Orient Paper (NYSE AMEX:ONP)

Since the spring of 2010 we have been trying to acquire approximately 667,000 square meters of land that is right across the street from our current facilities and is already approved by the government for our capacity expansion plan. However, since the acquisition process started we have met significant opposition by some local residents over the price that we offered for their land. We have finally completed on April 13, 2012 a partial closing on some 58,566 square meters of land with street frontage with local residents and secured all land use right permits. For the 58,566 square meters, we were refunded approximately $3.1 million of the purchase price on April 2, 2012 from the $7.3 million security deposit that we had paid as of March 31, 2012. Subsequently, we paid another $3.3 million in various compensation, taxes and recording fees to the sellers and the government to close out the acquisition on April 13, 2012. The area we acquired as of April 13, 2012 is not large enough to build major tissue paper production facilities, as we originally planned. However, because we have run out of space to house new employees and management hired since the construction of the 360,000 tonnes per year corrugating medium paper line, we plan to first build new offices and employee living quarters on the 58,566 square meters new land across the street. We estimate that the construction of these buildings may take up one third of the space of the new land. We will carefully evaluate the use of the rest of the new land, including making every effort to acquire more adjacent land in the rest of this year and in 2013 to allow the construction of new tissue paper plant.

Within the next 12 months we also intend to complete the acquisition of land that was originally approved by the government for some 667,000 square meters. If the entire 667,000 square meters is acquired at the unit price offered as of June 2010, the acquisition would cost approximately $14,500,000 in financial compensation to current land owners and in land use rights from the government. However, similar to many other recent land acquisition transactions in China, the acquisition process has met significant opposition by some local residents. These opposing local residents hold various objections to the terms of the acquisition and amount of compensation that we offer. While the provincial and local governments are fully supportive for the proposed acquisition, it has been a recent trend in China that eminent domain not be exercised for fear of civil unrest. Under these circumstances, we are evaluating the options of (1) acquiring only a portion of the square footage as originally planned, (2) possibly raising the unit price of our compensation offer, or (3) withdrawing from the transaction and seeking other locations following a full refund of the security deposit put down on the 667,000 square meters land plot. As of June 30, 2011, we have pre-paid a security deposit of $7,117,438 to the local village council toward the purchase of the land. We are cautiously optimistic that we may be able to reach an agreement with some village residents to allow us to partially close the acquisition on approximately 110,055 square meters adjacent lots and start the second phase of the acquisition, which involves the application and securing of the land use rights permit.

BAODING, China, May 31, 2011 /PRNewswire-Asia/ -Orient Paper, a leading manufacturer and distributor of diversified paper products in northern China, today announced that the Company has engaged BDO Limited ("BDO"), a Hong Kong member firm of BDO International Ltd., for the re-audit of its financial statements for the fiscal year ended December 31, 2008 (FY 2008).

As previously announced, due to lapsed licenses of Orient Paper's previous audit firm, Davis Accounting Group P.C. ("Davis Accounting"), at the time of auditing the Company's FY 2008 financial statements, the Company's FY 2008 financial statements included in the Annual Report for the fiscal year 2008 and fiscal year 2009 are not considered to be audited. The Company does not anticipate the re-audit to materially impact the Company's financial statements for fiscal year 2009 and fiscal year 2010, both of which were audited by the Company's current registered independent public accounting firm, BDO Limited.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper commented, "We have engaged BDO to complete the re-audit of our financial statements for FY 2008 and to confirm their accuracy. We anticipate the audit will be completed during the third quarter of 2011."

On April 1, 2011 Orient Paper, Inc., a Nevada corporation, was served notice of a lawsuit filed on March 30, 2011 in the Los Angeles Superior Court against the Company. The complaint in the lawsuit, Tribank Capital Investments, Inc. v. Orient Paper, Inc. and Zhenyong Liu, alleges, among other claims, that the Company breached the Non-Circumvention Agreement dated October 29, 2008 between the Company and Tribank Capital Investments, Inc. and that the Company was unjustly enriched as a result of breaching the Agreement. The complaint seeks, among other relief, compensatory damages and plaintiff’s counsel’s fees. The Company believes that the complaint has no merit and intends to vigorously defend the lawsuit.

We are filing this Amendment No. 1 to the Annual Report on Form 10-K/A (the “Amendment”) to amend certain disclosure in our Annual Report on Form 10-K for the year ended December 31, 2009, as originally filed with the Securities and Exchange Commission on March 29, 2010.

Our former independent auditor, formerly Davis Accounting Group P.C.(a.k.a. Etania Audit Group P.C.) was not duly licensed when it issued the audit report on our financial statements for the year ended December 31, 2008. Accordingly, the following changes have been made to our Annual Report:

• We removed the audit report of Etania Audit Group P.C., dated March 19, 2009.
• We labeled the columns of the financial statements for the year ended December 31, 2008 as “Not Audited.”

The Company is in the process of engaging its current auditor, BDO Limited, to perform a re-audit of the Company's financial statements for the years ended December 31, 2008 to confirm the accuracy of those financial statements.