UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 333-114564

CHINA CARBON GRAPHITE GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada

98-0550699

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

20955 Pathfinder Road, Suite 200

Diamond Bar

CA, USA

91765

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 909-843-6518

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Name of each exchange on which registered:
None		None

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter: $455,806.92 based on 22,790,346 non-affiliates shares of common stock at $0.02 per share as of June 30, 2019.

The number of shares of the registrant’s common stock issued and outstanding as of April 15, 2021 was 28,492,346 and 27,502,346, respectively.

Documents Incorporated by Reference: None

CHINA CARBON GRAPHITE GROUP, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2020

		Page

PART I

ITEM 1.	Business	1
ITEM 1A.	Risk Factors	6
ITEM 1B.	Unresolved Staff Comments	6
ITEM 2.	Properties	6
ITEM 3.	Legal Proceedings	6
ITEM 4.	Mine Safety Disclosures	6

PART II

ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	7
ITEM 6.	Selected Financial Data	8
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	18
ITEM 8.	Financial Statements and Supplementary Data	F-1
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19
ITEM 9A.	Controls and Procedures	19
ITEM 9B.	Other Information	20

PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance	21
ITEM 11.	Executive Compensation	23
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	24
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	25
ITEM 14.	Principal Accounting Fees and Services	25

PART IV

ITEM 15.	Exhibits and Financial Statement Schedules	27

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report on Form 10-K, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

OTHER PERTINENT INFORMATION

Unless the context specifically states or implies otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and words of like import refer to China Carbon Graphite Group, Inc., its wholly-owned subsidiaries, Talent International Investment Limited (“Talent”), XingheYongle Carbon Co., Ltd. (“Yongle”), Golden Ivy Limited (“BVI Co.”), Royal Elite International Limited (“Royal HK”), and Royal Elite New Energy Science and Technology (Shanghai) Co., Ltd. (“Royal Shanghai”).

Our business is conducted in the People’s Republic of China (“China” or the “PRC”). “RMB” refers to Renminbi, or the Yuan, the official currency of the PRC. Our consolidated financial statements are presented in U.S. dollars in accordance with U.S. GAAP. In this Annual Report, we refer to assets, obligations, commitments and liabilities in our financial statements in U.S. dollars. These dollar references are based on the exchange rate of RMB to U.S. dollars, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars, which may result in an increase or decrease in the amount of our obligations (expressed in U.S. dollars) and the value of our assets.

PART I

Item 1. Business.

Business Overview

China Carbon Graphite Group, Inc. (the “Company”), through its subsidiaries, is engaged in the research and development, rework and sales of graphene and graphene oxide and graphite bipolar plates in the People’s Republic of China (“China” or the “PRC”). The Company has developed its own graphene prototype and reworks the products by orders only. The Company outsource the production of large orders to third parties as it has not commercialized its product prototype. We also operate a business-to-business and business-to-consumers Internet portal (www.roycarbon.com) for graphite related products. Vendors can sell raw materials, industrial commodities and consumer (household) commodities to both business and consumers through the website by paying a fee for each transaction conducted through the website.

Our business scope includes manufacturing and selling primarily the following types of graphite products:

●

graphene;

●

graphene oxide;

●

carbon graphite felt; and

●

graphite bipolar plates

Our Growth Strategy

Some of our future business plans, including promoting our online portal and potential acquisition and merger, would likely require us to obtain additional funds from equity or debt markets, or to borrow additional funds from local banks. We currently have no commitments from any financing sources. There is no assurance that we will be able to raise any funds on terms favorable to us, or at all. In the event that we issue shares of equity or convertible securities, holdings of our existing stockholders would be diluted. In addition, there is no assurance that we will be able to successfully manage and integrate the production and sale of new products.

We will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of its products, and (3) short-term or long-term borrowings from banks, stockholders or other party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. We plan to look for opportunities to merge with other companies in the graphite industry.

The ability of us to continue as a going concern is dependent upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

Organizational Structure

We were incorporated on February 13, 2003 in Nevada under the name Achievers Magazine Inc. In connection with the reverse merger transaction described below, our corporate name was changed to China Carbon Graphite Group, Inc. on January 30, 2008.

On December 17, 2007, we completed a share exchange pursuant to a share exchange agreement with Sincere Investment (PTC), Ltd. (“Sincere”), a British Virgin Islands corporation. Sincere was the sole stockholder of Talent International Investment Limited (“Talent”), a British Virgin Islands corporation., which is the sole stockholder of XingheYongle Carbon Co., Ltd. (“Yongle”), a wholly foreign-owned enterprise company organized under the laws of the PRC. Pursuant to the share exchange agreement, the Company issued 9,388,172 shares of common stock to Sincere in exchange for all of the outstanding on stock of Talent, and Talent became a wholly-owned subsidiary of the Company. Upon completion of the reverse merger, the Company’s business became the business of Talent, its subsidiaries and its affiliated variable interest entities.

Talent owns 100% of the stock of Yongle, which is a wholly foreign-owned enterprise organized under the laws of the PRC.

On December 23, 2013, we acquired Golden Ivy Limited, a British Virgin Island company (“BVI Co.”). Pursuant to the terms of the acquisition, we issued an aggregate of 5,000,000 shares of common stock, par value $0.001 per share, to the former shareholders of BVI Co. in exchange for 100% of the issued and outstanding equity of BVI Co. BVI Co. then became a wholly owned subsidiary of the Company.

The Business and the facilities related thereto are all located in the PRC. The Business is conducted by Royal Elite New Energy Science and Technology (Shanghai) Co., Ltd. (“Royal Shanghai”), a wholly foreign owned enterprise under laws of China. Royal Shanghai is wholly owned by Royal Elite International Limited, a Hong Kong company (“Royal HK”), which is wholly owned by BVI Co.

Royal Shanghai was set up in Shanghai on June 9, 2010. Royal HK was set up in Hong Kong on January 8, 2010.

The consolidated financial statements presented herein consolidate the financial statements of China Carbon Graphite, Inc. with the financial statements of its subsidiaries in the following structure chart.

Organizational Structure Chart

The following chart sets forth our organizational structure:

Our Products

Through our newly acquired subsidiary we now manufacture and sell the following products:

●

graphene;

●

graphene oxide;

●

carbon graphite felt; and

●

graphite bipolar plates.

Graphene Oxide has wide applications as a conductive agent, such as in lithium ion batteries, super capacitors, rubber and plastic additives, conductive ink, special coating, transparent conductive thin films and chips.

Graphite bipolar plates are primarily used in solar power storage.

In 2018, we discovered an Innovational Anti-Bacterial Graphene Silver Composite. We have applied for a patent on this new graphene/silver invention. This powerful composite has a bacterial killing rate of 99% in just 4 hours. The bacteria is used to test for product potency that includes: staphylococcus aureus, colibacillus and blastomyces albicans.

Our new material is forecasted to replace the current leading cure for dermatomycosis, a nano-silver based medicine. In addition, the new composite can be material for resin/polymer fiber industrial products such as: anti-bacterial PU insole, anti-bacterial PET fiber, etc. Due to its wide array of industrial and medical applications, this material will provide great chances for Roycarbon further expand towards new markets.

Our Customers

Our customers include mainly domestic customers.

We generally do not enter into long-term contracts with our customers. Our customers generally purchase our products pursuant to purchase orders.

Sales to certain customers generated over 10% of the Company’s total net sales. Sales to one Company for the year ended December 31, 2020 were approximately 37% of the Company’s net sales. Sales to another Company for the year ended December 31, 2020 were approximately 34% of the Company’s net sales.

Our Sales and Marketing Efforts

We have not spent a significant amount of capital on advertising.

Competition and Competitive Advantages

We compete with a large number of domestic and international companies that manufacture graphene and grapheme related products. Because of the nature of the products that we sell, we believe that the reputation of the manufacturer and the quality of the product may be as important as price.

Government Regulations

Statutory Reserve

On December 31, 2013, the Company acquired new operations carried through BVI Co., and its subsidiaries Royal HK and Royal Shanghai. All of the cash generated by our operations has been held by our China entities. In order to transfer such cash to our parent entity, China Carbon Graphite Group, Inc., which is a Nevada Corporation, we would need to rely on dividends, loans or advances made by our PRC subsidiaries or VIE entity. Such transfers may be subject to certain regulations or risks. To date, our parent entity has paid its expenses by raising capital through private placement transactions. In the future, in the event that our parent entity is unable to raise needed funds from private investors, Royal Shanghai would have to transfer funds to our parent entity through our wholly-owned subsidiaries, Royal HK and BVI Co.

PRC regulations relating to statutory reserves and currency conversion would impact our ability to transfer cash within our corporate structure. The Company Law of the PRC applicable to Chinese companies provides that net after tax income should be allocated by the following rules:

10% of after tax income to be allocated to a statutory surplus reserve until the reserve amounts to 50% of the company’s registered capital.

If the accumulate balance of statutory surplus reserve is not enough to make up the Company’s cumulative prior years’ losses, the current year’s after tax income should be first used to make up the losses before the statutory surplus reverse is drawn.

Allocation can be made to the discretionary surplus reserve, if such a reserve is approved at the meeting of the equity owners.

Therefore, the Company is required to maintain a statutory reserve in China that limits any equity distributions to its shareholders. The maximum amount of the shareholders has not been reached. The company has never distributed earnings to shareholders and has consistently stated in the Company’s filings it has no intentions to do so.

The RMB cannot be freely exchanged into Dollars. The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they be conducted though designated financial institutions. Foreign Investment Enterprises, such as Royal Shanghai, may purchase foreign currency from designated financial institutions in connection with current account transactions, including profit repatriation.

These factors will limit the amount of funds that we can transfer from Royal Shanghai to our parent entity and may delay any such transfer. In addition, upon repatriation of earnings of Royal Shanghai to the United States, those earnings may become subject to United States federal and state income taxes. We have not accrued any U.S. federal or state tax liability on the undistributed earnings of our foreign subsidiary because those funds are intended to be indefinitely reinvested in our international operations. Accordingly, taxes imposed upon repatriation of those earnings to the U.S. would reduce the net worth of the Company.

Environmental Regulations

We believe that we are in compliance in all material respects with all applicable environmental protection laws and regulations.

Circular 106 Compliance and Approval

The State Administration of Foreign Exchange (“SAFE”) issued an official notice known as “Circular 106,” which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure to facilitate foreign financing or subsequent acquisitions in China. We believe that our wholly-owned subsidiaries Talent and BVI. Co. were not required to obtain SAFE’s approval to establish its offshore companies Yongle and Royal HK as “special purpose vehicle” for capital raising activities on behalf of Royal Shanghai because of offshore structure.

Restrictions on Exports of Natural Resources

In 2010, the Chinese government decided to implement a number of new restrictions on natural resource industry sectors. As a result, domestic Chinese companies in certain natural resource industries face export restrictions. Such restrictions may limit our ability to export our products in the future, or may increase the expense of our exports, which may impact our business.

Employees

As of the date hereof, we have 9 full-time employees.

Item 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 1B. Unresolved Staff Comments.

Not required for smaller reporting companies.

Item 2. Properties.

There is no private ownership of land in China and all urban land ownership is held by the government, its agencies and collectives. Land use rights can be obtained from the government for a period of up to 50 years for industrial usage, 40 years for commercial usage and 70 years for residential usage, and are typically renewable. Land use rights can be transferred upon approval by the State Land Administration Bureau and payment of the required land transfer fee. The Company leases office to conduct business and does not own any land use right.

Our principal executive office is located at 20955 Pathfinder Road, Suite 200, Diamond Bar, CA 91765, and our telephone number is (909) 843-6518. The Company leases its corporate mailing address for a monthly fee of $365. The lease is month to month.

Royal Shanghai leases an office in Shanghai China. The lease term of the office space is from March 16, 2019 to March 15, 2021. On March 2, 2021, the company renewed the one-year lease contract until March 15, 2022. The current monthly rent including monthly management fee is approximately $1,082 (RMB 7,063).

Royal Shanghai leases another laboratory in Shanghai China. The lease term of the office space is from December 1, 2020 to November 30, 2021. The current monthly rent including monthly management fee is approximately $2,834 (RMB 18,490).

As of December 31, 2020 and December 31, 2019, our property, plant and equipment consisted of the following:

	December 31, 2020			December 31, 2019
Machinery and equipment	$	46,277		$	41,708
Office equipment		11,696			10,963
Motor vehicles		42,814			40,127
Total		100,787			92,798
Less: accumulated depreciation		(69,747	)		(56,523	)
Plant and Equipment, net	$	31,040		$	36,275

For the years ended December 31, 2020 and 2019, depreciation expenses amounted to $8,922 and $8,231, respectively.

The Company purchased approximately $1,679 and $6,496 property and equipment during the years ended December 31, 2020 and 2019, respectively.

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the years ended December 31, 2020 and 2019.

Item 3. Legal Proceedings.

There are no actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 4. Mine Safety Disclosures.

Not Applicable.

PART II

Our common stock is quoted on the OTC Markets, or OTC, under the symbol “CHGI”. The bid prices set forth below reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

The following table sets forth, for the periods indicated, the high and low bid prices of our common stock.

	High		Low

Fiscal Year Ended December 31, 2021
First Quarter	$	0.45	$	0.06

Fiscal Year Ended December 31, 2020
First Quarter	$	0.04	$	0.02
Second Quarter	$	0.03	$	0.02
Third Quarter	$	0.03	$	0.02
Fourth Quarter	$	0.16	$	0.02

Fiscal Year Ended December 31, 2019
First Quarter	$	0.05	$	0.02
Second Quarter	$	0.04	$	0.02
Third Quarter	$	0.03	$	0.01
Fourth Quarter	$	0.03	$	0.02

Number of Holders of Our Common Stock

As of May 15, 2021 there were 47 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Transfer Agent

The transfer agent for the common stock is Empire Stock Transfer Inc. The transfer agent’s address is 2470 Saint Rose Parkway, Suite 304, Henderson, NV, and its telephone number is (702) 974-1444.

Dividend Policy

While we are required to pay dividends on the shares of our Series B Preferred Stock, we have never declared or paid cash dividends on our common stock and have no present plans to do so in the foreseeable future. In addition, any dividend payment that the Company makes is subject to foreign exchange rules governing repatriation. Current regulations in China permit our operating company to pay dividends to us only out of accumulated distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. The inability of our operating company to pay dividends or make other payments to us may limit our ability to pay dividends to holders of our Series B Preferred Stock.

As of December 31, 2020, there were no shares of our Series A Preferred Stock or Series B Preferred Stock outstanding. Any future decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities

On February 20, 2019, the Company issued an aggregate of 200,000 shares of common stock to four directors as compensation for services provided in 2018. The issuance of these shares was recorded at grant date fair market value at $0.03 per share.

On February 20,2019, the Company issued 40,000 shares of common stock to the CFO. The issuance of these shares was recorded at grant date fair market value of $0.03.

Item 6. Selected Financial Data.

Not required.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from our forward-looking statements, see the section entitled “Cautionary Note Regarding Forward Looking Statements” above.

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. This Annual Report should be read in its entirety and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Overview

We are engaged in the sale of graphene, graphene oxide, carbon graphite felt and graphite bipolar plates products in the PRC. We also operate a business-to-business and business-to-consumers Internet portal (www.roycarbon.com) for graphite related products. Vendors can sell raw materials, industrial commodities and consumer (household) commodities to both business and consumers through the website by paying a fee for each transaction conducted through the website.

As of and for the year ended December 31, 2019, the Company has incurred operating losses. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of its products, and (3) short-term or long-term borrowings from banks, stockholders or other party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. The Company plans to look for opportunities to merge with or acquire other graphite companies.

PRC regulations grant broad powers to the government to adjust the price of raw materials and manufactured products. Although the government has not imposed price controls on our raw materials or our products, it is possible that price controls may be implemented in the future, thereby affecting our results of operations and financial condition.

Recent Development

Started in December 2019, the outbreak of COVID-19 caused by a novel strain of the coronavirus has become widespread in China and in the rest of the world, including in each of the areas in which the Company, its suppliers and its customers operate. In order to avoid the risk of the virus spreading, the Chinese government enacted various restrictive measures, including suspending business operations and quarantines, starting from the end of January 2020. We followed the requirements of local health authorities to suspend operation and production and have employees work remotely in February and March 2020. During the first quarter of 2020, we experienced significant decrease in demand of our products because most of our customers’ operations were affected by COVID-19. Our abilities to fulfill orders also decreased during the first quarter of 2020 because of delays in deliveries from our suppliers, due to lack of raw material and delays in transportation as a result of the quarantine measures.

Since April 2020, the company has gradually resumed production and is now operating in its full capacity. Demands for our products have also increased compared to the first quarter of 2020. However, due to the negative impact of COVID-19 on domestic and global economy, the extent to which COVID-19 will affect our results of operations and future financial results in the long term remains uncertain.

Results of Operations - Fiscal Years Ended December 31, 2020 and 2019

The following table sets forth the results of our operations for the periods indicated in U.S. dollars:

	Years ended December 31,
	2020			2019

Sales	$	429,335		$	359,974

Cost of Goods Sold		237,986			171,869
Gross Profit		191,349			188,105
		44.6	%		52.3	%
Operating Expenses
Selling expenses		43,516			22,117
General and administrative		366,399			392,188
Total operating expenses		409,915			414,305

Loss before other income (expense) and income taxes		(218,566	)		(226,200	)

Other Income (Expense)
Interest expense		(56,295	)		(72,683	)
Other income (expense), net		3,460			-
Total other expense (income), net		(52,835	)		(72,683	)

Loss before income taxes		(271,401	)		(298,883	)

Income Tax Expense		-			-

Net loss		(271,401	)		(298,883	)

Other Comprehensive Income
Foreign currency translation gain (loss)		(25,633	)		5,007
Total Comprehensive Loss	$	(297,034	)	$	(293,876	)

Share Data
Basic and diluted loss per share
Net loss per share – basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding, basic and diluted		27,718,084			27,469,469

Sales

During the year ended December 31, 2020, we had sales of $429,335, compared to sales of $359,974 for the year ended December 31, 2019, an increase of $69,361, or approximately 1.19%. The sales increase was mainly because of increase in orders.

Cost of goods sold

Our cost of goods sold consists of the purchase cost. During the year ended December 31, 2020, our cost of goods sold was $237,986, compared to $171,869 for the cost of goods sold for the year ended December 31, 2019, an increase of $66,117, or approximately 38.47%. The increase in the cost of sales was due to the increase in sales volume.

Gross profit

Our gross profit increased from $188,105 for the year ended December 31, 2019 to $191,349 for the year ended December 31, 2020. The increase of the gross profit is mainly attributed to increased gross profit margin.

Gross profit Margin

Our gross profit margin decreased from 53.3% for the year ended December 31, 2019 to 44.6% for the year ended December 31, 2020 because less demand for high margin products.

Operating expenses

Operating expenses totaled $409,915 for the year ended December 31, 2020, compared to $414,305 for the year ended December 31, 2019, a decrease of $4,390, or approximately 1.06%. The decrease is mainly because of decreased professional expenses, decreased traveling expenses and decreased payroll expenses during the year ended December 31, 2020 compared to the same period 2019.

Selling, general and administrative expenses

Selling expenses increased from $22,117 for the year ended December 31, 2019 to $43,516 for the year ended December 31, 2020, an increase of $21,399, or 96.75%. The increase is mainly attributed to increased shipping expenses during the year ended December 31, 2020 compared to the same period 2019.

Our general and administrative expenses consist of salaries, office expenses, utilities, business travel, amortization expenses, public company expenses (including legal expenses and accounting expenses) and stock compensation. General and administrative expenses were $366,399 for the year ended December 31, 2020, compared to $392,188 for the year ended December 31, 2019, a decrease of $25,789 or 6.58%. The decrease of general and administrative expenses is mainly because of decreased professional expenses and decreased travelling expenses during the years ended December 31, 2020 compared to the same period 2019.

Loss from operations

Our operating loss was $218,566 for the year ended December 31, 2020, compared to operating loss of $226,200 for the year ended December 31, 2019, a decrease of approximately $7,634, or 17.9% due to increased sales and decreased operating expenses.

Other income and expenses

Our interest expense was $72,683 for the year ended December 31, 2019, compared to $56,295 for the year ended December 31, 2020.

Other income amounted to $0 and $3,460 for the years ended December 31, 2019 and 2020, respectively.

Income tax

During the years ended December 31, 2019 and 2020, we did not incur any income tax due for these periods.

Net loss

As a result of the factors described above, our net loss for the year ended December 31, 2020 was $271,401, compared to net loss of $298,883 for the year ended December 31, 2019 , a decrease of $27,482, or 9.2%.

Foreign currency translation

Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Our foreign currency translation loss for the year ended December 31, 2020 was $25,633, compared to a translation gain of $5,007 for the year ended December 31, 2019, a decrease of $30,640.

Net loss available to common stockholders

Net loss available to our common stockholders was $297,034, or net loss of $0.01 per share (basic and diluted), for the year ended December 31, 2020, compared to net loss of $293,876, or net loss of $0.01 per share (basic and diluted), for the year ended December 31, 2019.

Liquidity and Capital Resources

All of our business operations are carried out by Royal Shanghai, and all of the cash generated by our operations has been held by that entity. In order to transfer such cash to our parent entity, China Carbon Graphite Group, Inc., which is a Nevada corporation, we would need to rely on dividends, loans or advances made by our PRC subsidiaries. Such transfers may be subject to certain regulations or risks. To date, our parent entity has paid its expenses by raising capital through private placement transactions. In the future, in the event that our parent entity is unable to raise needed funds from private investors, Royal Shanghai would have to transfer funds to our parent entity through our wholly-owned subsidiaries, Royal Hongkong and BVI. Co.

10% of after tax income to be allocated to a statutory surplus reserve until the reserve amounts to 50% of the company’s registered capital.

Allocation can be made to the discretionary surplus reserve, if such a reserve is approved at the meeting of the equity owners.

The RMB cannot be freely exchanged into the Dollars. The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they be conducted though designated financial institutions. Foreign Investment Enterprises, such as Royal Shanghai, may purchase foreign currency from designated financial institutions in connection with current account transactions, including profit repatriation.

Our primary capital needs have been to fund our working capital requirements. Our primary sources of financing will be cash generated from loans from banks, equity investment from investors, and borrowings from unrelated parties.

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. At this point, there can be no assurance that the Company is able to obtain such funding.

Our long-term goal is to develop our Royal Shanghai business. During the interim, we expect that anticipated cash flows from future operations, loans and equity investment from unrelated or related parties, provided that:

●

we generate sufficient business so that we are able to generate substantial profits, which cannot be assured;

●

we are able to generate savings by improving the efficiency of our operations.

We may require additional equity, debt or bank funding to finance acquisitions or to allow us to develop our Royal Shanghai business, which is one of our primary growth strategies. We can provide no assurances that we will be able to enter into any additional financing agreements on terms favorable to us, if at all, especially considering the current global instability of the capital markets.

At December 31, 2020, cash and cash equivalents were $8,129, compared to $11,585 at December 31, 2019, a decrease of $3,456. Our working capital deficit increased by $232,797 to a deficit of $2,773,496 at December 31, 2020 from a deficit of $2,540,699 at December 31, 2019.

Accounts receivable, net of allowance, were $nil and $3,781 for the fiscal year ended December 31, 2020 and 2019, respectively. The decrease was mainly due to timely collect accounting receivable. Accounts receivable are recorded at the invoiced amount and do not bear interest. Our management reviews the adequacy of our allowance for doubtful accounts on an ongoing basis, using historical collection trends and the aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary.

As of December 31, 2020, inventories were $nil, compared to $17,583 at December 31, 2019, a decrease of $17,583, or 100%. As of December 31, 2020 and December 31, 2019, the Company has not made provision for inventory in regards to slow moving or obsolete items.

Fiscal Year ended December 31, 2020 Compared to Fiscal Year ended December 31, 2019

The following table sets forth information about our net cash flow for the years indicated:

	Years ended December 31,
	2020			2019
Net cash provided by (used in) operating activities		(96,166	)		9,027
Net cash used in investing activities		(1,679	)		(6,496	)
Net cash provided by financing activities		93,900			-

Net cash flow provided by operating activities was $9,027 for the year ended December 31, 2019, compared to $96,166 used in operating activities for the year ended December 31, 2020, a decrease of $105,193. The decrease in net cash flow in operating activities was mainly due to an increase of $35,053 in inventory, an increase of $61,670 in other receivables and an increase of $27,482 in net loss available to common shareholders, offset by a decrease of $148,278 in advance from customers and a decrease of $130,875 in accounts payable and accrued liabilities.

Net cash flow used in investing activities was $6,496 for the year ended December 31, 2019, compared to $1,679 for the year ended December 31, 2020, a decrease of $4,817. The decrease is mainly due to decrease acquisitions of plant and equipment in the year ended December 31, 2020.

Net cash flow used in financing activities was $0 for the year ended December 31, 2019, compared to $93,900 provided by financing activities for the year ended December 31, 2020, an increase of $93,900. The increase is due to increase loan payable in the year ended December 31, 2020.

Concentration of Business and Credit Risk

Most of the Company’s bank accounts are in banks located in the PRC and are not covered by any type of protection similar to that provided by the Federal Deposit Insurance Corporation (“FDIC”) on funds held in U.S. banks. The Company’s bank account in the United States is covered by FDIC insurance.

Because the Company’s operations are located in the PRC, this may give rise to significant foreign currency risks due to fluctuations in and the volatility of foreign exchange rates between U.S. dollars and RMB.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, trade accounts receivables and inventories, the balances of which are stated on the balance sheet. The Company places its cash in banks located in China. Concentration of credit risk with respect to trade accounts receivables is limited due to the diversity of the Company’s customers who are located in different regions of China. The Company does not require collateral or other security to support financial instruments subject to credit risk.

Significant Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an ongoing basis, we evaluate our estimates including the allowance for doubtful accounts, the saleability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue recognition

The Company derives revenues from distribution of graphite-based products. We recognize revenue in accordance with ASC 606, Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products. We enter into contracts that can include products, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Sales represent the invoiced value of goods, net of value added tax (“VAT”), if any, and are recognized upon delivery of goods and passage of title according to shipping terms.

The Company is subject to VAT, which is levied on a majority of the products, at a rate ranging from 13% to 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

The Company recognizes revenue upon transfer of control of promised products to customers according to shipping terms. The Company does not provide chargeback or price protection rights to the customers. The customer only places purchase orders with the Company once it has confirmed the sale with a third party because this is a specialized business, which dictates that the Company will not sell the products until the purchase order is received. The Company allows its customers to return products only if its products are later determined by the Company to be defective. Based on the Company’s historical experience, product returns have been insignificant throughout all of its product lines. Therefore, the Company does not record an allowance for sales returns. If sales returns occur, they are taken against revenue when products are returned from customers. Sales are presented net of any discounts given to customers. Interest income is recognized when earned. The Company experienced no returns for the years ended December 31, 2020 and 2019.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this ASU on January 1, 2018 for all revenue contracts with our customers using the modified retrospective approach.

There is no impact of applying this ASU.

Comprehensive Income

We have adopted ASC 220, Comprehensive Income, formerly known as SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of general purpose financial statements. We have chosen to report comprehensive income (loss) in the statements of operations and comprehensive income.

Income Taxes

We account for income taxes under the provisions of ASC 740, Income Tax, formerly known as SFAS No. 109, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Effective January 1, 2008, the new Chinese income tax law sets unified income tax rates for domestic and foreign companies at 25%, except for a 15% corporate income tax rate for qualified high technology and science enterprises. In accordance with this new income tax law, low preferential tax rates in accordance with both the tax laws and administrative regulations prior to the promulgation of this law gradually become subject to the new tax rate within five years after the implementation of this law.

Accounts Receivable and Allowance For Doubtful Accounts

The Company establishes an individualized credit and collection policy based on each individual customer’s credit history. The Company does not have a uniform policy that applies equally to all customers. The collection period usually ranges from three months to twelve months. The Company grants extended payment terms only when the Company believes that the payment will be collectible at the end of the term. The Company grants extended payment terms to customers if based on the following factors: (a) whether or not the Company views a real need, from the customer’s perspective, for the extension and (b) how critical the Company’s relationship with the customer and is the customer the Company’s long-term business. The Company grants extended payment terms only when the Company believes that the payment will be collectible at the end of the term. This meets the criteria of revenue recognition under U.S. GAAP, which requires that collection of the resulting receivable be reasonably assured.

As of December 31, 2020 and December 31, 2019, accounts receivable consisted of the following:

	December 31, 2020		December 31, 2019
Amount outstanding	$	-	$	3,781
Less: Allowance for doubtful accounts				-
Net amount	$	-	$	3,781

Inventories

As of December 31, 2020 and December 31, 2019, inventories consisted of the following:

	December 31, 2020		December 31, 2019
Inventory in transit	$	-	$	17,583
Reserve for slow moving and obsolete inventory				-
Inventory, net	$	-	$	17,583

For the years ended December 31, 2019 and 2020, the Company has not made provision for inventory in regards to slow moving or obsolete items. As of December 31, 2019 and December 31, 2020, the Company did not record any provision for inventory in regards to slow moving or obsolete items.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Major expenditures for betterments and renewals are capitalized while ordinary repairs and maintenance costs are expensed as incurred. Depreciation and amortization is provided using the straight-line method over the estimated useful life of the assets after taking into account the estimated residual value. The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.

As of December 31, 2020 and December 31, 2019, property, plant and equipment consisted of the following:

	December 31, 2020			December 31, 2019
Machinery and equipment	$	46,277		$	41,708
Office equipment		11,696			10,963
Motor vehicles		42,814			40,127
Total		100,787			92,798
Less: accumulated depreciation		(69,747	)		(56,523	)
Plant and Equipment, net	$	31,040		$	36,275

For the years ended December 31, 2020 and 2019, depreciation expenses amounted to $8,922 and $8,231, respectively.

The Company purchased approximately $1,679 and $6,496 property and equipment during the years ended December 31, 2020 and 2019, respectively.

Research and Development

Research and development costs are expensed as incurred, and are included in general and administrative expenses. These costs primarily consist of the cost of material used and salaries paid for the development of our products and fees paid to third parties. Our research and development expense for the years ended December 31, 2020 and 2019 were not significant.

Value Added Tax

Pursuant to China’s VAT rules and regulations, as an ordinary VAT taxpayer we are subject to a tax rate of 17% (“output VAT”). The output VAT is payable after offsetting VAT paid by us on purchases (“input VAT”). Under the commercial practice of the PRC, the Company paid VAT and business tax based on tax invoices issued.

The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty, which can range from zero to five times the amount of the taxes that are determined to be late or deficient. In the event that a tax penalty is assessed on late or deficient payments, the penalty will be expensed as a period expense if and when a determination has been made by the taxing authorities that a penalty is due.

Fair Value of Financial Instruments

On January 1, 2008, the Company began recording financial assets and liabilities subject to recurring fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. On January 1, 2009, the Company began recording non-recurring financial as well as all non-financial assets and liabilities subject to fair value measurement under the same principles. These fair value principles prioritize valuation inputs across three broad levels. The three levels are defined as follows:

●

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The carrying amounts of financial assets and liabilities, including cash and cash equivalents, accounts receivable, notes receivable, advances to suppliers, other receivables, short-term bank loans, notes payable, accounts payable, advances from customers and other payables, approximate their fair values because of the short maturity period for these instruments.

Stock-based Compensation

Stock-based compensation includes (i) common stock awards granted to employees and directors for services which are accounted for under FASB ASC 718, Compensation–Stock Compensation” and (ii) common stock awards granted to consultants which are accounted for under FASB ASC 505-50, Equity–Equity-Based Payments to Non-Employees.

All grants of common stock awards and stock options to employees and directors are recognized in the financial statements based on their grant date fair values. The Company has elected to recognize compensation expense using the straight-line method for all common stock awards and stock options granted with service conditions that have a graded vesting schedule, with a corresponding charge to additional paid-in capital.

Common stock awards are granted to directors for services provided. The vested portions of common stock awards granted but not yet issued are recorded in common stock to be issued.

Common stock awards issued to consultants represent common stock granted to non-employees in exchange for services at fair value. The measurement dates for such awards are set at the dates that the contracts are entered into as the awards are non-forfeitable and vest immediately. The measurement date fair value is then recognized over the service period as if the Company has paid cash for such service.

The Company estimates fair value of common stock awards based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, to increase the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. The Company adopted the policy on January 1,2019 and the impact of the adoption of this guidance is listed in Note 15.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory”, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-06 will be effective for the Company in its first quarter of 2019. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable to smaller reporting companies.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To: The Board of Directors and Stockholders of

China Carbon Graphite Group Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of China Carbon Graphite Group Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ TAAD LLP

We have served as the Company’s auditor since 2015

Diamond Bar, California

4/15/2021

F-1

China Carbon Graphite Group, Inc. and subsidiaries

Consolidated Balance Sheets

	December 31, 2020			December 31, 2019

ASSETS

Current Assets
Cash and cash equivalents	$	8,129		$	11,585
Account Receivable		0			3,781
Inventories		-			17,583
Prepaid expenses		18,829			19,067
Other receivables, net		19,500			30,709

Total current assets		46,458			82,725

Right-of-use asset - non current		44,144			38,567
Property And Equipment, Net		31,040			36,275

Total Assets	$	121,642		$	157,567

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable and accrued expenses	$	138,972		$	162,754
Accrued payroll - related party		747,281			679,410
Advance from customers		55,819			113,533
Loan payable		93,900			-
Other payables		1,686,961			1,576,148
Lease liability - current		42,006			36,564
Dividends payable		55,015			55,015
Total current liabilities		2,819,954			2,623,424

Lease liability - non current		2,138			2,003

Total Liabilities		2,822,092			2,625,427

Stockholders' Deficit
Common stock, $0.001 par value; 100,000,000 shares authorized 27,742,346 and 27,502,346 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively		27,742			27,502
Additional paid-in capital		48,891,697			48,827,492
Accumulated other comprehensive income		72,645			98,278
Accumulated Deficit		(51,692,533	)		(51,421,132	)
Total stockholders' deficit		(2,700,449	)		(2,467,860	)
Total Liabilities and Stockholders' Deficit	$	121,643		$	157,567

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

F-2

China Carbon Graphite Group, Inc and subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

For the Years Ended December 31, 2020 and 2019

	Years ended December 31,
	2020			2019

Sales	$	429,335		$	359,974

Cost of Goods Sold		237,986			171,869

Gross Profit		191,349			188,105
		44.6	%		52.3	%
Operating Expenses
Selling expenses		43,516			22,117
General and administrative		366,399			392,188

Total operating expenses		409,915			414,305

Loss before other income (expense) and income taxes		(218,566	)		(226,200	)

Other Income (Expense)
Interest expense		(56,295	)		(72,683	)
Other income (expense), net		3,460			-
Total other expense (income), net		(52,835	)		(72,683	)

Loss before income taxes		(271,401	)		(298,883	)

Income Tax Expense		-			-

Net loss		(271,401	)		(298,883	)

Other Comprehensive Income
Foreign currency translation gain (loss)		(25,633	)		5,007

Total Comprehensive Loss	$	(297,034	)	$	(293,876	)

Share Data
Basic and diluted loss per share
Net loss per share – basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding, basic and diluted		27,718,084			27,469,469

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

F-3

China Carbon Graphite Group, Inc and subsidiaries

Consolidated Statements of Changes in Stockholders' Deficit

For the Years Ended December 31, 2020 and 2019

	Common Stock				Additional Paid-In		Retained			Other Comprehensive			Total Stockholders’
	Number		Amount		Capital		Earnings			Income			Deficit

Balance at December 31, 2019		27,502,346	$	27,502	$	48,827,492	$	(51,421,132	)	$	98,278		$	(2,467,860	)

Issuance of common stock for directors and employees		240,000		240		4,560		-			-			4,800

Imputed interest		-		-		59,645		-			-			59,645

Net loss		-		-		-		(271,401	)		-			(271,401	)

Foreign currency translation adjustment		-		-		-		-			(25,633	)		(25,633	)

Balance at December 31, 2020		27,742,346	$	27,742	$	48,891,697	$	(51,692,533	)	$	72,645		$	(2,700,449	)

	Common Stock				Additional Paid-In		Retained			Other Comprehensive		Total Stockholders’
	Number		Amount		Capital		Earnings			Income		Deficit

Balance at December 31, 2018		27,262,346	$	27,262	$	48,753,751	$	(51,122,249	)	$	93,271	$	(2,247,965	)

Issuance of common stock for directors and employees		240,000		240		6,960		-			-		7,200

Imputed interest		-		-		66,781		-			-		66,781

Net loss		-		-		-		(298,883	)		-		(298,883	)

Foreign currency translation adjustment		-		-		-		-			5,007		5,007

Balance at December 31, 2019		27,502,346	$	27,502	$	48,827,492	$	(51,421,132	)	$	98,278	$	(2,467,860	)

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

F-4

China Carbon Graphite Group, Inc and subsidiaries

Consolidated Statements of Cash Flows

	Years ended December 31,
	2020			2019
Cash Flows from Operating Activities
Net Loss available to common shareholders	$	(271,401	)	$	(298,883	)
Adjustments to reconcile net cash provided by operating activities
Depreciation		8,922			8,231
Inventory impairment		-			1,430
Stock compensation		4,800			7,200
Imputed interest		58,118			67,300
Changes in operating assets and liabilities
Accounts receivable		1,621			1,750
Other receivables		36,399			(25,271	)
Advance to suppliers		-			7,482
Inventory		17,729			(17,324	)
Prepaid expenses		1,431			(19,216	)
Right-of-use asset		31,085			(11,302	)
Accounts payable and accrued liabilities		18,069			148,944
Advance from customers		(61,726	)		86,552
Taxes payable		1,411			(2,892	)
Other payables		88,461			43,724
Lease liability		(31,085	)		11,302
Net cash provided by (used in) operating activities		(96,166	)		9,027

Cash flows from investing activities
Acquisition of plant and equipment		(1,679	)		(6,496	)
Net cash used in investing activities		(1,679	)		(6,496	)

Cash flows from financing activities
Loan payable		93,900			-
Net cash used in financing activities		93,900			-

Effect of exchange rate fluctuation on cash and cash equivalents		491			(83	)

Net increase (decrease) in cash		(3,454	)		2,448

Cash and cash equivalents at beginning of period		11,585			9,137

Cash and cash equivalents at ending of period	$	8,131		$	11,585

Supplemental disclosure of cash flow information

Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

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

F-5

China Carbon Graphite Group, Inc. and subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

(1) Organization and Business

The Company was incorporated on February 13, 2003 in Nevada under the name Achievers Magazine Inc. In connection with the reverse merger transaction described below, the Company’s corporate name was changed to China Carbon Graphite Group, Inc. on January 30, 2008.

On December 17, 2007, the Company completed a share exchange pursuant to a share exchange agreement with Sincere Investment (PTC), Ltd. (“Sincere”), a British Virgin Islands corporation. Sincere was the sole stockholder of Talent International Investment Limited (“Talent”), a British Virgin Islands corporation, which is the sole stockholder of XingheYongle Carbon Co., Ltd. (“Yongle”), a wholly foreign-owned enterprise company organized under the laws of the PRC. Pursuant to the share exchange agreement, the Company issued 9,388,172 shares of common stock to Sincere in exchange for all of the outstanding on stock of Talent, and Talent became a wholly-owned subsidiary of the Company. Upon completion of the reverse merger, the Company’s business became the business of Talent, its subsidiaries and its affiliated variable interest entities.

Talent owns 100% of the stock of Yongle, which is a wholly foreign-owned enterprise organized under the laws of the PRC.

Acquisition in December 2013

On December 23, 2013, the Company acquired Golden Ivy Limited, a British Virgin Island company (“BVI Co.,”). Pursuant to the terms of the acquisition, we issued an aggregate of 5,000,000 shares of common stock, par value $0.001 per share, to the former shareholders of BVI Co. in exchange for 100% of the issued and outstanding equity of BVI Co. The shares were issued on January 16, 2014. BVI Co. then became a wholly owned subsidiary of the Company.

The Business and the facilities related thereto are all located in the People’s Republic of China (“China”). The Business is conducted by Royal Elite New Energy Science and Technology (Shanghai) Co., Ltd. (“Royal Shanghai”), a wholly foreign owned enterprise under laws of China. Royal Shanghai is wholly owned by Royal Elite International Limited, a Hong Kong company, (“Royal HK”), which is wholly owned by BVI Co.

F-6

Royal Shanghai was set up in Shanghai on June 9, 2010. Royal HK was set up in Hong Kong on January 8, 2010.

Organizational Structure Chart

The following chart sets forth our organizational structure:

Liquidity and Working Capital Deficit

As of December 31, 2020 and as of December 31, 2019, the Company managed to operate its business with a negative working capital.

The Company Law of the PRC applicable to Chinese companies provides that net after tax income should be allocated by the following rules:

10% of after tax income to be allocated to a statutory surplus reserve until the reserve amounts to 50% of the company’s registered capital.

If the cumulative balance of statutory surplus reserve is not enough to make up the Company’s cumulative prior years’ losses, the current year’s after tax income should be first used to make up the losses before the statutory surplus reverse is drawn.

Allocation can be made to the discretionary surplus reserve, if such a reserve is approved at the meeting of the equity owners.

F-7

Therefore, the Company is required to maintain a statutory reserve in China that limits any equity distributions to its shareholders. The maximum amount of the shareholders has not been reached. The Company has never distributed earnings to shareholders and has no intentions to do so.

The outbreak of COVID19 coronavirus in China starting from the beginning of 2020 has resulted reduction of manufacturing hours for our factory. The Company followed the restrictive measures implemented in China, by suspending operation and having employees work remotely during February and March 2020. The Company gradually resumed operation and production starting in April 2020. The demand for our products decreased in February and March 2020. The recent developments of COVID 19 are expected to result in lower sales and gross margin in 2020. Other financial impact could occur though such potential impact is unknown at this time.

(2) Going Concern

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of and for the period ended December 31, 2020, the Company had accumulated deficit of $51,692,533 and working capital deficit of $2,773,495. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management’s Plan to Continue as a Going Concern

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of its products, and (3) short-term or long-term borrowings from banks, stockholders or other party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. The Company plans to look for opportunities to merge with other companies in the graphite industry.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

(3) Basis for Preparation of the Consolidated Financial Statements

The Company maintains its books and accounting records in Renminbi (“RMB”), but its reporting currency is U.S. dollars.

The consolidated financial statements have been prepared in order to present the financial position and results of operations of the Company, its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

F-8

(4) Summary of Significant Accounting Policies

The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.

Use of estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reporting period. Some of the significant estimates include values and lives assigned to acquired property and equipment, reserves for customer returns and allowances, uncollectible accounts receivable, slow moving, obsolete and/or damaged inventory. Actual results may differ from these estimates.

Cash and cash equivalents

The Company considers all highly liquid debt instruments purchased with maturity periods of six months or less to be cash equivalents. The carrying amounts reported in the accompanying balance sheet for cash and cash equivalents approximate their fair value. Substantially all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance. The Company’s bank account in the United States is protected by FDIC insurance.

Accounts receivable

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Accounts receivable are recorded at the invoiced amount and do not bear interest. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary.

Inventory

Inventory is stated at the lower of cost or net realizable value. The cost of inventories comprises all costs of purchases, and other costs incurred in bringing the inventories to their present location and condition. Cost is determined using the weighted average method. Net realizable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to complete the sale. The Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. Impairment of inventories is recorded in cost of goods sold.

For the years ended December 31, 2020 and 2019, the Company has not made provision for inventory in regards to slow moving or obsolete items.

F-9

Lease

The Company used comparative method and adopted ASU 2018-20, Leases (Topic 842) to recognize leases assets and lease liabilities on the balance sheet and disclosing key information about lease transactions. All existing leases since January 1, 2018 are reported under this rule. After the adoption, $38,567 of operating lease right-of-use asset and $38,567 of operating lease liabilities were retroactively reflected to December 31, 2019 financial statements. After the adoption, $44,144 of operating lease right-of-use asset and $44,144 of operating lease liabilities were retroactively reflected to December 31, 2020 financial statements.

Property and equipment

Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment		5 years
Motor vehicle		5 years

Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the statements of income.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the years ended December 31, 2020 and 2019.

F-10

Stock-based compensation

Common stock awards are granted to directors for services provided. The vested portions of common stock awards granted but not yet issued are recorded in common stock to be issued.

The Company estimates fair value of common stock awards based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant.

Foreign currency translation

The reporting currency of the Company is U.S. dollars. The Company uses RMB as its functional currency. The results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rates at the balance sheet dates, and equity is translated at the historical exchange rates. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding accounts on the balance sheets. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statements of stockholders’ equity. Translation adjustments for the years ended December 31, 2020 and 2019 were $(25,633) and $5,007, respectively. The cumulative translation adjustment and effect of exchange rate changes on cash for the years ended December 31, 2020 and 2019 were $491 and $(83), respectively. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

F-11

Assets and liabilities were translated at 6.53 RMB and 6.96 RMB to $1.00 at December 31, 2020 and December 31, 2019, respectively. The equity accounts were stated at their historical rates. The average translation rates applied to income statements for the years ended December 31, 2020 and 2019 were 6.90 RMB and 6.91 RMB to $1.00, respectively. Cash flows are also translated at average translation rates for the period; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Revenue recognition

There is no impact of applying this ASU.

F-12

Cost of goods sold

Cost of goods sold consists primarily of the purchase costs of products.

Shipping and handling costs

The Company follows ASC 606, as amended and clarified by ASU 2016-10, to record shipping and handling cost. The Company classifies shipping and handling costs paid on behalf of its customers in selling expenses. For the years ended December 31, 2020 and 2019, shipping and handling costs were $40,085 and $4,597, respectively.

Taxation

Taxation on profits earned in the PRC has been calculated based on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.

The Company does not accrue U.S. income tax since it has no operations in the United States. Its operating subsidiaries are organized and located in the PRC and do not conduct any business in the United States.

In 2006, the Financial Accounting Standards Board (“FASB”) issued ASC, 740 Income Tax, formerly known as FIN 48, which clarifies the application of SFAS 109 by defining a criterion that an individual income tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements and provides guidance on measurement, recognition, classification, accounting for interest and penalties, accounting in interim periods, disclosure and transition. In accordance with the transition provisions, the Company adopted FIN 48 effective January 1, 2007.

The Company recognizes that virtually all tax positions in the PRC are not free from some degree of uncertainty due to tax law and policy changes by the state. The Company cannot reasonably quantify political risk factors and thus must depend on guidance issued by current government officials.

Based on all known facts and circumstances and current tax law, the Company believes that the total amount of unrecognized tax benefits as of December 31, 2020 is not material to its results of operations, financial condition or cash flows. The Company also believes that the total amount of unrecognized tax benefits as of December 31, 2020, if recognized, would not have a material effect on its effective tax rate. The Company further believes that there are no tax positions for which it is reasonably possible, based on current Chinese tax law and policy, that the unrecognized tax benefits will significantly increase or decrease over the next twelve months producing, individually or in the aggregate, a material effect on the Company’s results of operations, financial condition or cash flows.

F-13

Enterprise income tax

The enterprise income tax is calculated on the basis of the statutory profit as defined in the PRC tax laws. This statutory profit is computed differently than the Company’s net income under U.S. GAAP.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Value added tax

The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax (“VAT”) is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

VAT payable in the PRC is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of VAT included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year.

Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that the Company will incur a liability or obligations as a result. A contingent liability, which might occur but is not probable, is not recorded but is disclosed in the notes to the financial statements. The Company will recognize a liability or obligation when it is probable that the Company will incur such liability or obligation.

A contingent asset is an asset, which could possibly arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Company. Contingent assets are not recorded but are disclosed in the notes to the financial statements when it is likely that the Company will recognize an economic benefit. When the benefit is virtually certain, the asset is recognized.

F-14

Fair value of financial instruments

The Company has adopted ASC Topic 820, Fair Value Measurement and Disclosure, which defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. It establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

●

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The carrying amount of other receivables, advance to vendors, advances from customers, other payables, accrued liabilities are reasonable estimates of their fair value because of the short-term nature of these items.

Loss per share

Basic loss per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive shares of common stock consist of the common stock issuable upon the conversion of convertible debt, preferred stock and warrants. The Company uses if-converted method to calculate the dilutive preferred stock and treasury stock method to calculate the dilutive shares issuable upon exercise of warrants.

The following table sets forth the computation of the number of net loss per share for the years ended December 31, 2020 and 2019:

	December 31, 2020			December 31, 2019
Weighted average shares of common stock outstanding (basic)		27,718,084			27,469,469
Shares issuable upon conversion of Series B Preferred Stock		-			-
Weighted average shares of common stock outstanding (diluted)		27,718,084			27,469,469
Net loss available to common shareholders	$	(271,401	)	$	(298,883	)
Net loss per shares of common stock (basic)	$	(0.01	)	$	(0.01	)
Net loss per shares of common stock (diluted)	$	(0.01	)	$	(0.01	)

F-15

Accumulated other comprehensive income

The Company follows ASC 220, Comprehensive Income, formerly known as SFAS No. 130, Reporting Comprehensive Income, to recognize the elements of comprehensive income. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income for the years ended December 31, 2020 and 2019 included net income and foreign currency translation adjustments.

Related parties

Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Transactions with related parties are disclosed in the financial statements.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

F-16

(5) Concentration of Business and Credit Risk

Sales to certain customers generated over 10% of the Company’s total net sales. Sales to one Company for the year ended December 31, 2019 were approximately 44% of the Company’s net sales. Sales to another Company for the year ended December 31, 2019 were approximately 33% of the Company’s net sales.

For the year ended December 31, 2020, two suppliers accounted for approximately 98% of total purchases.

For the year ended December 31, 2019, three suppliers accounted for approximately 93% of total purchases.

(6) Income Taxes

United States

The Company is incorporated in United States, and is subject to corporate income tax rate of 21%.

The People’s Republic of China (PRC)

Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the PRC, which took effect on January 1, 2008, domestic and foreign companies pay a unified corporate income tax of 25%, except for a 15% corporate income tax rate for qualified high technology and science enterprises.

F-17

The new EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. Such withholding income tax was exempted under the previous income tax regulations.

Loss before income taxes consists of:

	For the years ended December 31,
	2020			2019
Non-PRC	$	(258,352	)	$	(194,436	)
PRC		(13,049	)		(104,447	)
	$	(271,401	)	$	(298,883	)

The income tax expense in the consolidated statements of operations consisted of:

	For the years ended December 31,
	2020		2019
Unites States Enterprise Income Tax	$	-	$	-
PRC Enterprise Income Tax		-		-
Income taxes, net	$	-	$	-

The components of deferred taxes are as follows at December 31, 2020 and 2019:

	December 31, 2020			December 31, 2019
Deferred tax assets, current portion
Amortization of fair value of stock for services	$	-		$	-
Total deferred tax assets, current portion		-			-
Valuation allowance		-			-
Deferred tax assets, current portion, net	$	-		$	-
Deferred tax assets, non-current portion
Fixed assets	$	-		$	-
Net operating losses		10,855,432			10,798,438
Total deferred tax assets, non-current portion		10,855,432			10,798,438
Valuation allowance		(10,855,432	)		(10,798,438	)
Deferred tax assets, non-current portion, net	$	-		$	-

F-18

As of December 31, 2020, Royal Shanghai had a net operating loss of $945,800 that can be carried forward to offset future net profit for income tax purposes under the PR China tax law. The net operating loss carry forwards as of December 31, 2020 will expire in years 2020 to 2024 if not utilized.

China Carbon is subject to United States of America tax law. As of December 31, 2020, the operations in the United States of America incurred approximately $13.4M of cumulative net operating losses that can be carried forward to offset future taxable income. The net operating loss carry forwards as of December 31, 2020 will expire in the year of 2035 to 2037 if not utilized. The Company has provided full valuation allowance for the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax in the PRC is as follows:

	December 31, 2020			December 31, 2019
Tax expense at statutory rate - US		21	%		21	%
Foreign income not recognized in the U.S.		(21	)%		(21	)%
PRC enterprise income tax rate		25	%		25	%
Loss not subject to income tax		(25	)%		(25	)%
Effective income tax rates		-	%		-	%

(7) Accounts Receivable

F-19

As of December 31, 2020 and December 31, 2019, accounts receivable consisted of the following:

	December 31, 2020		December 31, 2019
Amount outstanding	$	-	$	3,781
Less: Allowance for doubtful accounts		-		-
Net amount	$	-	$	3,781

(8) Inventories

As of December 31, 2020 and December 31, 2019, inventories consisted of the following:

	December 31, 2020		December 31, 2019
Inventory	$	-	$	17,583
Reserve for slow moving and obsolete inventory		-		-
Inventory, net	$	-	$	17,583

For the years ended December 31, 2020 and 2019, the Company has not made provision for inventory in regards to slow moving or obsolete items. As of December 31, 2020 and December 31, 2019, the Company did not record any provision for inventory in regards to slow moving or obsolete items.

(9) Prepaid Expense

Prepaid expense amounted $18,829 and $19,067 as of December 31, 2020 and December 31, 2019, respectively. Prepaid expenses are mainly prepayment for fixed assets.

(10) Other Receivables

Other receivables amounted $19,500 and $30,709 as of December 31, 2020 and December 31, 2019, respectively. Other receivables are mainly export tax rebates.

(11) Property and Equipment, net

As of December 31, 2020 and December 31, 2019, property, plant and equipment consisted of the following:

	December 31, 2020			December 31, 2019
Machinery and equipment	$	46,277		$	41,708
Office equipment		11,696			10,963
Motor vehicles		42,814			40,127
Total		100,787			92,798
Less: accumulated depreciation		(69,747	)		(56,523	)
Plant and Equipment, net	$	31,040		$	36,275

F-20

For the years ended December 31, 2020 and 2019, depreciation expenses amounted to $8,922 and $8,231, respectively.

The Company purchased approximately $1,679 and $6,496 property and equipment during the years ended December 31, 2020 and 2019, respectively.

(12) Stockholders’ deficit

Restated Articles of Incorporation

On January 22, 2008, the Company changed its authorized capital stock to 120,000,000 shares of capital stock, of which 20,000,000 shares are shares of preferred stock, par value $0.001 per share, and 100,000,000 shares are shares of common stock, par value $0.001 per share. The restated articles of incorporation authorizes the board of directors of the Company to issue one or more series of preferred stock and to designate the rights, preferences, privileges and limitation of the holders of such preferred stock. The board of directors has authorized the issuance of two series of preferred stock, Series A Convertible Preferred Stock (“Series A Preferred Stock”) and Series B Convertible Preferred Stock (“Series B Preferred Stock”).

Issuance of Common Stock

The Company has total outstanding shares of common stock of 27,742,346 and 27,502,346 as of December 31, 2020 and December 31, 2019, respectively.

(a) Stock Issuances For Compensation

On February 6, 2020, the Company issued an aggregate of 200,000 shares of common stock to four directors as compensation for services provided in 2019. The issuance of these shares was recorded at grant date fair market value at $0.02 per share.

On February 6, 2020, the Company issued 40,000 shares of common stock to the CFO. The issuance of these shares was recorded at grant date fair market value of $0.02 per share.

F-21

(b) Shares Held in Escrow

In a private placement that closed on December 22, 2009 and January 13, 2010, the Company sold an aggregate of 2,480,500 shares of Series B Preferred Stock and five-year warrants to purchase 992,000 shares of common stock at an exercise price of $1.30 per share, for an aggregate purchase price of $2,976,600. The Company also paid the private placement agent an aggregate of $298,000 and issued five-year warrants to purchase 124,025 shares of common stock at an exercise price of $1.32 per share. In connection with the private placement and pursuant to the transaction agreements, the Company deposited into escrow an aggregate of 1,240,250 shares of common stock, which are to be held in escrow to be returned to the Company or delivered to the investors, depending on whether the Company meets certain financial performance targets for the years ending December 31, 2010 and 2011.

The Company did not meet the financial targets. The number of Escrow Shares payable to each Investor shall be equal to a fraction of the total number of Escrow Shares potentially issuable pursuant to the terms hereof, the numerator of which shall be the amount by which (i) the number of Conversion Shares issued or issuable upon Preferred Shares which was initially issued to the Investor exceeds (ii) the sum of (x) the number of Conversion Shares sold or otherwise transferred by the Investor plus (y) the number of shares of Conversion Shares issued or issuable sold or otherwise transferred by the Investor, and the denominator of which is the number of Conversion Shares issued or issuable by the Company in the Offering. Any Escrow Shares for either Fiscal Year 2011 or Fiscal Year 2010 which are not transferred to the Investors pursuant to this paragraph shall be returned to the Company for cancellation. As of December 31, 2020, no Escrow Shares have been transferred to investors or returned to the Company.

(13) Related Parties

As of December 31, 2020 and December 31, 2019, $702,281 and $634,410 are the salary owed to Mr. Donghai Yu, who is CEO of the Company. As of December 31, 2020 and December 31, 2019, $45,000 and $45,000 are the salary owed to Ms. Grace King, who is VP finance of the Company. Ms. Grace King has resigned from the Company in 2018.

(14) Other Payable

Other payable amounted $1,686,961 and $1,576,148 as of December 31, 2020 and December 31, 2019, respectively. Other payables are mainly money borrowed from unrelated parties for operating purpose. These payable are without collateral, interest free, and due on demand.

(15) Lease Commitment

Our principal executive office is located in US. The Company leased its corporate address month to month for a monthly fee of $365. The lease is month to month.

Royal Shanghai has operating leases for corporate offices. Our leases have remaining lease terms of 6 months to 24 months.

Royal Shanghai leases another office in Shanghai China. The lease term of the office space is from December 1, 2020 to November 30, 2021. The current monthly rent including monthly management fee is approximately $2,834 (RMB 18,490).

F-22

The components of lease expense were as follows:

	Years Ended December 31,
	2020		2019

Operating lease cost	$	37,777	$	41,518

Supplemental cash flow information related to leases was as follows:

	Years Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	31,085	$	11,302

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		31,085		11,302

Supplemental balance sheet information related to leases was as follows:

	December 31, 2020		December 31, 2019
Operating Leases

Operating lease right-of-use assets-non current	$	44,144	$	38,567

Total operating lease right-of-use assets		44,144		38,567

Operating lease liability-current	$	42,006	$	36,564
Operating lease liability-non current		2,138		2,003

Total operating lease liabilities	$	44,144	$	38,567

Maturities of lease liabilities were as follows:

Year Ending December 31,	Operating Leases

2021	$	42,006
2022		2,138

Total lease payments		44,144
Less imputed interest		-

Total	$	44,144

(16) Subsequent Events

On March 25, 2021, the board has approved to issue 750,000 restricted shares of the company’s common stock to the CEO for a total cost of $120,000, at a price of $0.16 per share below 20% off market close price $0.21 on March 25, 2021.

F-23

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weakness in internal control over financial reporting, our disclosure controls and procedures were not effective as of December 31, 2020.

Management’s Report of Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO – 2013 framework) in Internal Control-Integrated Framework.

Based on that evaluation, our management has concluded that during the periods covered by this Annual Report, our internal control over financial reporting was not effective as of December 31, 2020. During our assessment of the effectiveness of internal control over financial reporting, management identified significant deficiencies related to: (i) lack of entity level controls establishing a “tone at the top”, including but not limited to, communication between committee members and senior management regarding corporate decisions and planning; (ii) insufficient knowledge of accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines; (iii) an inadequate amount of review by management of the financial statement reporting process, including understanding and reporting all required disclosures necessary, by those in charge of corporate governance; (iv) lack of corporate governance policies in place, such as an internal audit function, fraud and risk assessment policies and a whistleblower policy; and (v) inadequate segregation of duties over certain information system access controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.

Our current internal accounting department responsible for financial reporting of the Company, on a consolidated basis, is relatively new to U.S. GAAP and the related internal control procedures required of U.S. public companies. Although our accounting staff is professional and experienced in accounting requirements and procedures generally accepted in the PRC, management has determined that they require additional training and assistance in U.S. GAAP methods. Management has determined that our internal audit function is also significantly deficient due to insufficient resources to perform internal audit functions.

In order to correct the foregoing deficiencies, we are seeking to engage an experienced accountant or firm to assist us in establishing procedures that will enable us to have, on an ongoing basis, personnel who understand U.S. GAAP and the disclosure obligations under the Exchange Act. We are committed to the establishment of effective internal audit functions; however, due to the scarcity of qualified candidates with extensive experience in U.S. GAAP reporting and accounting in the region, we were not able to hire sufficient internal audit personnel in order to enable us to have such procedures and controls established by the end of December 31, 2020.

We believe that the foregoing steps will remediate the deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate. However, as a result of these material weaknesses and deficiencies in our disclosure controls and procedures, current and potential stockholders could lose confidence in our financial reporting and disclosures made in our public filings, which would harm our business and the trading price of our stock.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2020, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table sets forth certain information with respect to our directors, executive officers and significant employees:

Name	Age	Position
Donghai Yu	56	Chief Executive Officer, President and Director
Zhenfang Yang	57	Chief Financial Officer
Philip Yizhao Zhang	51	Director
John Qiang Chen	50	Director
Hongbo Liu	61	Director

Donghai Yu. Mr. Donghai Yu has been our Chief Executive Officer since November 2008 and a director since December 2007. Mr. Yu served as our Chief Financial Officer from December 2007 until November 2008. Since November 2007, he has also been Chief Financial Officer of Xingyong. Prior to joining the Company, Mr. Yu was a financial consultant in personal and business finance from 2002 to 2007. Mr. Yu received his Master of Business Administration from Oklahoma City University.

Zhenfang Yang. Mr. Zhenfang Yang has been employed as our Chief Financial Officer since November 2010. Since 2007, he worked as a key manager of our operating company. Prior to joining the Company, Mr. Yang was a key manager at the Inner Mongolia Forestry Department. Mr. Yang has over 30 years of experience in the finance and accounting field. He received his degree from Inner Mongolia Finance and Economics College.

Philip Yizhao Zhang. Mr. Yizhao Zhang has been a director of the Company since 2009. He is also a director of Kaisa Group Holdings Ltd. (HK: 1638) and HH Biotechnology Holdings Company (OTC BB: HHBT). Mr. Zhang has over 18 years of experience in accounting and internal control, corporate finance, and portfolio management. Previously, Mr. Zhang was the CFO or director at various public companies listed in the US, Hong Kong and Tokyo. Mr. Zhang also had experiences in portfolio management and asset trading at Guangdong South Financial Services Corporation from 1993 to 1999. He is a Certified Public Accountant of the State of Delaware, and a member of the American Institute of Certified Public Accountants (AICPA). He also has the Chartered Global Management Accountant (CGMA) designation. Mr. Zhang graduated with a bachelor’s degree in economics from Fudan University, Shanghai in 1992 and received a Master of Business Administration with concentrations in financial analysis and accounting from the State University of New York at Buffalo in 2003.

John Qiang Chen. Mr. John Chen has been a director of the Company since November 2009. Mr. Chen has also been a director of SGOCO Group, Ltd. (also known as SGOCO Technology, Ltd.) since November 2010 and General Steel Holdings, Inc., since March 2005. He has served as chief financial officer of General Steel Holdings, Inc. since May 2004. From August 1997 to July 2003, he served as a senior accountant at Moore Stephens, Wurth, Frazer and Torbet, LLP in Los Angeles, California. Mr. Chen graduated from Norman Bethune University of Medical Science, Changchun City, Jilin Province, China, in 1992. He obtained his Bachelor of Science in Business Administration with a concentration in accounting from California State Polytechnic University in July 1997.

Hongbo Liu. Dr. Hongbo Liu has been a director of the Company since November 2008. He is a professor at Hunan University in Hunan Province, where he has been the chair of the Department of Non-Metallic Materials since 2000. Dr. Liu is considered one of China’s top scholars in carbon graphite studies. He has been granted a special annual allowance for outstanding scholars in China by the PRC Department of State since 1997. Dr. Liu holds a doctorate degree in engineering from Hunan University.

There are no agreements or understandings between any of our executive officers or directors and any other person pursuant to which such executive officer or director was selected to serve as a director or executive officer of our Company. Directors are elected until their successors are duly elected and qualified. There are no family relationships among our directors or officers.

Director Qualifications

We seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our businesses. We seek directors who possess qualities such as integrity and candor, who have strong analytical skills and who are willing to engage management and each other in a constructive and collaborative fashion. We also seek directors who have the ability and commitment to devote significant time and energy to service on our board and its committees. We believe that all of our directors meet the foregoing qualifications.

Board Committees

Effective October 28, 2009, the Company created audit, compensation and corporate governance/nominating committees and adopted committee charters. Mr. John Chen, Mr. Philip Zhang, and Mr. Hongbo Liu, all independent directors, serve as members of each of these committees, with Mr. Zhang serving as chairman of the audit committee, Mr. Chen as chairman of the compensation committee and Mr. Liu as chairman of the corporate governance/nominating committee. Mr. Zhang is our audit committee financial expert.

Director Independence

The board determined that a majority of the Company’s directors are independent under NASDAQ Marketplace Rules.

Code of Ethics

On October 28, 2009, our board adopted a Code of Business Conduct and Ethics, which applies to all directors, officers and employees. The purpose of the Code is to promote honest and ethical conduct.

Involvement in Certain Legal Proceedings

None.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Our executive officers and directors and persons who own more than ten percent of our common stock failed to file a Form 3 upon becoming a Section 16 filer.

Item 11. Executive Compensation.

The following summary compensation table sets forth the compensation earned by our named executive officers for the years ended December 31, 2019 and 2020.

Summary Compensation Table

Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Stock Awards ($)⁽¹⁾			All Other Compensation ($)		Total ($)
Donghai Yu	2019		65,000		0		0			0		65,000
Chief Executive Officer	2020		65,000		0		0			0		65,000

Zhenfang Yang	2019		0		0		1,200	⁽²⁾		0		1,200
Chief Financial Officer	2020		0		0		800	⁽³⁾		0		800

(1)

This column represents the fair value of the stock issuance on the grant date determined in accordance with the provisions of ASC 718.

(2)

Mr. Yang received 40,000 shares of common stock for his service as CFO in 2019. The shares were valued at $0.03 per share.

(3)

Mr. Yang received 40,000 shares of common stock for his service as CFO in 2020. The shares were valued at $0.02 per share.

Director Compensation

The following table presents the compensation paid to our directors in respect of fiscal year 2020 and 2019 for their services as directors:

Name	Fiscal Year	Compensation
Donghai Yu	2019	$	1,500	(1)
	2020	$	1,000	(2)
Philip Yizhao Zhang	2019	$	1,500	(1)
	2020	$	1,000	(2)
John Chen	2019	$	1,500	(1)
	2020	$	1,000	(2)
Hongbo Liu	2019	$	1,500	(1)
	2020	$	1,000	(2)

(1)

Represents the fair value of the stock issuance on the grant date determined in accordance with the provisions of ASC 718. Each of the director received 50,000 shares for his service in 2019, valued at $0.03 per share.

(2)

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table provides information as to shares of common stock beneficially owned as of May 15, 2021, by:

●

each director;

●

each named executive officer;

●

each person known by us to beneficially own at least 5% of our common stock; and

●

all directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned (subject to community property laws where applicable). Unless otherwise indicated, the address of each beneficial owner listed below is 20955 Pathfinder Road, Suite 200, Diamond Bar, CA 91765.

Name	Amount and Nature of Beneficial Ownership		Percent of Class (1)

Donghai Yu		370,000		1.33	%
Zhenfang Yang		192,000		0.69	%
Hongbo Liu		375,000		1.35	%
Philip Yizhao Zhang		375,000		1.35	%
John Qiang Chen		375,000		1.35	%
All officers and directors as a group (5 persons)		1,512,000		5.45	%
5% shareholders:
Xiangxin Sun		3,200,000		11.53	%

(1)

Applicable percentages are based on 27,742,346 shares outstanding as of May 15, 2020, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, Company believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them.

Dengyong Jin, General Manager of our China operations and our former chief executive officer, is the chief executive officer and principal shareholder of Xingyong. Our principal stockholder, Sincere, is owned by Lizhong Gao, the brother-in-law of Mr. Jin, who has the sole power to vote and dispose of the shares of our Company held by Sincere. Sincere holds the shares as trustee for Mr. Jin’s wife and sister-in-law.

Hongbo Liu, Philip Yizhao Zhang and John Qiang Chen are independent as defined by NASDAQ Marketplace Rules.

As of December 31, 2019 and December 31, 2018, $634,410 and $581,662 are the salary owed to Mr. Donghai Yu, who is CEO of the Company. As of December 31, 2017 and December 31, 2016, $45,000 and $45,000 are the salary owed to Mr. Grace King, who was formerly the VP finance of the Company.

Item 14. Principal Accounting Fees and Services.

Audit Fees

For the Company’s fiscal years ended December 31, 2020 and 2019, we were billed $28,100 and $28,100, respectively from TAAD LLP for professional services rendered for the audit and reviews of our financial statements.

Audit Related Fees

For the Company’s fiscal years ended December 31, 2020 and 2019, we incurred for nil and nil in audited related fees from TAAD LLP.

Tax Fees

For the Company’s fiscal years ended December 31, 2020 and 2019, we had approximately $3,700 and $3,700 for professional services rendered for tax compliance, tax advice, and tax planning by our principal accountant.

All Other Fees

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2020 and 2019.

Pursuant to the requirements of Section 13 or 15(d) 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.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

●

approved by our audit committee; or

●

entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.

We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)

Documents filed as part of this report

(1)

All financial statements

		Page
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Shareholders’ Equity		F-4
Consolidated Statements of Cash Flows		F-5
Notes to Consolidated Financial Statements		F-6

(2)

Financial Statement Schedules

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K.

(3)

Exhibits required by Item 601 of Regulation S-K

Exhibit Number		Description
2.1		Exchange Agreement, dated as of December 14, 2007, between the Registrant and Sincere Investment (PTC), Ltd. (incorporated by reference to the Form 8-K filed by the Company on December 31, 2007).
3.1		Amended and Restated Articles of Incorporation of the Company, including the Statement of Designation for Series A Convertible Preferred Stock, as filed with the State of Nevada (incorporated by reference to the Form 8-K filed by the Company on January 28, 2008).
3.2		Amended and Restated Articles of Incorporation of the Company, including the Statement of Designation for Series B Preferred Stock, as filed with the State of Nevada (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
3.3		Amended and Restated Bylaws of the Company (incorporated by reference to the Form 8-K filed by the Company on November 3, 2009).
4.1		Form of Warrant issued to the investors (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
4.2		Warrant issued to Maxim Group LLC (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
10.1		Business Operations Agreement, dated December 7, 2007, between XingheXingyong Carbon Co., Ltd. and XingheYongle Carbon Co., Ltd. (English Translation) (incorporated by reference to the Form 8-K filed by the Company on December 31, 2007).
10.2		Exclusive Technical and Consulting Services Agreement, dated December 7, 2007, between XingheXingyong Carbon Co., Ltd. and XingheYongle Carbon Co., Ltd. (English Translation) (incorporated by reference to the Form 8-K filed by the Company on December 31, 2007).
10.3		Option Agreement, dated December 7, 2007, between XingheXingyong Carbon Co., Ltd. and XingheYongle Carbon Co., Ltd. (English Translation) (incorporated by reference to the Form 8-K filed by the Company on December 31, 2007).
10.4		Equity Pledge Agreement, dated December 7, 2007, among XingheXingyong Carbon Co., Ltd., XingheYongle Carbon Co., Ltd. and Dengyong Jin (English Translation) (incorporated by reference to the Form 8-K filed by the Company on December 31, 2007).
10.5		Consulting Agreement, dated February 9, 2009, between the Company and Ventanta Capital Partners (incorporated by reference to the Form 8-K filed by the Company on February 13, 2009).
10.6		Amendment to Securities Purchase Agreement, dated April 8, 2009, between the Company and XingGuang Investment Corporation, Limited (incorporated by reference to the Form 8-K filed by the Company on April 13, 2009).
10.7		Form of Subscription Agreement, dated December 22, 2009, between the Registrant and the investors set forth therein (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
10.8		Registration Rights Agreement, dated December 22, 2009, between the Company, Maxim Group LLC, and the investors set forth therein (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
10.9		Securities Escrow Agreement, dated December 22, 2009, between the Company, Maxim Group LLC, and the investors set forth therein (incorporated by reference to the Form 8-K filed by the Company on December 28, 2009).
10.10		Loan Agreement, dated August 6, 2010, between the Company and China Construction Bank (incorporated by reference to the Form 10-Q filed by the Company on November 15, 2010).
10.11		Loan Agreement, dated August 23, 2010, between the Company and China Construction Bank (incorporated by reference to the Form 10-Q filed by the Company on November 15, 2010).
10.12		Loan Agreement, dated September 6, 2010, between the Company and China Construction Bank (incorporated by reference to the Form 10-Q filed by the Company on November 15, 2010).
10.13		Loan Agreement, dated September 16, 2010, between the Company and China Construction Bank (incorporated by reference to the Form 10-Q filed by the Company on November 15, 2010).

10.14		Asset Purchase Agreement by and among the Company, Yongle Carbon Dengyong Jin and Benhua Du, and dated as of June 10, 2014 (incorporated by reference to the Form 8-K filed by the Company on June 16, 2014).
10.15		Installment Payment Agreement by and among the Company, Dengyong Jin and Benhua Du, dated as of July 3, 2014 (incorporated by reference to the Form 8-K filed by the Company on July 10, 2014).
10.16		Indebtedness Cancellation Agreement by and between the Company and Dengyong Jin, dated as of July 3, 2014 (incorporated by reference to the Form 8-K filed by the Company on July 10, 2014).
14		Code of Ethics (incorporated by reference to the Form 8-K filed by the Company on November 3, 2009).
21		List of Subsidiaries. (Incorporated by reference to the Form 10-K filed by the Company on April 1, 2015).
31.1*		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101. INS		XBRL Instance Document.
101. SCH		XBRL Taxonomy Extension Schema Document.
101. CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB		XBRL Taxonomy Extension Label Linkbase Document.
101. PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101. DEF		XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith

In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	CHINA CARBON GRAPHITE GROUP, INC.

Date: April 15, 2021	By:	/s/ Donghai Yu
		Donghai Yu
		Chief Executive Officer (Principal Executive Officer)

Date: April 15, 2021	By:	/s/ Zhenfang Yang
		Zhenfang Yang
		Chief Financial Officer (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Donghai Yu	Chief Executive Officer and Director	April 15, 2021
Donghai Yu	(Principal Executive Officer)

/s/ Zhenfang Yang	Chief Financial Officer	April 15, 2021
Zhenfang Yang	(Principal Accounting Officer)

/s/ Philip Yizhao Zhang	Director	April 15, 2021
Philip Yizhao Zhang

/s/ John Qiang Chen	Director	April 15, 2021
John Qiang Chen

/s/ Hongbo Liu	Director	April 15, 2021
Hongbo Liu

China Carbon Graphite Group, Inc. 10-K