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

Earnings (loss)Loss per share

Basic earningsloss 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 earningsloss 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 incomeloss per share for the ninesix months ended SeptemberJune 30, 20172021 and 2016:2020:

The following table sets forth the computation of the number of net incomeloss per share for the three months ended SeptemberJune 30, 20172021 and 2016:2020:

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 ninesix months ended SeptemberJune 30, 20172021 and 20162020 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

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. Early adoption is permitted. The Company does not expect thatadopted the policy on January 1, 2019 and the impact of the adoption of this guidance will have a material impact on its consolidated financial statements.

is listed in Note 15.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows”. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4)Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

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.

In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control”. The amendments affect reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. Specifically, the amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically, these amendments provide a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first, require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and second, remove the evaluation of whether a market participant could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting Principles when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date”, which defers the effective date for ASU 2014-09 by one year. For public entities, the guidance in ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods), which means it will be effective for the Company’s fiscal year beginning January 1, 2018. In March 2016, the FASB issued ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue versus Net)”, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing”, which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12 “Narrow-Scope Improvements and Practical Expedients”, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB further issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which makes minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are intended to address implementation issues that were raised by stakeholders and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. These amendments have the same effective date as the new revenue standard. Preliminarily, we plan to adopt Topic 606 in the first quarter of our fiscal 2018 using the retrospective transition method, and are continuing to evaluate the impact our pending adoption of Topic 606 will have on our consolidated financial statements. The Company’s current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASU 2014-09. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. While no significant impact is expected upon adoption of the new guidance, the Company will not be able to make that determination until the time of adoption based upon outstanding contracts at that time.

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date thatthe financial statements are issued (or within one year after the date that the financial statements are available to be issued  when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date thatthe financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

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.

(5) 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.

Sales to certain customers generated over 10% of the Company’s total net sales. Sales to Honglang Carbon Industry Co., Ltdone Company for the ninesix months ended SeptemberJune 30, 20172021 were approximately 55%73% of the Company’s net sales. Sales to NurolTeknolojiSanayiVeMadencianother Company for the ninesix months ended SeptemberJune 30, 20172021 were approximately 29% of the Company’s net sales. Sales to Jinko Solar Technology SDN. BHD, for the nine months ended September 30, 2017 were approximately 12%11% of the Company’s net sales.

Sales to certain customers generated over 10% of the Company’s total net sales. Sales to Jinko Solar Technology SDN. BHD,one Company for the ninesix months ended SeptemberJune 30, 20162020 were approximately 37%60% of the Company’s net sales. Sales to Honglang Carbon Industry Co., Ltdother Company for the ninesix months ended SeptemberJune 30, 20162020 were approximately 38%14% of the Company’s net sales. Sales to NurolTeknolojiSanayiVeMadencianother Company for the ninesix months ended SeptemberJune 30, 20162020 were approximately 15%11% of the Company’s net sales.

For the ninesix months ended SeptemberJune 30, 2017,2021, two suppliers accounted for approximately 92% of total purchases.

For the six months ended June 30, 2020, three suppliers accounted for approximately 88%99% of total purchases.

For the nine months ended September 30, 2016, three suppliers accounted for approximately 95% of total purchases.

(6) Accounts Receivable

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 SeptemberJune 30, 20172021 and December 31, 2016,2020, accounts receivable consisted of the followingfollowing:

(7) Advances to SuppliersPrepaid Expense

AsPrepaid expense amounted $20,559 and $18,829 as of SeptemberJune 30, 20172021 and December 31, 2016, advances to suppliers2020, respectively. Prepaid expenses are advancesmainly prepayment for finished goods and amounted to $268,435 and $158,010, respectively.fixed assets.

(8) Other Receivables

Advances to suppliers represent interest-free cash paid in advance to suppliers for purchasesOther receivables amounted $21,118 and $19,500 as of inventory.

(8) Inventories

As of SeptemberJune 30, 20172021 and December 31, 2016, inventories consisted of the following:

For the nine months ended September 30, 2017 and 2016, the Company has not made provision for inventory in regards to slow moving or obsolete items. As of September 30, 2017 and December 31, 2016, the Company did not record any provision for inventory in regards to slow moving or obsolete items.

(9) Other Receivables

Other receivables amounted $17,349 and $42,543 as of September 30, 2017 and December 31, 2016,2020, respectively. Other receivables are mainly export tax rebates.

(10)(9) Property and Equipment, net

As of SeptemberJune 30, 20172021 and December 31, 2016,2020, property, plant and equipment consisted of the following:

For the three months ended SeptemberJune 30, 20172021 and 2016,2020, depreciation expenses amounted to $2,484$2,387 and $2,139,$2,174, respectively. For the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, depreciation expenses amounted to $6,627$4,765 and $6,478,$4,345, respectively.

The Company spent $7,942purchased approximately $0 and $0 in acquisition of$1,649 property and equipment during the threesix months ended SeptemberJune 30, 20172021 and 2016. The Company spent $13,128 and $1,163 in acquisition of property and equipment during the nine months ended September 30, 2017 and 2016.2020, 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 ninesix months ended SeptemberJune 30, 20172021 and 2016.2020.

(10) Inventories

As of June 30, 2021 and December 31, 2020, inventories consisted of the following:

(11) 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

(a)  Stock Issuances for CashThe Company has total outstanding shares of common stock of 29,482,346 and 27,742,346 as of June 30, 2021 and December 31, 2020, respectively.

On December 19, 2016, the Company issued 3,200,000 shares for cash at $0.10 per share to an unrelated party.

(b)(a) Stock Issuances For Compensation

On March 8, 2016,February 2, 2021, the Company issued an aggregate of 200,000 shares of common stock to four4 directors as compensation for services provided in 2015.2020. The issuance of these shares was recorded at grant date fair market value which is the closing price on OTC market at $0.03$0.2 per share.

On March 8, 2016,February 2, 2021, the Company issued 64,00040,000 shares of common stock to the CFO and VP of Finance.CFO. The issuance of these shares was recorded at grant date fair market value which is the closing price on OTC market of $0.03 in 2016.

On December 19, 2016, the Company issued an aggregate of 200,000 shares of common stock to four directors as compensation for services provided in 2016. The issuance of these shares was recorded at grant date fair market value which is the closing price on OTC market at $0.05$0.2 per share.

(b) Stock Issuances For Debt Settlement

On December 19, 2016,March 25, 2021, the Company issued 64,000board has approved to issue 750,000 restricted shares of the company’s common stock to the CFO and VPCEO for a total fair value of Finance. The$157,500. It is a share issuance to settle the accrued payroll of these shares was recorded at grant date fair market value which is the closing price on OTC market of $0.05 in 2016.$120,000.

(c)  Stock cancellationOn April 29, 2021, the board has approved to issue 750,000 restricted shares of the company’s common stock to the an unrelated party for a total fair value of $127,500. It is a share issuance to settle the other payable of $120,000.

On June 10, 2014, theThe Company entered into an asset purchase agreement (the “Agreement”) by and among the Company and its wholly-owned subsidiary, Yongle (together with the Company, the “Sellers”), and Dengyong Jin and Benhua Du (collectively “Purchasers”).  Pursuant to the Agreement, the Purchasers purchased allrecorded $45,000 of the rights and obligationsloss on debt settlement as of Yongle with relating to Xingyong under the Contractual Arrangements.  The Purchasers collectively hold 100% of the outstanding equity interests of Xingyong.  The purchase price under the Agreement was $1,543,734 (RMB 10 million), including $575,813 (RMB 3.73 million) in cash and the cancellation of the registrant’s repayment obligations of $967,921 (RMB 6.27 million) previously advanced by Dengyong Jin to the Company. The Purchasers agreed to return all shares held individually and under Sincere Investment (PTC) Limited totaling 10,388,172 shares. The disposal of Xingyong became effective on June 30, 2014 after approved by majority of shareholders at a special meeting of shareholders held on such date. In connection with this transaction and as of December 31, 2016, Company has not received the $1,543,734 of the total purchase price and adjusted the note receivable as a bad debt expense. As of March 10, 2017, 9,388,172 shares of common stock previously held by Sincere and 1,000,000 shares of common stock previously held by Dengyong Jin were cancelled.2021.

(d)(c) 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 SeptemberJune 30, 2017,2021, no Escrow Shares have been transferred to investors or returned to the Company.

(12) Related Parties

As of SeptemberJune 30, 20172021 and December 31, 2016, $143,2032020, $642,216 and $137,345 are due to Mr. Donghai Yu, who is CEO of the Company. These amounts are advances made to the Company by unrelated parties through Mr. Donghai Yu for business operating purposes. The advances are interest free.

As of September 30, 2017 and December 31, 2016, $548,186 and $458,105$702,281 are the salary owed to Mr. Donghai Yu, who is CEO of the Company. As of SeptemberJune 30, 20172021 and December 31, 2016,2020, $45,000 and $45,000 are the salary owed to Mr.Ms. Grace King, who is VP finance of the Company. Ms. Grace King has resigned from the Company in 2018.

(13) Loan Payable

(13)Loan payable amounted $93,900 and $93,900 as of June 30, 2021 and December 31, 2020, respectively. Loan payable are the disaster loans from SBAD.

(14) Other Payable

Other payable amounted $1,034,570$1,408,975 and $1,086,325$1,686,961 as of SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively. Other payables are mainly money borrowed from unrelated parties for operating purpose. These payables are without collateral, with interest, free, and due on demand. Imputed interest amounted $26,579 and $30,670 for the six months ended June 30, 2021 and 2020 and was recorded as paid in capital, respectively.

(15) Lease Commitment

(14) Lease Commitment

Our principal executive office is located in US. The Company leased its corporate address month to month for an annuala monthly fee of $1,440.$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 an office in Shanghai China. The lease term of the office space is from March 16, 2019 to March 15, 2021. On March 16, 2017, Royal Shanghai leased an office space in China,2, 2021, the company renewed the one-year lease term ends oncontract until March 15, 2019.2022. The current monthly rent including monthly management fee is approximately $1,028$1,082 (RMB 7,063).

On April 1, 2017, Royal Shanghai leased anleases another office in Shanghai China. The lease term of the office space in China, the lease term ends on August 27, 2018.is from December 1, 2020 to November 30, 2021. The current monthly rent including monthly management fee is approximately $2,060$2,834 (RMB 14,158)18,490).

Future minimumThe components of lease payments under non-cancellable lease agreement for the twelve months after September 30, 2017 areexpense were as follow:follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

Maturities of lease liabilities were as follows:

(16) Subsequent Events

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report on Form 10-QThe following discussion of the results of our operations and other reports filed by China Carbon Graphite Group, Inc. (“we,” “us,” “our,” orfinancial condition should be read in conjunction with our financial statements and the “Company”)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 time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may containour forward-looking statements, (collectivelysee the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on thesesection entitled “Cautionary Note Regarding Forward Looking Statements” above.

In some cases, you can identify forward-looking statements which are only predictions and speak onlyby terms such as of the date hereof. When used in the filings, the words “anticipate,“anticipates,” “believe,“believes,” “estimate,“could,” “expect,“estimates,” “future,“expects,” “intend,“intends,” “plan,“may,” or the negative of these terms“plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions as they relateintended to the Company or the Company’s management identify forward-looking statements. SuchForward-looking statements reflect theour current view of the Companyviews with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, assumptions, and other factors. Should one or more ofundue reliance should not be placed on these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in theforward-looking statements. Also, forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certainrepresent our estimates judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilitiesonly as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussionthis report. This Annual Report should be read in conjunctionits entirety and with the understanding that our consolidated financialactual 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 and notes thereto appearing elsewherepublicly, or to update the reasons actual results could differ materially from those anticipated in this report.any forward-looking statements, even if new information becomes available in the future.

Overview

China Carbon Graphite Group, Inc. (the “Company”), through its subsidiaries, isWe are engaged in the research and development, small production and sales of graphene and graphene oxide and graphite bipolar plates in the People’s Republic of China (“China” or the “PRC”).  The Company hasChina. We have developed itsour own graphene prototype and produces the products by orders only. The CompanyWe outsource the production of large orders to third parties as it haswe have not commercialized itsour 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.

As of and for the three and ninesix months ended SeptemberJune 30, 2017,2021, 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)(i) obtaining capital from the sale of its equity securities, (2)(ii) sales of its products, and (3)(iii) 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.

Results of Operations

Comparison of the Three Months Ended SeptemberJune 30, 20172021 and 20162020

Sales.

During the three months ended SeptemberJune 30, 2017,2021, we had sales of $141,120,$63,214 compared to sales of $171,582$75,634 for the three months ended SeptemberJune 30, 2016,2020, a decrease of $30,462,$12,420 or approximately 17.75%16.42%. Significant sales decrease was mainly attributabledue to the decrease in demand for products among consumers in the market.COVID-19 and revenue recognition principles. 

Cost of goods sold.

Our cost of goods sold consists of the purchase cost. During the three months ended SeptemberJune 30, 2017,2021, our cost of goods sold was $141,058,$42,404, compared to $142,887$44,480 for the cost of goods sold for the three months ended SeptemberJune 30, 2016,2020, a decrease of $829$2,076 or approximately 1.28%4.67%. The decrease in the cost of sales was primarily attributable to the decrease in sales volume.

Gross profit.

Our gross profit decreased from $28,695$31,154 for the three months ended SeptemberJune 30, 20162020 to $62$20,810 for the three months ended SeptemberJune 30, 2017.2021. The decrease of the gross profit is mainly attributed to decrease ofin the sales.

Gross profit margin.Margin.

Our gross profit margin decreased from 16.7%41.19% for the three months ended SeptemberJune 30, 20162020 to 0.04%32.92% for the three months ended SeptemberJune 30, 2017 because the Company sold the products at lower margin2021 due to develop a new customer during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.increased less profitable products.