Revenue

Revenue increased by approximately $7.6 million or 80%, to approximately $17.3 million in the year ended December 31, 2017 from approximately $9.6 million in the year ended December 31, 2016. In August 2016, Kiwa Baiao Bio-Tech (Beijing) Co., Ltd obtained a fertilizer sales permit from the Chinese government and stockholders’ deficiencybegan to sell the products directly to customers in Northern areas of $11,100,454.China. Due to the good quality of our products, we have gained more reputation in the agricultural industry and were able to attract more customers. In addition, we established Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. in November 2016 to support sales in Southern areas of China. Our strategy on the expansion of our business was to gain market share in the bio-fertilizer market, thereby, we have extended credit to our customers. Our current payment terms on these customers are ranging from 60 days to 9 months after receipts of the goods depending on the creditworthiness of these customers. These circumstances, among others, raise substantial doubt aboutcustomers are mainly agricultural cooperative company and distributors who then resell our products to individual farmers. Because the Company’scrop growing cycle usually takes approximately 3 to 9 months in the agricultural industry, it will take approximately similar time frame of 3 to 9 months for farmers to harvest crops and to realize profits to repay our distributors. As a result, for the sales contracts with these customers, the collectability of payment is highly dependent on the successful harvest of corps and the customers’ ability to continue as a going concern.collect money from farmers. The financial statements doCompany deemed the collectability of payment may not include any adjustmentsbe reasonably assured until after the Company is paid. For those sales contracts that might resultthe Company has shipped its products but the payment is contingent on collections of payments from the outcomedownstream customers, the Company considers the revenue recognition criteria are not met and therefore defers the revenue and cost of this uncertainty. The financial statements also do not include any adjustments relatinggoods sold until payments are collected. We have sold, shipped and collected our accounts receivable approximately $17.3 million of our products during the year ended December 31, 2017. As a result, our revenue increased accordingly for the year ended December 31, 2017 as compared to the recoverabilitysame period in 2016. 

We currently realized revenue in two major product categories of Biological Organic Fertilizer and classificationCompound Microbial Fertilizer. Biological Organic Fertilizer is the first product category we launched into market in September 2016. Compound Microbial Fertilizer are our new products with higher effectiveness on the productivity of recorded asset amounts,crops and increasing the value and quality of the crops harvested, which was firstly introduced in March 2017. We sold and shipped Compound Microbial Fertilizer in the third quarter of 2017. We plan to launch another product category of Bio-Water Soluble Fertilizer in the third quarter of 2018. Our revenues from our major product categories are summarized as follows:

Revenue from Biological Organic Fertilizer decreased by approximately $0.4 million or amounts4.2%, to approximately $9.2 million in the year ended December 31, 2017 from approximately $9.6 million in the year ended December 31, 2016. The decrease of revenue from Biological Organic Fertilizer mainly due to the combination of decrease of quantity sold and classificationsdecrease in average selling price for the year ended December 31, 2017 as compared to the same period in 2016. Quantity sold decreased by 1,373 tons or 2.6% mainly due to management’s revenue generating focus was toward the higher unit profit margin product, Compound Microbial Fertilizer, which was firstly introduced in March 2017. Average selling prices decreased by $2.94 or 1.6% during the year ended December 31, 2017 as compared to the year ended December 31, 2016 was mainly due to the appreciation of liabilitiesRenminbi against U.S. Dollar of approximately 1.7%. Average selling prices for both periods remained stable in Renminbi.

Because the Chinese Government is continuously to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry, we expect our revenues from our innovated and highly effective products, Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer, will continue to grow in a higher rate than that might be necessary shouldfrom Biological Organic Fertilizer. Our Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer generally have a higher effectiveness on the Company be unableproductivity of crops that are suitable for promoting green environment. In addition, our marketing team is expanding to the Western areas of China and Hainan province and we expect our revenues will continue to grow in 2018. Meanwhile, we expect to continue asto gain more market shares in our existing sales channel bases in the Northern and the Southern areas of China due to the good quality of the products and better reputation in the industry.

Compound Microbial Fertilizer is adding appropriate amount of nitrogen, phosphorus, potassium and other nutrients into Biological Organic Fertilizer. Through the action of organic matter and beneficial microorganisms, the utilization rate of nitrogen, phosphorus, potassium can be significantly improved. The Bio-Water Soluble Fertilizer is mainly another form of the biological fertilizer. It is in the form of powder which has high water solubility, and it is convenient for the farmers to use during the drop irrigation. Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer generally contain more bacteria and have a going concern.higher effectiveness on the productivity of crops and increasing the value and quality of the crops harvested than Biological Organic Fertilizer. As a result, our Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer generally have a higher average selling price.

The companysold and shipped amount of Compound Microbial Fertilizer increased by approximately $8.1 million or 100.0% in the year ended December 31, 2017 as we did not sell this product category during the year ended December 31, 2016.

Cost of Revenue

Our cost of revenues from our major product categories are summarized as follows:

Cost of revenue from Biological Organic Fertilizer decreased by approximately $1.0 million or 13.9%, to approximately $6.2 million in the year ended December 31, 2017 from approximately $7.2 million in the year ended December 31, 2016. The decrease is mainly due to the combination of decrease in quantity sold and the decrease of average unit production cost. The decrease of $15.76 or 11.7% of average unit production cost is mainly due to the combination of decrease of price for raw materials (mainly includes nitrogen, phosphorus and potassium) used in the year ended December 31, 2017 and the appreciation of Renminbi against U.S. Dollar of approximately 1.7%.

Cost of sold and shipped from Compound Microbial Fertilizer increased by approximately $5.7 million or 100.0%. The increase was in line with the increase in the selling amount of Compound Microbial Fertilizer.

Gross Profit

Our gross profit from our major product categories are summarized as follows:

Gross profit percentage for Biological Organic Fertilizer increased from 25.2% for the year ended December 31, 2016 to 32.8% for the year ended December 31, 2017 mainly due to the decrease in raw materials price in our unit production cost of our products for the reason as discussed above.

Research and Development Expenses

Research and development expenses was approximately $148,000 (RMB 1,000,000) for the year ended December 31, 2017, keeping the same as the prior comparable period of approximately $149,000 (RMB 1,000,000) for the year ended December 31, 2016. On November 20, 2015, the Company signed a strategic cooperation agreement (the “Agreement”) with China Academy of Agricultural Science (“CAAS”)’s Institute of Agricultural Resources & Regional Planning (“IARRP”) and Institute of Agricultural Economy & Development (“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership with the two institutes and establish an “International Cooperation Platform for Internet and Safe Agricultural Products”. To fund the cooperation platform’s R&D activities, the Company will provide RMB 1 million (approximately $148,000) per year to the Spatial Agriculture Planning Method & Applications Innovation Team that belongs to the Institutes. The term of the Agreement is for three years beginning November 20, 2015 and will expire on November 19, 2018. However, the Company is only liable for the annual funds to be provided to the extent of the contract obligations performed by CAAS IARRP and IAED, and the agreement is terminable before the three years’ commitment date based on negotiations of both parties. The Company contributed approximately $148,000 (RMB 1,000,000) for the year ended December 31, 2017 and approximately $149,000 (RMB 1,000,000) for the year ended December 31, 2016. The Company plans to relycontribute the same R&D expense in quarterly installments in 2018 until the date of the Agreement expires on November 19, 2018.

Selling Expense

Selling expenses for the years ended December 31, 2017 and 2016 were approximately $483,000 and $530,000, respectively. Selling expenses include salaries of sales personnel, sales commission, travel and entertainment as well as freight out expenses. The decrease in selling expenses is mainly due to the decrease of freight out expenses of approximately $0.5 million offset by the increase in salary expenses of approximately $0.3 million and increase in promotional expenses of approximately $0.1 million in 2017. During the year ended December 31, 2016, we were responsible for freight out expenses while during the year ended December 31, 2017, our demand of the products was on a rise and our customers are willing to pay for the freight out expenses on their own. The increase in salary expenses is mainly because we have started hiring sales managers in the fourth quarter of 2016 for the marketing of our products in 2017. Prior to September 2016, there was no designated sales personnel since Kiwa Beijing just obtained the permit to sell bio-fertilizer in September 2016. With business expansion, we have hired more sales managers in Kiwa Beijing and in Kiwa Shenzhen to manage our sales activities in different regions of China from October 2016 and throughout 2017. In addition, we have incurred a lot of promotion and marketing activities in 2017 which also attributable to the increase of promotional expenses.

General and Administration

General and administrative (“G&A”) expenses increased by approximately $2.1 million or 245% from approximately $0.9 million in the year ended December 31, 2016 to approximately $3.0 million in the same period in 2017. General and administrative expenses include professional fees, officers’ compensation, depreciation and amortization, salaries, travel and entertainment, rent, office expense and telephone expense and the like. The increase in general and administrative expenses is mainly attributed to business expansion and the establishment of Kiwa Shenzhen in November 2016, Kiwa Hebei in December 2016 and Kiwa Asia in July 2017, which contributed approximately $1.0 million increase. In addition, approximately $0.6 million increase of G&A expenses are attributable to the increase of professional fees, such as attorneys, auditors, financial consultants, IT consultants, and business strategic and development consultants.

Right-to-use Trademark Income

Trademark license income totaled $0 for the year ended December 31, 2017, compared with $786,329 for the same period of 2016, reflecting a decrease of 100% from the same period of last year. Income was generated from licensing our trademark to Gerui. We signed the license agreement with Gerui to allow Gerui to sell fertilizer using our trademark in December 2015. We charged Gerui 10% of net sales of fertilizers bearing Kiwa trademark for using our trademark. Gerui began to sell fertilizers bearing Kiwa trademark in 2016. In August 2016, we  obtained the government approval of selling fertilizers in China. As a result, we ceased the licensing arrangement cooperation with Gerui and started to sell our own bio-fertilizers from September 2016.

Other Income

Other income increased by approximately $0.4 million from $0 for the year ended December 31, 2016 to approximately $0.4 million in the same period in 2017. The increase is mainly attributable the accrued professional fees which were unclaimed for more than ten years and we have evaluated and reached the decision to discharge these liabilities.

Interest Expenses

Net interest expense was $ 524,333 and $ 190,552 for the year ended December 31, 2017 and 2016, respectively, representing an increase of $333,781 or 175%. Interest expense included accrued interest on convertible note and other note payable, and the amortization of the convertible note discount for the year ended December 31, 2017 and 2016. The increase in interest expenses is mainly attributed to newly issuance of two 15% convertible notes for the year ended December 31, 2017.

Income (Loss) from discontinued operations, net of taxes

Income from discontinued operations, net of taxes was $4,495,333 for the year ended December 31, 2017 and loss from discontinued operations, net of taxes was $150,471 for the year ended December 31, 2016, which results an increase of $4,645,804 gain from discontinued operations, net of taxes for the years ended December 31, 2017 and 2016. Due to suffering from losses for several years, on February 11, 2017, the Company executed an Equity Transfer Agreement with Dian Shi Cheng Jing (Beijing) Technology Co. (“Transferee”) whereby the Company transferred all of its right, title and interest in Kiwa Bio-Tech Products (Shandong) Co., Ltd. (“Shandong”) to the Transferee for RMB 1.00. The government processing of the transaction was completed on April 12, 2017. Therefore, it’s resulted in the increase of income from discontinued operations, net of taxes.

Net Income

During the fiscal year 2017, net income was $5,309,036, compared with $891,030 for the same period of 2016, representing an increase of $4,418,006 or 496%. Such change was the result of the combination of the changes as discussed above.

Critical Accounting Policies and Estimates

We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under current circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. In addition, you should refer to our accompanying consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity (deficiency) and cash flows for the fiscal years ended December 31, 2017 and 2016, and the related notes thereto, for further discussion of our accounting policies.

Revenue Recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

The Company’s current payment terms on credits to its customers are ranging from 60 days to 9 months after receipts of the goods depending on the proceedscreditworthiness of its customers. The Company’s customers are mainly agricultural cooperative company and distributors who then resell the Company’s products to individual farmers. Because the crop growing cycle usually takes approximately 3 to 9 months in the agricultural industry for some of these Co-ops and distributors, will take approximately similar time frame of 3 to 9 months for farmers to harvest crops and to realize profits to repay the resellers. As a result, for the sales contracts with these customers, the collectability of payment is highly dependent on the successful harvest of corps and the customers’ ability to collect money from farmers. The Company deemed the collectability of payment may not be reasonably assured until after the Company get paid. For those sales contracts that the Company has shipped its products but the payment is contingent on collections of payments from the downstream customers, the Company considers the revenue recognition criteria are not met and therefore defers the revenue and cost of goods sold until payments are collected. These revenue and cost of goods sold are classified in the captioned “Deferred revenue” and “Deferred cost of goods sold” in the accompanying consolidated balance sheets. For other customers whose repayment is within normal business course and not highly dependent on the succession of corps being harvested, the Company recognized revenue when title and ownership of the goods are transferred upon shipment to the customer by the Company.

Accounts receivable and allowance for doubtful accounts

Accounts receivable represent customer accounts receivables. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience, the economic environment trends in the microbial fertilizer industry, and a review of the current status of trade accounts receivable. Management reviews its accounts receivable each reporting period to determine if the allowance for doubtful accounts is adequate. Such allowances, if any, would be recorded in the period the impairment is identified. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Uncollectible accounts receivables are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted.

Impairment of Long-Lived Assets

The Company’s long-lived assets consist of property and equipment. The Company evaluates its investment in long-lived assets for recoverability whenever events or changes in circumstances indicate the net carrying amount may not be recoverable. It is possible that these assets could become impaired as a result of legal factors, market conditions, operational performance indicators, technological or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) 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; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly Influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Income Taxes

The Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” 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. The Company establishes a valuation when it is more likely than not that the assets will not be recovered.

ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.

Liquidity and Capital Resources

In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our liquidity needs is to meet our working capital requirements, operating expenses and capital expenditure obligations.

We engage in the business for organically bio-fertilizer and our customers are mainly agricultural cooperative company and distributors who then resell our products to individual farmers. Because the crop growing cycle usually takes approximately 3 to 9 months in the agricultural industry, it will take approximately similar time frame of 3 to 9 months for farmers to harvest crops and to realize profits to repay our distributors. Our current payment terms on these customers are ranging from 60 days to 9 months after receipts of the goods depending on the creditworthiness of these customers. As a result, our accounts receivable turnover ratio is normally low due to the nature of our business. In addition, our business is capital intensive as we need to make advance payment to our suppliers to secure timely delivery and current market price of raw materials. Debt financing in the form of notes payable and loans from both unrelated and related parties have been utilized to providefinance our working capital requirements. As of December 31, 2017, our working capital was approximately $10.2 million and we had cash of approximately $1.1 million, with remaining current assets mainly composed of advance to suppliers.

Although management believes that we can realize our current assets in the resources necessarynormal course of business, our ability to fundrepay our current obligations will depend on the developmentfuture realization of our business plancurrent assets and operations.the future operating revenues generated from our products. Because the Chinese Government is continuously to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry, we expect our revenues from our innovated and highly effective products, Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer, will continue to grow in its business. In addition, our marketing team is expanding to the Western areas of China and Hainan province and we expect our revenues will continue to grow in 2018. Meanwhile, our management expects to continue to gain market shares in our existing sales channel bases in the Northern and the Southern areas of China due to the good quality of our products and better reputation in the industry. Our management believes these factors will enable us sufficiently to support our working capital needs for the next twelve months.

Our management has considered our historical experience, the economic environment, trends in the Agricultural industry, the realization of the advance to suppliers as of December 31, 2017. We expects to realize the balance of its current assets within the normal operating cycle of a twelve month period. If we are unable to realize its current assets within the normal operating cycle of a twelve month period, we may have to consider supplementing its available sources of funds through the following sources:

Based on the above considerations, our management is of the opinion that we have sufficient funds to meet our working capital requirements and debt obligations as they become due one year from the date of this report. However, there is no assurance that management will be successful in their plans. There are a number of factors that could potentially arise that could undermine our plans, such as changes in the demand for the Company’s products, PRC government policy, economic conditions, and competitive pricing in the Agricultural industry.

The following table set forth summary of our cash flows for the periods indicated:

Operating Activities

Net cash used operating activities was approximately $5.6 million for the year ended December 31, 2017, compared to cash used in operating activities of approximately $0.9 million for the same period in 2016. The increase in net cash used in operating activities was primarily attributable to 1) increase of approximately $10.3 million of advance to suppliers as we need to secure current market price of raw materials purchases as we are anticipating the raw materials price is on the rise in the near future; 2) increase of approximately $2.7 million of inventory as we need to stock up our inventory for the anticipated sales in 2018 offset by 3) net income from our continuing operations of approximately $0.8 million and non-cash reconciliation of operating items of approximately $0.9 million, 4) decrease of approximately of $1.1 million accounts receivables as we have improved our collection effort during 2017 5) decrease of approximately $1.5 million due from related parties – non trade as our related parties has repaid us during 2017 6) increase of approximately $0.6 million of accounts payable as we incurred more payables in our operations 7) increase of approximately $0.9 million of other payables and accruals as we have incurred additional R&D payable and received additional subscription receivable in advances 8) increase of approximately $0.5 million of advance from customers as we received more deposits for our sales orders and 9) increase of approximately $0.7 million of income taxes payable as we have generated more income in 2017 which incurred additional income tax payable.

Investing Activities

Net cash used in investing activities was approximately $0.8 million in the year ended December 31, 2017, and net cash used in investing activities was approximately $80,000 for the year ended December 31, 2016. The net cash used in investing activities was mainly attributable to deposit of investment. The Company also plansentered an equity purchase agreement with the shareholders of Yantai Peng Hao New Materials Technology Co. Ltd. (“Peng Hao”) to raise fundsacquire 100% interest in Peng Hao on June 8, 2017. As of December 31, 2017, the Company has made deposit payment of RMB 5,000,000 (approximately $768,000).

Financing Activities

Net cash provided by financing activities was approximately $7.5 million for the year ended December 31, 2017 and net cash provided by financing activities was approximately $1.0 million for the year ended December 31, 2016. The cash inflow for the year ended December 31, 2017 was mainly resulted from domesticsale of common stocks of approximately $6.3 million, from issuing of our convertible note of approximately $1.0 million and foreign banks and/or financial institutions to increaseapproximately $0.2 million which we borrowed from our related parties for working capital in order to meet capital demands.purpose.

Trends and Uncertainties in Regulation and Government Policy in China

Foreign Exchange Policy Changes

China is considering allowing its currency to be freely exchangeable for other major currencies. This change will result in greater liquidity for revenues generated in Renminbi (“RMB”). We would benefit by having easier access to and greater flexibility with capital generated in and held in the form of RMB. The majority of our assets are located in China and most of our earnings are currently generated in China, and are therefore denominated in RMB. Changes in the RMB-U.S. Dollar exchange rate will impact our reported results of operations and financial condition. In the event that RMB appreciates over the next year as compared to the U.S. Dollar, our earnings will benefit from the appreciation of the RMB. However, if we have to use U.S. Dollars to invest in our Chinese operations, we will suffer from the depreciation of U.S. Dollars against the RMB. On the other hand, if the value of the RMB were to depreciate compared to the U.S. Dollar, then our reported earnings and financial condition would be adversely affected when converted to U.S. Dollars.

On July 21, 2005, the People’s Bank of China announced it would appreciate the RMB, increasing the RMB-U.S. Dollar exchange rate from approximately US$1.00 = RMB 8.28 to approximately US$1.00 = RMB 8.11. So far the trend of such appreciation continues. The exchange rate of U.S. Dollar against RMB on December 31, 20152017 was US$1.00 = RMB 6.4857.6.50979.

Critical Accounting Policies and Estimates

We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under current circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. In addition, you should refer to our accompanying audited balance sheets as of December 31, 2015 and 2014, and the audited statements of comprehensive loss, equity movement and cash flows for the fiscal years ended December 31, 2015 and 2014, and the related notes thereto, for further discussion of our accounting policies.

Fair value of warrants and options

We have adopted ASC Topic 815, “Accounting for Derivative Instruments and Hedging Activities” to recognize warrants relating to loans and warrants issued to consultants as compensation as derivative instruments in our consolidated financial statements.

We also adopted ASC Topic 718, “Share Based Payment” to recognize options granted to employees as derivative instruments in our consolidated financial statements.

We calculate the fair value of the warrants and options using the Black-Scholes Model.

Income Taxes

The Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” 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. The Company establishes a valuation when it is more likely than not that the assets will not be recovered.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Major Customers and Suppliers.Risk

Bio-fertilizer productsCredit Risk

Credit risk is one of the most significant risks for our business.

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and accounts receivable. Cash held at major financial institutions located in the PRC are not insured by the government. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

Accounts receivable are typically unsecured and derived from revenue (or deferred revenue) earned from customers, thereby exposed to credit risk. Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. We manages credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. To minimize credit risk, we normally require certain prepayment from the customers prior to begin production or delivery products. We identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

In measuring the credit risk of our sales to our customers, we mainly reflects the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its likely future development.

Liquidity Risk

During 2015We are also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and 2014,liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions or related parties to obtain short-term funding to meet the liquidity shortage.

Inflation Risk

We are also exposed to inflation risk Inflationary factors, such as increases in raw material and overhead costs, could impair our principal business didoperating results. Although we do not generate anybelieve that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue thus we had no customers.

During 2015 and 2014, we didif the selling prices of our products do not purchase any raw materials; hence we had no suppliers for 2015 and 2014.increase with such increased costs.

Results of OperationsCommitments and Contingencies

Net Sales

Net sales were $nil forSee Note 17 to the years ended December 31, 2015 and 2014, respectively.

Cost of Sales

Cost of sales was $nil for the years ended December 31, 2015 and 2014, respectively.

Gross Profit/Loss

Gross profit for fiscal 2015 and 2014 was $nil, the Company had not been able to recognize any sales revenue during 2015 and 2014.

General and Administrative

General and administrative expenses were $313,589 and $364,843 for the years ended December 31, 2015 and 2014, respectively, a decrease of $51,254 or 14%. General and administrative expenses include professional fees, officers’ compensation, depreciation and amortization, salaries, travel and entertainment, rent, office expense and telephone expense etc. The decrease mainly resulted from the reduction of our operating activities, which led to a decrease in rent, salaries, travel expenses and office expenses.

Research and Development

Research and development expenses increased significantly by $16,273 or 10% to $178,988 for the year ended December 31, 2015, compared to $162,715 for the prior comparable period. Research and development expense mainly consists of the expenses of maintaining Kiwa-CAU R&D Center, which began operation in July 2006 (see “Business-Intellectual Property and Product Lines- Kiwa-CAU R&D Center”Consolidated Financial Statements under Item 18 in Part I). On November 5, 2015, the Company signed a strategic cooperation agreement (the “Agreement”) with China Academy of Agricultural Science (“CAAS”)’s Institute of Agricultural Resources & Regional Planning (“IARRP”) and Institute of Agricultural Economy & Development (“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership with the two institutes and establish an “International Cooperation Platform for Internet and Safe Agricultural Products”. To fund the cooperation platform’s R&D activities, the Company will provide RMB 1 million (approximately $160,000) per year to the Spatial Agriculture Planning Method & Applications Innovation Team that belongs to the Institutes. During the year ended December 31, 2015, the Company accrued $18,425 for research and development expenses related to this agreement.

Penalty Expense

We charged $72,152 and $66,602 of liquidated damages in connection with the 6% Notes and 2% Notes to penalty expenses during the years ended December 31, 2015 and 2014, respectively. The increase of penalty expense was mainly due to accrued and unpaid interest on the 6% Notes.

Interest Expenses

Net interest expense was $112,629 and $113,396 in the fiscal years of 2015 and 2014, respectively, representing a decrease of $767 or 0.7%.

Net Loss

During the fiscal year 2015, net loss was $677,358, comparing with $707,556 for the same period of 2014, representing a decrease of $30,198 or 4.3%. The decrease is mainly because of decrease in general and administrative expenses especially salary and rent, partially offset by increase of research and development expense and penalty expense described above.

Comprehensive Loss

Comprehensive loss decreased by $337,004 or 57.1% from $590,297 for fiscal 2014, as compared to $253,293 for the comparable year of 2015. This decrease in comprehensive loss resulted from increase in foreign currency translation adjustments of $306,806, in addition to the decrease in net loss described above.

Liquidity and Capital Resources

Since inception of our ag-biotech business in 2002, we have relied on the proceeds from the sale of our equity securities and loans from both unrelated and related parties to provide the resources necessary to fund our operations and the execution of our business plan. During fiscal 2015 and 2014, we raised $148,009 and $144,194 in total from related parties. To some extent, these advances improved our short-term liquidity. However, as of December 31, 2015, our current liabilities substantially exceeded current assets by $9,330,130, reflecting a current ratio of 0.0051, whereas current liabilities exceeded current assets by $9,983,397, reflecting a current ratio of 0.0017 as of December 31, 2014. During the years ended December 31, 2015 and 2014, we did not issue any shares resulting from the conversion of principal of the 6% Notes and 2% Notes into our common stock.

As of December 31, 2015 and 2014, we had cash of $721 and $2,963, respectively. The change is outlined as follows:

During the fiscal year of 2015, net cash used in our operating activities was $150,208, compared to $143,255 for the comparable period of 2014. Such cash was mainly used for maintaining operations of a public company and working capital for our bio-fertilizer business.

During the fiscal years of 2015 and 2014, we did not invest in acquiring property, plant and equipment.

During the year ended December 31, 2015, we generated cash inflow of $148,009 from financing activities. During the year ended December 31, 2014, we generated cash inflow of $144,194 from financing activities.

As of December 31, 2015, we had an accumulated deficit of $20,324,812, which was made up in part of a net loss of $677,358 during 2015 and net loss of $707,556 during 2014.

Currently we have insufficient cash resources to accomplish our objectives. We will need to seek additional funding to sustain our operations. In the next year, we intend to raise additional capital through the issuance of debt or equity securities to fund the development of our planned business operations, although there can be no assurance that we will be successful in obtaining this financing. Various factors listed below significantly harm our ability to obtain this financing.

Given the facts that:

To the extent that we are unable to successfully raise capital necessary to fund our future cash requirements on a timely basis and under acceptable terms and conditions, we will not have sufficient cash resources to maintain operations, and may have to curtail operations and consider a formal or informal restructuring or reorganization.

Contractual Obligations

Pursuant to the agreement on joint incorporation of the research and development center between CAU and Kiwa Shandong dated November 14, 2006, Kiwa Shandong agrees to invest RMB 1 million (approximately $160,000) each year to fund research at the R&D Center. The term of this agreement is ten years starting from July 1, 2006. Prof. Qi Wang, who became one of our directors in July 2007, has acted as the Director of Kiwa-CAU R&D Center since July 2006.

According to the Project Agreement with Zoucheng Municipal Government in 2002, we have committed to investing approximately $18 million to $24 million for developing the manufacturing and research facilities in Zoucheng, Shandong Province. As of December 31, 2015, we had invested approximately $1.91 million for the project.

On November 5, 2015, the Company signed a strategic cooperation agreement (the “Agreement”) with China Academy of Agricultural Science (“CAAS”)’s Institute of Agricultural Resources & Regional Planning (“IARRP”) and Institute of Agricultural Economy & Development (“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership with the two institutes and establish an “International Cooperation Platform for Internet and Safe Agricultural Products”. To fund the cooperation platform’s R&D activities, the Company will provide RMB 1 million (approximately $160,000) per year to the Spatial Agriculture Planning Method & Applications Innovation Team that belongs to the Institutes. The term of the Agreement is for three years beginning November 20, 2015. Prof. Yong Chang Wu, the authorized representative of IARRP, CAAS, is also one of the Company’s directors effective since November 20, 2015.

On November 30, 2015, we entered into an acquisition agreement (the “Agreement”) with the shareholders of Caber Holdings LTD, whose Chinese name is Hong Kong Baina Group Co., Ltd, located in Hong Kong (“Baina Hong Kong”), and Oriental Baina Co. Ltd. (hereinafter referred to as “Baina Beijing”), Baina Hong Kong’s wholly-owned subsidiary in Beijing, China. When this acquisition is completed, Kiwa will rename Baina Beijing to Kiwa Baiao Co. Ltd. Kiwa Baiao Co. Ltd will replace Kiwa’s current subsidiary in China - Kiwa Bio-Tech (Shandong) Co., Ltd (“Kiwa Shandong”) - to operate Kiwa’s bio-fertilizer market expansion and become Kiwa’s platform for future acquisitions of new agricultural-related projects in China. In accordance with the terms of the Agreement, Kiwa agreed to pay US$30,000 to the Baina Hong Kong Shareholders for the acquisition of 100% of the equity of Baina Hong Kong. As of December 31, 2015, the Company has paid RMB 220,000 (approximately $34,000) for the acquisition. The acquisition was completed on January 7, 2016. Both Baina Hong Kong and Baina Beijing had no activities before the acquisition date and had no assets and liabilities.

On December 17, 2015, Kiwa Bio-Tech Products Group Corporation (the “Company”) entered into a distribution agreement (the “Agreement”) with Kangtan Gerui (Beijing) Bio-Tech Co., Ltd. (“Gerui”) and formally awarded Gerui a right to sell and distribute the Company’s fertilizer products in 3 major agricultural regions of China’s Hainan Province, Hunan Province and Xinjiang Autonomous Region. The Company’s Research and Development department has been conducting application experiments in Hainan and Hunan Provinces since August 2015, in accordance with the market requirements. The experiment data indicates that the Company’s fertilizer products have fulfill the requirements of reduction of content of heavy metals in soil and improve crop yield. Gerui was founded in Beijing in April 2015 and relies on the sales network of China’s Supply and Marketing Cooperatives system. Currently, the Company and Gerui do not hold any interest in each other; however, a collaboration and integration may take place in the future. The term of the Agreement is for a period of three years commencing December 17, 2015.II.

Off-Balance Sheet Arrangements

At December 31, 2015,2017, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had we engaged in such relationships.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements under Item 8, Part II.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Not required.

ITEM 8. Financial Statements and Supplementary Data

The full text of our audited consolidated financial statements as of December 31, 20152017 and 20142016 begins on page F-1 of this annual report.

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

None.On February 15, 2017, the Board of Directors of Kiwa Bio-Tech Products Group Corporation (“Kiwa” or “Company”) decided to engage DYH & Co. as independent principal accountant and auditor to report on the Company’s financial statements for the fiscal year ended December 31, 2016, including performing the required quarterly reviews.

In conjunction with the new engagement, the Company has dismissed its former accountant, Paritz & Co., P.A., Hackensack, NJ (“Paritz”), as the Company’s principal accountant effective February 22, 2017.

On October 5, 2017, management concluded that the Company’s previously issued consolidated financial statements: (i) for the year ended December 31, 2016 (the “Annual Financial Statement”) included in the Company’s Annual Report on Form 10-K for the year then ended (the “Annual Report”); and (ii) for the three months ended March 31, 2017 and the three and six months ended June 30, 2017 (collectively, the “Quarterly Financial Statements”) included in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017, respectively (the “Quarterly Reports”) should no longer be relied upon. The Company stated at the time that it would file with the Securities and Exchange Commission amendments to the aforementioned Annual Report and Quarterly Reports to revise its Annual Financial Statement and its Quarterly Financial Statements.

On October 9, 2017, Kiwa’s Board of Directors decided to engage Friedman LLP as the Company’s new independent registered public accounting firm to report on the Company’s financial statements for the fiscal year ended December 31, 2017, including performing the required quarterly reviews for the period commencing September 30, 2017. In conjunction with the new engagement, the Company has dismissed DYH & Co., Brea, CA (“DYH”) as the Company’s independent auditors effective October 9, 2017. In connection with the engagement of Friedman LLP, the Company agreed that Friedman LLP would re-audit the Company’s financial statements for the fiscal year ended December 31, 2016, including performing the required quarterly reviews for the period commencing January 1, 2017 (and reviewing the amendments to the previously-filed Quarterly Reports for the periods ended March 31, 2017 and June 30, 2017).

ITEM 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of ourWe are required to maintain disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Annual Report. Our disclosure controls and proceduresthat are designed to ensure that information required to be disclosed in our reports filed under the reports we file or submitSecurities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2017 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ourthe Company’s management, including ourthe Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Based on their evaluation,disclosure. The principal basis for this conclusion is the lack of segregation of duties within our CEOfinancial function and CFO have concluded that, asthe lack of December 31, 2015, our disclosure controls and procedures were ineffective.an operating Audit Committee.

Management(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published consolidated financial statements.reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’scompany’s principal executive and principal financial officers and effected by the Company’scompany’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted accounting principles. Internalin the United States of America and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective internal control over financial reporting can provide only provide reasonable assurance with respect to the financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management has conducted,We carried out an assessment, under the supervision and with the participation of our management, including our CEO and CFO, an assessment, including testing of the effectiveness of the design and operation of our internal controlcontrols over financial reporting, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2015. Management’s2017. In making this assessment, of internal control over financial reporting was conducted usingmanagement used the criteria in Internal Control over Financial Reporting - Guidance for Smaller Public Companies issuedset forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)inInternal Control — Integrated Framework (2013). Based on such evaluation, management identified deficiencies that were determined to be a material weakness.

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 the company’s annual or interim financial statements will not be prevented or detectedassessment and on a timely basis. Because of the material weakness described below, managementthose criteria, our CEO and CFO concluded that our internal control over financial reporting was ineffectivenot effective as of December 31, 2015.2017. The principal basis for this conclusion is (i) failure to engage sufficient resources in regards to our accounting and reporting obligations and (ii) failure to fully document our internal control policies and procedures.

Remediation

The specific material weakness identified byOur management has dedicated resources to correcting the Company’s management ascontrol deficiencies and to ensuring that we take proper steps to improve our internal control over financial reporting in the area of December 31, 2015 is described as follows:financial statement preparation and disclosure.

We have taken a number of remediation actions that we believe will improve the effectiveness of our internal control over financial reporting, including the following:

Remediation Initiative

In addition to the above executed remediation plans, we are planning to hire a full-time CFO to release the CFO duties off Yvonne Wang, our current Acting President, CEO and CFO and Director.

This Annual Reportannual report does not include an attestation report of the Company’sour registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’sour registered public accounting firm pursuant to temporary rules of the SEC that permit the Companyus to provide only the management’s report in this Annual Report.annual report.

(c) Changes in Internal Control over Financial Reporting

There were noWe plan to adopt the new revenue recognition standard in the first quarter of 2018. We plan to enhance our internal controls over financial reporting related to this new adoption to ensure all related accounting policy and disclosures to reflect this change.

Except as disclosed in the aforementioned remediation plans, there have not been any other changes in ourthe Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal yearcurrent quarter ended December 31, 2015 that2017, to have materially affected or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.

ITEM 9B. Other Information

None.

Part III

ITEM 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Set forth below are the names of our directors and executive officers, their ages, their offices with us, if any, their principal occupations or employment for the past five years. The directors listed below will serve until the Company’s next annual meeting of the stockholders:shareholders:

Yvonne Wang wasMs. Wang became our Chairman in November 2015. She served as corporate Secretary from September 2005 until November 20, 2015 and became our Chief Operating Officer and a Director into 2015. Prior to that,2005, she served as an executive assistant and a manager of the Company’s U.S. office between April 2003 and September 2005. She obtained her B.S. degree of Business Administration in July 2001 from University of Phoenix. She is also a California Realtor,

On August 11, 2106 became Company’s acting president, CEO and a certified Notary Public.CFO.

Jimmy Ji Zhoubecame our Chief Executive Officer on July 1, 2015. Mr. Zhou was employed by AXA Advisors LLC (“AXA”) in California as a financial advisor from 2000 to 2007. He became a Certified Estate Planner (CEP) and a Registered Financial Consultant (RFC) with AXA in 2005. From 2007 to 2008, Mr. Zhou was involved in investment banking projects between China and the United States and since 2008, Mr. Zhou has worked as an independent business consultant and as an offshore financial advisor to clients in China. Mr. Zhou graduated from Shanghai International Studies University in China in 1990.

Feng Libecame our Secretary and a Director in 2015. From 2011- 2012, Ms. Li has served as an assistant project manager for SCHSAsia, a boutique business consulting firm specializing in events and project management for overseas company wishing to expand into the Asia Pacific arena. From 2012 until 2014, Ms. Li served as a campaigner for WildAid China Office, a non-profit organization with focus on raising public awareness on wildlife and climate change related issues. Mr. Hu graduated with a bachelor degree in commerce and economics from the University of Toronto in 2011.

Qi Wang became our Vice President - Technical on July 19, 2005 and was elected as one of our directors of the Company on July 18, 2007. Prof. Wang has also acted as Director of Kiwa-CAU R&D Center since July 2006. Prof. Wang served as a Professor and Advisor for Ph.D. students in the Department of Plant Pathology, China Agricultural University (“CAU”) since January 2005. Prior to that, he served as an assistant professor and lecturer of CAU since June 1997. He obtained his master degree and Ph.D. in agricultural science from CAU in July 1994 and July 1997, respectively. Prof. Wang received his bachelor’s degree of science from Inner Mongolia Agricultural University in July 1989. He is a committee member of various scientific institutes in China, including the National Research and Application Center for Increasing-Yield Bacteria, Chinese Society of Plant Pathology, Chinese Association of Animal Science and Veterinary Medicine. Prof. Wang’s unique expertise in the field of agriculture offers significant knowledge and experience to the Board of Directors when making critical operational decisions.

Yong Chang WuLin Song became a directorour CTO and Director of Technology responsible for the Company’s R&D operations on March 2016 and as one of our directors of the Company in 2015.on March 2017. Mr. Song is a senior agronomist at the Institute of Agricultural Resources and Regional Planning, Chinese Academy of Agricultural Sciences. He has 29 years of experience in microbial R&D and technology promotion and has led many national agricultural projects. In 2001, he was responsible for technological achievement transformation and technology promotion of Agricultural Resources and Regional Planning, Chinese Academy of Agricultural Sciences. In 2009, he served in positions foras deputy secretary general of the Doctor of Agriculture, Ministry of Science and rural information, the National Agricultural Science and Technology Park and the National Sustainable Development Experimental Zone, Hainan Technology 110 senior government adviser, Chinese Society of Plant Nutrition and Fertilizer Science.

Xiao Qiang Yu became our Sales and Marketing Director on June 2016 and is responsible for Sustainable Developmentmanaging the overall marketing strategy of sustainable agriculture Professional Committee of the Secretary-General and China Agricultural Research Association. Mr. Wu has undertaken positions in sustainable agriculture and rural development (Sustainable Agriculture and Rural Development, SARD), food security and food safety, farming systems and other expert systems design and development work, research focuses on urban and ruralKiwa, which includes brand expansion, sale targets, strategic planning and rural information technology projects.corporate communications. Mr. WuYu participated in Chinese fertilizer market since 1999. Mr. Yu has presided over 16 items15 years of marketing, management and strategy experience from two major national scientific and technological cooperation, research, support, “Spark Program” topics, won 4 of the provincial awards and provided design for over 20 of the modern agricultural park and regional development planning.fertilizer companies in China.

Family Relationships

There are no family relationships among our directors or executive officers.

Involvement in Certain Legal Proceedings

None of our directors or executive officers has, during the past ten years:

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and certain persons holding more than 10 percent of a registered class of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and certain other shareholders are required by the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the best of the Company’s knowledge, based solely upon a review of the copies of such reports, the Company believes that all Section 16(a) filing requirements applicable to its officers, directors and certain other shareholders were complied with during the fiscal year ended December 31, 2015.2017.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics (the “Code”) that is applicable to all employees, consultants and members of the Board of Directors, including the Chief Executive Officer, Chief Financial Officer and Secretary. This Code embodies our commitment to conduct business in accordance with the highest ethical standards and applicable laws, rules and regulations. We will provide any person a copy of the Code, without charge, upon written request to the Company’s Secretary. Requests should be addressed in writing to Ms. Yvonne Wang; 310 N. Indian Hill Blvd., #702 Claremont,3200 Guasti Road, Ste. 100, California 91711.91761.

Director Nominees Recommended by Stockholders

Board Composition; Audit Committee and Financial Expert

Our Board of Directors is currently composed of fivefour members: Yvonne Wang, Jimmy Ji Zhou, Feng Li, Qi Wang and Yong Chang Wu.Lin Song. All board actions require the approval of a majority of the directors in attendance at a meeting at which a quorum is present. Yong Chang Wu is our only “independent” director as set forth in Rule 4200(a)(15) of the Market Place Rules of the Nasdaq Stock Market, which is the independence standard under which we have chosen to report.

We currently do not have an audit committee. We intend, however, to establish an audit committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. Currently such functions are performed by our Board of Directors.

The Board does not have a “financial expert” as defined by SEC rules implementing Section 407 of the Sarbanes-Oxley Act.

Board meetings and committees; annual meeting attendance.

During fiscal year 2015, theThe Board of Directors either met or took action by unanimous consent ten (10) times during fiscal year 2017. No Committee Meetings were held during fiscal year 2017. The Company did not have meeting. All membersan Annual Meeting of the Board of Directors are required to attend the annual meetings of securities holders.Shareholders in 2017.

ITEM 11. Executive Compensation

We currently have no Compensation Committee. The Board of Directors is currently performing the duties and responsibilities of Compensation Committee. In addition, we have no formal compensation policy. We decide on our executives’ compensation based on average compensation levels of similar companies in the U.S. or China, depending on consideration of many factors such as where the executive works. Our Chief Executive Officer’s compensation is approved by the Board of Directors. Other named executive officers’ compensation are proposed by our Chief Executive Officer and approved by the Board of Directors.

Our Stock Incentive Plan is administered by the Board of Directors. Any amendment to our Stock Incentive Plan requires majority approval of the stockholdersshareholders of the Company.

The Company had no officers or directors whose total compensation during either 20152017 or 20142016 exceeded $100,000.

Currently, the main forms of compensation provided to each of our executive officers are: (1) annual salary; (2) non-equity Incentive Plan; and (3) the granting of incentive stock options subject to approval by our Board of Directors.

Summary Compensation Table

Summary Compensation Table