NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
Description of Business and Organization
Organization
Kiwa
Bio-Tech Products Group Corporation (“the Company”) is the result of a share exchange transaction accomplished on
March 12, 2004 between the 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. The share exchange resulted
in a change of control 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 to the share exchange transaction, Tintic changed its
name to Kiwa Bio-Tech Products Group Corporation. On July 21, 2004, the Company completed its 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 and interest in Kiwa Shandong to the Transferee
for USD $1.00. Currently, the completion of transfer is under the government processing.
Business
The
Company’s business plan is to develop and market innovative, manufacture, distribute cost-effective and environmentally
safe bio-technological products for agriculture markets primarily in China. The Company has acquired technologies to produce and
market bio-fertilizer.
2.
Summaries of Significant Accounting Policies
Principle
of Consolidation
These
consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries, Kiwa BVI,
Hong Kong Baina Group Holding Company, Kiwa Baiao Bio-Tech (Beijing) Co., Ltd, Kiwa Bio-Tech Products (Shandong) Co., Ltd. (“Kiwa
Shandong”). All significant inter-company balances or transactions are eliminated on consolidation.
Reverse
Split
On
January 14, 2016, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the State of Delaware
with reference to a 1-for-200 reverse stock split with respect to its Common Stock with effective date of January 28, 2016. In
connection with the reverse split, the Company’s authorized capital was amended to be 120,000,000 shares, comprising 100,000,000
shares of Common Stock par value $0.001 and 20,000,000 shares of Preferred Stock par value $0.001. All relevant information relating
to numbers of shares, options and per share information have been retrospectively adjusted to reflect the reverse stock split
for all periods presented.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant accounting estimates include the valuation of securities issued, deferred tax assets and related
valuation allowance.
Certain
of our estimates, including evaluating the collectability of accounts receivable and the fair market value of long-lived assets,
could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible
that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates.
We re-evaluate all of our accounting estimates annually based on these conditions and record adjustments when necessary.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents. At times,
such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit.
Accounts
Receivables
Accounts
receivables represent customer accounts receivables. The allowance for doubtful accounts is based on a combination of current
sales, historical charge offs and specific accounts identified as high risk. Uncollectible accounts receivable are charged against
the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted. Such allowances,
if any, would be recorded in the period the impairment is identified.
Allowance
for doubtful accounts
The
Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate
is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably
possible that the Company’s estimate of the allowance for doubtful accounts will change. There was no allowance for doubtful
accounts at March 31, 2017 and December 31, 2016.
Inventories
Inventories
are stated at the lower of cost, determined on the weighted average method, and net realizable value. Work in progress and finished
goods are composed of direct material, direct labor and a portion of manufacturing overhead. Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs to complete and dispose.
Property,
plant and equipment
Property,
plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Gains or losses
on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of property,
plant and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All
ordinary repair and maintenance costs are expensed as incurred. Depreciation for financial reporting purposes is provided using
the straight-line method over the estimated useful lives of the assets as follows:
|
|
Useful Life
|
|
|
|
(In years)
|
|
Buildings
|
|
|
30 - 35
|
|
Machinery and equipment
|
|
|
5 - 10
|
|
Automobiles
|
|
|
8
|
|
Office equipment
|
|
|
2 - 5
|
|
Computer software
|
|
|
3
|
|
Impairment
of Long-Lived Assets
The
Company’s long-lived assets consist of property, equipment and intangible assets. The Company evaluates its investment in
long-lived assets, including property and equipment, for recoverability whenever events or changes in circumstances indicate the
net carrying amount may not be recoverable. Judgments regarding potential impairment are based on legal factors, market conditions
and operational performance indicators, among others. In assessing the impairment of property and equipment, the Company makes
assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets.
Fair
value of warrants and options
The
Company adopted ASC Topic 815, “Accounting for Derivative Instruments and Hedging Activities” to recognize warrants
relating to loans and warrants issued to consultants as compensation as derivative instruments in our consolidated financial statements.
The Company also adopted ASC Topic 718, “Share Based Payment” to recognize options granted to employees as derivative
instruments in our consolidated financial statements. The Company calculates the fair value of the warrants and options using
the Black-Scholes Model.
Revenue
Recognition
The
Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes
revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all
of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably
assured.
The
Company derives its revenues from sales contracts with its customer with revenues being generated upon delivery of products. Persuasive
evidence of an arrangement is demonstrated via invoice; and the sales price to the customer is fixed upon acceptance of the purchase
order and there is no separate sales rebate, discount, or volume incentive.
Shipping
and Handling Costs
Substantially
all costs of shipping and handling of products to customers are included in selling expense. Shipping and handling costs for the
three months ended March 31, 2017 and 2016 were $ nil, respectively.
Income
Taxes
The
Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” which requires recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated
financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable
to the difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred
tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. The Company establishes a valuation when it
is more likely than not that the assets will not be recovered.
ASC
Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions
for any of the reporting periods presented.
Foreign
Currency Translation and Other Comprehensive Income
The
Company uses United States dollars (“US Dollar” or “US$” or “$”) for financial reporting purposes.
However, the Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”), being the
primary currency of the economic environment in which its operations are conducted. In general, the Company translates its assets
and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement
of comprehensive loss and the statement of cash flow are translated at average exchange rates during the reporting period. Equity
accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements
are recorded as accumulated other comprehensive income.
Other
comprehensive income for the three months ended March 31, 2017 and 2016 represented foreign currency translation adjustments and
were included in the consolidated statements of comprehensive loss.
The
exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements
were as follows:
|
|
As of
March 31, 2017
|
|
|
As of
December 31, 2016
|
|
Balance sheet items, except for equity accounts
|
|
|
6.8905
|
|
|
|
6.9472
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Items in the statements of comprehensive loss
|
|
|
6.8887
|
|
|
|
6.5395
|
|
Advertising
Costs
The
Company charges all advertising costs to expense as incurred. The total amounts of advertising costs charged to selling, general
and administrative expense were $57,374 and nil for the three months ended March 31, 2017 and 2016, respectively.
Research
and Development Costs
Research
and development costs are charged to expense as incurred. During the three months ended March 31, 2017 and 2016, research and
development costs were $36,291 and $76,993, respectively.
Net
Loss Per Common Share
Net
income per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income
per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period.
Diluted
net income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable
through contingent shares issuance arrangement, stock options or warrants.
As
of March 31, 2017 and 2016, potentially dilutive securities aggregated 10,851,204 and 4,098,410 shares of common stock, respectively.
Fair
Value of Financial Instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820- 10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value with
U.S. GAAP, and expands disclosures about fair value measurements.
To
increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes
a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37
are described below:
|
●
|
Level
1: quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
●
|
Level
2: pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly
observable as of the reporting date.
|
|
|
|
|
●
|
Level
3: Pricing inputs that are generally observable inputs and not corroborated by market data.
|
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalent, prepaid expenses, accounts
payable and accrued expenses, approximate their fair value because of the short maturity of those instruments.
Transactions
involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of
competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply
that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions
unless such representations can be substantiated.
It
is not however practical to determine the fair value of advances from stockholders, if any, due to their related party nature.
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
consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated financial statements is not required in those statements. 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.
Commitments
and Contingencies
The
Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived
merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable
and material, would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would
be disclosed. Management does not believe, based upon information available at this time that these matters will have a material
adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance
that such matters will not materially and adversely
Stock
Based Compensation
The
Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for
services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on
the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.
No
stock based compensation was issued or outstanding as of March 31, 2017 and December 31, 2016.
Income
Tax Provision
Income
taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in
recognizing certain income, expense and credit items for financial reporting purposes and tax reporting purposes. Such deferred
income taxes primarily relate to the difference between the tax basis of assets and liabilities and their financial reporting
amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years
in which deferred tax assets or liabilities are expected to be settled or realized. There were no material deferred tax assets
or liabilities as of March 31, 2017 and December 31, 2016.
As
of March 31, 2017 and December 31, 2016, the Company did not identify any material uncertain tax positions.
As
of March 31, 2017, the Company’s returns are subject to examination by federal and state taxing authorities, generally for
three years and four years, respectively, after they are filed.
Cash
Flows Reporting
The
Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash
receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions
of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile
it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and
payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income
that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency
cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held
in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents
and separately provides information about investing and financing activities not resulting in cash receipts or payments in the
period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent
Events
The
Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent
events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU
2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when
they are widely distributed to users, such as through filing them on EDGAR.
Recent
accounting pronouncements
In
January 2016, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity
investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment
of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; Eliminates
the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value
that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business
entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires
an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability
resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value
in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial
liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial
statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to
available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for financial
statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company
does not expect these changes to have a material impact on the Company’s consolidated financial statements.
In
March 2016, the FASB issued ASU 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting. The amendments in this guidance are relating to employee share-based compensation. Under the new guidance,
we are required to recognize the tax effects of stock compensation as income tax expense or benefit in the income statement and
treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur. Excess tax
benefits are required to be classified as operating activities, and shares we withhold on behalf of employees for tax purposes
are required to be classified as financing activities. We may make an accounting policy election to continue to estimate the number
of awards that are expected to vest or account for forfeitures when they occur. The threshold to qualify for equity classification
permits withholding up to the maximum statutory tax rates. This guidance is required to be adopted in the first quarter of 2017.
We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In
August 2016, the FASB issued ASU 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments (a consensus of the Emerging Issues Task Force). The amendments in this guidance on eight specific cash flow issues
with regard to how cash receipts and cash payments are presented and classified in the statement of cash flows in order to clarify
existing guidance and reduce diversity in practice. The guidance is required to be adopted in the first quarter of 2018 on a retrospective
basis, unless it is impracticable to apply, in which case it should be applied prospectively as of the earliest date practicable.
Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated statement of cash
flows.
In
January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.”
The amendments in this guidance are clarifying the definition of a business to assist entities when determining whether an integrated
set of assets and activities meets the definition of a business. The update provides that when substantially all the fair value
of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not
a business. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those
fiscal years. The adoption of this new guidance is not expected to have a material impact on our consolidated financial statements.
In
January 2017, the FASB issued ASU 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment. The amendments in this guidance to eliminate the requirement to calculate the implied fair value of goodwill to measure
goodwill impairment charge (Step 2). As a result, an impairment charge will equal the amount by which a reporting unit’s
carrying amount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. An entity still
has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is
necessary. The amendment should be applied on a prospective basis. The guidance is effective for goodwill impairment tests in
fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed after January
1, 2017. The impact of this guidance for the Company will depend on the outcomes of future goodwill impairment tests.
There
were other updates recently issued. The Company does not believe that other than disclosed above, the recently issued, but not
yet adopted, accounting pronouncements will have a material impact on its financial position, results of operations or cash flows.
Goodwill
and Other Intangibles
In
accordance with Accounting Standards Update (ASU) No. 2014-02, management evaluates goodwill on an annual basis in the fourth
quarter of more frequently if management believes indicators of impairment exist. Such indicators could, but are not limited to
(1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action
or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more
likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative
goodwill impairment test. The first step of the impairment test involves comparing the fair value of the applicable reporting
unit with its carrying value. The Company estimates the fair value of its reporting units using a combination of the income, or
discounted cash flows, approach and the market approach, with utilizes comparable companies’ data. If the carrying amount
of a reporting unit exceeds the reporting unit’s fair value, management performs the second step of the goodwill impairment
test. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s
goodwill with the carrying value of that goodwill. The amount, by which the carrying value of the goodwill exceeds its implied
fair value, if any, is recognized as an impairment loss. The Company’s evaluation of goodwill completed during the three
months ended March 31, 2017 resulted in no impairment losses.
3.
Going Concern
The
consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business.
As
of March 31, 2017, the Company’s current liabilities substantially exceeded its current assets by $4,267,836, had an accumulated
deficit of $19,247,049, and stockholders’ deficiency of $4,148,775. These circumstances, among others, raise substantial
doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. The financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The
management of the Company already raised additional equity for approximately $1,000,000 and convertible note for approximately
$145,165 during the first quarter of 2017. The Company is generating additional revenue while seeking additional equity financing.
Management is very optimistic about the Company’s continue profitability for the coming years.
4.
Accounts Receivable, net
Accounts
receivable consisted of the following:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Accounts receivable
|
|
$
|
3,772,440
|
|
|
$
|
1,122,754
|
|
Less: Allowance for doubtful debts
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
3,772,440
|
|
|
$
|
1,122,754
|
|
As
of March 31, 2017 and December 31, 2016, the management has determined that no allowance for doubtful debts was necessary.
5.
Other Receivable
Other
receivable consisted of the following:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Due to customer-Kangtan Gerui (Beijing) Bio-Tech Co., Ltd.
|
|
$
|
1,317,271
|
|
|
$
|
1,522,434
|
|
Weifang Deluke
|
|
|
1,053,708
|
|
|
|
0
|
|
Advance to employees
|
|
|
56,337
|
|
|
|
7,197
|
|
|
|
$
|
2,427,316
|
|
|
$
|
1,561,331
|
|
On May 10, 2017, the Company collected from Weifang Druek Fertilizer Co., Ltd. of repayments
totaled RMB 6,860,000 or approximately USD 995,574.
6.
Property, Plant and Equipment
Property,
plant and equipment, net consisted of the following:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
-
|
|
|
$
|
-
|
|
Machinery and equipment
|
|
|
-
|
|
|
|
-
|
|
Automobiles
|
|
|
-
|
|
|
|
-
|
|
Office equipment
|
|
|
942
|
|
|
|
942
|
|
Furniture
|
|
|
8,276
|
|
|
|
8,276
|
|
Leasehold improvement
|
|
|
70,871
|
|
|
|
70,871
|
|
Computer software
|
|
|
-
|
|
|
|
-
|
|
Property, plant and equipment - total
|
|
$
|
80,089
|
|
|
$
|
80,089
|
|
Less: accumulated depreciation
|
|
|
(29,943
|
)
|
|
|
(20,311
|
)
|
Less: impairment of long-lived assets
|
|
|
-
|
|
|
|
-
|
|
Property, plant and equipment - net
|
|
$
|
50,146
|
|
|
$
|
59,778
|
|
The
building is on a piece of land the use right of which was granted to Kiwa Bio-Tech Products (Shandong) Co., Ltd. by local government
free for 10 years and then for another 20 years on a fee calculated according to Kiwa Shandong’s net profit. Since Kiwa
Shandong did not generate any net profit, no fee is payable.
Depreciation
expense was $9,466 and $nil for the three months ended March 31, 2017 and 2016, respectively.
Impairment
of long-lived assets was $nil for the three months ended March 31, 2017 and 2016, respectively.
All
of our property, plant and equipment have been held as collateral to secure the 6% Notes (see Note 12).
7.
Goodwill
On
November 30, 2015, Kiwa Bio-tech Products Group Ltd in BVI (“Kiwa BVI”) entered an acquisition agreement with shareholders
of Caber Holdings Ltd. (“Acquiree”) in Hong Kong to acquire 100 percent entity interest of the acquiree, including
a wholly owned subsidiary, Oriental Baina Co., Ltd. in Beijing for US$30,000. The acquisition was completed in January, 2016.
On the acquisition date, there was no any asset or liability acquired, and thus no fair value was allocated to asset and liability.
Including legal fee and government fees, the total payment of approximately $34,112 ($30,000 plus legal fee and government fees
totaled $4,112) was recorded as goodwill. The fair value of the goodwill is tested prior to March 31, 2017 and management determined
there is no impairment to the goodwill as of March 31, 2017.
8. Construction Costs Payable
Construction costs payable represents outstanding
balance to be settled for the first phase of construction of bio-fertilizer facility in Shandong. The balances of construction
costs payable as of March 31, 2017 and December 31, 2016 were $257,642 and $255,539, respectively.
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 and interest, as well as all the obligations in Kiwa Shandong to the Transferee for USD $1.00. Currently,
the completion of transfer is under the government processing.
9. Related Party Transactions
Amounts due to related parties consisted of
the following as of March 31, 2017 and December 31, 2016:
Item
|
|
Nature
|
|
|
Notes
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Yvonne Wang (“Ms. Wang”)
|
|
|
Non-trade
|
|
|
|
(1
|
)
|
|
|
73,798
|
|
|
|
100,798
|
|
Kiwa-CAU R&D Center
|
|
|
Trade
|
|
|
|
(2
|
)
|
|
|
1,131,993
|
|
|
|
1,122,754
|
|
CAAS IARRP and IAED Institutes
|
|
|
Trade
|
|
|
|
(3
|
)
|
|
|
196,743
|
|
|
|
160,461
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,402,534
|
|
|
$
|
1,384,013
|
|
(1) Ms. Wang
Ms. Wang is the Secretary of the Company until
November 20, 2015. Effective as of November 20, 2015, the Company appointed Ms. Wang as the Chairman of the Board. Effective August
11, 2016, the Company’s Board of Directors has assigned Ms. Wang the additional titles of Acting President, Acting Chief
Executive Officer and Acting Chief Financial Officer.
On December 14, 2015, Ms. Wang subscribed for
the purchase of 250,000 shares of preferred stock for the aggregate amount of $500,000, and agrees to the concurrent cancellation
of debt owed by the Company.
On March
24, 2016, the Company issued 240,000 shares of common stock to Ms. Wang to pay off the loan balance of $240,000.
During
the three months ended March 31, 2017, Ms. Wang paid various expenses on behalf of the Company. As of March 31, 2017, the amount
due to Ms. Wang was $73,798.
(2) Kiwa-CAU R&D Center
In November 2006, Kiwa and China Agricultural
University (the “CAU”) agreed to jointly establish a new research and development center, named Kiwa-CAU R&D Center.
The term of the agreement was ten years commencing July 1, 2006.
Pursuant to the agreement, Kiwa agree to invest
RMB 1 million (approximately $160,000) each year to fund research at Kiwa-CAU R&D Center. Prof. Qi Wang, a director of the
Company, is also the director of Kiwa-CAU R&D Center. The Company recorded nil and $38,229 research and development expenses
related to this R&D Center for the three months ended March 31, 2017 and 2016, respectively.
(3) CAAS IARRP and IAED Institutes
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”). The term of the Agreement was three years commencing November 20, 2015.
Pursuant to the agreement, Kiwa agree to invest
RMB 1 million (approximately $160,000) each year to the Spatial Agriculture Planning Method & Applications Innovation Team
that belongs to the Institutes. 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. The Company recorded $36,291 and $38,764 research and development
expenses related to the institutes, for the three months ended March 31, 2017 and 2016, respectively.
10. Unsecured Loans Payable
Unsecured loans payable consisted of the following:
Item
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Unsecured loan payable to Zoucheng Municipal Government, non-interest bearing, becoming due within three years from Kiwa Shandong’s first profitable year on a formula basis, interest has not been imputed due to the undeterminable repayment date
|
|
$
|
1,283,502
|
|
|
$
|
1,269,880
|
|
Unsecured loan payable to Zoucheng Science & Technology Bureau, non-interest bearing, it is due in Kiwa Shandong’s first profitable year, interest has not been imputed due to the undeterminable repayment date
|
|
|
385,463
|
|
|
|
385,463
|
|
Total
|
|
$
|
1,668,965
|
|
|
$
|
1,655,343
|
|
The Company qualifies for non-interest bearing
loans under a Chinese government sponsored program to encourage economic development in certain industries and locations in China.
To qualify for the favorable loan terms, a company must meet the following criteria: (1) be a technology company with innovative
technology or product (as determined by the Science Bureau of the central Chinese government); (2) operate in specific industries
that the Chinese government has determined are important to encourage development, such as agriculture, environmental, education,
and others; and (3) be located in an undeveloped area such as Zoucheng, Shandong Province, where the manufacturing facility of
the Company is located.
According to the Company’s project agreement,
Zoucheng Municipal Government granted the Company 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, the Company has the option to pay a fee of RMB 480,000 ($77,100) per
acre for the land use right after the 10-year period until May 2012. The Company may not transfer or pledge the temporary land
use right. The Company also committed to invest approximately $18 million to $24 million for developing the manufacturing and research
facilities in Zoucheng, Shandong Province. As of December 31, 2016, the Company has invested approximately $1.91 million for the
property, plant and equipment of the project and these assets were impaired as of December 31, 2016.
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 and interest in Kiwa Shandong to the Transferee for USD $1.00. Currently, the completion of transfer is under the
government processing.
11. Convertible Notes Payable
Convertible notes payable consists $ 150,250
of 6% secured convertible notes issued to FirsTrust Group Inc. on June 29, 2006 and $145,127 of 15% convertible note issued to
Mr. Geng Liu on January 17, 2017.
6% secured convertible notes
The notes beard interest at 6% and were due
on June 29, 2009. Once the note is pass due, the interest rate increased to 15% per annum. The Company accrued $5,557 and $5,619
interest expense on convertible notes for the three months ended March 31, 2017 and 2016, respectively. Interest payable to FirstTrust
Group Inc. totaled $188,919 and $183,361 at March 31, 2017 and December 31, 2016, respectively.
The conversion price of the 6% Notes is based
on a 40% discount to the average of the trading price of the Company’s common stock on the OTC Bulletin Board over a 20-day
trading period. The conversion price is also adjusted for certain subsequent issuances of equity securities of the Company at prices
below the conversion price then in effect. The 6% Notes contain a volume limitation that prohibits the holder from further converting
the 6% Notes if doing so would cause the holder and its affiliates to hold more than 4.99% of the Company’s outstanding common
stock. In addition, the holder of the 6% Notes agrees that they may not convert more than their pro-rata share (based on original
principal amount) of the greater of $120,000 principal amount of the 6% Notes per calendar month or the average daily dollar volume
calculated during the 10 business days prior to a conversion, per conversion. This conversion limit has since been eliminated pursuant
to an agreement by the Company and the Purchasers.
The Company incurs a financial penalty in cash
or shares at the option of the Company (equal to 2% of the outstanding amount of the Notes per month plus accrued and unpaid interest
on the Notes, prorated for partial months) if it breaches this or other affirmative covenants in the Purchase Agreement, including
a covenant to maintain a sufficient number of authorized shares under its Certificate of Incorporation to cover at least 110% of
the stock issuable upon full conversion of the Notes. Pursuant to the relevant provisions for liquidated damages in the Purchase
Agreement, the Company has accrued the penalty of $20,239 and $18,886 for the three months ended March 31, 2017 and 2016, respectively.
The 6% Notes require the Company to procure
the Purchaser’s consent prior to taking certain actions including the payment of dividends, repurchasing stock, incurring
debt, guaranteeing obligations, merging or restructuring the Company, or selling significant assets.
The Company’s obligations under the 6%
Notes are secured by a first priority security interest in the Company’s intellectual property pursuant to an Intellectual
Property Security Agreement with the Purchasers, and by a first priority security interest in all of the Company’s other
assets pursuant to a Security Agreement with the Purchasers. In addition, Mr. Li, the Company’s former Chief Executive Officer
until July 1, 2015, has pledged all of his common stock of the Company as collateral for the Company’s obligations under
the 6% Notes. The intellectual property pledged had a cost of $592,901 which carrying value of $179,897 was fully impaired during
the year ended December 31, 2009.
15% convertible notes
On January 17, 2017, the Company entered a
Convertible Note Agreement with an individual person with principal of RMB 3 million or approximately USD 435,380. The note bears
interest at 15% per annum and will be mature on January 16, 2018. Before the maturity date, the Note holder has an option to convert
partial or all of the outstanding principal and accrued interest to the Company’s common shares with a conversion
price of $0.99 per share. As of March 31, 2017, the Company has received partial principal totaled RMB1 million. Using weighted
average method, the Company accrued $2,721 interest expense on convertible notes for the three months ended March 31, 2017.
12. Note payable
On May 29, 2007, the Company issued a $360,000
promissory note to an unrelated individual. This note bears interest at 18% per annum and due on July 27, 2007. This note is currently
in default and bears interest of 25% per annum (the “Default rate”) until paid in full. This note is secured by a pledge
of 6,178,336 (post-reverse split 30,892) shares of the Company’s common stock owned by Investlink (China) Limited, a British
Virgin Island corporation. The Company accrued $22,500 and $22,500 interest expense on note payable for the three months ended
March 31, 2017 and 2016, respectively.
13. Other payable
Other payable includes the payables to
two unrelated potential investors and other liabilities. As of March 31, 2017, two potential investors have made the payments
approximately $464,407 to the Company and the investment agreements have not finalized.
14.Stockholders’ Deficiency
In March, 2016, the Company issued 3,140,000
shares of common stock to Mr. Li and Ms. Wang for debt and salary payable settlement for an aggregate amount of $3,141,000. In
addition, the Company issued 101,947 common shares to Jimmy Zhou, former CEO in August 2016, to settle payable to him for $50,974.
All of issuances of common shares for settlement of debts were based the stock price on the transaction dates.
During the year ended December 31, 2016, the
Company issued 1,650,000 common shares for cash at $0.8 per share for an aggregate subscribe price equivalent to $1,320,000, of
which $759,659 has received while approximately $560,341 remaining subscribe receivable at December 31, 2016.
On November 15, 2016, the Company completed
another private offering of common stock to an accredited investor for 125,000 shares of its common stock and warrants to purchase
300,000 shares of Company common stock at an exercise price of $3.00 per share prior to November 15, 2021. The Company may adjust
the exercise price for some or all of the warrants under certain terms and conditions. We have determined the issued warrants do
not meet the definition of a derivative security, and thus allocated the net proceeds of the sale of the common stock to the par
value of the common stock, with the remainder to additional paid in capital.
During the year ended December 31, 2016, the
Company issued 1,711,808 common shares to four consulting companies as compensation for their consulting service received, totaled
$254,250 approximately for the year ended December 31, 2016.
In February, 2017, the Company issued 1,000,000
common shares to Mr. Junwei Zheng for cash at $1.00 per share for an aggregate price to $1,000,000, all of which has been received
as of March 31, 2017.
On February 15, 2017, the Company entered an
consulting agreement with Mr. Yuan Wang to assist the Company in financing projects. The agreement has one year team with a total
of USD85,400 that was determined as fair value at the time of execution of the agreement. The total services fee will be recognized
based straight-line amortization method over the service term. On March 3, 2017, the Company issued 70,000 common shares to Mr.
Yuan Wang based on market price of $1.22 per share. At March 31, 2017, the Company realized $10,675 as a compensation for Mr. Wang’s
consulting service for the period of 1.5 months. The $10,675 was allocated between Common Shares for $70 and AIPC for $10,605.
15. Stock-based Compensation
On December 12, 2006, the Company granted options
for 2,000,000 shares (10,000 post-reverse split shares) of its common stock under its 2004 Stock Incentive Plan. However, this
stock option plan was expired on December 11, 2016, and all outstanding options were forfeited.
On March 15, 2017, the Board of Directors approved
a new stock option plan with ten years’ term. As of March 31, 2017, the Company has not granted any option yet.
16. Income Tax
In accordance with the current tax laws in
China, Kiwa Shandong is subject to a corporate income tax rate of 25% on its taxable income. However, Kiwa Shandong has not provided
for any corporate income taxes since it had no taxable income for the three months ended March 31, 2017 and 2016.
Kiwa Baiao Co., Ltd., is also subject to a
corporation income tax rate of 25% on its taxable income. For the three months ended March 31, 2017, it recorded income tax provision
for RMB1,511,077 or approximately USD219,356.
No provision for taxes is made for U.S. income
tax as the Company has no taxable income in the U.S. In accordance with the relevant tax laws in the British Virgin Islands, Kiwa
BVI, as an International Business Company, is exempt from income taxes.
A reconciliation of the provision for income
taxes determined at the local income tax rate to the Company’s effective income tax rate is as follows:
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Pre-tax income (loss)
|
|
$
|
527,514
|
|
|
$
|
56,130
|
|
|
|
|
|
|
|
|
|
|
U.S. federal corporate income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Income tax computed at U.S. federal corporate income tax rate
|
|
|
179,355
|
|
|
|
19,084
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Rate differential for PRC earnings
|
|
|
(77,670
|
)
|
|
|
4,898
|
|
Change of valuation allowance
|
|
|
110,532
|
|
|
|
66,602
|
|
Non-deductible expenses
|
|
|
7,140
|
|
|
|
(90,584
|
)
|
Effective tax expense
|
|
$
|
219,356
|
|
|
$
|
-
|
|
The Company had deferred tax assets as follows:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Net operating losses carried forward
|
|
$
|
3,565,236
|
|
|
$
|
3,475,563
|
|
Less: Valuation allowance
|
|
|
(3,565,236
|
)
|
|
|
(3,475,563
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
As of March 31, 2017 and December 31, 2016,
the Company had approximately $3.6 million and $3.5 million net operating loss carryforwards available to reduce future taxable
income. Net operating loss of the Company could be carried forward and taken against any taxable income for a period of not more
than twenty years from the year of the initial loss pursuant to Section 172 of the Internal Revenue Code of 1986, as amended. The
net operating loss of Kiwa Shandong could be carried forward for a period of not more than five years from the year of the initial
loss pursuant to relevant PRC tax laws and regulations. It is more likely than not that the deferred tax assets cannot be utilized
in the future because there will not be significant future earnings from the entity which generated the net operating loss. Therefore,
the Company recorded a full valuation allowance on its deferred tax assets.
As of March 31, 2017 and December 31, 2016,
the Company has no material unrecognized tax benefits which would favorably affect the effective income tax rate in future periods
and does not believe that there will be any significant increases or decreases of unrecognized tax benefits within the next twelve
months. No interest or penalties relating to income tax matters have been imposed on the Company during three months ended March
31, 2017 and December 31, 2016, and no provision for interest and penalties is deemed necessary as of March 31, 2017 and December
31, 2016.
According to the PRC Tax Administration and
Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the
taxpayer or its withholding agent. The statute of limitations extends to five years under special circumstances, which are not
clearly defined. In the case of a related party transaction, the statute of limitation is ten years. There is no statute of limitation
in the case of tax evasion.
17. Commitments and Contingencies
The Company has the following material contractual
obligations:
(1) Investment in manufacturing and research
facilities in Zoucheng, Shandong Province in China
According to the Project Agreement with Zoucheng
Municipal Government in 2002, we have committed to investing approximately $18 million to $24 million for developing the manufacturing
and research facilities in Zoucheng, Shandong Province. As of December 31, 2016, we had invested approximately $1.91 million for
the project. 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 and interest in Kiwa Shandong to the Transferee
for USD $1.00. Currently, the completion of transfer is under the government processing.
(2) Strategic cooperation with two institutes in China
On November 5, 2015, the Company signed a strategic
cooperation agreement (the “Agreement”) with China Academy of Agricultural Science (“CAAS”)’s Institute
of Agricultural Resources & Regional Planning (“IARRP”) and Institute of Agricultural Economy & Development
(“IAED”). Pursuant to the Agreement, the Company will form a strategic partnership with the two institutes and establish
an “International Cooperation Platform for Internet and Safe Agricultural Products”. To fund the cooperation platform’s
R&D activities, the Company will provide RMB 1 million (approximately $160,000) per year to the Spatial Agriculture Planning
Method & Applications Innovation Team that belongs to the Institutes. The term of the Agreement is for three years beginning
November 20, 2015. Prof. Yong Chang Wu, the authorized representative of IARRP, CAAS, is also one of the Company’s directors
effective since November 20, 2015 until March 13, 2017.
(3) Distribution agreement with Kangtan
Gerui Bio-Tech in China
On December 17, 2015, Kiwa Bio-Tech Products
Group Corporation (the “Company”) entered into a distribution agreement (the “Agreement”) with Kangtan
Gerui (Beijing) Bio-Tech Co., Ltd. (“Gerui”) and formally awarded Gerui a right to sell and distribute the Company’s
fertilizer products in 3 major agricultural regions of China— 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 improve crop yield. Gerui was founded
in Beijing in April 2015 and relies on the sales network of China’s Supply and Marketing Cooperatives system. Currently,
the Company and Gerui do not hold any interest in each other; however, a collaboration and integration may take place in the future.
The term of the Agreement is for a period of three years commencing December 17, 2015. 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.
(4) Lease payments
(1) On April 29, 2016, Kiwa Baiao Bio-Tech
(Beijing) Co., Ltd. entered an office lease agreement with two-year team. Monthly lease payment and building management fee totaled
RMB 77,867 or approximately USD $11,303.
(2) On November 11, 2016, Kiwa Baiao Bio-Tech
(Beijing) Co., Ltd. entered an apartment lease agreement for its employees. The lease term is one year with monthly lease payment
of RMB 6,000 or approximately USD $871.
(3) In March 15, 2017, Kiwa Bio-Tech (Shenzhen)
Co., Ltd, a newly established subsidiary entered an office lease agreement with one-year term. Monthly lease payment is RMB 29,000
or approximately of USD $4,210.
The future lease payments at March 31, 2017
are summarized below.
|
|
Beijing Office
|
|
|
Beijing Apartment
|
|
|
Shenzhen Office
|
|
|
Total
|
|
2017
|
|
$
|
101,727
|
|
|
$
|
6,384
|
|
|
$
|
37,890
|
|
|
$
|
146,001
|
|
2018
|
|
$
|
45,212
|
|
|
|
-
|
|
|
$
|
10,525
|
|
|
$
|
55,737
|
|
Thereafter
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
18. Subsequent Events
On May 9, 2017, the Company entered into a
Convertible Loan Agreement with Junwei Zheng with principal of approximately US$ 4.5 million (RMB 30,000,000) with a term of 24
months and bearing interest at a rate of Fifteen Percent (15%) per annum. The Loan is convertible at any time at the option of
the Lender at a conversion price of $3.50 per share. The net proceeds will be used for the further development of Kiwa products
and distribution, as well as for general working capital. As of May 15, 2017, the Company has received partial principal totaled
$507,946.
The Company has evaluated the existence of
significant events subsequent to the balance sheet date through the date these financial statements were issued and has determined
that, other than as stated above, there were no subsequent events or transactions which would require recognition or disclosure
in the financial statements, other than noted herein.