Orient Paper Inc. (referred to in this Quarterly Report on Form 10-Q as "we" or the "Company") desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This report contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events and financial performance. All statements made in this Quarterly Report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to future reserves, cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," " anticipate," "estimate," "may," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this Report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "--Risk Factors" below as well as those discussed elsewhere in this Report, and the risks discussed in our press releases and other communications to shareholders issued by us from time to time, which attempt to advise interested parties of the risks and factors that may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The section, "Management's Discussion and Analysis of Financial Condition and Results of Operations," is intended to facilitate the reader's understanding of the Company's audited financial statements included in this Quarterly Report on Form 10-Q. This section is provided as a supplement to, and should be read in conjunction with, our unaudited financial statements included in this Quarterly Report and the accompanying notes to such financial statements.

Comparison of the six month periods ended June 30, 2008 and 2007.

The following table and subsequent discussion presents certain consolidated statement of operations information derived from the consolidated statements of operations for the six months ended June 30, 2008 and 2007 included in this Quarterly Report on Form 10-Q.

                                       Six months       Six months
                                            ended            ended
                                    June 30, 2008    June 30, 2007
                                      (Unaudited)      (Unaudited)     Change
--------------------------------------------------------------------------------
Revenues                             $ 31,081,287     $ 17,371,280  $13,710,007
--------------------------------------------------------------------------------
Cost of Sales                          25,427,613       14,339,607   11,088,006
--------------------------------------------------------------------------------
Gross Profit                            5,653,674        3,031,673    2,622,001
--------------------------------------------------------------------------------
General and Administrative Expense        423,773          123,342      300,431
--------------------------------------------------------------------------------
Income from Operations                  5,229,901        2,908,331    2,321,570
--------------------------------------------------------------------------------
Other Income (Expense)                   (230,134)        (127,655)    (102,479)
--------------------------------------------------------------------------------
Income before Income Taxes              4,999,767        2,780,676    2,219,091
--------------------------------------------------------------------------------
Net Income                              3,749,825        1,863,053    1,886,772
--------------------------------------------------------------------------------
Total Comprehensive Income              5,489,272        2,352,924    3,136,348
--------------------------------------------------------------------------------

Revenue was $31,081,287 for the six months ended June 30 2008, an increase of $13,710,007 (or approximately 78%) from revenue of $17,371,280 for the six months ended June 30, 2007. The change in revenues was attributable to increased demand for our products as a result of the closure of many small paper milling companies in the PRC because of heightened environmental laws and regulations. In addition to the increased demand, we launched a successful market expansion plan that increased our sales volume in the domestic market. Revenues also increased as a result of inflation which caused an increase in unit prices. Further, the Chinese currency (Renminbi Yuan) has been appreciating against the United States dollar, leading to an increase in revenues as reported in US dollars.

Cost of sales amounted to $25,427,613 for the six months ended June 30, 2008, an increase of $11,088,006 (or approximately 64%) from cost of sales of $17,321,280 for the six months ended June 30, 2007. The increase in cost of sales was attributable to the increase in our sales volume and an increase in the price of raw materials due to inflation.

Gross profit was $5,653,674 for the six months ended June 30, 2008, an increase of $2,622,001 (or approximately 86%) from gross profit of $3,031,673 for the six months ended June 30, 2007. The increase in gross profit was attributable to the fact that we experienced an increase in our sales and related pricing which was greater than the increases noted in related costs during the period.

General and administrative expenses amounted to $423,773 during the six months ending June 30, 2008, an increase of $300,431 (or approximately 243%) from general and administrative expenses of $123,342 for the six months ended June 30, 2007. The increase in general and administrative expenses was attributable to increases in business travel and research expenses required to expand our production and market position.

Income from operations was $5,229,901 during the six months ended June 30, 2008, an increase of $2,321,570 (or approximately 80%) from income from operations of $2,908,331 for the six months ended June 30, 2007. The increase in income from operations was attributable to higher net sales generated and the relatively lower cost of sales and general and administrative expenses compared to the growth of net sales.

Other expenses were $230,134 for the six months ended June 30, 2008, an increase of $102,479 (or approximately 80%) from other expenses of $127,655 for the six months ended June 30, 2007. The increase in other expense was attributable to a significant increase in interest expense on related debt.

Income before Income Taxes

Income before income taxes amounted to $4,999,767 during the six months ended June 30, 2008, an increase of $2,219,091 (or approximately 80%) from income before income taxes of $2,780,676 for the six months ended June 30, 2007. The increase in income before income taxes was attributable to our rapid growth of net sales and relatively slower growth of our cost of sales, general and administrative expense, and other expenses.

Income tax expense was $1,249,542 during the six months ended June 30, 2008, an increase of $332,319 (or approximately 36%) from income tax expense of $917,623 for the six months ended June 30, 2007. The increase in income tax expense was attributable to our rapid growth of net sales and relatively slower growth of our cost of sales, general and administrative expense, and other expenses.

Net income was $3,749,825 for the six months ended June 30, 2008, an increase of $1,886,772 (or approximately 101%) from net income of $1,863,053 for the six months ended June 30, 2007. The increase in net income was attributable to our rapid growth of net sales and relatively slower growth of our cost of sales, general and administrative expense, and other expenses.

Total comprehensive income was $5,489,272 for the six months ended June 30, 2008, an increase of approximately 133% from total comprehensive income of $2,352,924 for the six months ended June 30, 2008. The increase reflects the Company's higher net income and an increase in income from foreign translation adjustments.

As of June 30, 2008, we had cash and cash equivalents of $2,434,236. As of June 30, 2008, we had negative working capital $(11,981,440) as compared to negative working capital of $(7,856,626) as of December 31, 2007. This decrease is attributable to the purchase of machinery and equipment. Cash flows from operating activities were $11,391,332 for the six months ended June 30, 2008, as compared to $2,813,239 as of December 31, 2007. Cash flows used in investing activities were $12401,234 for the six months ended June 30, 2008, as compared to $1,508,015 for the six months ended June 30, 2007. Cash flows provided by financing activities were $1,082,030 for the six months ended June 30, 2008, as compared to $1,809,649 provided by financing activities for the six months ended June 30, 2007. We expect that our cash and cash equivalents will be sufficient to satisfy our cash requirements for the next twelve months.

As of June 30, 2008, we had loans due to an officer in the amount of $6,123,527. Advances from this officer have been as high as $11,773,190 during the past two years and, absent such advances, we could not have grown our business as we have done over the past two years. The obligations to this officer do not bear interest and are due in installments of $2,692,784 and $3,430,743 on December 31, 2008 and 2009, respectively. If the Company does not have sufficient liquidity to pay these loans when due, this officer could seek to collect his loans, which would have a material adverse effect on the business of the Company.

On a long-term basis, our liquidity is dependent on successfully executing our business plan, receipt of revenues, and additional infusions of capital through equity and debt financing. Any funds raised from an offering of our equity or debt will be used to continue to develop and execute our business plan. However, there can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us. We believe that the funds available to us are adequate to meet our operating needs for internally generated market expansion.

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets. We have no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to any investor in our securities.