-4158835                       
|                                                 |  |                                  
|(State or other jurisdiction of incorporation or |  | (IRS Employer identification No.)
|organization)                                    |  |                                  

|                                                        
|--------------------------------------------------------
|Nansan Gongli, Nanhuan Rd, Xushui County,
  Baoding City
|Hebei Province, The Peoples Republic of
  China 072550 
|                                                        
|(Address of principal executive offices)                
|                                                        
|011 - (86) 312-8605508                                  
|                                                        
|(Registrants telephone number, including area code)    

Indicate by
check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 x  
No o

Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such files). Yes o  
No o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.

| |                                                                         |  |                              
| | ----------------------------------------------------------------------- |  | -----------------------------
| | Large
  accelerated filer o                                             |  | Accelerated
  filer o        
| |                                                                         |  |                              
| | Non-accelerated
  filer o (Do not check if a smaller reporting company) |  | Smaller
  reporting company x

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act.): Yes o   No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY 
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Check whether
the registrant filed all documents and reports required to be filed by Section
l2, 13 or 15(d) of the Exchange Act after the distribution of securities under
a plan confirmed by a court. Yes o   No o



---



APPLICABLE ONLY TO CORPORATE ISSUERS:

State the
number of shares outstanding of each of the issuers classes of common equity,
as of the latest practicable date: 45,106,987 shares of common stock, $.001 par
value, were outstanding as of May 14, 2009.



---



|                  |                                                                                        |     
|----------------- | -------------------------------------------------------------------------------------- | ----
|TABLE OF CONTENTS
|                  |                                                                                        |     
|                  |                                                                                        | Page
|                  |                                                                                        |     
|PART I            | F-1                                                                                   
|Item 1.           | Financial Statements                                                                   | 3   
|Item 2.           | Managements Discussion and Analysis of Financial Condition and
  Results of Operation | 17  
|Item 3.           | Quantitative and Qualitative Disclosures About Market Risk                             | 23  
|Item 4T.          | Controls and Procedures                                                                | 23  
|PART II           | 23                                                                                    
|Item 1.           | Legal Proceedings                                                                      | 23  
|Item 1A.          | Risk Factors                                                                           | 23  
|Item 2.           | Unregistered Sales of Equity Securities and Use of Proceeds                            | 23  
|Item 3.           | Defaults Upon Senior Securities                                                        | 23  
|Item 4.           | Submission of Matters to a Vote of Security Holders                                    | 24  
|Item 5.           | Other Information                                                                      | 24  
|Item 6.           | Exhibits                                                                               | 24  
|SIGNATURES        | 25                                                                                    

2

---



PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

ORIENT PAPER, INC.

INDEX TO INTERIM FINANCIAL STATEMENTS

MARCH 31, 2009, AND 2008

|                                                                                                        |    
|------------------------------------------------------------------------------------------------------- | ---
|Interim Financial Statements-                                                                           |    
|                                                                                                        |    
|Balance Sheets as of March 31,
2009, and December 31, 2008                                              | F-2
|                                                                                                        |    
|Statements of Operations and
Comprehensive
  Income for the Three Months Ended March 31, 2009, and 2008 | F-3
|                                                                                                        |    
|Statements of Cash Flows for the Three
  Months Ended March 31, 2009, and 2008                          | F-4
|                                                                                                        |    
|Notes to Interim Financial Statements March
  31, 2009, and 2008                                        | F-5

F-1

---



ORIENT PAPER, INC. 
BALANCE SHEETS
AS OF MARCH 31, 2009, AND DECEMBER 31, 2008 
(Unaudited)

ASSETS

|                                                                                                                   |  |                          |             |                             |   |             |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ----------- | --------------------------- | - | ----------- | -
|                                                                                                                   |  | As of
  March 31,
  2009 |             | As of
  December 31,
  2008 |  
|                                                                                                                   |  |                          |             |                             |  
|Current Assets:                                                                                                    |  |                          |             |                             |   |             |  
|Cash and cash equivalents                                                                                          |  | $                        | 7,815,588   |                             | $ | 3,234,419   |  
|Accounts receivable - Trade, net of allowance of
$24,040 and nil in
  2009 and 2008, respectively                  |  |                          | 2,380,017   |                             |   | 1,425,899   |  
|Other receivable                                                                                                   |  |                          | 1,453       |                             |   |            |  
|Inventories                                                                                                        |  |                          | 1,369,524   |                             |   | 2,821,063   |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total current assets                                                                                               |  |                          | 11,566,582  |                             |   | 7,481,381   |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Property, Plant, and Equipment:                                                                                    |  |                          |             |                             |   |             |  
|Building and improvements                                                                                          |  |                          | 9,863,172   |                             |   | 9,876,637   |  
|Machinery and equipment                                                                                            |  |                          | 47,282,559  |                             |   | 47,347,109  |  
|Vehicles                                                                                                           |  |                          | 543,928     |                             |   | 544,670     |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|                                                                                                                   |  |                          | 57,689,659  |                             |   | 57,768,416  |  
|Less - Accumulated depreciation and
amortization                                                                   |  |                          | (13,290,217 | )                           |   | (12,427,735 | )
|                                                                                                                   |  |                          |             |                             |   |             |  
|Net property, plant, and equipment                                                                                 |  |                          | 44,399,442  |                             |   | 45,340,681  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total Assets                                                                                                       |  | $                        | 55,966,024  |                             | $ | 52,822,062  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                               | 
|Current Liabilities:                                                                                               |  |                          |             |                             |   |             |  
|Short-term loans                                                                                                   |  | $                        | 6,849,838   |                             | $ | 6,858,652   |  
|Accounts payable - Trade and accrued
liabilities                                                                   |  |                          | 1,490,894   |                             |   | 740,846     |  
|Income taxes payable                                                                                               |  |                          | 1,212,190   |                             |   | 1,047,678   |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total current liabilities                                                                                          |  |                          | 9,552,922   |                             |   | 8,647,176   |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Long-Term Debt, less current portion:                                                                              |  |                          |             |                             |   |             |  
|Loan from credit union                                                                                             |  |                          | 1,945,520   |                             |   | 1,948,176   |  
|Related party notes                                                                                                |  |                          | 8,126,460   |                             |   | 8,137,554   |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total long-term debt                                                                                               |  |                          | 10,071,980  |                             |   | 10,085,730  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total liabilities                                                                                                  |  |                          | 19,624,902  |                             |   | 18,732,906  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Commitments and Contingencies                                                                                      |  |                          |             |                             |   |             |  
|Stockholders Equity:                                                                                              |  |                          |             |                             |   |             |  
|Common stock, 500,000,000 shares authorized,
$0.001par value per share,
  45,101,987 shares issued and outstanding |  |                          | 45,102      |                             |   | 45,102      |  
|Additional paid-in capital                                                                                         |  |                          | 9,565,117   |                             |   | 9,565,117   |  
|Statutory earnings reserve                                                                                         |  |                          | 3,079,063   |                             |   | 3,079,063   |  
|Accumulated other comprehensive income                                                                             |  |                          | 3,546,205   |                             |   | 3,592,839   |  
|Retained earnings                                                                                                  |  |                          | 20,105,635  |                             |   | 17,807,035  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total stockholders equity                                                                                         |  |                          | 36,341,122  |                             |   | 34,089,156  |  
|                                                                                                                   |  |                          |             |                             |   |             |  
|Total Liabilities and Stockholders Equity                                                                         |  | $                        | 55,966,024  |                             | $ | 52,822,062  |  
|                                                                                                                   |  |                          |             |                             |   |             |  

The accompanying notes to financial
statements are 
an integral part of these balance sheets.

F-2

---



ORIENT PAPER, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED 
MARCH 31, 2009 AND 2008 
(Unaudited)

|                                                                    |  |                                 |            |      |   |            |  
|------------------------------------------------------------------- |  | ------------------------------- | ---------- | ---- | - | ---------- | -
|                                                                    |  | Three Months Ended 
  March 31, |           
|                                                                    |  |                                 |           
|                                                                    |  | 2009                            |            | 2008 |  
|                                                                    |  |                                 |            |      |  
|Revenues:                                                           |  |                                 |            |      |   |            |  
|Sales, net                                                          |  | $                               | 17,837,478 |      | $ | 13,528,033 |  
|                                                                    |  |                                 |            |      |   |            |  
|Cost of Sales:                                                      |  |                                 |            |      |   |            |  
|Cost of sales                                                       |  |                                 | 14,445,124 |      |   | 10,991,548 |  
|Business tax and surcharges                                         |  |                                 | 55,916     |      |   | 52,956     |  
|                                                                    |  |                                 |            |      |   |            |  
|Total cost of sales                                                 |  |                                 | 14,501,040 |      |   | 11,044,504 |  
|                                                                    |  |                                 |            |      |   |            |  
|Gross Profit                                                        |  |                                 | 3,336,438  |      |   | 2,483,529  |  
|Selling, General and Administrative Expenses                        |  |                                 | 198,754    |      |   | 220,957    |  
|                                                                    |  |                                 |            |      |   |            |  
|Income from Operations                                              |  |                                 | 3,137,684  |      |   | 2,262,572  |  
|                                                                    |  |                                 |            |      |   |            |  
|Other Income (Expense):                                             |  |                                 |            |      |   |            |  
|Interest income                                                     |  |                                 | 24,978     |      |   | 7,606      |  
|Interest (expense)                                                  |  |                                 | (89,849    | )    |   | (114,566   | )
|                                                                    |  |                                 |            |      |   |            |  
|Total other (expense)                                               |  |                                 | (64,871    | )    |   | (106,960   | )
|                                                                    |  |                                 |            |      |   |            |  
|Income before Income Taxes                                          |  |                                 | 3,072,813  |      |   | 2,155,612  |  
|Provision for Income Taxes                                          |  |                                 | (774,213   | )    |   | (711,352   | )
|                                                                    |  |                                 |            |      |   |            |  
|Net Income                                                          |  |                                 | 2,298,600  |      |   | 1,444,260  |  
|                                                                    |  |                                 |            |      |   |            |  
|Comprehensive Income:                                               |  |                                 |            |      |   |            |  
|Foreign currency translation adjustment                             |  |                                 | (46,634    | )    |   | 1,218,354  |  
|                                                                    |  |                                 |            |      |   |            |  
|Total Comprehensive Income                                          |  | $                               | 2,251,966  |      | $ | 2,662,614  |  
|                                                                    |  |                                 |            |      |   |            |  
|Earnings Per Share:                                                 |  |                                 |            |      |   |            |  
|Basic and Diluted Earning per Share                                 |  | $                               | 0.05       |      | $ | 0.04       |  
|                                                                    |  |                                 |            |      |   |            |  
|Weighted Average Number of Shares Outstanding -
  Basic and Diluted |  |                                 | 45,101,987 |      |   | 40,101,987 |  
|                                                                    |  |                                 |            |      |   |            |  

The accompanying notes to financial
statements are 
an integral part of these statements.

F-3

---



ORIENT PAPER, INC. 
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2009, AND 2008 
(Unaudited)

|                                                               |  |                                |           |      |   |             |  
|-------------------------------------------------------------- |  | ------------------------------ | --------- | ---- | - | ----------- | -
|                                                               |  | Three Months Ended
  March 31, |          
|                                                               |  |                                |          
|                                                               |  | 2009                           |           | 2008 |  
|                                                               |  |                                |           |      |  
|Cash Flows from Operating Activities:                          |  |                                |           |      |   |             |  
|Net income                                                     |  | $                              | 2,298,600 |      | $ | 1,444,260   |  
|Adjustments to reconcile net income to net
cash                |  |                                |           |      |   |             |  
|provided by operating activities:                              |  |                                |           |      |   |             |  
|Depreciation and amortization                                  |  |                                | 879,485   |      |   | 1,026,784   |  
|Changes in net assets and liabilities:                         |  |                                |           |      |   |             |  
|Accounts receivable - Trade                                    |  |                                | (956,127  | )    |   | (214,465    | )
|Other receivable                                               |  |                                | (1,453    | )    |   |            |  
|Inventories                                                    |  |                                | 1,447,792 |      |   | (100,139    | )
|Prepaid expenses                                               |  |                                |          |      |   | (285,600    | )
|Accounts payable - Trade and accrued
liabilities               |  |                                | 751,110   |      |   | 8,093,784   |  
|Deferred revenues                                              |  |                                |          |      |   | 189,924     |  
|Income taxes payable                                           |  |                                | 165,951   |      |   | 376,749     |  
|                                                               |  |                                |           |      |   |             |  
|Net Cash Provided by Operating Activities                      |  |                                | 4,585,358 |      |   | 10,531,297  |  
|                                                               |  |                                |           |      |   |             |  
|Cash Flows from Investing Activities:                          |  |                                |           |      |   |             |  
|Purchases of property, plant, and
equipment                    |  |                                |          |      |   | (11,220,192 | )
|                                                               |  |                                |           |      |   |             |  
|Net Cash (Used in) Investing Activities                        |  |                                |          |      |   | (11,220,192 | )
|                                                               |  |                                |           |      |   |             |  
|Cash Flows from Financing Activities:                          |  |                                |           |      |   |             |  
|Proceeds from related party loans                              |  |                                |          |      |   | 239,233     |  
|Proceeds from short term loans                                 |  |                                | 537       |      |   |            |  
|Payments of principal on credit facility                       |  |                                |          |      |   | (107,519    | )
|                                                               |  |                                |           |      |   |             |  
|Net Cash Provided by Financing Activities                      |  |                                | 537       |      |   | 131,714     |  
|                                                               |  |                                |           |      |   |             |  
|Effect of Exchange Rate Changes on Cash and Cash
  Equivalents |  |                                | (4,726    | )    |   | 1,218,354   |  
|                                                               |  |                                |           |      |   |             |  
|Net Increase in Cash and Cash Equivalents                      |  | $                              | 4,581,169 |      | $ | 661,173     |  
|Cash and Cash Equivalents - Beginning of Period                |  |                                | 3,234,419 |      |   | 622,661     |  
|                                                               |  |                                |           |      |   |             |  
|Cash and Cash Equivalents - End of Period                      |  | $                              | 7,815,588 |      | $ | 1,283,834   |  
|                                                               |  |                                |           |      |   |             |  
|Supplemental Disclosure of Cash Flow Information:              |  |                                |           |      |   |             |  
|Cash paid for interest                                         |  | $                              | 89,849    |      | $ | 117,050     |  
|                                                               |  |                                |           |      |   |             |  
|Cash paid for income taxes                                     |  | $                              | 994,641   |      | $ | 455,672     |  
|                                                               |  |                                |           |      |   |             |  

The accompanying notes to financial
statements are 
an integral part of these statements.

F-4

---



ORIENT PAPER, INC. 
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 
DECEMBER 31, 2008, AND 2007

Supplemental Disclosure of Cash Flow Information:

In May 2008, the Company
issued 5,000,000 shares of common stock to three consultants for services
rendered during the year ending December 31, 2008, valued at $500,000.

The accompanying notes to financial
statements are 
an integral part of these statements.

F-5

---



(1) Summary of Significant Accounting
Policies

Basis of Presentation and Organization

Orient Paper,
Inc. (Orient Paper or the Company) was incorporated under the laws of the
State of Nevada on December 9, 2005, under the name of Carlateral, Inc.
Carlateral, Inc. started its business by providing financing services
specializing in subprime title loans, secured primarily using automobiles (and
also boats, recreational vehicles, machinery, and other equipment) as
collateral.

Hebei Baoding
Orient Paper Milling Company Limited (HBOP) was organized on March 3, 1996,
under the laws of the PRC. HBOP engages mainly in the production and
distribution of products such as copy paper, uncoated and coated paper, digital-photo
paper, corrugated paper, plastic paper, craft paper, graphic-design paper,
antifraud-thermal-security paper, and other paper and packaging-related
products. HBOP uses recycled paper as its primary raw material.

Dongfang Zhiye
Holding Limited (DZH Limited) was formed on November 13, 2006, under the laws
of the British Virgin Islands, and is a holding company. As such, DZH Limited
does not generate any financial or operating transactions. On July 16, 2007,
DZH Limited acquired all of the issued and outstanding stock and ownership of
HBOP and placed such shares in trust with Zhenyong Liu, Xiaodong Liu, and
Shuangxi Zhao, pursuant to a trust agreement executed as of the same date.
Under the terms of the trust agreement, Mr. Liu, Mr. Liu and Mr. Zhao (the
original shareholders of HBOP) would exercise control over the disposition of
DZH Limiteds shares in HBOP on DZH Limiteds behalf until DZH Limited
successfully completed the change in registration of HBOPs capital with the
relevant PRC Administration of Industry and Commerce as the 100% owner of
HBOPs shares.

On October 29,
2007, Orient Paper entered into an Agreement and Plan of Merger (see Note 7)
with (i) Orient Paper wholly owned subsidiary, CARZ Merger Sub, Inc., (ii) DZH
Limited, and (iii) each of DZH Limited shareholders (Zhenyong Liu, Xiaodong
Liu, Chen Li, Ning Liu, Jie Liu, Shenzhen Huayin Guaranty & Investment
Company Limited, Top Good International Limited, Total Giant Group Limited,
Total Shine Group Limited, Victory High Investment Limited, Think Big Trading
Limited, Huge Step Enterprises Limited, and Sure Believe Enterprise Limited).

Pursuant to
the agreement and plan of merger, DZH Limited merged with CARZ Merger Sub, Inc.
via a share exchange, with DZH Limited as the surviving entity. In exchange for
their shares in DZH Limited, the DZH Limited shareholders received an aggregate
of 29,801,987 newly-issued shares of Orient Papers common stock, $.001 par
value, which were distributed pro ratably among the DZH Limited shareholders in
accordance with their respective ownership interests in DZH Limited.

As a result of
the merger transaction, DZH Limited became a wholly-owned subsidiary of Orient
Paper, which, in turn, made Orient Paper the indirect owner of DZH Limiteds
operating company subsidiary, HBOP, pursuant to the terms of the trust
agreement. HBOP, the entity through which the Company operates its business
currently has no subsidiaries, either wholly- or partially-owned.

Prior to the
completion of the reverse merger, Orient Paper only had limited operations
(since its incorporation on December 9, 2005). On December 21, 2007, the name
of the Company was changed from Carlateral, Inc. to Orient Paper, Inc. in order
to better reflect the current business plan subsequent to the reverse merger.

Given that DZH
Limited is considered to have acquired Orient Paper by a reverse merger through
an Agreement and Plan of Merger (see Note 7), and its stockholders currently
have voting control of Orient Paper, the accompanying financial statements and
related disclosures in the notes to financial statements present the financial
position as of March 31, 2009, and 2008, and the operations for the three
months ended March 31, 2009, and 2008, of DZH Limited and its subsidiary HBOP
under the name of Orient Paper. The reverse merger has been recorded as a
recapitalization of Orient Paper, with the consolidated net assets of DZH
Limited and its wholly owned operating subsidiary HBOP, and net assets Orient
Paper brought forward at their historical bases. The costs associated with the
reverse merger have been expensed as incurred.

Interim Financial Statements

The interim
financial statements of Orient Paper have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information, and the instructions for Securities and Exchange
Commission Form 10-Q under Regulation S-X. They do not include all of the
information and footnotes
required by generally accepted accounting principles for complete financial

F-6

---



statements. Therefore, these financial statements should be read in conjunction
with Orient Papers audited financial statements and notes thereto for the year
ended December 31, 2008, included in Orient Papers Annual Report on Form 10-K
filed on March 27, 2009, with the SEC.

The
accompanying interim financial statements included herein are unaudited.
However, they contain all normal recurring accruals and adjustments that, in
the opinion of management, are necessary to present fairly Orient Papers
financial position as of March 31, 2009, and December 31, 2008, and the results
of its operations and cash flows for the three months ended March 31, 2009, and
2008. The results of operations for the three months ended March 31, 2009, are
not necessarily indicative of the results to be expected for future quarters or
the year ending December 31, 2009.

Foreign Currency Translation

Orient Paper
accounts for foreign currency translation pursuant to SFAS No. 52, Foreign Currency Translation (SFAS No.
52). Orient Papers functional currency is the Chinese Yuan Renminbi (CNY).
Under SFAS No. 52, all assets and liabilities are translated into United States
dollars using the current exchange rate at the end of each fiscal period.
Revenues and expenses are translated using the average exchange rates
prevailing throughout the respective periods. Translation adjustments are
included in other comprehensive income (loss) for the period. Certain
transactions of Orient Paper are denominated in United States dollars.
Translation gains or losses related to such transactions are recognized for
each reporting period in the related statement of operations and comprehensive
income (loss).

Use of Estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of March 31, 2009, and December 31, 2008, and revenues and
expenses for the three months ended March 31, 2009, and 2008. Actual results
could differ from those estimates made by management.

Risks and Uncertainties

Orient Paper
is subject to substantial risks from, among other things, intense competition
associated with the industry in general, other risks associated with financing,
liquidity requirements, rapidly changing customer requirements, limited
operating history, foreign currency exchange rates, and operating in the PRC
under its various laws and restrictions.

Cash and Cash Equivalents

For purposes
of reporting within the statements of cash flows, Orient Paper considers all
cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.

Concentration of Credit Risk

Financial
instruments which potentially subject Orient Paper to concentrations of credit
risk consist principally of cash. Orient Paper places its temporary cash
investments in reputable financial institutions in the PRC. Although it is
generally understood that the PRC central government stand behind all of the
banks in China in the event of bank failure, there is no deposit insurance
system in China that is similar to the protection provided by the Federal
Deposit Insurance Corporation (FDIC) of the United States.

Accounts Receivable

Trade accounts
receivable are recorded on shipment of products to customers, and generally are
due under the terms of net 30 days. The trade receivables are not
collateralized and interest is not accrued on past due accounts. Periodically,
management reviews the adequacy of its provision for doubtful accounts based on
historical bad debt expense results and current economic conditions using
factors based on the aging of its accounts receivable. Additionally, Orient
Paper may identify additional allowance requirements based on indications that
a specific customer may be experiencing financial difficulties. Actual bad debt
results could differ materially from these estimates. As of March 31, 2009, and
December 31, 2008, balance of allowance for doubtful account was $24,040 and
$0, respectively. While

F-7

---



management
uses the best information available upon which to base estimates, future
adjustments to the allowance may be necessary if economic conditions differ
substantially from the assumptions used for the purposes of analysis.

Inventories

Inventories
consist principally of raw materials (used paper) and finished goods, and are
stated at the lower of cost (weighted average method) or market.

Property, Plant, and Equipment

Property,
plant, and equipment are stated at cost. Major renewals, betterments, and
improvements are charged to the asset accounts while replacements, maintenance,
and repairs, which do not improve or extend the lives of the respective assets,
are expensed to operations. At the time property, plant, and equipment are
retired or otherwise disposed of, the asset and related accumulated
depreciation or amortization accounts are relieved of the applicable amounts.
Gains or losses from retirements or sales are credited or charged to income.

Orient Paper
depreciates and amortizes property, plant, and equipment using the
straight-line method as follows:

| |                             |           
| | --------------------------- | ----------
| | Building and
  improvements | 30 years  
| | Machinery
  and equipment   | 5-15 years
| | Vehicles                    | 15 years  

Long-Lived Assets

Orient Paper
evaluates the recoverability of long-lived assets and the related estimated
remaining useful lives when events or circumstances lead management to believe
that the carrying value of an asset may not be recoverable and the undiscounted
cash flows estimated to be generated by those assets are less than the assets
carrying amount. In such circumstances, those assets are written down to
estimated fair value. For the three months ended March 31, 2009, and 2008, no
events or circumstances occurred for which an evaluation of the recoverability
of long-lived assets was required.

Fair Value of Financial Instruments

Orient Paper
estimates the fair value of financial instruments using the available market
information and valuation methods. Considerable judgment is required in
estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts Orient Paper could realize in a current market
exchange. As of March 31, 2009, and December 31, 2008, Orient Papers financial
instruments approximated fair value to do the nature and maturity of such
instruments.

Statutory Reserves

The laws and
regulations of the PRC require that before an enterprise distributes profits to
its shareholders, it must first satisfy all tax liabilities, provide for losses
in previous years, and make allocations, in proportions determined at the
discretion of the Board of Directors, after the statutory reserve. The
statutory reserves include a surplus reserves fund and a common welfare fund.
These statutory reserves represent restricted retained earnings.

Surplus Reserve Fund

Orient Paper
is required to transfer 10 percent of the current year net income of HBOP, as
determined in accordance with the PRC accounting rules and regulations, to a
statutory surplus reserve fund on an annual basis until such reserve balance
reaches 50 percent of HBOPs registered capital. As of March 31, 2009, such registered
capital is in the amount of RMB 75,030,000 yuan, or USD $10,991,895.

The transfer
to this reserve must be made before distribution of any dividend to
shareholders. For the three months ended March 31, 2009, and 2008, Orient Paper
did not make a transfer to this reserve. The surplus reserve fund is
non-distributable other than during liquidation and can be used to fund
previous years losses, if any, and may be utilized for business expansion or
converted into share capital by issuing new shares to existing shareholders in
proportion to their shareholdings or by increasing the par value of the shares
currently held by them, provided that the remaining reserve balance after such
issue is not less than 25 percent of the registered capital.

F-8

---



Common Welfare Fund

Orient Paper
is required to transfer five percent to 10 percent of the net income of HBOP,
as determined in accordance with the PRC accounting rules and regulations, to
the statutory common welfare fund on an annual basis. For the three months
ended March 31, 2009, and 2008, Orient Paper did not make a transfer to this
fund. This fund can only be utilized on capital items for the collective
benefit of Orient Papers employees, such as construction of dormitories,
cafeteria facilities, and other staff welfare facilities. This fund is
non-distributable other than upon liquidation. The transfer to this fund must
be made before distribution of any dividend to shareholders.

Revenue Recognition Policy

Orient Paper
recognizes revenue when goods are shipped, when a formal arrangement exists,
the price is fixed or determinable, the delivery is completed, no other
significant obligations of Orient Paper exist, and collectability is reasonably
assured. Orient Paper is required to collect a three percent value-added-tax
(VAT) on each sale. Gross revenues do not include this VAT which is remitted
to the government quarterly.

Advertising

Orient Paper
expenses all advertising and promotion costs as incurred. The Company did not
incur any advertising and promotion costs for the three months ended March 31,
2009, and 2008, respectively.

Lease Obligations

All
noncancellable leases with an initial term greater than one year are
categorized as either capital or operating leases. Assets recorded under capital
leases are amortized according to the same depreciation methods employed for
property and equipment or over the term of the related lease, if shorter.

Income Taxes

Orient Paper
accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). Under
SFAS
No. 109, deferred tax assets and liabilities are determined based on temporary
differences between the bases of certain assets and liabilities for income tax
and financial reporting purposes. The deferred tax assets and liabilities are
classified according to the financial statement classification of the assets
and liabilities generating the differences.

Orient Paper
maintains a valuation allowance with respect to deferred tax assets. Orient
Paper establishes a valuation allowance based upon the potential likelihood of
realizing the deferred tax asset and taking into consideration Orient Papers
financial position and results of operations for the current period. Future
realization of the deferred tax benefit depends on the existence of sufficient
taxable income within the carryforward period under the Federal tax laws.

Changes in
circumstances could cause a change in judgment about the realizability of the
related deferred tax asset. Any change in the valuation allowance will be
included in income in the year of the change in estimate.

Foreign
operations of Orient Paper are governed by the Income Tax Laws of the PRC.
Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (EIT) is
imposed at a statutory rate of 25 percent.

Comprehensive Income (Loss)

Orient Paper
presents comprehensive income (loss) in accordance with Statement of Financial
Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS No. 130). SFAS No. 130 states that all
items that are required to be recognized under accounting standards as
components of comprehensive income (loss) be reported in the financial
statements. For the three months ended March 31, 2009, and 2008, the only
components of comprehensive income were the net income for the periods, and the
foreign currency translation adjustments.

Earnings Per Common Share

Basic earnings
per share is computed by dividing the net income attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed similar
to basic earnings per share except that the denominator is increased to include
the number of

F-9

---



additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive.

Share-Based Compensation

The Company
uses the fair value recognition provision of Financial Accounting Standards No.
123R, Share Based payment (FASB No. 123R), which requires the Company to
expense the cost of employee services received in exchange for an award of
equity instruments based on the grant date fair value of such instruments. The
Company uses the Black-Scholes option pricing model to calculate the fair value
of any equity instruments on the grant date.

The Company
also uses the provisions of EITF 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
Or in Conjunction with selling, Goods or Services (EITF 96-18),
to account for stock-based compensation awards issued to non-employees for
services. Such awards for services are recorded at either the fair value of the
services rendered or the instruments issued in exchange for such services,
whichever is more readily determinable, using the measurement date guidelines
enumerated in EITF 96-18.

(2) Inventories

Raw material
inventory includes mainly recycled used paper and pulp. Finished goods include
mainly products of offset paper and corrugated paper. Inventories consisted of
the following as of March 31, 2009, and December 31, 2008:

|                  |  |           |           |              |   |           | 
|----------------- |  | --------- | --------- | ------------ | - | --------- | 
|                  |  | March 31, |           | December 31, |  
|                  |  | 2009      |           | 2008         |  
|                  |  |           |           |              |  
|Raw materials     |  | $         | 677,159   |              | $ | 2,378,757 | 
|Finished goods    |  |           | 692,365   |              |   | 442,306   | 
|                  |  |           |           |              |   |           | 
|Total inventories |  | $         | 1,369,524 |              | $ | 2,821,063 | 
|                  |  |           |           |              |   |           | 

(3) Loans Payable

Orient Paper
had the following loans payable as of March 31, 2009, and December 31, 2008:

F-10

---



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- | ------------ | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | March 31, |            | December 31, |  
|Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2009      |            | 2008         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |  
|Note payable to Industrial
  & Commercial Bank of China, secured by certain manufacturing equipments
  of the Company. Interest is payable monthly at the rate of 6.372% per annum.
  The entire principal is due and payable at maturity on January 20, 2010. The
  note is renewable upon maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $         | 1,904,500  |              | $ | 1,907,100  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Loan payable to Huaxia
  Bank, guaranteed by a third party guaranty company with a guaranty fee of 2.4%
  of the outstanding balance payable to the guaranty company. Interest is
  payable monthly at 9.828% per annum. The entire principal was due and payable
  at maturity on March 5, 2009, when the bank granted us a one-month grace
  period for negotiating interest rates and terms for renewing the loan. The
  Company subsequently decided not to renew the Huanxia Bank loan and arranged
  for the guaranty company to provide the Company with a one-month bridge loan
  to pay off the bank loan in April 2009. The guaranty company bridge loan
  carried interest at 0.933% per month. The Company paid off the bridge loan on
  April 30, 2009. |  |           | 1,245,250  |              |   | 1,246,950  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Credit facility provided by
  Industrial & Commercial Bank of China. Interest is payable monthly at
  8.217% per annum. The entire principal is due and payable at maturity on June
  4, 2009. The note is renewable upon maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |           | 879,000    |              |   | 880,200    |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Short-term credit facility
  provide by the United Commercial Bank (China) Limited, including a revolving
  credit facility of $2,000,000 and a non-revolving import loan facility of
  $816,976. The credit facility is secured by the Companys building, land use
  rights. and is personally guaranteed by the Chief Executive Officer and the
  Director. Interest is paid monthly with a floating rate indexed to 5% plus
  the three-month LIBOR, adjusted every three months and was 6.2667% per annum
  on March 31, 2009. The note is renewable upon maturity, which was extended to
  June 30, 2009 according to the Short-Term Credit Facility Extension Agreement
  entered into by the Company and the Bank on January 23, 2009.                       |  |           | 2,821,088  |              |   | 2,824,402  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Loan payable to Rural Credit Cooperative of Xushui, guaranteed by an unrelated third party company. The
  entire principal is due and payable at maturity on September 16, 2011.
  Interest is paid monthly at the rate of 0.774% per month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |           | 1,945,520  |              |   | 1,948,176  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Total loans payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $         | 8,795,358  |              | $ | 8,806,828  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Less - Current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |           | (6,849,838 | )            |   | (6,858,652 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  
|Total loans payable -
  long-term portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $         | 1,945,520  |              | $ | 1,948,176  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |           |            |              |   |            |  

As of March
31, 2009, Orient Papers United Commercial Bank (China) Limited credit facility
had a maximum borrowing level of $2,816,977, which left zero in borrowing
capacity. The average short-term borrowing rates for the three months ended
March 31, 2009, and 2008, were approximately 5.31 percent and 7.47 percent,
respectively. The credit facility agreement includes certain covenants that
require the Company to maintain (1) the equity to debt (including contingent
liabilities) ratio at no less than 50%, and (2) its current ratio at no less
than 100%. The Company is in compliance with these covenants as of March 31,
2009.

Future
maturities of loans payable, excluding lease obligations, are as follows as of
March 31, 2009:

|         |  |        |           | 
|-------- |  | ------ | --------- | 
|March 31 |  | Amount |          
|         |  |        |          
|2010     |  | $      | 6,849,838 | 
|2011     |  |        |          | 
|2012     |  |        | 1,945,520 | 
|         |  |        |           | 
|Totals   |  | $      | 8,795,358 | 
|         |  |        |           | 

(4) Major Suppliers

For the three
months ended March 31, 2009, Orient Paper had two major suppliers which
primarily accounted for 50% and 18% of total purchases. For the three months
ended March 31, 2008, Orient Paper had three major suppliers, which primarily
accounted for 49%, 20%, and 14% of total purchases.

F-11

---



(5) Commitments and Contingencies

Operating Lease

Orient Paper
leases 32.95 acres of land at its location from a local government 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 $17,580. This
operating lease is renewable at the end of the 30-year term.

Future minimum
lease payments are as follows:

|                                 |  |        |         | 
|-------------------------------- |  | ------ | ------- | 
|March 31,                        |  | Amount |        
|                                 |  |        |        
|2010                             |  | $      | 17,580  | 
|2011                             |  |        | 17,580  | 
|2012                             |  |        | 17,580  | 
|2013                             |  |        | 17,580  | 
|2014                             |  |        | 17,580  | 
|Thereafter                       |  |        | 298,860 | 
|                                 |  |        |         | 
|Total
  operating lease payments |  | $      | 386,760 | 
|                                 |  |        |         | 

Environmental Remediation

In accordance
with the real estate lease, Orient Paper will be obligated to return the land
to its condition prior to the lease. As such, Orient Paper will accrue the cost
estimated to return the land to its prior condition over the 30-year life of
the lease. Orient Paper has not obtained an estimate for those costs, but
management is confident that any such costs that should be accrued are not
material as of March 31, 2009, and December 31, 2008.

Consulting Agreements

On January 1,
2008, Orient Paper entered into three separate written Consulting Agreements
with third-party individuals to provide consulting services during the year of
2008. These Consulting Agreements could be terminated at any time by the
parties with or without cause, effective upon a written 30-day notice. However,
termination by Orient Paper did not waive the obligation of Orient Paper to pay
the consultants. Consulting services under the agreements principally commenced
January 1, 2008, and consisted of various accounting, legal, and regulatory
matters. The consultants further agreed that compensation, which amounted to at
least $500,000 in aggregate under the Consulting Agreements, could be paid by
the Company by issuing restricted shares of common stock under the terms
mutually agreed upon by both parties at a future date. For the year ended December
31, 2008, $500,000 of consulting expense was recorded for services rendered by
the three consultants with the issuance of 5,000,000 shares of common stock of
the Company.

(6) Related Party Transactions

The Chief
Executive Officer of Orient Paper loaned money (over a period of time) to the
Company for working capital purposes, which amounted to $6,148,710 as of March
31, 2009. During the three months ended March 31, 2009, and 2008, Orient Paper
did not make a payment towards this loan. On July 24, 2008, the Chief Executive
Officer of the Company agreed to change the term of the loan from payable on
demand to a period of three years, maturing on July 23, 2011 and with no stated
interest.

On August 1,
2008, a member of the Board of Directors of HBOP loaned money to the Company
for working capital purposes which amounted to $879,000 and $880,200 as of
March 31, 2009, and December 31, 2008, respectively. The amount owed bears
interest at 7.56% per annum and is due on July 31, 2011.

On August 5,
2008, a member of the Board of Directors of Orient Paper loaned money to the
Company for working capital purposes which amounted to $1,098,750 and
$1,100,250 as of March 31, 2009, and December 31, 2008, respectively. The
amount owed bears interest at 7.56% per annum and is due on August 4, 2011.

(7) Common Stock

F-12

---



On December
16, 2006, Orient Paper issued 7,000,000 shares of its common stock for proceeds
of $7,000.

On December
24, 2006, Orient Paper issued 3,300,000 shares of its common stock for proceeds
of $16,500.

On October 29,
2007, Orient Paper entered into an Agreement and Plan of Merger (the Merger
Agreement) between Orient Paper; CARZ Merger Sub, Inc., a Nevada corporation,
and wholly owned subsidiary of Orient Paper; DZH Limited; and the stockholders
of DZH Limited. Under the terms of the Merger Agreement, Orient Paper issued to
the stockholders of DZH Limited 29,801,987 shares of Orient Papers common
stock, par value $0.001, in exchange for all of the issued and outstanding
shares of stock of DZH Limited (50,000 shares). The shares of common stock of
Orient Paper were issued without registration under the Securities Act of 1933,
and were distributed pro rata among the stockholders of DZH Limited in
accordance with their respective ownership interests in DZH Limited immediately
before completion of the merger transaction. As a result of the Merger
Agreement, DZH Limited merged with CARZ Merger Sub, Inc., with DZH Limited as
the surviving entity. As such, DZH Limited became a wholly owned subsidiary of
Orient Paper, which in turn, made Orient Paper the indirect owner of DZH
Limiteds operating subsidiary, HBOP, pursuant to the terms of a trust
agreement between DZH Limited and the original shareholders of HBOP.

For financial
reporting purposes, DZH Limited is considered to have acquired Orient Paper by
a reverse merger through the Merger Agreement, and its stockholders currently
have voting control of Orient Paper. As such, the accompanying financial
statements and related disclosures in the notes to financial statements present
the financial position as of March 31, 2008, and December 31, 2007, and the
operations for the three months ended March 31, 2008, and 2007, of DZH Limited
and its subsidiary HBOP under the name of Orient Paper. The reverse merger has
been recorded as a recapitalization of Orient Paper, with the consolidated net
assets of DZH Limited and its wholly owned operating subsidiary HBOP, and net
assets Orient Paper brought forward at their historical bases. The costs
associated with the reverse merger have been expensed as incurred.

On December
21, 2007, by a majority vote of the stockholders of Orient Paper, the amount of
authorized common stock, par value $0.001 per share, was increased from
75,000,000 shares to 500,000,000 shares. In addition, Orient Paper eliminated
preemptive rights to acquire unissued shares of its common stock.

On April 23,
2008, Orient Paper established a 2008 Equity Incentive Plan (Equity Incentive
Plan), granted to individuals who are affiliates of Orient Paper. As part of
this Equity Incentive Plan, Orient Paper registered with the SEC 5,000,000
shares of its common stock, at a proposed maximum offering price of $0.75 per
share.

On May 15,
2008, the Company issued to three consultants 5,000,000 shares of common stock
for services rendered and to be rendered during the year 2008 with a value of
$500,000.

On May 1, 2009, the Company entered into a loanout agreement under which Winston
C. Yen was appointed as the Chief Financial Officer of the Company. As part of
the compensation, the Company is to issue 20,000 shares of common stock to Mr.
Yen within the initial one-year term of employment, with 5,000 shares vesting
quarterly starting May 10, 2009. The Company issued the first 5,000 shares on
May 11, 2009.

(8) Income Taxes

On March 16,
2007, the National People’s Congress in China passed the New Enterprise Income
Tax Law effective January 1, 2008. Orient Papers Enterprise Income Tax rate is
25% effective January 1, 2008. The provision for income taxes for the three
months ended March 31, 2009, and 2008, were as follows (25% effective tax
rate):

|                            |  |      |         |      |   |         | 
|--------------------------- |  | ---- | ------- | ---- | - | ------- | 
|                            |  | 2009 |         | 2008 |  
|                            |  |      |         |      |  
|Current Tax Provision:      |  |      |         |      |   |         | 
|National and local-         |  | $    | 830,129 |      | $ | 764,308 | 
|                            |  |      |         |      |   |         | 
|Total current tax provision |  | $    | 830,129 |      | $ | 764,308 | 
|                            |  |      |         |      |   |         | 

(9) Change in the Board of Directors and
Management

Effective
November 16, 2007, each of the following individuals was appointed by the Board
of Directors of Orient Paper to serve until his or her successor is chosen or
upon his or her earlier resignation or removal as an officer of Orient Paper in
accordance with the Bylaws of Orient Paper: Zhenyong Liu, Chief Executive
Officer; Jing Hao, Chief Financial Officer; and, Dahong Zhou, Secretary.

Effective
November 30, 2007, Hui Ping Cheng resigned in her capacity as the sole member
of the Board of Directors of Orient Paper. Effective the same date, Zhenyong
Liu, Xiaodong Liu, Fuzeng Liu, and Chen Li were appointed to the Board of
Directors to serve until his or her successor is chosen or upon his or her
earlier death, resignation, or

F-13

---



removal as a
member of the Board of Directors in accordance with the Bylaws of Orient Paper.
Zhenyong Liu was also appointed as Chairman of the Board of Directors of Orient
Paper.

Effective May
1, 2009, Ms. Jing Hao resigned as the Chief Financial Officer. Effective May 1,
2009, Orient Paper entered into a Loanout Agreement with Winston C. Yen, CPA, A Professional Accounting Corporation, for Mr. Winston C. Yen to
serve as the Chief Financial Officer, for an initial term of one year.

(10) Recent Accounting Pronouncements

In December
2007, the FASB issued SFAS No. 141R, Business
Combinations  Revised 2007 (SFAS No. 141R), which replaces FASB
Statement No. 141, Business Combinations.
SFAS No. 141 restablishes
principles and requirements intending to improve the relevance,
representational faithfulness, and comparability of information that a
reporting entity provides in its financial reports about a business combination
and its effects. This is accomplished through requiring the acquirer to
recognize assets acquired and liabilities assumed arising from contractual
contingencies as of the acquisition date, measured at their acquisition-date
fair values. This includes contractual contingencies only if it is more likely
than not that they meet the definition of an asset of a liability in FASB
Concepts Statement No. 6, Elements of
Financial Statements  a
replacement of FASB Concepts Statement No. 3.This statement also requires the acquirer
to recognize goodwill as of the acquisition date, measured as a residual.
However, this statement improves the way in which an acquirers obligations to
make payments conditioned on the outcome of future events are recognized and measured,
which in turn improves the measure of goodwill. This statement also defines a
bargain purchase as a business combination in which the total acquisition-date
fair value of the consideration transferred plus any noncontrolling interest in
the acquiree, and it requires the acquirer to recognize that excess in earnings
as a gain attributable to the acquirer. This, therefore, improves the
representational faithfulness and completeness of the information provided
about both the acquirers earnings during the period in which it makes a
bargain purchase and the measures of the assets acquired in the bargain
purchase. The management of Orient Paper does not expect the adoption of this
pronouncement to have a material impact on its financial statements.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements  amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the
recognition of a noncontrolling interest (minority interest) as equity in the
consolidated financial statements and separate from the parents equity. The
amount of net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 clarifies that changes in a parents ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, this statement
requires that a parent recognize a gain or loss in net income when a subsidiary
is deconsolidated. Such gain or loss will be measured using the fair value of
the noncontrolling equity investment on the deconsolidation date. SFAS No. 160
also includes expanded disclosure requirements regarding the interests of the
parent and its noncontrolling interest.

SFAS No. 160
is effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
management of Orient Paper does not expect the adoption of this pronouncement
to have a material impact on its financial statements.

In March 2008,
the FASB issued FASB Statement No. 161, Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement 133 (SFAS No. 161). SFAS No. 161 enhances required
disclosures regarding derivatives and hedging activities, including enhanced
disclosures regarding how: (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under FASB
No. 133, Accounting for Derivative Instruments and
Hedging Activities; and (c) derivative instruments
and related hedged items affect an entitys financial position, financial
performance, and cash flows. Specifically, FASB No. 161 requires:

| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Disclosure
  of the objectives for using derivative instruments be disclosed in terms of
  underlying risk and accounting designation;
| |   |                                                                                                                                       
| |  | Disclosure
  of the fair values of derivative instruments and their gains and losses in a
  tabular format;                           
| |   |                                                                                                                                       
| |  | Disclosure
  of information about credit-risk-related contingent features; and                                                        
| |   |                                                                                                                                       
| |  | Cross-reference
  from the derivative footnote to other footnotes in which derivative-related
  information is disclosed.             

F-14

---



FASB No. 161
is effective for fiscal years and interim periods beginning after November 15,
2008. Earlier application is encouraged. The management of Orient Paper does
not expect the adoption of this pronouncement to have a material impact on its
financial statements.

In May 2008,
the FASB issued FASB Statement No. 162, The
Hierarchy of Generally Accepted Accounting Principles (SFAS No.
162). SFAS No. 162 identifies the sources of accounting principles and the
framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles in the United States of America. The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:

| |    |                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | FASB
  Statements of Financial Accounting Standards and Interpretations, FASB
  Statement 133 Implementation Issues, FASB Staff Positions, and American
  Institute of Certified Public Accountants (AICPA) Accounting Research
  Bulletins and Accounting Principles Board Opinions that are not superseded by
  actions of the FASB.
| |    |                                                                                                                                                                                                                                                                                                                                       
| | b) | FASB
  Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
  Accounting Guides and Statements of Position.                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                       
| | c) | AICPA
  Accounting Standards Executive Committee Practice Bulletins that have been
  cleared by the FASB, consensus positions of the FASB Emerging Issues Task
  Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF
  D-Topics).                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                       
| | d) | Implementation
  guides (Q&As) published by the FASB staff, AICPA Accounting
  Interpretations, AICPA Industry Audit and Accounting Guides and Statements of
  Position not cleared by the FASB, and practices that are widely recognized
  and prevalent either generally or in the industry.                                        

SFAS No. 162
is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendment to its authoritative literature. It is
only effective for nongovernmental entities; therefore, the GAAP hierarchy will
remain in SAS 69 for state and local governmental entities and federal
governmental entities. The management of Orient Paper does not expect the
adoption of this pronouncement to have a material impact on its financial
statements.

On May 26,
2008, the FASB issued FASB Statement No. 163, Accounting
for Financial Guarantee Insurance Contracts (SFAS No. 163). SFAS
No. 163 clarifies how FASB Statement No. 60, Accounting
and Reporting by Insurance Enterprises (SFAS No. 60), applies to
financial guarantee insurance contracts issued by insurance enterprises,
including the recognition and measurement of premium revenue and claim
liabilities. It also requires expanded disclosures about financial guarantee
insurance contracts.

The accounting
and disclosure requirements of SFAS No. 163 are intended to improve the
comparability and quality of information provided to users of financial
statements by creating consistency. Diversity exists in practice in accounting
for financial guarantee insurance contracts by insurance enterprises under SFAS
No. 60, Accounting and Reporting by
Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies (SFAS No.
5). SFAS No. 163 requires that an insurance enterprise recognize a claim
liability prior to an event of default when there is evidence that credit
deterioration has occurred in an insured financial obligation. It also requires
disclosure about (a) the risk-management activities used by an insurance
enterprise to evaluate credit deterioration in its insured financial
obligations and (b) the insurance enterprises surveillance or watch list.

SFAS No. 163
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years, except
for disclosures about the insurance enterprises risk-management activities.
Disclosures about the insurance enterprises risk-management activities are
effective the first period beginning after issuance of SFAS No. 163. Except for
those disclosures, earlier application is not permitted. The management of
Orient Paper does not expect the adoption of this pronouncement to have
material impact on its financial statements.

(11) Subsequent Events

On April 30,
the Company made a payment in the amount of $1,266,557, including $21,307 for
interest, to Hebei Small-Medium Enterprise Credit Guarantee Service Center, a
quasi-governmental agency, to pay off the principal and accrued
interest of a one-month bridge loan that

F-15

---



Heibei Small-Medium Enterprise Credit
Guarantee Service Center made to the Company during the grace period following
the March 5, 2009 maturity date of the $1,245,250 loan from the Huaxia Bank.

F-16

---



Item 2. Managements Discussion and Analysis
or Plan of Operation

Cautionary Notice Regarding Forward-Looking
Statements

In
this quarterly report, references to Orient Paper, OPAI, the Company,
we, our, us, and the Companys wholly-owned subsidiary, HBOP, refer to
Orient Paper, Inc.

We
make certain forward-looking statements in this report. Statements concerning
our future operations, prospects, strategies, financial condition, future
economic performance (including growth and earnings), demand for our services,
and other statements of our plans, beliefs, or expectations, including the
statements contained under the captions Managements Discussion and Analysis
of Financial Condition and Results of Operations, Business, as well as
captions elsewhere in this document, are forward-looking statements. In some
cases these statements are identifiable through the use of words such as
anticipate, believe, estimate, expect, intend, plan,
project,
target, can, could, may, should, will, would, and
similar
expressions. We intend such forward-looking statements to be covered by the
safe harbor provisions contained in Section 27A of the Securities Act of 1933,
as amended (the Securities Act) and in Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act). The forward-looking statements we
make are not guarantees of future performance and are subject to various
assumptions, risks, and other factors that could cause actual results to differ
materially from those suggested by these forward-looking statements. Because
such statements are subject to risks and uncertainties, actual results may
differ materially from those expressed or implied by the forward-looking
statements. Indeed, it is likely that some of our assumptions will prove to be
incorrect. Our actual results and financial position will vary from those
projected or implied in the forward-looking statements and the variances may be
material. You are cautioned not to place undue reliance on such forward-looking
statements. These risks and uncertainties, together with the other risks
described from time to time in reports and documents that we file with the SEC
should be considered in evaluating forward-looking statements.

The
nature of our business makes predicting the future trends of our revenue,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our
actual results may differ materially from the anticipated results indicated in
these forward-looking statements. Important factors that could cause actual
results to differ from those in the forward-looking statements include, without
limitation, the following:

| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | the effect
  of political, economic, and market conditions and geopolitical events;
| |   |                                                                                    
| |  | legislative
  and regulatory changes that affect our business;                     
| |   |                                                                                    
| |  | the
  availability of funds and working capital;                                   
| |   |                                                                                    
| |  | the actions
  and initiatives of current and potential competitors;                
| |   |                                                                                    
| |  | investor
  sentiment; and                                                          
| |   |                                                                                    
| |  | our
  reputation.                                                                  

We
do not undertake any responsibility to publicly release any revisions to these
forward-looking statements to take into account events or circumstances that
occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by any
forward-looking statements.

The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this Report.

Results of Operations

Comparison of the
Three Months Ended March 31, 2009 and 2008

Revenue

Revenue
for the three months ended March 31, 2009 was $17,837,478, an increase of
$4,309,445 or 32% from $13,528,033 for the comparable period in 2008. The
increase was primarily attributable to increased demand from our existing
customers on essentially all major paper products, with the increase in
production and sales of corrugated paper significantly higher than the other
types of products. Revenue from corrugated paper amounted to

3

---



$8,388,501 (or
47% of total revenue) for the three months ended March 31, 2009, representing a
$3,068,744 (or 58%) increase over the corrugated paper revenue of $5,319,756
for the comparable period in 2008. Revenue from uncoated writing paper amounted
to $3,947,839 (or 22% of total revenue) for the three months ended March 31,
2009, representing a $2,068,270 (or 52% increase) over the uncoated writing
paper revenue of $1,879,568 for the comparable period in 2008. On the other
hand, revenue from middle grade offset paper for the three months
period ended March 31, 2009 dropped $1,296,086, to $2,014,877.

Gross Profit

Gross
profit for the three months ended March 31, 2009 was $3,336,438, an increase of
$852,909 or 34.34% compared to $2,483,529 for the comparable period in 2008.
The increase was primarily attributable to increased sales volume in the first
quarter of 2009. However, increases in gross profit as a percentage of current
quarter sales did not grow in proportion to the growth in total revenue in 2009
as compared to the same period in 2008, because the Company offered more volume
discounts to customers who placed larger sales orders. The gross profit margin
for the three months ended March 31, 2009 only increased by 0.35%, from 18.36%
to 18.70%, in 2009.

Income from operations

Operating
income for the three months ended March 31, 2009 was $3,137,684, an increase of
$875,112 or 38.7% compared to $2,262,572 for the comparable period in 2008. The
increase was primarily attributable to the increase in gross profit in the
first quarter of 2009.

Cost of Sales

Cost
of sales for the three months ended March 31, 2009 was $14,501,040, an increase
of $3,456,536 or 31.3% from $11,044,504 for the comparable period in 2008. The
increase in cost of sales is largely due to increased sales volume.

Selling, General and Administrative Expenses

General
and administrative expenses for the three months ended March 31, 2009 were
$198,754, a decrease of $22,203 or 10.0% compared to $220,957 for the
comparable period in 2008. The decrease was primarily attributable to cost-cutting
measures applied to various administrative expenses.

Net Income

Net income was
$2,298,600 for the three months ended March 31, 2009, an increase of $854,340 or 59.2%
from $1,444,260 for the same period of 2008. This increase is primarily due to
our increased sales volume in terms of quantities sold to existing major
customers.

Accounts Receivable

Accounts
receivable increased 66.9% to $2,380,017 as of the three months ended March 31,
2009, compared with $1,425,899 as of the three months ended March 31, 2008.
This increase in accounts receivable was primarily attributable to increased
sales revenue.

Inventory

Inventory
consists of raw materials and finished goods. As of the three months ended
March 31, 2009, the recorded value of our inventory has decreased 51.45% to
$1,369,524 from $2,821,063 as of the three months ended March 31, 2008. The
increase is mainly due to a decrease in raw material costs from $2,378,757 as
of December 31, 2008 to $677,159 as of March 31, 2009, a decrease of 71.5%. The
Company experienced a market of declining raw material costs in the fourth
quarter of 2008 and built up a larger than normal position in used papers by
the end of year 2008. The Company predicted that the raw material costs might
remain relatively low in the first half of 2009 and accordingly reduced the raw
material inventory level in the three months ended March 31, 2009.

Accounts Payable

4

---



Accounts
payable amounted to $1,490,894 as of the three months ended March 31, 2009, an
increase from $740,846 as of the three months ended March 31, 2008. This
increase is mainly due to increased sales/business activities in the first
three months of 2009.

Liquidity and Capital Resources

Overview

We
had net working capital of $2,013,660 at March 31, 2009, an increase of
$3,179,455 over a net working capital deficit of ($15,253,388) at March 31,
2008.

Cash and Cash Equivalents

Our
cash and cash equivalents as at the beginning of the three months ended March
31, 2009 was $3,234,419 and increased to $7,815,588 by the end of the period,
an increase of $4,581,169 or 141.6% over the base amount at January 1,
2009. The cash and cash equivalents as of March 31, 2009 represented an increase of
$6,531,754 or 508.8% from $1,283,834 for the comparable period in 2008. The
significant increase over the comparable 2008 period was primarily attributable
to the cash outlay for acquiring additional fixed assets in the first quarter
of 2008.

Net cash provided by operating activities

Net
cash provided by operating activities was $4,585,358 for the three months ended
March 31, 2009, a decrease of $5,945,939 or 56.5% from $10,531,297 for the
comparable period in 2008. However, net income increased by $854,340 or
59.2% from $1,444,260 for the comparable period in 2008. The decrease in
operating cash, compared to the same period in 2008, is mainly attributable to
the significant ending balance of accounts payable and accrued expense at March
31, 2008, which included (i) capitalized but unpaid equipment acquisition costs
in the amount of $2,926,552 and (ii) $4,486,463 of unpaid accounts payable for
purchased inventory. None of the two factors above existed in the three months
ended March 31, 2009.

Net cash used in investing activities

The
Company did not incur cash expenditure in investing activities during the
three-month period ended March 31, 2009.

Net cash used in financing activities

Net
cash provided by financing activities was $537 for the three months ended March
31, 2009. The Company did not incur new borrowings or pay off any loans carried
from December 31, 2008.

Short
term loans

On
January 31, 2008, HBOP entered into a loan agreement with the Industrial and
Commercial Bank of China, Xushui Branch, for a loan in the amount of RMB
13,000,000 yuan ($1,904,500 at March 31, 2008). The loan is renewable at
maturity and is subject to a 6.372% interest rate. The loan is secured by
certain manufacturing equipments of the Company and payable on the maturity
date of January 29, 2009. On January 21, 2009 the Company and the Bank renewed
the loan agreement for another 12 months and extended the maturity date to
January 20, 2010.

On
March 10, 2008, HBOP entered into a loan agreement with Huaxia Bank,
Shijiazhuang Branch, for a loan in the amount of RMB 8,500,000 yuan ($1,245,250
at March 31, 2008). The loan is renewable and subject to a 9.828% per annum
interest rate. The loan is guaranteed by a third party guarantor, Hebei
Small-Medium Enterprise Credit Guarantee Service Center, a quasi-governmental
agency, and is due and payable on the maturity date of March 5, 2009. On and
after March 5, 2009, the Bank granted a grace period to the HBOP for purpose of
negotiating for loan renewal. The Company then arranged to receive a one-month
bridge loan from Heibei Small-Medium Enterprise Credit Gurantee Service Center
to pay off the Huanxia Bank loan. The bridge loan carried a monthly interest of
0.933%. We paid off the bridge loan and accrued interest in the amount of
$1,266,557 on April 30, 2009.

On
September 5, 2008, HBOP entered into a loan agreement with the Industrial &
Commercial Bank of China, Xushui Branch, for a credit facility in the amount of
RMB 6,000,000 yuan ($879,000 as of March 31, 2009).

5

---



The loan is
renewable at maturity and subject to a 8.217% interest rate. The loan is due
and payable on the maturity date of June 4, 2009.

On
January 23, 2009, HBOP entered into a short term credit facility extension
agreement with United Commercial Bank (China) Limited, for the extension of a
revolving credit facility in the amount of $2,000,000 and a non-revolving
import loan of $816,977. The original credit facility agreement was entered
into on April 14, 2006 and extended on May 8, 2007. Under the terms of the
extension agreement, the loan is collateralized by the Companys building and
land use rights and personally guaranteed by Zhenyong Liu, our Chief Executive
Officer. Interest payment is made quarterly and is indexed to a floating
interest rate, based upon 5% plus the three-month LIBOR, adjustable every three
months. The entire principal of $2,816,977 is due and payable on June 30, 2009.
The credit facility agreement includes certain covenants that require the Company
to maintain (1) the equity to debt (including contingent liabilities) ratio at
no less than 50%, and (2) its current ratio at no less than 100%. The Company
is in compliance with these covenants as of March 31, 2009.

Long term loan

On
August 12, 2008, HBOP entered into a loan agreement with the Rural Credit Cooperative
of Xushui, Dayin Branch, for a loan in the amount of RMB 13,280,000 yuan
($1,945,520 as of March 31, 2009). The loan is guaranteed by an unrelated third
party, Hebei Chenyang Industry and Trade Group Co., Ltd., and carries a 0.774%
interest rate per month. The loan runs for three years, starting September 16,
2008, and is payable on the maturity date of September 16, 2011.

Related party loans

On
December 31, 2006, Zhenyong Liu, our Chief Executive Officer and a member of our Board of Directors, loaned money to
HBOP for working capital purposes, which amounted to RMB 41,970,716 yuan
($6,157,104 as of December 31, 2008). The loan is non-interest bearing and is
to be paid in installments of RMB20,000,000 per year, or as otherwise to be
negotiated, depending on the liquidity condition of HBOP. On July 24, 2008, Mr.
Liu agreed to change the loan term to three years. As such, the loan, as
amended, is non-interest bearing and is due on July 23, 2011.

On
August 1, 2008, Shuangxi Zhao, a director of HBOP, loaned money to HBOP for
working capital purposes, which amounted to $880,200 as of December 31, 2008.
The amount owed bears interest at 7.56% per annum (equivalent to the interest
rate determined by the Peoples Bank of China), and is due on July 31, 2011.

On
August 5, 2008, Xiaodong Liu, a member of our Board of Directors, loaned money
to HBOP for working capital purposes, which amounted to $1,100,250 as of
December 31, 2008. The amount owed bears interest at 7.56% per annum
(equivalent to the interest rate determined by the Peoples Bank of China), and
is due on August 4, 2011.

Contractual Obligations

We
have certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our financial position, results of operations, and cash flows.

Contractual Obligations and Off-Balance Sheet
Arrangements

Contractual Obligations

|                                                     |  |                        |           |                    |   |             |  |             |        |                     |   |           |  |   |         | 
|---------------------------------------------------- |  | ---------------------- | --------- | ------------------ | - | ----------- |  | ----------- | ------ | ------------------- | - | --------- |  | - | ------- | 
|                                                     |  | Payments Due by Period |          
|                                                     |  |                        |          
|Contractual Obligations                              |  | Total                  |           | Less than
  1 year |   | 1  3 years |  | 3  5 years |        | More than
  5 years |  
|                                                     |  |                        |           |                    |   |             |  |             |        |                     |  
|Long-Term Debt Obligations                           |  | $                      | 8,795,358 |                    | $ | 6,849,838   |  | $           |       |                     | $ | 1945,520  |  | $ |        | 
|R&D Project Obligation Operating Lease
  Obligations |  |                        | 386,760   |                    |   | 17,580      |  |             | 35,160 |                     |   | 35,160    |  |   | 298,860 | 
|                                                     |  |                        |           |                    |   |             |  |             |        |                     |   |           |  |   |         | 
|Total                                                |  | $                      | 9,182,118 |                    | $ | 6,867,418   |  | $           | 35,160 |                     | $ | 1,980,680 |  | $ | 298,860 | 
|                                                     |  |                        |           |                    |   |             |  |             |        |                     |   |           |  |   |         | 

6

---



Off Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The
Companys financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Management makes these estimates using the best information
available at the time the estimates are made. However, actual results could
differ materially from those estimates (See Note 2 in the Notes to Financial
Statements).

Recent Accounting Pronouncements

In
December 2007, the FASB issued SFAS No. 141R, Business
Combinations  Revised 2007 (SFAS No. 141R), which replaces FASB
Statement No. 141, Business Combinations.
SFAS No. 141Restablishes
principles and requirements intending to improve the relevance,
representational faithfulness, and comparability of information that a
reporting entity provides in its financial reports about a business combination
and its effects. This is accomplished through requiring the acquirer to
recognize assets acquired and liabilities assumed arising from contractual
contingencies as of the acquisition date, measured at their acquisition-date
fair values. This includes contractual contingencies only if it is more likely
than not that they meet the definition of an asset of a liability in FASB
Concepts Statement No. 6, Elements of
Financial Statements  a
replacement of FASB Concepts Statement No. 3.This statement also requires the acquirer
to recognize goodwill as of the acquisition date, measured as a residual.
However, this statement improves the way in which an acquirers obligations to
make payments conditioned on the outcome of future events are recognized and
measured, which in turn improves the measure of goodwill. This statement also
defines a bargain purchase as a business combination in which the total
acquisition-date fair value of the consideration transferred plus any
noncontrolling interest in the acquiree, and it requires the acquirer to
recognize that excess in earnings as a gain attributable to the acquirer. This,
therefore, improves the representational faithfulness and completeness of the
information provided about both the acquirers earnings during the period in which
it makes a bargain purchase and the measures of the assets acquired in the
bargain purchase. The management of Orient Paper does not expect the adoption
of this pronouncement to have a material impact on its financial statements.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements  amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement requires the
recognition of a noncontrolling interest (minority interest) as equity in the
consolidated financial statements and separate from the parents equity. The
amount of net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 clarifies that changes in a parents ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, this statement
requires that a parent recognize a gain or loss in net income when a subsidiary
is deconsolidated. Such gain or loss will be measured using the fair value of
the noncontrolling equity investment on the deconsolidation date. SFAS No. 160
also includes expanded disclosure requirements regarding the interests of the
parent and its noncontrolling interest.

SFAS
No. 160 is effective for fiscal years and interim periods within those fiscal
years, beginning on or after December 15, 2008. Earlier adoption is prohibited.
The management of Orient Paper does not expect the adoption of this
pronouncement to have a material impact on its financial statements.

In
March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities  an
amendment of FASB Statement 133 (SFAS No. 161). SFAS No. 161
enhances required disclosures regarding derivatives and hedging activities,
including enhanced disclosures regarding how: (a) an entity uses derivative
instruments; (b) derivative instruments and related hedged items are accounted
for under FASB No. 133, Accounting for
Derivative Instruments and Hedging Activities; and (c) derivative
instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. Specifically, FASB No. 161 requires:

7

---



|  |                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------
| | Disclosure
  of the objectives for using derivative instruments be disclosed in terms of
  underlying risk and accounting designation;
|  |                                                                                                                                       
| | Disclosure
  of the fair values of derivative instruments and their gains and losses in a
  tabular format;                           
|  |                                                                                                                                       
| | Disclosure
  of information about credit-risk-related contingent features; and                                                        
|  |                                                                                                                                       
| | Cross-reference
  from the derivative footnote to other footnotes in which derivative-related
  information is disclosed.             

FASB
No. 161 is effective for fiscal years and interim periods beginning after
November 15, 2008. Earlier application is encouraged. The management of Orient
Paper does not expect the adoption of this pronouncement to have a material
impact on its financial statements.

In
May 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles
(SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles
and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles in the United States
of America. The sources of accounting principles that are generally accepted
are categorized in descending order as follows:

|   |                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|e) | FASB
  Statements of Financial Accounting Standards and Interpretations, FASB
  Statement 133 Implementation Issues, FASB Staff Positions, and American
  Institute of Certified Public Accountants (AICPA) Accounting Research
  Bulletins and Accounting Principles Board Opinions that are not superseded by
  actions of the FASB.
|   |                                                                                                                                                                                                                                                                                                                                       
|f) | FASB
  Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
  Accounting Guides and Statements of Position.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                       
|g) | AICPA
  Accounting Standards Executive Committee Practice Bulletins that have been
  cleared by the FASB, consensus positions of the FASB Emerging Issues Task
  Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF
  D-Topics).                                                                            
|   |                                                                                                                                                                                                                                                                                                                                       
|h) | Implementation
  guides (Q&As) published by the FASB staff, AICPA Accounting
  Interpretations, AICPA Industry Audit and Accounting Guides and Statements of
  Position not cleared by the FASB, and practices that are widely recognized
  and prevalent either generally or in the industry.                                        

SFAS
No. 162 is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendment to its authoritative literature. It is
only effective for nongovernmental entities; therefore, the GAAP hierarchy will
remain in SAS 69 for state and local governmental entities and federal governmental
entities. The management of Orient Paper does not expect the adoption of this
pronouncement to have a material impact on its financial statements.

On
May 26, 2008, the FASB issued FASB Statement No. 163, Accounting for Financial Guarantee Insurance
Contracts (SFAS No. 163). SFAS No. 163 clarifies how FASB
Statement No. 60, Accounting and Reporting
by Insurance Enterprises (SFAS No. 60), applies to financial
guarantee insurance contracts issued by insurance enterprises, including the
recognition and measurement of premium revenue and claim liabilities. It also
requires expanded disclosures about financial guarantee insurance contracts.

The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency. Diversity exists in practice in accounting
for financial guarantee insurance contracts by insurance enterprises under SFAS
No. 60, Accounting and Reporting by
Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies (SFAS No.
5). SFAS No. 163 requires that an insurance enterprise recognize a claim
liability prior to an event of default when there is evidence that credit
deterioration has occurred in an insured financial obligation. It also requires
disclosure about (a) the risk-management activities used by an insurance
enterprise to evaluate credit deterioration in its insured financial
obligations and (b) the insurance enterprises surveillance or watch list.

SFAS No. 163
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years, except
for disclosures about the insurance enterprises risk-management

8

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activities.
Disclosures about the insurance enterprises risk-management activities are
effective the first period beginning after issuance of SFAS No. 163. Except for
those disclosures, earlier application is not permitted.

The
management of the Company does not anticipate that the adoption of these three
standards will have a material impact on these financial statements.

Item 3. Quantitative and Qualitative
Disclosures about Market Risk.

N/A.

Item 4. Controls and Procedures.

Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuers management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.

Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation
with the participation of the Companys management, including Zhenyong Liu, the
Companys Chief Executive Officer (CEO), and Winston C. Yen, the Companys
Chief Financial Officer (CFO), of the effectiveness of the Companys
disclosure controls and procedures (as defined under Rule 13a-15(e) under the
Exchange Act) as of the three months ended March 31, 2009. Based upon that
evaluation, the Companys CEO and CFO concluded that the Companys disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports that the Company files or submits under
the Exchange Act, is recorded, processed, summarized and reported, within the
time periods specified in the SECs rules and forms, and that such information
is accumulated and communicated to the Companys management, including the
Companys CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosure.

Changes in internal controls

Our
management, with the participation of our CEO and CFO, performed an evaluation as to whether any change in our
internal controls over financial reporting occurred during the quarter ended
March 31, 2009. Based on that evaluation, our CEO and CFO concluded that no change occurred in the Companys internal
controls over financial reporting during the quarter ended March 31, 2009 that
has materially affected, or is reasonably likely to materially affect, the
Companys internal controls over financial reporting.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

To
our knowledge, there is no material litigation pending or threatened against
us.

Item 1A. Risk Factors.

N/A.

Item 2. Unregistered Sale of Equity
Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

9

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To
our knowledge, there are no material defaults upon senior securities.

Item 4. Submission of Matters to a Vote of
Securities Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a)
Exhibits

|     |                                                                                                                                 
|---- | --------------------------------------------------------------------------------------------------------------------------------
|10.1 | Loan
  Agreement, dated December 31, 2006, by and between Hebei Baoding Orient Paper
  Milling Company Limited and Zhenyong Liu.
|     |                                                                                                                                 
|10.2 | Loan
  Agreement, dated August 1, 2008, by and between Hebei Baoding Orient Paper
  Milling Company Limited and Shuangxi Zhao.  
|     |                                                                                                                                 
|10.3 | Loan
  Agreement, dated August 5, 2008, by and between Hebei Baoding Orient Paper
  Milling Company Limited and Xiaodong Liu.   
|     |                                                                                                                                 
|31.1 | Certification
  Required Under Section 302 of Sarbanes-Oxley Act of 2002.                                                       
|     |                                                                                                                                 
|31.2 | Certification
  Required Under Section 302 of Sarbanes-Oxley Act of 2002.                                                       
|     |                                                                                                                                 
|32.1 | Certification
  Required Under Section 906 of Sarbanes-Oxley Act of 2002.                                                       
|     |                                                                                                                                 
|32.2 | Certification
  Required Under Section 302 of Sarbanes-Oxley Act of 2002.                                                       

10

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SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                      |                    |                                 
|--------------------- | ------------------ | --------------------------------
|                      | ORIENT PAPER, INC.
|                      |                    |                                 
|Dated: May 15,
  2009 | By:                | /s/ Zhenyong Liu                
|                      |                    |                                 
|                      |                    | Name:
  Zhenyong Liu            
|                      |                    | Title: Chief
  Executive Officer
|                      |                    |                                 
|                      |                    |                                 
|Dated: May 15,
  2009 | By:                | /s/ Winston C. Yen              
|                      |                    |                                 
|                      |                    | Name:
  Winston C. Yen          
|                      |                    | Title: Chief
  Financial Officer

11

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