UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20172019

OR

For the Transition Period from ______ to ______

Commission File Number: 000-33167

KIWA BIO-TECH PRODUCTS GROUP CORPORATION

(Exact name of registrant as specified in its charter)

(909) 456-8828

(Registrant’s telephone number, including area code)

3200 Guasti Road, Suite #100

Ontario, CA 91761

n/a

(Former address)

Securities registered pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

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

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2019, based on a closing price of $0.75 was approximately $10,522,514.

As of March 30, 2018,May 29, 2020, the Company had 16,120,465282,385,206 shares of common stock, $0.001 par value, issued and outstanding.

Documents Incorporated by Reference: None.

TABLE OF CONTENTS

Part I

Special Note Regarding Forward-Looking Statements

On one or more occasions, we may make forward-looking statements in this Annual Report on Form 10-K regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions identify forward-looking statements. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties, including, but not limited to those listed below and those business risks and factors described elsewhere in this report and our other Securities and Exchange Commission filings.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent annual and periodic reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

References herein to “we,” “us,” “our” or “the Company” refer to Kiwa Bio-Tech Products Group Corporation and its wholly-owned and majority-owned subsidiaries unless the context specifically states or implies otherwise.

ITEM 1. Business

The Company

1. Organizational History

We are the result of a share exchange transaction completedThe Company took its present corporate form in March 2004 betweenwhen shareholders of Kiwa Bio-Tech Products Group Ltd. (“Kiwa BVI”), a company originally organized under the shareholderslaws of the British Virgin Islands on June 5, 2002 and Tintic Gold Mining Company (“Tintic”), a corporation originally incorporated in the state of Utah on June 14, 1933 to perform mining operations in Utah, andentered into a share exchange transaction. The share exchange transaction left the shareholders of Kiwa Bio-Tech Products Group Ltd. (“Kiwa BVI”),BVI owning a company originally organized under the laws of the British Virgin Islands on June 5, 2002. The share exchange resulted in a change of controlmajority of Tintic with former Kiwa BVI stockholders owning approximately 89% of Tintic on a fully diluted basis and Kiwa BVI surviving as a wholly-owned subsidiary of Tintic. Subsequent toFor accounting purposes this transaction was treated as an acquisition of Tintic by Kiwa BVI in the share exchange transaction, Tintic changedform of a reverse triangular merger and a recapitalization of Kiwa BVI and its name towholly owned subsidiary, Kiwa Bio-Tech Products Group Corporation.(Shandong) Co., Ltd. (“Kiwa Shandong”). On July 21, 2004, we completed our reincorporation in the State of Delaware. On March 8, 2017, we completed our reincorporation in the State of Nevada.

The Company operates through a series of subsidiaries in the Peoples Republic of China as detailed in the following Organizational Chart. The Company had previously operated its business through its subsidiaries Kiwa Bio-Tech Products (Shandong) Co., Ltd. (“Kiwa Shandong”) and Tianjin Kiwa Feed Co., Ltd. (“Kiwa Tianjin “). Kiwa Tianjin has been dissolved since July, 11, 2012. On February 11, 2017, the Company entered an Equity Transfer Agreement with Dian Shi Cheng Jing (Beijing) Technology Co. (“Transferee”) to transfer all of shareholders’ right, title, interest and liabilities in Kiwa Shandong to the Transferee for RMB 1.00. On April 12, 2017, the government processing of transfer has been completed. Currently, the Companycurrently mainly operates its business through its subsidiaries Kiwa Baiao Bio-Tech (Beijing)(Yangling) Co., Ltd,Ltd. (“Kiwa Yangling”), which incorporated in March 2018, Kiwa Bio-Tech Products (Hebei) Co., Ltd. (“Kiwa Hebei”), which was acquiredincorporated in JanuaryChina in December 2016, and renameThe Institute of Kiwa-Yangling Ecological Agriculture and Environment Research Co., Ltd. (“Kiwa Institute”), which incorporated in March 2018.

On October 12, 2018, the Company got the approval from the Administrative Committee of Yangling Agricultural High-tech Industry Demonstration Zone to obtain land to construct a new manufacturing facility to help meet the growing demand in China for bio-fertilizers. Yangling Free Trade Zone has agreed to offer the Company approximately US$432,975 (RMB 3,000,000) in incentives and provide tax preferences for the first three years of production. The manufacturing facility will specialize in developing and producing Kiwa Bio-Tech’s core microbes, the fundamental components for making high-quality bio-fertilizers. The total facility construction area is approximately 8.77 acres, and will include fermentation and production terminals, agricultural produce sorting facilities and storage, a research and development institute and corresponding ancillary facilities. The construction of the first phase of the manufacturing facility is expected to be completed in 2020 and have a production capacity of 60,000 tons of Kiwa Bio-Tech’s core microbes. The annual production value is expected to be over US$65 million (approximately 462 million RMB).

On October 21, 2019, the Company transferred all of its right, title and interest in Kiwa Bio-Tech Asia Holdings (Shenzhen) Ltd. (Kiwa Asia), Kiwa Baiao Bio-Tech (Beijing) Co., Ltd. from Oriental Baina Co.(“Kiwa Beijing”), Ltd. in June, 2016; Kiwa Bio-Tech Products (Shenzhen) Co., Ltd, which was incorporated in China in November, 2016Ltd. (“Kiwa Shenzhen”), and Kiwa Bio-Tech Products (Hebei)(Shenzhen) Co., Ltd., which was incorporated in December, 2016. In July, 2017, the Company established Kiwa Bio-Tech Asia Holding (Shenzhen) Ltd. (“Kiwa Asia”) to be the direct holding company of Kiwa Beijing, Kiwa Shenzhen and Kiwa Hebei. The Company established Inner Mongolia Jing Nong Investment & Management, Ltd. (“Kiwa Jing Nong”) in August 2017. The Company established Kiwa Bio-Tech Asia Holding (Shenzhen) Ltd., Xian Branch Company, in December 2017.(“Kiwa Xian”), to the Hong Kong Sano Group Co., Ltd. for the HKD 17,000,000 equivalent of US $2,169,862. As Kiwa Asia, Kiwa Shenzhen, Kiwa Beijing, and Kiwa Xian has transferred all of their bio-technological products business to Kiwa Yangling, this restructuring did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Kiwa Asia, Kiwa Shenzhen, Kiwa Beijing, and Kiwa Xian were not reported as discontinued operations under the guidance of Accounting Standards Codification (“ASC”) 205.

2. Overview of Business

We develop, manufacture, distribute and market innovative, cost-effective and environmentally safe bio-technological products for agriculture.agriculture use. Our products are designed to enhance the quality of human life by increasing the value, quality and productivity of crops and decreasing the negative environmental impact of chemicals and other wastes.

Our Products

We have developed three bio-fertilizer products with bacillus species (“bacillus spp”) and/or photosynthetic bacteria as core ingredients. For the year ended December 31, 2017,2019, we are currently generating revenues from two of our threefour bio-fertilizer products: 1) Biological Organic Fertilizer andFertilizer; 2) Compound Microbial Fertilizer. We expect to add one more bio-fertilizer product,Fertilizer; 3) Bio-Water Soluble Fertilizer, to our revenue sources in 2018 and it is expecting to launch sometime in the third quarter of 2018.Fertilizer; 4) Microbial Inoculum Fertilizer.

Some of our products contain ingredients of both photosynthesis and bacillus bacteria. Bacillus spp is a species of bacteria that interacts with plants and promotes biological processes. It is highly effective for promoting plant growth, enhancing yield, improving quality and elevating resistances. Photosynthetic bacteria are a group of green and purple bacteria. Bacterial photosynthesis differs from green plant photosynthesis in that bacterial photosynthesis occurs in an anaerobic environment and does not produce oxygen. Photosynthetic bacteria can enhance the photosynthetic capacity of green plants by increasing the utilization of sunlight, which helps keep the photosynthetic process at a vigorous level, enhances the capacity of plants to transform inorganic materials to organic products, and boosts overall plant health and productivity.

Biological Fertilizer provide beneficial living microorganisms and micronutrition to soil and improve plants absorptivity of main growth ingredients. Proper use could prevent soil-borne, crops disease, improve soil fertility, alleviate agricultural pollution and degrade heavy metal in farmland soil.

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 that we firstly introduced in the first quarter of 2018. 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.

Microbial Inoculum Fertilizer is an environment-friendly biological soil conditioner that made of compound high-silicon, calcium, and mineral raw materials, on the basis of dissolving-phosphorus, dissolving-potassium, and disease-resistant microbial agents. It is rich in highly active microorganisms, which can improve the micro-ecological environment in the soil, transform and reduce heavy metal toxicity, release the plant growth stimulants, promote crop growth, and enhance the stress resistance.

Compound Microbial Fertilizer, Bio-Water Soluble Fertilizer, and Microbial Inoculum Fertilizer generally contain more microorganism and have a 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, Bio-Water Soluble Fertilizer, and Microbial Inoculum Fertilizer generally have a higher average selling price as compared to Biological Organic Fertilizer.

Intellectual Property

Our bacillus bacteria based fertilizers are protected by patents. In 2004, we acquired patent no. ZL 93101635.5 entitled “Highly Effective Composite Bacteria for Enhancing Yield and the Related Methodology for Manufacturing” from China Agricultural University (“CAU”) for the aggregate purchase of $480,411, consisting of $60,411 in cash and 5,000 shares of our common stock, valued at $84.00 per share (aggregate value of $420,000). Our photosynthetic bacteria based fertilizers are also protected by trade secret laws.

The patent acquired from CAU covers six different species of bacillus which have been tested as bio-fertilizers to enhance yield and plant health. The production methods of the six species are also patented. The patent has expired on February 19, 2013.There are no limitations under this agreement on our exclusive use of the patent. Pursuant to our agreement with CAU, the University agreed to provide research and technology support services at no additional cost to us in the event we decide to use the patent to produce commercial products. These research and technology support services include: (1) furnishing faculty or graduate-level researchers to help bacteria culturing, sampling, testing, trial production and production formula adjustment; (2) providing production technology and procedures to turn the products into powder form while keeping live required bacteria in the products; (3) establishing quality standards and quality control systems; (4) providing testing and research support for us to obtain necessary sale permits from the Chinese government; and (5) cooperation in developing derivative products.

On January 5, 2011, the State Intellectual Property Office of the PRC (“Intellectual Property Office”) granted Kiwa two Certificates of Patent of Invention for (1) “A cucumber dedicated composite anti-continuous cropping effect probiotics and their specific strains with related application” with patent number of “ZL 2008 1 0144492.6”; and (2) “Cotton dedicated composite anti-continuous cropping effect probiotics and their special strains with related application” with patent number of “ZL 2008 1 0144491.1” These two patents have been developed by Kiwa-CAU R&D Center. These two patents will expire on August 5, 2028. These two patents can be used to develop specific environment-friendly bio-fertilizer.

We have obtained three fertilizer registration certificates from the Chinese government - two covering our bacillus bacteria fertilizer and one covering our photosynthetic bacteria fertilizer. The five registration certificates are: (1) Biological Organic Fertilizer Registration Certificate issued by the PRC Ministry of Agriculture; (2) Compound Microbial Fertilizer Registration Certificate issued by the PRC Ministry of Agriculture; (3) Compound Microbial Water Soluble Fertilizer Registration Certificate issued by the PRC Ministry of Agriculture. Protected by these three fertilizer registration certificates and five trademarks under the names of “KANGTAN” (Chinese translation name for Kiwa), “ZHIGUANGYOU,” “PUGUANGFU,” “JINWA” and “KANGGUAN,” we have developed three series of bio-fertilizer products with bacillus spp and/or photosynthetic bacteria as core ingredients. Valid period of fertilizer registration certificates is five years and may be extended for another five years upon application from the owner of fertilizer registration certificates. The Company has determined to re-apply the Fertilizer Registration Certificate issued by the PRC Ministry of Agriculture.

Our Customers

For the year ended December 31, 2017,2019, three customers accounted for 46%, 26%31%, 17%and 23% of the Company’s sales.

1. Qingdao Lanhai Hanrui Bio-TechBiotechnology Co., Ltd. (46% of sales)

2. Wofu (Tianjing) Agriculture DevelopmentYangling Shaotao Agricultural Service Co., Ltd. (26%(31% of sales)

3. Deluke Agriculture Bio-TechMingke Biotechnology Development (Shenzhen) Co., Ltd. (17%(23% of sales)

Should we lose any of these large scalelarge-scale customers in the future and are unable to obtain additional customers, our revenues and operation results might be adversely affected.

Our Suppliers

For the year ended December 31, 2017, two suppliers2019, one supplier Shandong Ronghua Bio-Tech Co., Ltd. accounted for 49% and 47%94% of the Company’s total purchases, respectively. One of our supplier is named Weifang Deluke Fertilizer Co., Ltd. (“Weifang Deluke”), which is our subcontractor that purchase raw materials and produce our bio-fertilizer products. Prior to May 2017, all raw materials used to produce our bio-fertilizer were contributed by Weifang Deluke. Starting from May, 2017, we began making raw materials purchase orders from Shenzhen San Kang Life Agriculture Development Ltd. Co. (“Shenzhen San Kang”), who specializes in the supply chain business of agriculture industry. For the year ended December 31, 2017, Weifang Deluke was contributing approximately 49% of total purchases including raw materials and finished goods, and Shenzhen San Kang was contributing approximately 47% of total purchase which only included raw materials for producing our bio-fertilizer. Starting from 2018, Weifang Deluke was expected to contributing approximately 30%-40% raw materials for producing our bio-fertilizer, and Shenzhen San Kang was expected to contributing approximately 60%-70% raw materials for producing our bio-fertilizer.

Our Competition

We compete primarily on the basis of quality, technological innovation and price. Some of our competitors have achieved greater market penetration but with less sophisticated technological innovation than our products as therethey were in the transition period from being the chemical bio-fertilizer producers to the organically bio-fertilizer producers. We believe that we have a better competitive advantage over them as we are the pioneer within our markets. Some of our competitors competed within our markets have lesser financial and other resources than us as they have established their companies a few years behind us. If we are unable to compete successfully in our markets, our relative market share and profits could be reduced.

Our main competitors include China Green Agriculture, Inc., Genliduo Biotechnology Ltd., Shenzhen Baitan Ecotypic Engineering Co. Ltd., Hunan Taigu Biotechnology Co. Ltd. and Shanxi A.K. Quantum Agricultural Technology Corporation.

Kiwa-CAU Research and Development Center

In July 2006, we established a new research center with China Agricultural University (“CAU”) which is known as Kiwa-CAU Bio-Tech Research & Development Center (the “Kiwa-CAU R&D Center”). Pursuant to an agreement between CAU and Kiwa Shandong dated November 14, 2006, Kiwa agreed to contribute RMB 1 million (approximately $160,000) each year to fund research at Kiwa-CAU R&D Center. The term of this agreement was 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. Under the above agreement, the Kiwa-CAU R&D Center is responsible for fulfilling the overall research-and-development functions of Kiwa Shandong, including: (1) development of new technologies and new products (which will be shared by Kiwa and CAU); (2) subsequent perfection of existing product-related technologies; and (3) training quality-control personnel and technicians and technical support for marketing activities.

During fiscal 2014, Kiwa-CAU R&D Center had successfully isolated several strains of endophytic bacillus from plants. A number of strains had been observed to have the capability of boosting crop yield and dispelling chemical pesticide residual from soil. These strains could be used for developing not only new biological preparation but also environmental protection preparation. The Company terminated its cooperation with CAU when the agreement expired on July 1, 2016. All the liabilities owed to Kiwa-CAU R&D Center were assumed by the Transferee of Kiwa Shandong when the Company disposed Kiwa Shandong on Feb 11, 2017.

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 Institute. The term of the Agreement is for three years beginning November 20, 2015. 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. Prof. Yong Chang Wu, the authorized representative of IARRP, CAAS, is also one of the Company’s directors effective since November 20, 2015 until March 13, 2017.

On February 23, 2017,In March 2018, Kiwa Bio-Tech has established a Research Institute of Ecological Agriculture and Environmental Research. Based on cooperation with various Universities including the Company agreedChina Agriculture University, Northwest University, Northwest A&F University, Harbin Institute of Technology and Tsinghua University, we believe that it can secure a leading position in the KETS technology in the next thirty years. In comparison to our existing technology, Ecology Technological Sustainability (“KETS”) technology is comprised of microorganisms with a strategic relationship with ETS (Tianjin) Biological Science and Technology Development Co., Ltd. (“ETS”).larger scale of micro-flora. The partnership will includemicro-flora could significantly increase the deployment and strategic use of ETS biotechnology to produce of bio-fertilizers for usebeneficial microorganism in both China and internationally. Kiwa and ETS, together with the certain Chinese government departments, will work together to enhance China’s microbial fertilizer industry standards and China’s food safety industry chain standards. The parties will work together on the development of microbial technology and products in agriculture, environmental protection, soil management and other fields. Relying on the Chinese Academy of Sciences, ETS Environmental and Agricultural Microbial Technology Research Center and biotechnology project research results, Kiwa has introduced the ETS core technology to complete bio-fertilizer upgrading, transformation and to develop new product lines. In order to meet the growing global consumer demand to increase food supply and develop sustainable farming we are applying sustainable use of biotechnology and the use of biotechnology products to replace chemical products, which will strengthen environmental protection and promote international cooperation. As a result of strict management of many agricultural chemicals, such chemicals will continue to be abandoned, resulting is a growing demand for bio-fertilizers. It has been widely accepted that the application of ETS biotechnology facilitates agricultural sustainability and helps to protect the soil and improve grain output. The technology focuses on keeping soil healthy by restoring healthy microbes that are naturally present in healthy soils. Asenhances the technology gains worldwide recognition, it is imperative to popularize bio-fertilizer in developing countries to fulfill the needs of growing populations and promote environmentally friendly agriculture. Through the cooperation of Kiwa and ETS, the parties aim to enhance the usageyield of the bio-fertilizers in China.plant crops and prevents soil ecological problems. The cooperationnewly upgraded technology will bring technological transformation and support for Kiwa to improve its existing manufacturing techniques. Kiwa and ETS will also collaborate to establish a comprehensive platform for producing, supplying, and marketing in China. Ultimately, Kiwa would look to introduce these productsbe applied to the international market, including the United States.main crop planting areas and presently-polluted arable areas for soil restoration.

Other

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. As a result of this Agreement, Kiwa renamed Baina Beijing to Kiwa Baiao Bio-Tech (Beijing) Co., Ltd., which replaced 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 approximately HKD 1.00 to the Baina Hong Kong Shareholders, a group of unrelated third parties, for the acquisition of 100% of the equity of Baina Hong Kong. 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. The purpose of this acquisition was to acquire Baina Hong Kong’s corporation registration in Hong Kong and in China.

Thereafter, Baina Beijing formed four new subsidiaries—Kiwa Bio-Tech (Shenzhen) Co., Ltd (Registered in Shenzhen on November 2016); Kangdu Bio-Tech Hebei Co., Ltd. (Registered in Hebei on December 2016) , Kiwa Bio-Tech Asia Holding (Shenzhen) Ltd. (Registered in Shenzhen on July, 2017) and Inner Mongolia Jing Nong Investment & Management, Ltd. (Registered in Shenzhen on July, 2017).

On December 17, 2015, we 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— 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 fulfilled the requirements of reduction of content of heavy metals in soil and improved 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. In September 2016, Kiwa Baiao Bio-Tech (Beijing) Co., Ltd obtained a fertilizer sales permit from the Chinese government and began to sale the products directly to customers in those 3 major agricultural regions. In September 2016, Kiwa Baiao Bio-Tech (Beijing) Co., Ltd obtained a fertilizer sales permit from the Chinese government and began to sale the products directly to customers in those 3 major agricultural regions.

On February 27, 2017, the Company signed a strategic cooperation agreement with the Beijing Zhongpin Agricultural Science and Technology Development Center (“Zhongpin Center”). Zhongpin Center is the Chinese Agricultural Science and Technology Innovation and Development Committee’s executive implementation agency (referred to as the Agricultural Science and Technology Commission). The Agricultural Science and Technology Commission is set up by the Chinese Central Government for the construction of the National Ecological Security Agriculture Industrial Chain standardization system. This includes the establishment of National Ecology Safe Agricultural Industrial Parks to build China’s Ecological Security and Agricultural Industrial in an orderly business environment, including completion of the National Soil Remediation Program and governance of the various government functions of the institutions. Through the guidance and support by the Zhongpin Center, Kiwa will participate and be involved in China’s National Soil Remediation Program and construction of the National Ecological Security Agriculture Industrial Chain Standardization System’s operation and process.

On April 2, 2018, the company had terminated its cooperation agreement with ETS Biological Science and Technology Development Co., Ltd. (“ETS”) and, in its place, has developed “Ecology Technological Sustainability” (“KETS”) as its core technology to upgrade its microbial fertilizer products. In February 2017, the Company had signed a strategic cooperation agreement with ETS and planned to build new product categories based on the cooperative research results. Following the research, the two parties did not reach a further agreement and determined to terminate the partnership. As a result, the Company switched its focus to the KETS technology to fulfill its needs in connection with fertilizer production. As a part of this process, Kiwa Bio-Tech has established a Research Institute of Ecological Agriculture and Environmental Research. Based on cooperation with various Universities including the China Agriculture University, Northwest University, Northwest A&F University, Harbin Institute of Technology and Tsinghua University, the Company believes that it can secure a leading position in the KETS technology in the next thirty years. In comparison to the Company’s existing technology, KETS technology is comprised of microorganisms with a larger scale of micro-flora. The micro-flora could significantly increase the beneficial bacteria in the soil that enhances the yield of the plant crops and prevents soil ecological problems. The newly upgraded technology will be applied to the main crop planting areas and presently-polluted arable areas for soil restoration.

Employees

As of December 31, 2017,2019, we employed 8216 full-time employees. The following table sets forth the number of our full-time employees by function as of December 31, 2017.2019.

Employees and their Functions

As required by applicable PRC law, we have entered into employment contracts with all our officers, managers and employees. We believe that we maintain a satisfactory working relationship with our employees and we have not experienced any significant labor disputes or any difficulty in recruiting staff.

In addition, we are required by PRC law to cover employees in China with various types of social insurance and believe that we are in material compliance with the relevant laws.

Insurance

We believe our insurance coverage is customary and standard for companies of comparable size in comparable industries in China.

ITEM 1A.Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

In June 2002, Kiwa Shandong entered into an agreement with Zoucheng Municipal Government granting us the use of at least 15.7 acres in Shandong Province, China at no cost for 10 years to construct a manufacturing facility. Under the agreement, we have the option to pay a fee of approximately RMB 480,000 (approximately $78,155) per acre for the land use right at the expiration of the 10-year period. In the same agreement, we have also committed to invest approximately $18 million to $24 million for developing the manufacturing and research facilities in Zoucheng, Shandong Province. On February 11, 2017April 3, 2019, Kiwa Bio-Tech Products (Shandong) entered an Equity Transfer Agreement with Dian Shi Cheng Jing (Beijing) Technology Co. (“Transferee”) to transfer all of shareholders’ right, title, interest and liabilities in Kiwa Shandong to the Transferee for RMB $1.00. The completion of transfer was completed on April 12, 2017.

(a) On March 1, 2017, Kiwa Bio-Tech (Shenzhen)(Yangling) Co., Ltd, a newly established subsidiaryLtd. entered an office lease agreement with one-yearthree-year term. Monthly lease payment is approximately RMB 29,00014,000 or approximately of USD $4,320. This lease was terminated on August 31, 2017.

(b) On June 20, 2017, Kiwa Bio-Tech (Shenzhen) Co., Ltd, a newly established subsidiary entered an office lease agreement with two-year term. Monthly lease payment$2,000. The total useable space is RMB 117,221 or approximately of USD $17,213 for the first year and RMB 124,254 or approximately of USD $18,245 for the second year. And the previous lease agreement terminated automatically since the landlord is the same one.685 square meters.

(c) On May 5, 2017, Kiwa Bio-Tech Products Group Corporation entered an office lease agreement with 13 months term. Monthly lease payment totaled USD $781.15.

(d) On July 1, 2017, Kiwa Bio-Tech Products Group Corporation entered an office lease agreement with one-year term. Monthly lease payment totaled USD $1,087.

ITEM 3. Legal Proceedings

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

Part II

ITEM 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities

Market Information

The Company’s common stock has been quoted under the symbol “KWBT” since March 30, 2004. Our shares are currently traded on the OTCQB.

The following table sets forth the high and low bid quotations per share of our common stock as reported on the OTCQB for the periods indicated. The high and low bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. All prices are adjusted to reflect the Company’s one for 200 reverse split which went effective January 28, 2016.

Holders

As of December 31, 2017,2019, there were approximately 495500 shareholders of record of our common shares.

Dividend Policy

We have not paid any dividends on our common shares since our inception and do not anticipate that dividends will be paid at any time in the immediate future.

Equity Compensation Plan Information

The information required by Item 5 regarding securities authorized for issuance under equity compensation plans is included in Item 12 of this report.

Recent Sales of Unregistered Securities

The following is a list of securitiesshares of Company Common Stock issued for cash, or converted withthe conversion of convertible debentures or as stock compensation to consultants during the period from January 1, 20172019 through March 30, 2018,May 29, 2020, which were not registered under the Securities Act:

There were no other sales of unregistered securities not already reported on the Company’s quarterly filings on Form 10-Q or on a Current Report on Form 8-K.

ITEM 6. Selected Financial Data

Not required.

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

This Annual Report on Form 10-K for the fiscal year ended December 31, 20172019 contains “forward-looking” statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements that include the words “believes,” “expects,” “anticipates,” or similar expressions. These forward-looking statements include, among others, statements concerning our expectations regarding our working capital requirements, financing requirements, business, growth prospects, competition and results of operations, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking statements in this Annual Report on Form 10-K for the fiscal year ended December 31, 20172019 involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements contained herein.

Overview

The Company took its present corporate form in March 2004 when shareholders of Kiwa Bio-Tech Products Group Ltd. (“Kiwa BVI”), a company originally organized under the laws of the British Virgin Islands on June 5, 2002 and Tintic Gold Mining Company (“Tintic”), a corporation originally incorporated in the state of Utah on June 14, 1933 to perform mining operations in Utah, entered into a share exchange transaction. The share exchange transaction left the shareholders of Kiwa BVI owning a majority of Tintic and Kiwa BVI a wholly-owned subsidiary of Tintic. For accounting purposes this transaction was treated as an acquisition of Tintic by Kiwa BVI in the form of a reverse triangular merger and a recapitalization of Kiwa BVI and its wholly owned subsidiary, Kiwa Bio-Tech Products (Shandong) Co., Ltd. (“Kiwa Shandong”). On July 21, 2004, we completed our reincorporation in the State of Delaware. On March 8, 2017, we completed our reincorporation in the State of Nevada.

On November 30, 2015, we entered into an acquisition agreement (the “Agreement”) withThe Company develops, manufactures, distributes and markets innovative, cost-effective and environmentally safe bio-technological products for agricultural use. Our products are designed to enhance the shareholdersquality of Caber Holdings LTD, whose Chinese name is Hong Kong Baina Group Co., Ltd, located in Hong Kong (“Baina Hong Kong”),human life by increasing the value, quality and Oriental Baina Co. Ltd. (hereinafter referred to as “Baina Beijing”), Baina Hong Kong’s wholly-owned subsidiary in Beijing, China. Kiwa will rename Baina Beijing to Kiwa Baiao Co. Ltd. Kiwa Baiao Co. Ltd will replace Kiwa’s current subsidiary in China -productivity of crops and decreasing the negative environmental impact of chemicals and other wastes.

The Company currently mainly operates its business through 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 approximately $34,000 (RMB 220,000) to the Baina Hong Kong Shareholders, a group of unrelated third parties, for the acquisition of 100% of the equity of Baina Hong Kong. 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. The purpose of this acquisition was to acquire Baina Hong Kong’s corporation registration in Hong Kong and in China.

We previously established a subsidiary in China, Kiwa Shandong in 2002, a wholly-owned subsidiary, engaging in the bio-fertilizer business. Formerly, our subsidiary Tianjin Kiwa Feed(Yangling) Co., Ltd. (“Kiwa Tianjin”Yangling”), which incorporated in March 2018, Kiwa Bio-Tech Products (Hebei) Co., Ltd. (“Kiwa Hebei”), which was engagedincorporated in the bio-enhanced feed business. At the endChina in December 2016, and The Institute of 2009, Kiwa-Yangling Ecological Agriculture and Environment Research Co., Ltd. (“Kiwa Tianjin could no longer use its assets including machinery and inventoryInstitute”), which incorporated in the normal course of operations. Kiwa Tianjin has been dissolved since July 11, 2012. March 2018.

On February 11, 2017,October 21, 2019, the Company entered an Equity Transfer Agreement with Dian Shi Cheng Jing (Beijing) Technology Co. (“Transferee”) to transfertransferred all of shareholders’its right, title interest and liabilitiesinterest in Kiwa ShandongBio-Tech Asia Holdings (Shenzhen) Ltd. (Kiwa Asia), Kiwa Baiao Bio-Tech (Beijing) Co., Ltd. (“Kiwa Beijing”), Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. (“Kiwa Shenzhen”), and Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. Xian Branch, (“Kiwa Xian”), to the TransfereeHong Kong Sano Group Co., Ltd. for RMB1.00. On April 12, 2017,a consideration of HKD 17,000,000 equivalent of US $2,169,862. Kiwa Asia, Kiwa Shenzhen, Kiwa Beijing, and Kiwa Xian has transferred all of their bio-technological products business to Kiwa Yangling, the government processingCompany conduct the same business of transfer has been completed.bio-technological products before and after the disposal of these entities.. These disposed subsidiaries did not operate or generate any revenue in 2019. This restructuring did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Kiwa Asia, Kiwa Shenzhen, Kiwa Beijing, and Kiwa Xian were not reported as discontinued operations under the guidance of Accounting Standards Codification (“ASC”) 205. The disposal transactions resulted in loss of approximately $3.5 million.

Principal Factors Affecting Our Financial Performance

We believe that the following factors that wouldcould affect our financial performance:

Results of Operations for the YearYears ended December 31, 20172019 and December 31, 20162018

The following table summarizes the results of our operations for the years ended December 31, 20172019 and December 31, 2016,2018, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

(All amounts, other than percentages, in thousands of U.S. dollars)

Revenue

Revenue increased by approximately $7.6$9.4 million or 80%31%, to approximately $17.3$40.1 million in the year ended December 31, 20172019 from approximately $9.6$30.7 million in the year ended December 31, 2016. In August 2016, Kiwa Baiao Bio-Tech (Beijing) Co., Ltd obtained a fertilizer2018. More sales permit from the Chinese government and began to sell the products directly to customersare achieved for most of our four product lines in Northern areas of China. Duequantities are due to the good quality of our products we have gainedand more reputation gained in different regions of the agricultural industryPRC, such as Hainan Province, Guangdong Province 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 expansionShaanxi Province upon establishment of our business was to gain market sharesales channel 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 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. 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 is 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. 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 same period in 2016. different regions.

We currently realized revenue in twofour major product categories of Biological Organic Fertilizer, and Compound 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 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.and Microbial Inoculum Fertilizer. Our revenues from our major product categoriescategory are summarized as follows:

Revenue fromAverage selling prices of Biological Organic Fertilizers, Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer decreased by approximately $0.4 million$8.21 or 4.2%5%, to approximately $9.2 million$14.03 or 4% and $16.15 or 2%, respectively in the year ended December 31, 2017 from approximately $9.6 million in2019 as compared with the year ended December 31, 2016. Thesame period of 2018. This decrease of revenue from Biological Organic Fertilizeris mainly due to the combinationfluctuation of decrease of quantity sold and decrease in average selling priceexchange rate as Chinese Yuan depreciated against U.S. dollars by approximately 4% 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 compared2019 compares to the year ended December 31, 2016 was mainly due to the appreciation of Renminbi against U.S. Dollar of approximately 1.7%. Average selling prices for both periods remained stable in Renminbi.2018.

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, and Microbial Inoculum Fertilizer will continue to grow in a higher rate than that from Biological Organic Fertilizer. Our Compound Microbial Fertilizer, and Bio-Water Soluble Fertilizer, and Microbial Inoculum Fertilizer generally have a higher effectiveness on the productivity 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 2018.2020. Meanwhile, we expect to continue to 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 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 sold 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, decreasedCompound Microbial Fertilizer and Bio-Water Soluble Fertilizer increased by approximately $0.8 million, $6.6 million and $1.0 million or 13.9%7%, 62% and 79% to approximately $6.2$11.2 million, $17.3 million and $2.3 million in the year ended December 31, 20172019 from approximately $7.2$10.5 million, $10.6 million and $1.3 million in the year ended December 31, 2016.2018. The increase is mainly due to the total quantity of products sold increased due to the good quality of our products and more reputation gained in the agricultural industry, which offset by the fluctuation of exchange rate as Chinese Yuan depreciated against U.S. dollars by approximately 4.4% during the year ended December 31, 2019 compared to the year ended December 31, 2018.

Average unit cost of Biological Organic Fertilizers decreased by $2.65 or 2% in the year ended December 31, 2019 as compared with the same period of 2018. The decrease is mainly due to the combinationfluctuation of decreaseexchange rate changes as Chinese Yuan depreciated against U.S. dollars by approximately 4.4% and offset by a slightly increase in quantity sold andoverall purchase price of the decreaseraw material. Average unit cost of averageCompound Microbial Fertilizer increased by $2.52 or 1% is mainly due to increase in overall purchase price of raw material. Average unit production cost. The decreasecost of $15.76Bio-Water Soluble Fertilizer decreased by $15.14 or 11.7% of average unit production cost3% is mainly due to the combinationRMB depreciation against USD of approximately 4.4% along with a 2.6% decrease of price for raw materials (mainly includes nitrogen, phosphorus and potassium) useddue to we outsourced manufacturing to a third party vendor in the year ended December 31, 2017 and2019 compares to the appreciation of Renminbi against U.S. Dollar of approximately 1.7%.year ended December 31, 2018.

CostWe did not sell any Microbial Inoculum Fertilizer during the year ended December 31, 2019. The company is adjusting the formula of soldMicrobial Inoculum Fertilizer and shipped from Compound Microbial Fertilizer increased by approximately $5.7 million or 100.0%. The increase was in line withplans to re-make the increasepackaging and launch it in the selling amount of Compound Microbial Fertilizer.market in August, 2020. 

Gross Profit

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

Gross profit percentage for Biological Organic Fertilizer increaseddecreased from 25.2%32% for the year ended December 31, 20162018 to 32.8%30% for the year ended December 31, 20172019 mainly due to the decrease in raw materialsaverage unit cost less than the decrease in average selling price in our unit production cost of our products for the reason as discussed above.

Gross profit percentage for Compound Microbial decreased from 21% for the year ended December 31, 2018 to 17% for the year ended December 31, 2019 mainly due to the increase in average unit cost was less than the decrease in average selling price of our products as discussed above.

Gross profit percentage for Bio-Water Soluble Fertilizer remains unchanged as 31% for year ended December 31, 2019 and 2018, respectively.

Gross profit percentage for Microbial Inoculum Fertilizer was 7% for the year ended December 31, 2018. We did not sell any Microbial Inoculum Fertilizer during the year ended December 31, 2019.

Provision for Deferred Cost of Goods Sold

Provision on deferred cost of goods sold was $2.4 million for the year ended December 31, 2019, increased by approximately $2.4 million or 100% from nil for the year ended December 31, 2018. The increase in provision on deferred cost of goods sold is made based on historical collection experience on related accounts receivable and realizability of deferred revenue. Because part of the shipments to several clients, for which revenue have already been deferred, have been assessed to be uncollectible, $2.4 million of provision for deferred cost of goods sold were made during the year ended December 31, 2019.

Research and Development Expenses

Research and development expenses was approximately $148,000 (RMB 1,000,000)$0 for the year ended December 31, 2017, keeping the same as the prior comparable period of2019, decreased by approximately $149,000$123,000 or 100% from approximately $123,000 (RMB 1,000,000)801,630) for the year ended December 31, 2016.2018. 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 expirehas expired 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) forWe did not have such expenses during 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 contribute the same R&D expense in quarterly installments in 2018 until the date of the Agreement expires on November 19, 2018.2019.

Selling ExpenseExpenses

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. Selling expenses for the years ended December 31, 2019 and 2018 were approximately $200,000 and $617,000, respectively. The decrease in selling expenses is because we were in the position of integrating and closing our offices from different locations and consolidated our bio-technological products business to Kiwa Yangling. The decrease in selling expenses is mainly due to thea decrease of approximately $273,000 of sales personnel salary, a decrease of office, insurance, travel, entertainment expenses and other selling expenses of approximately $118,000, and a decrease of freight out and shipping 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 andas our customers are willingrequired to pay for the freight out expenses on their own. The increaseits own shipping costs in salary expenses is mainly because we have started hiring sales managers in the fourth quarter2019 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 theapproximately $50,000, offset by an increase of promotionalapproximately $23,000 advertising expenses.

General and AdministrationAdministrative Expenses

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&A expenses include professional fees, officers’ compensation, depreciation and amortization, insurance, salaries, employee benefits, travel, auto expense, meal and entertainment, rent, office expense and telephone expense and the like. The increase in generalother miscellaneous G&A expenses. General and administrative (“G&A”) expenses is mainly attributed to business expansion and the establishment of Kiwa Shenzhendecreased by approximately $0.5 million or 11% from approximately $4.9 million 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, 20162018 to approximately $0.4$4.4 million in the same period in 2017.2019. The increasedecrease in G&A expenses is because we were in the position of integrating and closing our offices from different location and consolidated our bio-technological products business to Kiwa Yangling. The decrease in G&A expenses is mainly attributabledue to a decrease of approximately $783,000 salaries expense and employee benefits, a decrease of approximately $258,000 rent expense and related utilities and management fees, and a decrease of approximately $154,000 consulting and professional fees. This decrease is offset by an increase of approximately $410,000 of meals and entertainment, travel, office expense, and other G&A expenses, and an increase of approximately $235,000 bad debt expenses according to the accrued professional fees which were unclaimedcompany policy of allowance for more than ten years and we have evaluated and reached the decision to discharge these liabilities.doubtful accounts.

Loss on Sales of Subsidiaries

We were in the position of integrating and closing our offices from different locations and consolidated our bio-technological products business to Kiwa Yangling as we deemed restructuring our offices into our headquarters is the best course for the Company. On October 21, 2019, we transferred all of our right, title and interest in Kiwa Bio-Tech Asia Holdings (Shenzhen) Ltd. (Kiwa Asia), Kiwa Baiao Bio-Tech (Beijing) Co., Ltd. (“Kiwa Beijing”), Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. (“Kiwa Shenzhen”), and Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. Xian Branch Company, (“Kiwa Xian”), to the Hong Kong Sano Group Co., Ltd. for the HKD 17,000,000 equivalent of US $2,169,862, which resulted in a loss of $3,527,254.

Interest ExpensesExpense

Net interest expense was $ 524,333$3,943,751 and $ 190,552$634,874 for the yearyears ended December 31, 20172019 and 2016,2018, respectively, representing an increase of $333,781$3,308,877 or 175%521%. Interest expense included accrued interest on convertible note and other note payable, and the amortization of the convertible note discount, and the issuance cost of the convertible note for the year ended December 31, 20172019 and 2016.2018. The increase in interest expenses is mainly attributed to newly issuance of two 15%the six 12% convertible notes forissued during the year ended December 31, 2017.2019 where we did not have these in the year ended December 31, 2018.

Income (Loss) from discontinued operations, net ofProvision for income taxes

Income from discontinued operations, net ofProvision for income taxes was $4,495,333 for the year ended December 31, 2017$1,660,081 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$1,906,222 for the years ended December 31, 20172019 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 all2018, respectively, representing a decrease of its right, title and interest$246,141 or 13%. Our profitable PRC subsidiaries incurred more of taxable income in Kiwa Bio-Tech Products (Shandong) Co., Ltd. (“Shandong”)2019 as compared to the Transferee for RMB 1.00. The government processingsame period in 2018 offset by the deferred income tax benefits resulted from the temporary difference of the transaction was completed on April 12, 2017. Therefore, it’s resulted in the increase of income from discontinued operations, net of taxes.accrued expenses between book basis and tax basis.

Net Income

During the fiscal year 2017,2019, net loss was $6,635,296, compared with a net income was $5,309,036, compared with $891,030 forof $343,821 or the same period of 2016,2018, representing an increasea decrease of $4,418,006$6,979,117 or 496%2,030%. 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 2016,2019, and the consolidated statements of operations and comprehensive income, (loss), changes in shareholders’ equity (deficiency) and cash flows for the fiscal yearsyear ended December 31, 2017 and 2016,2019, and the related notes thereto, for further discussion of our accounting policies.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (FASB ASC Topic 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018. We did not result in an adjustment to the retained earnings upon adoption of this new guidance as the Company’s revenue was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations.

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized at a point in time.

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

The Company applies paragraph 605-10-S99-1accounts for a contract with a customer when the contract is committed in writing, the rights of the FASB Accounting Standards Codification for revenue recognition.parties, including payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable.

The Company continues to derive its revenues from sales contracts with its customers with revenues being recognized upon delivery of products. Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or volume incentive. The Company recognizes revenue when it is realized or realizabletitle and earned. The Company considers revenue realized or realizable and earned when allownership of the following criteriagoods are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been renderedtransferred upon shipment to the customer (iii)by the sales price is fixed or determinable,Company to consider control of goods are transferred to its customer and (iv) collectability of payment is reasonably assured. The Company’s revenues are recognized at a point in time after all performance obligations are satisfied.

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 creditworthiness 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 thoseCollectability is a necessary condition for the contract to be accounted for to meet the criteria of the first step “identifying the contract with the customer” under the new revenue guidance in ASC 606. As a result, the sales contracts thatwith these customers are not considered a contract under ASC 606, thus the shipments under these contracts are not recognized as revenue until all criteria for “identifying the contract with the customer” and revenue recognition are met using the five-step model.

Deferred Revenue and Deferred Cost of Goods Sold

Deferred revenue and deferred cost of goods sold result from transactions where the Company has shipped its products but the payment is contingent on collections of payments from the downstream customers, the Company considers theproduct for which all revenue recognition criteria under the five-step model have not yet been met. Though these contracts are not metconsidered a contract under ASC 606, they are legally enforceable, and the Company has an unconditional and immediate right to payment after the Company has shipped products, therefore, defers the Company recognizes a receivable and a corresponding deferred revenue andupon shipment. Deferred cost of goods sold until payments are collected. Theserelated to deferred product revenues includes direct inventory costs. Once all revenue recognition criteria under the five-step model have been met, the deferred revenues and associated cost of goods sold are classified in the captioned “Deferred revenue” and “Deferredrecognized. The Company’s provision for deferred cost of goods sold” in the accompanying consolidated balance sheets. For other customers whose repaymentsold is within normal business coursemade based on historical collection experience on such related accounts receivable and not highly dependent on the successionrealizability 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.deferred revenue.

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 related parties have been utilized to finance our working capital requirements. As of December 31, 2017,2019, our working capital was approximately $10.2$8.6 million, andhowever, we had only cash of approximately $1.1 million,$8,000, with remaining current assets mainly composed of advance to suppliers.suppliers, notes receivable, other receivables, and prepaid expenses. In addition, we sold Convertible Promissory Notes (“Notes”) in the aggregate principal amount of $1,901,250 for the year ended 2019.

Although management believes that we can realize our current assets in the normal course of business, our ability to repay our current obligations will depend on the future realization of our current assets and 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 itsour available sources of funds for operations through the following sources:

Based on the above considerations, our management is of the opinion that weit does not 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 assuranceTherefore, our consolidated financial statements have been prepared assuming that managementwe will be successful in their plans. There arecontinue as a numbergoing concern, which contemplates the realization of factors that could potentially arise that could undermine our plans, such as changesassets and the satisfaction of liabilities in the demandnormal course of business. If the Company can’t raise enough funds, it might be unable to fund our future cash requirement on a timely basis and under acceptable terms and conditions and may not have sufficient liquidity to maintain operations and repay our liabilities for the Company’s products, PRC government policy, economic conditions,next twelve months. As a result, we may be unable to implement our current plans for expansion, repay our debt obligations or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition and competitive pricing in the Agricultural industry.results of operations.

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

Operating Activities

Net cash usedprovided by operating activities was approximately $5.6$0.2 million for the year ended December 31, 2017,2019, compared to cash used in operating activities of approximately $0.9$1.6 million for the same period in 2016. The increase in net2018. Net cash used inprovided by operating activities for the year ended December 31, 2019 was primarily attributable to 1) a decrease of approximately $3.4 million accounts receivable, 2) approximately $3.5 million loss on selling those subsidiaries, 3) approximately $2.7 million provision for deferred cost of goods sold and bad debt expenses, 4) approximately $2.1 million accrued interest, penalties and financing costs of convertible note, 5) an increase of approximately $10.3$2.1 million in tax payables, 6) a decrease of approximately $1.6 million of advance to suppliers as we need to secure current market priceinventories 7) approximately $1.9 million stock compensation for services, 8) a decrease of raw materials purchases as we are anticipating the raw materials price is on the rise in the near future; 2)approximately $1.2 million of prepaid expenses, 9) an increase of approximately $2.7$0.3 million in other payables and accruals, 10) an increase of inventory as we need to stock up our inventory for the anticipated salesapproximately $0.5 million in 2018salary payable, and 11) an increase of approximately $0.5 million in advance from customers. This increase in cash was offset by 3)1) a net income from our continuing operationsloss of approximately $0.8$6.6 million, and non-cash reconciliation of operating items2) an increase in approximately $7.2 note receivables as promissory notes was received, 3) an increase of approximately $0.9$3.4 million deferred revenue, 4) decrease of approximately of $1.1 million accounts receivables as we have improved our collection effort during 2017 5)a decrease of approximately $1.5 million due from related parties – non trade as our related parties has repaid us during 2017 6)accounts payables, and 5) an increase of approximately $0.6$0.4 million of accounts payable as we incurred more payables in our operations 7)deferred tax assets, and 6) an increase of approximately $0.9$0.3 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.to suppliers.

Investing Activities

Net cash used in investing activities was approximately $0.8$2.1 million in the year ended December 31, 2017, and net2019, which was mainly attributable to loan to third parties as they were our important strategy partners. Net cash used in investing activities was approximately $80,000$53,000 for the year ended December 31, 2016. The net cash used in investing activities was mainly attributable to deposit of investment. The Company entered an equity purchase agreement with the shareholders of Yantai Peng Hao New Materials Technology Co. Ltd. (“Peng Hao”) to acquire 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).2018.

Financing Activities

Net cash provided by financing activities was approximately $7.5$1.5 million for the year ended December 31, 20172019 and net cash provided by financing activities was approximately $1.0$0.6 million for the year ended December 31, 2016.2018. The cash inflow for the year ended December 31, 20172019 was mainly resulteddue to an approximately $1.6 million proceed from six new issued convertible notes, and an approximately 0.2 million proceeds from sale of common stocks ofstocks; offset by an approximately $6.3$0.3 million from issuing of our convertible note of approximately $1.0 million and approximately $0.2 million which we borrowed from ournet payment to related parties for working capital purpose.parties.

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,From the People’s Bankend of China announced it would appreciate2018 through December 31, 2019, the value of the RMB increasingdepreciated by approximately 1.6% against the RMB-U.S. DollarU.S. Dollar. With the development of the foreign exchange market and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further changes to the exchange rate from approximately US$1.00 =system and there is no guarantee that the RMB 8.28will not appreciate or depreciate significantly in value against the U.S. Dollar in the future. It is difficult to approximately US$1.00 =predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB 8.11. So farand the trend of such appreciation continues.U.S. Dollar in the future. The exchange rate of U.S. Dollar against RMB on December 31, 20172019 was US$1.00 = RMB 6.50979.6.9860.

Risk

Credit 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 managesmanage 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 identifiesidentify 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 reflectsreflect 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

We are also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and 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 operating results. Although we do not believe 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 if the selling prices of our products do not increase with such increased costs.

Coronavirus (COVID-19) Pandemic Risk

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of this time, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. Our operations are principally located in China, which has taken action to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. If a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

Commitments and Contingencies

See Note 1722 to the Consolidated Financial Statements under Item 8 in Part II.

Off-Balance Sheet Arrangements

At December 31, 2017,2019, 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 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, 20172019 and 20162018 begins on page F-1 of this annual report.

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

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.None.

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

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities 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, 20172019 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 the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The principal basis for this conclusion is the lack of segregation of duties within our financial function and the lack of an operating Audit Committee.

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

Our management is responsible for establishing and maintaining adequate internal control over financial 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’s principal executive and principal financial officers and effected by the company’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 in the United States of America and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting 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 can provide only reasonable assurance with respect to 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.

We carried out an assessment, under the supervision and with the participation of ourThe management including our CEO and CFO, ofhas evaluated the effectiveness of the design and operation of our internal controls 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, 2017.2019. In making this assessment,evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control — Integrated Framework (2013). Based on that assessmentour evaluation and on those criteria, our CEO and CFO concluded that our internal control over financial reporting was not effective as of December 31, 2017.2019. 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

Our management has dedicated resources to correcting the control deficiencies and to ensuring that we take proper steps to improve our internal control over financial reporting in the area of 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:

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

(c) Changes in Internal Control over Financial Reporting

We 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.

On January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02 Leases (FASB ASC Topic 842). Except as disclosed in the aforementioned remediation plans and the adoption of ASU 2016-02, there have not been any other changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the current quarteryear ended December 31, 2017,2019, to have materially affected the 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 shareholders:

Wade LiMr. Wade Li used to work in People’s Insurance Company of China. In 1989, established Xinhua International Market Development Co., Ltd. and served as president, investing in a variety of growth industries companies of high-tech, pharmaceutical, medical and real estate, etc. and has extensive experience in corporate operation.

He founded Kiwa Bio-Tech Products Group Corporation in 1999. Over the past two decades, Mr. Li has focused on China’s ecological agriculture industry, and accumulated massive experience; he has also gained high recognition of the market and related government departments in microbial fertilizer, as well as the planning and promotion of green safe agricultural products.

Yvonne Wang Ms. Wang became our Chairman in November 2015. She served as corporate Secretary from 2005 to 2015. Prior to 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 from University of Phoenix.

On August 11, 21062016, she became Company’s acting president, CEO and CFO. On April 15, 2018, the Company’s Board of Directors appointed Hon Man Yun as Chief Financial Officer of the Company. On March 4, 2020, Yvonne Wang submitted her resignation as Chief Executive Officer. Her position now is the secretary of Kiwa Bio-Tech Products Group Corp.

Feng LiHon Man YunMr. Yun became our SecretaryCFO in April 2018. Mr. Yun is a Chartered Accountant having fellowship with the Institute of Chartered Accountants in England and Wales. He is also a Fellow Member of the Chartered Association of Certified Accountants and a Directormember of the Hong Kong Institute of Certified Public Accountants. He was a member of Association of International Accountants, the Society of Registered Financial Planners, the Institute of Financial Accountants and the Institute of Crisis and Risk Management. Mr. Yun received his MBA at the University of Western Sydney 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.2007.

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 Lin Song became our 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 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 as deputy secretary general of the Chinese Society of Plant Nutrition and Fertilizer Science.

Xiao QiangXiaoqiang Yu became our Sales and Marketing DirectorCOO on June 2016 and is responsible for managing the overall marketing strategy of Kiwa, which includes brand expansion, sale targets, strategic planning and corporate communications. Mr. Yu participated in Chinese fertilizer market since 1999. Mr. Yu has over 15 years of marketing, management and strategy experience from two major 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, 2017.2019.

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; 3200 Guasti Road, Ste. 100, California 91761.

Board Composition; Audit Committee and Financial Expert

Our Board of Directors is currently composed of four members: Yvonne Wang, Feng Li, Qi Wang, Xiaoqiang Yu and Yong Lin Song.Wade Li. All board actions require the approval of a majority of the directors in attendance at a meeting at which a quorum is present.

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.

The Board of Directors either met or took action by unanimous consent ten (10) times during fiscal year 2017.2019. No Committee Meetings were held during fiscal year 2017.2018. The Company did not have an Annual Meeting of Shareholders in 2017.2019.

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 shareholders of the Company.

The Company had no officers or directors whose total compensation during either 2017 or 2016 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

Employment Contracts and Termination of Employment and Change of Control Arrangements

There are no compensatory plans or arrangements with respect to a named executive officer that would result in payments or installments in excess of $100,000 upon the resignation, retirement or other termination of such executive officer’s employment with us or from a change-in-control.

Stock Incentive Plan and Option Grants

20172018 Stock-based Compensation

On March 15, 2017, the Board of Directors approved a new stock option plan with ten years’ term. As of December 31, 2017,During 2018, the Company has not granted any incentive compensation under this plan.

registered 1,663,702 shares of common stock, par value $0.001 allocated to its 2016 Employee, Director and Consultant Stock Plan. No options were granted under the Plan during 2017.Plan.

Option Exercises and Stock Vested

No stock options were exercised by any officers or directors during 20172019 and 2016.2018. We did not adjust or amend the exercise price of any stock options previously awarded to any named executive officers during 20172019 and 2016.2018.

Director Compensation for 20172019

We currently have no policy in effect for providing compensation to our directors for their services on our Board of Directors, and did not compensate our directors in 20172019 for services performed as directors.

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

The following table sets forth as of March 30, 2018May 29, 2020 certain information with respect to the beneficial ownership of our common stock by (i) each of our executive officers, (ii) each person who is known by us to beneficially own more than 5% of our outstanding common stock, and (iii) all of our directors and executive officers as a group. Percentage ownership is calculated based on 16,120,465282,385,206 shares of our common stock 500,000 shares of our Series A Preferred Stock, and 811,148 shares of our Series B Preferred Stock outstanding as of March 30, 2018 .May 29, 2020. None of the shares listed below are issuable pursuant to stock options or warrants of the Company.

Change in Control

None.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

For description of transactions with related parties, see Note 7 to Consolidated Financial Statements under Item 8 in Part II.

Under the independence standard set forth in Rule 4200(a) (15) of the Market Place Rules of the Nasdaq Stock Market, which is the independence standard that we have chosen to report under.

ITEM 14. Principal Accountant Fees and Services

Fees Paid to Independent Public Accountants for 20172019 and 2016.2018.

Audit Fees

All of the services described below were approved by our board of directors prior to performance of such services. The board of directors has determined that the payments made to its independent accountants for these services are compatible with maintaining such auditor’s independence.

The aggregate audit fees for 2017 paid and payable to DYH & Company and Friedman LLP were approximately $144,000, of which, $9,000 paid to DYH & Company and $135,0002019 paid and payable to Friedman LLP.LLP were approximately $220,000. The aggregate audit fees for 20162018 paid and payable to Paritz & Company, P.A, DYH & Company and Friedman LLP were approximately $113,000, of which, $20,500 paid to Paritz & Company, P.A., $42,500 paid to DYH & Company, and $50,000 paid to Friedman, LLP.  $205,000.

The amounts include: (1) fees for professional services rendered by DYH & Company, Friedman LLP and Paritz & Company, P.A. in connection with the audit and re-audit of our consolidated financial statements; (2) reviews of our quarterly reports on the Form 10-Q.

Audit-Related Fees

Audit-related fees for 20172019 and 20162018 were $0.

Tax Fees

Tax service fees billed by Paritz & Co., P.A. as tax consultant for 20172019 and 20162018 were $6,500 and $3,400, respectively.$0.

All Other Fees

None.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

Since we did not have a formal audit committee, our board of directors served as our audit committee. We have not adopted pre-approval policies and procedures with respect to our accountants in 2017.2019 and 2018. All of the services provided and fees charged by our independent registered accounting firms in 20162018 and 2017 were approved by the board of directors. There is no non-audit services provided by our independent auditors during the year of 2019 and 2018.