UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2018~~2019

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

For the Transition Period from ______ to ______

Commission File Number: 000-33167

KIWA BIO-TECH PRODUCTS GROUP CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

77-0632186

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3200 Guasti Road, Suite #100,

Ontario, California

91761

(Address of principal executive offices)

(Zip Code)

(909) 456-8828

(Registrant’s telephone number, including area code)

~~3200 Guasti Road, Suite #100~~n/a

Ontario, CA 91761

(Former address)

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

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

Title of Each Class		Trading Symbol		Name of Each Exchange on which registered
Common Stock, par value $0.001		KWBTB		OTCQB

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.

Large accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated filer [ ]	Smaller reporting company [X]

(Do not check if a smaller reporting company)	Emerging growth company [ ]

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

~~State~~The ~~the~~ aggregate market value of the voting and non-voting common equity held by non-affiliates ~~computed~~of ~~by reference to~~ the ~~price at~~registrant ~~which~~on ~~the~~June ~~common~~30, ~~equity was last sold~~2019, orbased on ~~the~~a ~~average~~closing ~~bid and asked~~ price of ~~such~~$0.75 ~~common~~was ~~equity,~~approximately ~~as of the last business day of the registrant’s most recently completed second fiscal quarter:~~ $710,~~382~~522,~~012 (assuming $1~~514.~~14 per share)~~

As of ~~April~~May 1229, ~~2019~~2020, the Company had 18282,~~858~~385,~~719~~206 shares of common stock, $0.001 par value, issued and outstanding.

Documents Incorporated by Reference: None.

TABLE OF CONTENTS

	Page
Part I
ITEM 1. Business	3
ITEM 1A.Risk Factors	8
ITEM 1B. Unresolved Staff Comments	98
ITEM 2. Properties	98
ITEM 3. Legal Proceedings	98
ITEM 4. Mine Safety Disclosures	98
Part II
ITEM 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchasers of Equity Securities	9
ITEM 6. Selected Financial Data	10
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk	23
ITEM 8. Financial Statements and Supplementary Data	23
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
ITEM 9A. Controls and Procedures	2423
ITEM 9B. Other Information	25
Part III	25
ITEM 10. Directors, Executive Officers and Corporate Governance	25
ITEM 11. Executive Compensation	27
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2928
ITEM 13. Certain Relationships and Related Transactions, and Director Independence	29
ITEM 14. Principal Accountant Fees and Services	3029
Part IV	30
ITEM 15. Exhibits and Financial Statement Schedules	3029
Signatures	3130
Index to Consolidated Financial Statements	3231

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

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.

The Company currently mainly operates its business through Kiwa ~~Baiao~~ Bio-Tech (~~Beijing~~Yangling) Co., Ltd. (“Kiwa ~~Beijing~~Yangling”), which ~~was~~ incorporated in ~~China~~March ~~in January 2016~~2018, Kiwa Bio-Tech Products (~~Shenzhen) Co., Ltd. (“Kiwa Shenzhen”), which was incorporated in China in November 2016, Kiwa Bio-Tech Products (~~Hebei) Co., Ltd. (“Kiwa Hebei”), which was incorporated in China in December 2016, Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. Xian Branch Company, (“Kiwa Xian”), which was incorporated in China in December 2017, Kiwa Bio-Tech (Yangling) Co., Ltd. (“Kiwa Yangling”), which incorporated in March 2018, and The Institute of Kiwa-Yangling Ecological Agriculture and Environment Research Co., Ltd. (“Kiwa Institute”), which incorporated in March 2018. 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, Kiwa Xian, Kiwa Institue and Kiwa Hebei.

~~The~~On ~~Company’s~~October ~~Research~~12, ~~and~~2018, ~~Development~~the ~~department~~Company ~~has~~got ~~been~~the ~~conducting~~approval ~~application~~from ~~experiments~~the inAdministrative ~~Hainan~~Committee ~~and~~of ~~Hunan~~Yangling ~~Provinces since~~Agricultural ~~August~~High-tech ~~2015,~~Industry inDemonstration Zone ~~accordance~~to ~~with~~obtain ~~the~~land ~~market~~to ~~requirements.~~construct ~~The~~a ~~experiment~~new ~~data~~manufacturing ~~indicates~~facility ~~that~~to help meet the ~~Company’s~~growing ~~fertilizer~~demand in China for bio-fertilizers. Yangling ~~products~~Free ~~have~~Trade ~~fulfilled~~Zone ~~the~~has ~~requirements~~agreed ofto ~~reduction~~offer ofthe ~~content~~Company ofapproximately ~~heavy~~US$432,975 ~~metals~~(RMB 3,000,000) in ~~soil~~incentives and ~~improved~~provide ~~crop~~tax ~~yield~~preferences for the first three years of production. OnThe ~~December 17,~~manufacturing ~~2015,~~facility wewill ~~awarded~~specialize ~~Kangtan~~in ~~Gerui~~developing ~~(Beijing)~~and producing Kiwa Bio-Tech’s core ~~Co.~~microbes, ~~Ltd.~~the ~~(“Gerui”),~~fundamental acomponents ~~related~~for ~~party~~making ofhigh-quality ~~the~~bio-fertilizers. ~~Company~~The ~~who~~total ~~was founded~~facility inconstruction ~~Beijing~~area inis ~~April~~approximately 8.77 ~~2015~~acres, and ~~has~~will ~~fertilizer~~include ~~sales~~fermentation ~~permit~~and inproduction ~~China~~terminals, ~~the~~agricultural ~~right~~produce tosorting ~~sell~~facilities and ~~distribute~~storage, ~~the~~a ~~Company’s~~research ~~fertilizer~~and ~~products~~development ininstitute 3and ~~major~~corresponding ~~agricultural~~ancillary ~~regions~~facilities. ofThe ~~China—~~construction ~~Hainan~~of ~~Province,~~the ~~Hunan~~first ~~Province~~phase ~~and~~of ~~Xinjiang~~the ~~Autonomous~~manufacturing ~~Region~~facility ~~for~~is aexpected ~~period~~to ofbe ~~three~~completed ~~years~~in ~~commencing~~2020 ~~December~~and ~~17,~~have ~~2015.~~a Inproduction ~~September~~capacity ~~2016~~of 60,000 ~~Kiwa~~tons ~~Beijing~~of ~~obtained~~Kiwa aBio-Tech’s ~~fertilizer~~core ~~sales~~microbes. ~~permit from~~The ~~the~~annual ~~Chinese~~production ~~government~~value ~~and~~is ~~began~~expected to ~~sale~~be ~~the~~over ~~products~~US$65 ~~directly~~million to(approximately ~~customers~~462 inmillion ~~those 3 major agricultural regions~~RMB).

On October 1221, ~~2018~~2019, the Company ~~got~~transferred ~~the~~all ~~approval~~of ~~from~~its ~~the~~right, ~~Administrative~~title ~~Committee~~and ofinterest ~~Yangling~~in ~~Agricultural~~Kiwa ~~High~~Bio-~~tech~~Tech ~~Industry~~Asia ~~Demonstration Zone~~Holdings to(Shenzhen) ~~obtain~~Ltd. (Kiwa ~~land~~Asia), toKiwa ~~construct~~Baiao aBio-Tech ~~new~~(Beijing) ~~manufacturing~~Co., ~~facility~~Ltd. to(“Kiwa ~~help~~Beijing”), ~~meet~~Kiwa ~~the~~Bio-Tech ~~growing~~Products ~~demand~~(Shenzhen) ~~in China for bio-fertilizers~~Co., ~~Yangling~~Ltd. ~~Free~~(“Kiwa ~~Trade~~Shenzhen”), ~~Zone~~and ~~has~~Kiwa ~~agreed~~Bio-Tech toProducts ~~offer~~(Shenzhen) ~~the~~Co., ~~Company~~Ltd. ~~approximately~~Xian ~~US$432~~Branch Company,~~975~~ (~~RMB~~“Kiwa ~~3,000,000~~Xian”), to inthe ~~incentives~~Hong ~~and~~Kong ~~provide~~Sano ~~tax~~Group ~~preferences~~ Co., Ltd. for the ~~first~~HKD ~~three~~17,000,000 ~~years~~equivalent of ~~production~~US $2,169,862. ~~The~~As ~~manufacturing~~Kiwa ~~facility~~Asia, ~~will~~Kiwa ~~specialize~~Shenzhen, inKiwa ~~developing~~ Beijing, and ~~producing~~ Kiwa ~~Bio-Tech’s core~~Xian ~~microbes,~~has ~~the~~transferred ~~fundamental~~all ~~components~~of ~~for~~their ~~making high-quality~~ bio-~~fertilizers.~~technological ~~The~~products ~~total~~business ~~facility~~to ~~construction~~Kiwa ~~area is approximately 8.77 acres~~Yangling, ~~and~~this ~~will~~restructuring ~~include~~did ~~fermentation~~not ~~and~~constitute a ~~production~~strategic ~~terminals,~~shift ~~agricultural~~that ~~produce~~will ~~sorting~~have ~~facilities~~a ~~and~~major ~~storage,~~effect aon ~~research and~~the ~~development~~Company’s ~~institute~~operations and ~~corresponding~~financial ~~ancillary facilities~~results. ~~The~~Therefore, ~~construction of~~ the ~~manufacturing facility is expected to~~results beof ~~completed~~operations infor ~~2020~~Kiwa ~~and~~Asia, ~~have~~Kiwa aShenzhen, ~~production~~Kiwa ~~capacity of 60~~Beijing,~~000~~ ~~tons~~and of Kiwa ~~Bio-Tech’s~~Xian ~~core~~were ~~microbes.~~not ~~The~~reported ~~annual~~as ~~production value~~discontinued isoperations ~~expected~~under tothe guidance beof ~~over~~Accounting ~~US$65~~Standards ~~million~~Codification (~~approximately 462 million RMB~~“ASC”) 205.

The company plans to restructure its operations in China to relocate its activities previously located in Shenzhen and Beijing to Yangling and focus its research and development, and strains fermentation activities in the Yangling Free Trade Zone. The Company will streamline its corporate structure in China to conduct its business through its wholly-owned subsidiary, Kiwa Yangling, and will divest its interest in Kiwa Asia and all of its subsidiaries except for Kiwa Hebei and the Kiwa-Yangling Institute. Kiwa Hebei and Kiwa Institute will become subsidiaries of Kiwa Yangling. The Company expects to complete this restructuring and divestiture in early 2019, and plans to build four fertilizer production bases in China’s major agricultural regions in the next five years.

2. Overview of Business

We develop, manufacture, distribute and market innovative, cost-effective and environmentally safe bio-technological products for 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, ~~2018~~2019, we are currently generating revenues from our four bio-fertilizer products: 1) Biological Organic Fertilizer; 2) Compound Microbial Fertilizer; 3) Bio-Water Soluble 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, ~~2018~~2019, ~~four~~three customers accounted for 4346%, 2331%, ~~19%,~~and 1423% of the Company’s sales.

1. ~~Yangling~~Qingdao ~~Shaotao~~Lanhai ~~Agricultural~~Hanrui ~~Service~~Biotechnology Co., Ltd. (4346% of sales)

2. ~~Deluke~~Yangling ~~Agriculture~~Shaotao ~~Bio-Tech~~Agricultural ~~(Shenzhen)~~Service Co., Ltd. (2331% of sales)

3. Mingke Biotechnology Development (Shenzhen) Co., Ltd. (1923% of sales)

4.Should ~~Qingdao~~we ~~Lanhai~~lose ~~Hanrui~~any ~~Biotechnology~~of ~~Co.~~these large-scale customers in the future and are unable to obtain additional customers, ~~Ltd.~~our ~~(14%~~revenues ofand ~~sales)~~operation results might be adversely affected.

Should we lose any of these large 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, ~~2018~~2019, ~~three~~one ~~suppliers~~supplier ~~accounted~~Shandong ~~for~~Ronghua ~~42%,~~Bio-Tech ~~40%~~Co., 10Ltd. accounted for 94% of the Company’s total purchases, respectively.

1. Sankang Life Agricultural Technology (Shenzhen) Co., Ltd. (42% of purchase)

2. Shandong Ronghua Biological Technology Co., Ltd. (40% of purchase)

3. Weifang Deluke Fertilizer Co., Ltd. (10% of purchase)

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 they 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.

Research and Development

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.

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 China 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 larger scale of micro-flora. The micro-flora could significantly increase the beneficial microorganism 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.

Other

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, ~~2018~~2019, we employed 6316 full-time employees. The following table sets forth the number of our full-time employees by function as of December 31, ~~2018~~2019.

Employees and their Functions

Management & Administrative Staff	197	3044	%
Sales	114	1825	%
Technical & Engineering Staff	335	5231	%
Total	6316	100.00	%

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

~~During~~On ~~the~~April ~~year~~3, ~~ended~~2019, ~~December~~Kiwa ~~31,~~Bio-Tech ~~2018~~(Yangling) Co., ~~the~~Ltd. ~~company~~entered ~~leased~~an ~~six~~office ~~offices~~lease agreement with three-year term. Monthly lease payment is approximately RMB 14,000 or approximately of USD $2,000. The total useable space ofis 685 square meters.

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.~~

Fiscal Year 2019	High		Low
First Quarter	$	1.40	$	0.37
Second Quarter	$	1.09	$	0.52
Third Quarter	$	1.00	$	0.50
Fourth Quarter	$	0.38	$	0.02

Fiscal Year 2018	High		Low
First Quarter	$	1.77	$	1.70
Second Quarter	$	1.23	$	1.17
Third Quarter	$	1.02	$	0.97
Fourth Quarter	$	0.58	$	0.54

Fiscal Year 2017	High		Low
First Quarter	$	1.49	$	1.44
Second Quarter	$	2.61	$	2.48
Third Quarter	$	2.52	$	2.31
Fourth Quarter	$	1.92	$	1.83

Holders

As of December 31, ~~2018~~2019, there were approximately 500 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 shares of Company Common Stock issued for cash, the conversion of convertible debentures or as stock compensation to consultants during the period from January 1, ~~2018~~2019 through ~~April~~May 1229, ~~2019~~2020, which were not registered under the Securities Act:

Stock Purchase for cash	1,345,200 shares
Stock Purchase for Cash	220,000 shares
Consultant Fees	157,918 shares
Commitment shares	1,463,333 shares
Conversion of Convertible Note	126,045 shares
Consultant Fees	804,999 shares
Salary Compensation	30,632 shares
Conversion of Convertible Note	262,587,130 shares
Debt Settlement	695,959 shares
Salary Compensation	124,484 shares
Total	3,655,754 shares
Debt Settlement	300,000 shares
Total	265,499,946 shares

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, ~~2018~~2019 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, ~~2018~~2019 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 develops, manufactures, distributes and markets innovative, cost-effective and environmentally safe bio-technological products for agricultural 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.

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. (“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 Hong Kong Sano Group Co., Ltd. for 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 Company conduct the same business of 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 could affect our financial performance:

●

Change in the Chinese Government Policy on agricultural industry. The Chinese Government is continuously to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry. Below is a list of government policies issued by the Chinese Government to promote green environment and these policies are either directly or indirectly to encourage the end users of the bio-fertilizer to use more organic related products. Unfavorable changes to these policies could affect demand of our products that we produce and could materially and adversely affect the results of operations. Although we have generally benefited from these policies by using our bio-fertilizer to enhances the capacity of plants to transform inorganic materials to organic products, to boost overall plant health and productivity and not to deteriorate landfall soil.

	○	In April 2008, the Ministry of Finance of PRC issued Circular No. 2008-56 to tax-exempt value-added taxes on all organically fertilizer related products effectively from June 1, 2008.

	○	In January 2016, the PRC State Council official website issued statements to fasten the agricultural modernization process.

	○	In June 2016, the PRC State Council issued Circular No. 2016-31 to prevent further deterioration of landfall soil action plan.

	○	In February 2017, the PRC State Council official website issued statements to promote agricultural structural reform on accelerating the cultivation in the agricultural development.

	○	In February 2017, the Ministry of Agriculture of PRC issued Circular No. 2017-02 to carry out replacement of chemical bio-fertilizers by organically bio-fertilizers action plan on vegetables, fruits and teas planting.

	○	In April 2017, the Ministry of Agriculture of PRC issued Circular No. 2017-06 to implementing five major action plans on agriculture green development with an action plan for replacing chemical bio-fertilizers with organically bio-fertilizers on vegetables, fruits and teas planting under action plan No. 2-2.

	○	In April 2018, at the second meeting of the 13^th National People’s Congress meeting, the Minister of the Agriculture and Rural Affairs has pronoun that the Chinese government will continue to promote green environment, to ensure food safety and food qualify for the people in the PRC, and to provide more education and training cause to the farmer in the Agriculture industry. Follow up with the second meeting, in July 2018, the Chinese government is in the process of setting up some government grants to these companies or individuals, including but not limited, organic fertilizer production companies, organic fertilizer raw materials (livestock and poultry excrement) storage and transportation companies, users of organic fertilizer, and users of organic fertilizer production machinery.

●

Innovation Efforts. We strive to produce the most technically and scientifically advanced products for our customers and maintained close relationships with institutes in the PRC.

○ 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 China 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 larger scale of micro-flora. The micro-flora could significantly increase the beneficial microorganism 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. On October 12, 2018, Kiwa Bio-Tech got the approval from the Administrative Committee of Yangling Agricultural High-tech Industry Demonstration Zone to obtain land use rights 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 Kiwa Bio-Tech approximately US$432,975 (3,000,000 RMB) 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 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 RMB 462 million).11

	●	Experienced Management. Management’s technical knowledge and business relationships give us the ability to secure more sales orders with our customers. If there were to be any significant turnover in our senior management, it could deplete the institutional knowledge held by our existing senior management team.
	●	Large Scale Customer Relationship. We have contracts with major customers that are distributors of our products. Our sales efforts focus on these distributors which place large recurring orders. For the year ended December 31, 2018, four customers accounted for 43%, 23%, 19%, 14% of the Company’s total sales. Should we lose any large-scale customer in the future and are unable to obtain additional customers, our revenues will suffer.

○

On October 12, 2018, Kiwa Bio-Tech got the approval from the Administrative Committee of Yangling Agricultural High-tech Industry Demonstration Zone to obtain land use rights 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 Kiwa Bio-Tech 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 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 RMB462 million).

	●	Experienced Management. Management’s technical knowledge and business relationships give us the ability to secure more sales orders with our customers. If there were to be any significant turnover in our senior management, it could deplete the institutional knowledge held by our existing senior management team.

	●	Large Scale Customer Relationship. We have contracts with major customers that are distributors of our products. Our sales efforts focus on these distributors which place large recurring orders. For the year ended December 31, 2019, three customers accounted for 46%, 31%, and 23% of the Company’s total sales. Should we lose any large-scale customer in the future and are unable to obtain additional customers, our revenues will suffer.

●

Competition. Our competition includes a number of publicly traded companies in the PRC and privately-held PRC-based companies that produce and sell products similar to ours. 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 there 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.

~~Results of Operations for the Year ended December 31, 2018 and December 31, 2017~~12

~~The~~Results ~~following table summarizes the results~~ of ~~our~~Operations ~~operations~~ for the ~~years~~Years ended December 31, ~~2018~~2019 and ~~December 31, 2017, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.~~2018

	Year Ended December 31,						Amount Increase			Percentage Increase
Statement of Operations Data:	2018			2017			(Decrease)			(Decrease)
Revenues	$	30,650,402		$	17,270,069		$	13,380,333			77	%
Cost of goods sold		(22,391,952	)		(11,845,874	)		(10,546,078	)		89	%
Gross profit		8,258,450			5,424,195			2,834,255			52	%
Operating expenses
Research and development expense		122,774			147,992			(25,218	)		(17	)%
Selling expenses		617,387			483,045			134,342			28	%
General and administrative expenses		4,928,943			2,997,027			1,931,916			64	%
Total operating expenses		5,669,104			3,628,064			2,041,040			56	%
Operating Income		2,589,346			1,796,131			793,215			44	%
Other income/(expense), net
Change in fair value of derivative liabilities		241,312			321,851			(80,539	)		(25	)%
Interest expense		(634,874	)		(524,333	)		(110,541	)		21	%
Other income/(expense)		(1,185	)		382,126			(383,311	)		(100	)%
Exchange loss		55,444			(58,757	)		114,201			(194	)%
Total other income/(expense), net		(339,303	)		120,887			(460,190	)		(381	)%
Income from continuing operations before income taxes		2,250,043			1,917,018			333,025			17	%
Income taxes		(1,906,222	)		(1,103,315	)		(802,907	)		73	%
Income from continuing operations	$	343,821		$	813,703		$	(469,882	)		(58	)%
Income (loss) from discontinued operations, net of taxes		-			4,495,333			(4,495,333	)		(100	)%
Net Income	$	343,821		$	5,309,036		$	(4,965,215	)		(94	)%

The following table summarizes the results of our operations for the years ended December 31, 2019 and 2018, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

	Years Ended December 31,						Amount Increase			Percentage Increase
Statement of Operations Data:	2019			2018			(Decrease)			(Decrease)

Revenues	$	40,089,457		$	30,650,402		$	9,439,055			31	%
Cost of goods sold		(30,757,460	)		(22,391,952	)		(8,365,508	)		37	%
Gross profit		9,331,997			8,258,450			1,073,547			13	%
Operating expenses
Provision for deferred cost of goods sold		2,411,006			-			2,411,006			100	%
Research and development expense		-			122,774			(122,774	)		(100	)%
Selling expenses		199,664			617,387			(417,723	)		(68	)%
General and administrative expenses		4,379,851			4,928,943			(549,092	)		(11	)%
Loss on sale of subsidiaries		3,527,254			-			3,527,254			100	%
Total operating expenses		10,517,775			5,669,104			4,848,671			86	%
Operating income/(expense)		(1,185,778	)		2,589,346			(3,775,124	)		(146	)%
Other income/(expense), net
Change in fair value of derivative liabilities		101,765			241,312			(139,547	)		(58	)%
Interest expense		(3,943,751	)		(634,874	)		(3,308,877	)		521	%
Other income/(expense)		37,253			(1,185	)		38,438			(3,244	)%
Exchange gain		15,296			55,444			(40,148	)		(72	)%
Total other expense		(3,789,437	)		(339,303	)		(3,450,134	)		1,017	%
Income (loss) from continuing operations before income taxes		(4,975,215	)		2,250,043			(7,225,258	)		(321	)%
Provision for income taxes
Current		(2,091,736	)		(1,906,222	)		(185,514	)		10	%
Deferred		431,655			-			431,655			100	%
Income taxes		(1,660,081	)		(1,906,222	)		246,141			(13	)%
Net Income (loss)	$	(6,635,296	)	$	343,821		$	(6,979,117	)		(2,030	)%

Revenue

Revenue increased by approximately $139.4 million or 7731%, to approximately $3040.71 million in the year ended December 31, ~~2018~~2019 from approximately $1730.37 million in the year ended December 31, ~~2017~~2018. ~~The~~More ~~increase~~sales isare ~~mainly~~achieved ~~due~~for ~~to:~~most 1)of aour ~~$11.6~~four ~~million~~product ~~increase~~lines in ~~revenues due~~quantities ~~to more sales~~ are ~~achieved~~ due to the good quality of our products and more reputation gained in different regions of the PRC, such as Hainan Province, Guangdong Province and ~~Shanxi~~Shaanxi Province upon establishment of our sales ~~office~~channel in different regions~~, and 2) a $1~~.8 million increase in revenues of introduction of our new product, Bio-water soluble fertilizer and Microbial Agent, during the year ended December 31, 2018. In addition, there are approximately $7.0 million being deferred for the year ended December 31, 2018, as compared to $27,568 of our revenues being deferred for the year ended December 31, 2017, as discussed in the non-GAAP analysis section below.

We currently realized revenue in four major product categories of Biological Organic Fertilizer, Compound Microbial Fertilizer, Bio-Water Soluble Fertilizer, and Microbial Inoculum Fertilizer. Our revenues from our major product category are summarized as follows:

	For the year ended December 31, 2018		For the year ended December 31, 2017		Change		Change (%)
Biological Organic Fertilizer
Sold and shipped in USD	$	15,311,862	$	9,219,453	$	6,092,409		66	%
Quantity sold in tons		84,139		51,877		32,262		62	%
Average selling price	$	181.98	$	177.72	$	4.26		2	%
Compound Microbial Fertilizer
Sold and shipped in USD	$	13,499,578	$	8,050,616	$	5,448,962		68	%
Quantity sold in tons		40,585		24,781		15,804		64	%
Average selling price	$	332.62	$	324.87	$	7.75		2	%
Bio-Water Soluble Fertilizer
Sold and shipped in USD	$	1,825,752	$	-	$	1,825,752		100	%
Quantity sold in tons		2,733		-		2,733		100	%
Average selling price	$	668.04	$	-	$	667.98		100	%
Microbial Inoculum Fertilizer
Sold and shipped in USD	$	13,210	$	-	$	13,210		100	%
Quantity sold in tons		18		-		18		100	%
Average selling price	$	733.89	$	-	$	733.88		100	%
Total
Sold and shipped in USD	$	30,650,402	$	17,270,069	$	13,380,333		77	%
Quantity sold in tons		127,475		76,658		50,817		66	%
Average selling price	$	240.44	$	225.29	$	15.16		7	%

Average selling prices of Biological Organic Fertilizers and Compound Microbial Fertilizer increased by $4.26 or 2% and $7.75 or 2%, respectively in the year ended December 31, 2018 as compared with the same period of 2017. The increase in average selling price is due to the fluctuation of exchange rate.

	For the year ended December 31, 2019		For the year ended December 31, 2018		Change			Change (%)

Biological Organic Fertilizer
Sold and shipped in USD	$	16,026,941	$	15,311,862	$	715,079			5	%
Quantity sold in tons		92,229		84,139		8,090			10	%
Average selling price	$	173.77	$	181.98	$	(8.21	)		(5	)%

Compound Microbial Fertilizer
Sold and shipped in USD	$	20,770,479	$	13,499,578	$	7,270,901			54	%
Quantity sold in tons		65,196		40,585		24,611			61	%
Average selling price	$	318.59	$	332.62	$	(14.03	)		(4	)%

Bio-Water Soluble Fertilizer
Sold and shipped in USD	$	3,292,037	$	1,825,752	$	1,466,285			80	%
Quantity sold in tons		5,050		2,733		2,317			85	%
Average selling price	$	651.89	$	668.04	$	(16.15	)		(2	)%

Microbial Inoculum Fertilizer
Sold and shipped in USD	$	-	$	13,210	$	(13,210	)		(100	)%
Quantity sold in tons		-		18		(18	)		(100	)%
Average selling price	$	-	$	733.89	$	(733.89	)		(100	)%

Total
Sold and shipped in USD	$	40,089,457	$	30,650,402	$	9,439,055			31	%
Quantity sold in tons		162,475		127,475		35,000			27	%
Average selling price	$	246.74	$	240.44	$	6.30			3	%

~~Because~~Average ~~the~~selling ~~Chinese~~prices ~~Government~~of isBiological ~~continuously~~Organic ~~to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry~~Fertilizers, ~~we expect our revenues from our innovated and highly effective products,~~ Compound Microbial Fertilizer, and Bio-Water Soluble Fertilizer, ~~and~~decreased ~~Microbial Inoculum Fertilizer will continue to grow in a higher rate than that from~~by ~~Biological Organic Fertilizer~~$8.21 ~~Our~~or ~~Compound Microbial Fertilizer~~5%, ~~Bio-Water~~$14.03 ~~Soluble~~or ~~Fertilizer,~~4% and ~~Microbial~~$16.15 ~~Inoculum~~or ~~Fertilizer generally~~2%, ~~have~~respectively ain ~~higher effectiveness on~~ the ~~productivity~~year ofended ~~crops~~December ~~that~~31, ~~are~~2019 ~~suitable~~as ~~for~~compared ~~promoting~~with ~~green~~the ~~environment.~~same ~~In addition,~~period ~~our~~of ~~marketing~~2018. ~~team~~This decrease is ~~expanding~~mainly due to the ~~Western~~fluctuation ~~areas~~ of ~~China~~exchange ~~and~~rate ~~Hainan~~as ~~province~~Chinese ~~and~~Yuan wedepreciated ~~expect~~against ~~our~~U.S. ~~revenues~~dollars ~~will~~by ~~continue to~~approximately ~~grow~~4% infor ~~2019. Meanwhile, we expect to continue to gain more market shares in our existing sales channel bases in~~ the ~~Northern and~~year ~~the~~2019 ~~Southern~~compares ~~areas of China due~~ to the ~~good~~year ~~quality of the products and better reputation in the industry~~2018.

~~Non~~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, Bio-~~GAAP~~Water Soluble Fertilizer, and Microbial Inoculum Fertilizer will continue to grow in a higher rate than that from ~~analysis~~Biological Organic Fertilizer. Our Compound Microbial Fertilizer, 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 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.

Our strategy on the expansion of our business was to gain market shares 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 get paid. Starting in March 2018, the Company began to use a supply chain financing model, which the Company’s customers engage with third party financing companies to advance the Company’s accounts receivable on its behalf without recourse to the Company. This model has a one-year trial period. The Company’s customers are required to purchase an insurance product to cover the risk of bad weather or any other reason which they are not able to harvest crops and to realize profits of repaying the third-party financing companies. This model allows the Company to collect its accounts receivables sooner than the 3 to 9 months crop growing period. The Company deemed the collectability of payment may not be reasonably assured until after the Company get paid from these financing companies. For those sales contracts that the Company has shipped its products but the payment is contingent on collections of payments from the downstream customers or is contingent on the approval of the financing companies to advance payment on behalf of the Company’s customers, the Company considers the revenue recognition criteria using the five-step model under the new guidance are not met and therefore defers the revenue and cost of goods sold until payments are collected.

We have sold and shipped approximately $37.7 million of our products during the year ended December 31, 2018, among which $7.0 million of the shipment did not meet the the collectability criteria of revenue recognition and were deferred to be recognized in the future periods when our collectability of payments will be assured, as compared to $27,568 were deferred for the year ended December 31, 2017.

Our sales and shipment from our four products categories are summarized as follows including revenue recognized and deferred under U.S. GAAP:

	For the year ended December 31, 2018		For the year ended December 31, 2017		Change		Change (%)
Biological Organic Fertilizer
Revenue in USD	$	18,669,770	$	9,247,713	$	9,422,057		102	%
Quantity sold in tons		102,580		52,036		50,544		97	%
Average selling price	$	182.00	$	177.72	$	4.28		2	%
Compound Microbial Fertilizer
Sold and shipped in USD	$	17,158,885	$	8,050,616	$	9,108,269		113	%
Quantity sold in tons		51,587		24,781		26,806		108	%
Average selling price	$	332.62	$	324.87	$	7.75		2	%
Bio-Water Soluble Fertilizer
Sold and shipped in USD	$	1,826,514	$	-	$	1,826,514		100	%
Quantity sold in tons		2,734		-		2,734		100	%
Average selling price	$	668.07	$	-	$	668.07		100	%
Microbial Inoculum Fertilizer
Sold and shipped in USD	$	13,210	$	-	$	13,210		100	%
Quantity sold in tons		18		-		18		100	%
Average selling price	$	733.89	$	-	$	733.89		100	%
Total
Sold and shipped in USD	$	37,668,379	$	17,298,329	$	20,370,050		118	%
Quantity sold in tons		156,919		76,817		80,103		104	%
Average selling price	$	240.05	$	225.19	$	14.86		7	%

The sales and shipment of all our products increased by $20.4 million in the year ended December 31, 2018 as compared to the year ended December 31, 2017. The increase is due to: 1) a $18.6 million increase in revenues due to more sales are achieved due to the good quality of our products and more reputation gained in different regions of the PRC, such as Hainan Province, Guangdong Province and Shanxi Province upon establishment of our sales office in different regions, and 2) a $1.8 million increase in revenues of introduction of our new product, Bio-water soluble fertilizer and Microbial Agent, during the year ended December 31, 2018.

Average selling prices of Biological Organic Fertilizers and Compound Microbial Fertilizer increased by $4.28 or 2% and $7.75 or 2%, respectively, in the year ended December 31, 2018 as compared with the same period of 2017. The increase in average selling price is due to the fluctuation of exchange rate.

Cost of Revenue

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

	For the year ended December 31, 2018		For the year ended December 31, 2017		Change			Change (%)
	For the year ended December 31, 2019		For the year ended December 31, 2018		Change			Change (%)
Biological Organic Fertilizer
Cost of sold and shipped in USD	$	1011,~~470~~233,~~687~~403	$	610,~~196~~470,~~511~~687	$	4762,~~274,176~~716			697	%
Quantity sold and shipped in tons		8492,~~139~~229		5184,~~877~~139		328,~~262~~090			6210	%
Average unit cost	$	~~124~~121.4580	$	~~119~~124.45	$	5(2.0065	)		4(2	)%
Compound Microbial Fertilizer
Cost of sold and shipped in USD	$	1017,~~644~~264,~~951~~806	$	510,~~649~~644,~~363~~951	$	46,~~995~~619,~~588~~855			8862	%
Quantity sold and shipped in tons		4065,~~585~~196		2440,~~781~~585		1524,~~804~~611			6461	%
Average unit cost	$	~~262~~264.2981	$	~~227~~262.9729	$	342.3252			151	%
Bio-Water Soluble Fertilizer
Cost of sold and shipped in USD	$	12,~~264~~259,~~068~~251	$	-1,264,068	$	1995,~~264,068~~183			~~100~~79	%
Quantity sold and shipped in tons		25,~~733~~050		-2,733		2,~~733~~317			~~100~~85	%
Average unit cost	$	~~462~~447.5238	$	-462.52	$	~~462~~(15.5214	)		~~100~~(3	)%
Microbial Inoculum Fertilizer
Cost of sold and shipped in USD	$	~~12,246~~-	$	-12,246	$	(12,246	)		(100	)%
Quantity sold and shipped in tons		18-		-18		(18	)		(100	)%
Average unit cost	$	~~680.33~~-	$	-680.33	$	(680.33	)		(100	)%
Total
Cost of sold and shipped in USD	$	2230,~~391~~757,~~952~~460	$	1122,~~845~~391,~~874~~952	$	108,~~546~~365,~~078~~508			8937	%
Quantity sold and shipped in tons		~~127~~162,475		76127,~~658~~475		5035,~~817~~000			6627	%
Average unit cost	$	~~175~~189.6631	$	~~154~~175.5366	$	~~21.~~13.65			148	%

Cost of revenue from Biological Organic Fertilizer, Compound Microbial Fertilizer, and Bio-Water Soluble Fertilizer, ~~and Microbial Inoculum Fertilizer~~ increased by approximately $40.38 million, $56.06 million, and $1.30 million, ~~and $12,246~~ or 697%, 8862%, ~~100%~~ and ~~100~~79% to approximately ~~$10.5~~ ~~million,~~ $1011.62 million, $117.3 million, and $~~12,246~~2.3 million in the year ended December 31, ~~2018~~2019 from approximately $610.25 million, $510.6 million, ~~$0,~~ and $01.3 million in the year ended December 31, ~~2017~~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 ~~line~~the ~~with~~agricultural industry, which offset by the ~~revenue~~fluctuation ~~increase~~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 ~~and~~decreased ~~Compound Microbial Fertilizer increased~~ by $52.0065 or 42% ~~and $34.32 or 15%, respectively,~~ in the year ended December 31, ~~2018~~2019 as compared with the same period of ~~2017~~2018. The ~~increase~~decrease is mainly due to the ~~RMB~~fluctuation ~~appreciation~~ of exchange rate changes as Chinese Yuan depreciated against U.S. ~~USD~~dollars ofby approximately 24.4% ~~along~~and ~~with~~offset ~~the~~by ~~ingredient~~a ~~mix~~slightly increase in overall purchase price of the raw material. ~~price~~Average ~~increase.~~unit cost ~~The~~of ~~Chinese~~Compound ~~government~~Microbial ~~has~~Fertilizer ~~implemented strict~~increased ~~environmental~~by ~~protection~~$2.52 ~~policies,~~or ~~resulting~~1% is mainly due to increase in aoverall ~~variety~~purchase price of raw material. Average ~~prices~~unit ~~increased,~~cost ~~therefore,~~of Bio-Water Soluble Fertilizer decreased by $15.14 or 3% is mainly due to the ~~average~~RMB ~~unit~~depreciation against USD ~~cost~~of ~~goes~~approximately ~~higher~~4.4% along with a 2.6% decrease due to we outsourced manufacturing to a third party vendor in the year ended December 31, 2019 compares to the year ended December 31, 2018.

16We did not sell any Microbial Inoculum Fertilizer during the year ended December 31, 2019. The company is adjusting the formula of Microbial Inoculum Fertilizer and plans to re-make the packaging and launch it in the market in August, 2020.

~~Non-GAAP analysis~~15

Our cost of goods sold for our four products categories are summarized as follows including cost of goods sold recognized and deferred under U.S. GAAP:

	For the year ended December 31, 2018		For the year ended December 31, 2017		Change		Change (%)
Biological Organic Fertilizer
Cost of sold and shipped in USD	$	12,733,657	$	6,213,237	$	6,520,420		105	%
Quantity sold and shipped in tons		102,580		52,017		50,563		97	%
Average unit cost	$	124.13	$	119.45	$	4.68		4	%
Compound Microbial Fertilizer
Cost of sold and shipped in USD	$	13,512,022	$	5,649,363	$	7,862,659		139	%
Quantity sold and shipped in tons		51,587		24,781		26,806		108	%
Average unit cost	$	261.93	$	227.97	$	33.96		15	%
Bio-Water Soluble Fertilizer
Sold and shipped in USD	$	1,264,592	$	-	$	1,264,592		100	%
Quantity sold in tons		2,734		-		2,734		100	%
Average unit cost	$	462.54	$	-	$	462.54		100	%
Microbial Inoculum Fertilizer
Sold and shipped in USD	$	12,246	$	-	$	12,246		100	%
Quantity sold in tons		18		-		18		100	%
Average unit cost	$	680.33	$	-	$	680.33		100	%
Total
Sold and shipped in USD		27,522,517		11,862,600		15,659,917		132	%
Quantity sold in tons		156,919		76,798		80,121		104	%
Average unit cost		175.39		154.46		20.93		14	%

The costs of goods sold of all of our products increased in the year ended December 31, 2018 as compared to the year ended December 31, 2017, which is in line with the revenue increase.

Average unit cost of Biological Organic Fertilizers and Compound Microbial Fertilizer increased by $4.68 or 4%, or $33.96 or 15%, respectively, in the year ended December 31, 2018 as compared with the same period of 2017 mainly due to the RMB appreciation against USD of approximately 2% along with the ingredient mix of raw material price increase. The Chinese government has implemented strict environmental protection policies, resulting in a variety of raw material prices increased, therefore, the average unit cost goes higher.

Gross Profit

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

	For the year ended December 31, 2018			For the year ended December 31, 2017			Change			Change (%)
	For the year ended December 31, 2019			For the year ended December 31, 2018			Change			Change (%)
Biological Organic Fertilizer
Gross Profit	$	4,~~841~~793,~~175~~538		$	34,~~022~~841,~~942~~175		$	1(47,~~818,233~~637	)		60(1	)%
Gross Profit Percentage		3230	%		3332	%		(1)2	)%		(36	)%
Compound Microbial Fertilizer
Gross Profit	$	23,~~854~~505,~~627~~673		$	2,~~401~~854,~~253~~627		$	~~453~~651,~~374~~046			1923	%
Gross Profit Percentage		2117	%		3021	%		(9)4	)%		(~~30)~~19	)%
Bio-Water Soluble Fertilizer
Gross Profit	$	~~561~~1,~~684~~032,786		$	-561,684		$	~~561~~471,~~684~~102			~~100~~84	%
Gross Profit Percentage		31	%		-31	%		31-	%		~~100~~-	%
Microbial Inoculum Fertilizer
Gross Profit	$	~~964~~-		$	-964		$	(964	)		(100	)%
Gross Profit Percentage		7-	%		-7	%		(7	)%		(100	)%
Total
Gross Profit		89,~~258~~331,~~450~~997			58,~~424~~258,~~195~~450			21,~~834~~073,~~255~~547			5213	%
Gross Profit Percentage		2723	%		3127	%		(4)	)%		(~~13)~~15	)%

Gross profit percentage for Biological Organic Fertilizer decreased from 3332% for the year ended December 31, ~~2017~~2018 to 3230% for the year ended December 31, ~~2018~~2019 mainly due to the ~~increase~~decrease in average unit cost isless ~~slightly higher~~ than ~~increase~~the decrease in average selling price of our products 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 ~~Compound~~Bio-Water ~~Microbial~~Soluble ~~decreased~~Fertilizer ~~from~~remains ~~30%~~unchanged ~~for~~as ~~the year ended December~~ 31~~, 2017 to 21~~% for ~~the~~ year ended December 31, ~~2018~~2019 ~~mainly~~and ~~due~~2018, ~~to the increase in selling price of our products is lower than the increase in unit cost as discussed above~~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~~ $~~123,000~~0 ~~(RMB 801,630)~~ for the year ended December 31, ~~2018~~2019, decreased by approximately $25123,000 or 17100% from approximately $~~148~~123,000 (RMB 1801,~~000,000~~630) for the year ended December 31, ~~2017~~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 has expired on November 19, 2018. ~~The~~We ~~Company~~did ~~contributed~~not ~~approximately~~have ~~$122,774~~such ~~(RMB~~expenses ~~801,630) for~~during the year ended December 31, ~~2018 and approximately $148,000 (RMB 1,000,000) for the year ended December 31, 2017~~2019.

Selling Expenses

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, ~~2018~~2019 and ~~2017~~2018 were approximately $~~617~~200,000 and $~~483~~617,000, respectively. ~~Selling~~The ~~expenses~~decrease in ~~include~~selling ~~salaries~~expenses is because we were in the position of ~~sales~~integrating ~~personnel,~~and ~~sales~~closing ~~commission,~~our ~~travel~~offices from different locations and consolidated ~~entertainment~~our asbio-technological ~~well~~products asbusiness ~~freight~~to ~~out~~Kiwa ~~expenses~~Yangling. The ~~increase~~ decrease in selling expenses is mainly due to ana ~~increase~~ decrease of approximately $67273,000 ~~salary~~of ~~expenses~~sales aspersonnel wesalary, ~~have~~a ~~hired~~decrease ~~more~~of ~~sales managers~~office, ~~for~~insurance, ~~marketing~~travel, ofentertainment ~~our~~expenses ~~products,~~ and another selling ~~increase~~expenses of approximately $67118,000, and a decrease of freight out ~~expense,~~ and ~~travel~~shipping ~~and~~expenses ~~entertainment~~as our customers required ~~expense~~to ~~because~~pay offor ~~the~~its ~~expansion~~own shipping costs in 2019 of ~~our~~approximately ~~business~~$50,000, inoffset ~~2018~~by an increase of approximately $23,000 advertising expenses.

General and Administrative Expenses

~~General~~G&A expenses include professional fees, depreciation and amortization, insurance, salaries, employee benefits, travel, auto expense, meal and entertainment, rent, office expense and telephone expense and other miscellaneous G&A expenses. General and administrative (“G&A”) expenses decreased ~~increased~~ by approximately $10.95 million or 6411% from approximately $34.09 million in the year ended December 31, ~~2017~~2018 to approximately $4.94 million in the same period in ~~2018~~2019. ~~General~~The ~~and~~decrease ~~administrative~~in G&A expenses ~~include~~ ~~professional~~is ~~fees,~~because ~~officers’~~we ~~compensation,~~were ~~depreciation~~in ~~and~~the ~~amortization,~~position ~~insurance,~~of ~~salaries, employee benefits,~~integrating ~~travel,~~and ~~auto~~closing ~~expense,~~our ~~meal~~offices ~~and~~from ~~entertainment,~~different ~~rent,~~location ~~office expense~~ and ~~telephone~~consolidated ~~expense~~our ~~and~~bio-technological ~~other~~products ~~miscellaneous~~business ~~G&A~~to ~~expenses~~Kiwa Yangling. The ~~increase~~decrease in G&A expenses is mainly due to ~~the~~a ~~increase~~decrease of ~~professional~~approximately ~~fees~~$783,000 ~~such~~salaries asexpense ~~attorneys,~~and ~~auditors,~~employee ~~financial consultants~~benefits, ITa ~~consultants,~~decrease ~~and~~of ~~business~~approximately ~~strategic~~$258,000 ~~and~~rent ~~development~~expense ~~consultants,~~and ~~for~~related ~~approximately~~utilities ~~$1.7~~and ~~million~~management asfees, weand ~~need~~a ~~more~~decrease ~~professional~~of approximately to$154,000 ~~assist~~consulting and ~~support~~professional usfees. ~~for~~This ~~our~~decrease ~~business~~is ~~expansion~~offset ~~and~~by ~~the~~an increase inof ~~salary expense for~~ approximately $~~0.6 million~~410, ~~which~~000 ~~offset~~of bymeals ~~the~~and entertainment, ~~decrease~~travel, ofoffice ~~auto~~ expense, ~~for~~and ~~approximately~~other ~~$0.1~~G&A ~~million~~expenses, ~~the~~and ~~decrease~~an increase of ~~employee~~approximately ~~benefits~~$235,000 ~~expenses~~bad ~~for~~debt ~~approximately~~expenses ~~$0.1~~according ~~million,~~to ~~and~~ the ~~decrease~~company policy of ~~travel~~allowance ~~expense~~ for ~~approximately~~doubtful $0accounts.~~1 million.~~

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 Expense

Net interest expense was $~~634~~3,~~874~~943,751 and $~~524~~634,~~333~~874 for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively, representing an ~~increase~~ increase of $~~110~~3,~~541~~308,877 or 21521%. 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, ~~2018~~2019 and ~~2017~~2018. The increase in interest expenses is mainly attributed to ~~newly~~the ~~issuance~~six ~~a 15~~12% convertible ~~note~~notes issued induring the ~~middle~~year ofended ~~May~~December 31, ~~2017~~2019 where we ~~incurred~~did ~~only~~not ~~seven-and-a-half-month~~have ~~interest expense~~these ~~during~~in the year ended December 31, ~~2017 on the notes~~2018.

~~Income~~Provision ~~(Loss)~~for ~~from~~income ~~discontinued operations, net of~~ taxes

~~Gain~~Provision ~~from~~for ~~discontinued~~income ~~operations, net of~~ taxes was $01,660,081 and $41,~~495~~906,~~333~~222 for the ~~year~~years ended December 31, ~~2018~~2019 and ~~2017~~2018, ~~which~~respectively, ~~results an~~representing ~~decrease~~a decrease of $4246,~~495,333~~141 ~~gain~~or ~~from discontinued operations, net of taxes for the years ended December 31, 2018 and 2017~~13%. On ~~February~~Our ~~11,~~profitable ~~2017,~~PRC ~~the~~subsidiaries ~~Company~~incurred ~~executed~~more anof ~~Equity~~taxable ~~Transfer~~income ~~Agreement~~in ~~with~~2019 ~~Dian~~as ~~Shi~~compared ~~Cheng~~to ~~Jing (Beijing) Technology Co. (“Transferee”) whereby~~ the ~~Company~~same ~~transferred~~period ~~all of its right, title and interest~~ in 2018 ~~Kiwa~~offset ~~Shandong~~by to the ~~Transferee~~deferred ~~for~~income ~~RMB~~tax ~~1.00.~~benefits ~~The~~resulted ~~government processing~~from of the ~~transaction~~temporary ~~was~~difference ~~completed on April 12, 2017. The Company recorded a net gain~~ of ~~$4,495,333~~accrued ~~during~~expenses ~~the~~between ~~year~~book ~~ended~~basis ~~December~~and ~~31,~~tax ~~2017 based on the discharge of the excess liabilities over the assets of the Kiwa Shandong~~basis.

Net Income

During the fiscal year ~~2018~~2019, net ~~income~~loss was $~~343~~6,~~821~~635,296, compared with $a net income of $5343,~~309,036~~821 ~~for~~or the same period of ~~2017~~2018, representing a decrease of $46,~~965~~979,~~215~~117 or 942,030%. 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, ~~2018~~2019, and the consolidated statements of operations and comprehensive income, and cash flows for the year ended December 31, ~~2018~~2019, and the related notes thereto, for further discussion of our accounting policies.

Revenue Recognition

On January 1, 2018, wethe 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~~ 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 accounts for a contract with a customer when the contract is committed in writing, the rights of the 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 title and ownership of the goods are transferred upon shipment to the customer by the Company to consider control of goods are transferred to its customer and collectability of payment is reasonably assured. The Company’s revenues are recognized at a point in time after all performance obligations are satisfied.

1918

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. Collectability 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 with 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 product for which all revenue recognition criteria under the five-step model have not yet been met. Though these contracts are not considered 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, the Company recognizes a receivable and a corresponding deferred revenue upon shipment. Deferred cost of goods sold related 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 recognized. The Company’s provision for deferred cost of goods sold is made based on historical collection experience on such related accounts receivable and realizability of 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.

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.

2019

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. ~~As of December 31, 2018, Kiwa Hebei is committed to pay a RMB10,000,000 based on the payment milestone in the equity purchase agreement.~~

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, ~~2018~~2019, our working capital was approximately $118.96 million, ~~and~~however, we had ~~only~~ only cash of approximately $8,000, with remaining current assets mainly composed of advance to suppliers, ~~accounts~~notes ~~receivables~~receivable, ~~prepaid~~other ~~expenses~~receivables, and ~~deferred~~prepaid ~~cost of goods sold~~expenses. In addition, we sold Convertible Promissory Notes (“Notes”) in the aggregate ~~principal~~ principal amount of $1,~~665~~901,~~000.00~~250 infor ~~February~~the ~~and~~year ~~March~~ended 2019.

We may have to consider supplementing our available sources of funds for operations through the following sources:

	●	We will continuously seek additional equity financing to support our working capital;
	●	other available sources of financing from PRC banks and other financial institutions; and
	●	financial support and credit guarantee commitments from our major shareholder.

Based on the above considerations, our management is of the opinion that it 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. Therefore, our consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal 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 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 results of operations.

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

	Years Ended December 31,
	2018			2017
		2019			2018
Net cash used in operating activities	$	(1,648,963	)	$	(5,649,150	)
Net cash provided by (used in) operating activities	$	183,067		$	(1,648,963	)
Net cash used in investing activities		(522,~~992~~070,522	)		(~~815~~52,~~126~~992	)
Net cash provided by financing activities		~~510~~1,~~707~~482,086			7510,~~534,356~~707
Effect of exchange rate changes on cash		~~115~~405,~~568~~475			~~(10~~115,568	)
Net increase (decrease) in cash		~~(1,075,680~~106	)		(1,~~070~~075,~~070~~680	)
Cash, beginning of year		17,~~083,539~~859			131,~~469~~083,539
Cash, end of year	$	7,~~859~~965		$	17,~~083,539~~859

Operating Activities

Net cash ~~used~~provided inby operating activities was approximately $10.62 million for the year ended December 31, ~~2018~~2019, compared to cash used in in operating activities of approximately $51.6 million for the same period in ~~2017~~2018. Net cash ~~used~~provided inby operating activities for ~~the~~ the year ended December 31, ~~2018~~2019 was primarily attributable to 1) ~~increased~~a decrease of approximately of $3.94 million ~~advance~~accounts ~~to suppliers~~receivable, as2) weapproximately ~~previously~~$3.5 ~~secure~~million ~~current~~loss ~~market~~on ~~price~~selling ofthose ~~raw~~subsidiaries, ~~materials~~3) ~~purchases~~approximately ~~which~~$2.7 wemillion ~~were~~provision ~~anticipating~~for ~~the~~deferred ~~raw~~cost ~~materials price is~~of ongoods ~~the~~sold ~~rise~~and inbad ~~the~~debt ~~near~~expenses, ~~future; 2~~4) ~~increase of~~ approximately $0.2.1 million ofaccrued ~~rent~~interest, ~~deposit~~penalties and ~~other~~financing ~~receivables;~~costs 3of convertible note, 5) an increase of approximately $52.1 million ofin ~~deferred~~tax ~~cost~~payables, of6) ~~goods~~a ~~sold~~decrease asof weapproximately ~~deferred~~$1.6 ~~our~~million ~~revenues and cost~~ of ~~goods sold due to our evaluation~~inventories of7) ~~the~~approximately ~~collectability~~$1.9 ~~with~~million ~~our~~stock ~~customers~~compensation ~~until~~for ~~all~~services, ~~revenue~~8) ~~recognition~~a ~~criteria~~decrease ~~under the five-step model have been met; 4) increase~~ of approximately $01.2 million of ~~gain~~prepaid ~~on derivative liabilities; offset by 5~~expenses, 9) ~~net~~an ~~income~~increase of approximately $0.3 million~~; and~~ 6)in ~~approximately~~other ~~$2.2~~payables ~~million~~and ofaccruals, ~~non-cash~~10) ~~stock~~an ~~compensation~~increase ~~issued~~of ~~for~~approximately ~~consulting~~$0.5 ~~fees~~million ~~and~~in salary ~~officer~~payable, ~~salaries;~~and 711) an increase of approximately $10.95 million ofin ~~taxes~~advance ~~payable~~from ascustomers. weThis ~~incurred~~increase ~~more~~in ~~taxes~~cash ~~payables~~was ~~from~~offset by ~~our~~1) ~~operations;~~a 8)net ~~decrease~~loss of approximately $16.06 million, of2) ~~inventory~~an asincrease wein ~~have~~approximately ~~shipped~~$7.2 ~~out~~note ~~more~~receivables ~~products~~as onpromissory ~~our~~notes ~~inventory that we previously stocked up for productions~~was ~~during~~received, ~~the period; 9~~3) an increase of approximately $03.94 million ofdeferred ~~other~~revenue, ~~payables~~4) ~~and~~a ~~accruals~~decrease asof weapproximately ~~incurred~~$1.5 ~~more~~million accounts payables, ~~from our operations~~ and 105) an increase of approximately $0.84 million ofdeferred ~~salary~~tax ~~payables~~assets, ~~as we incurred more payables to employees~~ and 11 6) an increase of approximately $0.63 million advance ofto ~~accrued interest and penalties~~suppliers.

Investing Activities

Net cash used in investing activities was approximately $~~53,000~~2.1 million in the year ended December 31, ~~2018~~2019, which was mainly attributable to ~~purchase~~loan ofto ~~property,~~third ~~plant~~parties ~~and~~as ~~equipment~~they were our important strategy partners. Net cash used in investing activities was approximately $~~0.8~~53,000 ~~million~~ for the year ended December 31, ~~2017~~2018.

Financing Activities

Net cash provided by financing activities was approximately $01.5 million for the year ended December 31, ~~2018~~2019 and net cash provided by financing activities was approximately $70.56 million for the year ended December 31, ~~2017~~2018. The cash inflow for the year ended December 31, ~~2018~~2019 was mainly ~~resulted~~due to an approximately $1.6 million proceed from ~~sale~~six ofnew ~~common~~issued ~~stocks~~convertible ofnotes, ~~approximately~~and $an approximately 0.32 million, ~~and~~proceeds from sale of common stocks; offset by an approximately $0.3 million ~~which~~ wenet ~~borrowed~~payment ~~from~~to ~~our~~ related parties ~~for working capital purpose~~.

Trends and Uncertainties in Regulation and Government Policy in China

Foreign Exchange Policy Changes

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

From the end of ~~2017~~2018 through ~~the~~December ~~end~~31, ~~of 2018~~2019, the value of the RMB depreciated by approximately 51.46% against the U.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 system and there is no guarantee that the RMB will not appreciate or depreciate significantly in value against the U.S. Dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. Dollar in the future. The exchange rate of U.S. Dollar against RMB on December 31, 2019 was US$1.00 = RMB 6.9860.

~~On July~~ 21, 2005, the People’s Bank of China announced it would appreciate the RMB, increasing the RMB-U.S. Dollar exchange rate from approximately US$1.00 = RMB 8.28 to approximately US$1.00 = RMB 8.11. So far the trend of such appreciation continues. The exchange rate of U.S. Dollar against RMB on December 31, 2018 was US$1.00 = RMB 6.5098.

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 manage 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 identify 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 reflect 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, ~~2018~~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, ~~2018~~2019 and ~~2017~~2018 begins on page F-1 of this annual report.

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

None.

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, ~~2018~~2019 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) Management’s Report on Internal Control over Financial Reporting~~23

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:

●	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

●	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

●	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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.

The management has 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, ~~2018~~2019. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on our evaluation and on those criteria, our CEO and CFO concluded that our internal control over financial reporting was not effective as of December 31, ~~2018~~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:

	●	Hired a consulting firm with expertise in U.S. GAAP financial reporting and accounting.

	●	Implemented an internal review process over financial reporting to continue to improve our ongoing review and supervision of our internal control over financial reporting;

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

~~Except~~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 year ended December 31, ~~2018~~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:

Name	Age	Position	Director Since
Yvonne Wang	40	Acting President, CEO and Director	2015
Wade Li	57	Acting President, CEO	2020
Hon Man Yun	49	CFO	2018
Yvonne Wang	41	Secretary, Director	2015
Feng Li	29	Secretary and Director	2015
Hon Man Yun	50	CFO	2018
Qi Wang	5051	Vice President of Technology, Director	2007
Yong Lin Song Xiao Qiang Yu	51 40	CTO, Director of Technology and Director COO	2017 2016
Xiao Qiang Yu	41	COO, Director	2016

Wade Li Mr. 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.

25On August 11, 2016, 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.

On August 11, 2016, 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. The position had been formerly held by Yvonne Wang, who also serves as Chief Executive Officer of the Company.

Hon Man Yun Mr. Yun became our CFO 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 member 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 2007.

Feng Li became our Secretary and a Director in 2015. From 2011- 2012, Ms. Li has served as an assistant project manager for SCHSAsia, a boutique business consulting firm specializing in events and project management for overseas company wishing to expand into the Asia Pacific arena. From 2012 until 2014, Ms. Li served as a campaigner for WildAid China Office, a non-profit organization with focus on raising public awareness on wildlife and climate change related issues.25

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~~Xiaoqiang ~~Lin~~Yu ~~Song~~ became our ~~CTO~~COO ~~and~~on ~~Director~~June of2016 ~~Technology~~and is responsible for managing the ~~Company’s~~overall ~~R&D~~marketing ~~operations~~strategy onof ~~March~~Kiwa, ~~2016~~which includes ~~and~~brand asexpansion, ~~one~~sale oftargets, ~~our~~strategic ~~directors~~planning ofand ~~the~~corporate ~~Company on March 2017~~communications. Mr. ~~Song~~Yu isparticipated ain ~~senior~~Chinese ~~agronomist~~fertilizer ~~at the Institute of Agricultural Resources~~market ~~and~~since ~~Regional~~1999. ~~Planning, Chinese Academy of Agricultural Sciences~~Mr. HeYu has 29over 15 years of ~~experience in microbial R&D and technology promotion and has led many national agricultural projects. In 2001~~marketing, hemanagement ~~was responsible for technological achievement transformation~~ and ~~technology~~strategy ~~promotion~~experience offrom ~~Agricultural~~two ~~Resources~~major ~~and~~fertilizer ~~Regional~~companies ~~Planning,~~in ~~Chinese Academy of Agricultural Sciences~~China. ~~In 2009, he served as deputy secretary general of the Chinese Society of Plant Nutrition and Fertilizer Science.~~

Xiao Qiang Yu became our COO 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:

(a) Had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) Been convicted in a criminal proceeding or subject to a pending criminal proceeding; (c) Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; and (d) Been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

(c) Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; and (d) Been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

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, ~~2018~~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, ~~and~~Xiaoqiang ~~Yong~~Yu ~~Lin~~and ~~Song~~Wade Li. All board actions ~~require~~ 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 ~~2018~~2019. No Committee Meetings were held during fiscal year 2018. The Company did not have an Annual Meeting of Shareholders in ~~2018~~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.

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

Name and principal position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)
Yvonne Wang,		~~2018~~2019		84,000		-0-		-0-		-0-		-0-		-0-		-0-		84,000
Acting President, CEO		~~2017~~2018		84,000		-0-		-0-		-0-		-0-		-0-		-0-		84,000
Hon Man Yun		~~2018~~2019		77104,~~102~~290		-0-		-0-		-0-		2534,~~299~~738		-0-		-0-		~~102~~139,~~401~~028
CFO		~~2017~~2018		~~-0-~~77,102		-0-		-0-		-0-		~~-0-~~25,299		-0-		-0-		~~-0-~~102,401
Yong Lin Song,		2018		36,271		-0-		-0-		-0-		-0-		-0-		-0-		62,295
Xiaoqiang Yu,		2019		59,927		-0-		-0-		-0-		-0-		-0-		-0-		59,927
CTO, Director of Technology		2017		62,295		-0-		-0-		-0-		-0-		-0-		-0-		29,828
COO		2018		59,927		-0-		-0-		-0-		-0-		-0-		-0-		59,927
Xiao Qiang Yu,		2018		31,003		-0-		-0-		-0-		-0-		-0-		-0-		59,927
COO		2017		59,927		-0-		-0-		-0-		-0-		-0-		-0-		30,259

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

2018 Stock-based Compensation

During 2018, the Company 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.

Option Exercises and Stock Vested

No stock options were exercised by any officers or directors during ~~2018~~2019 and ~~2017~~2018. We did not adjust or amend the exercise price of any stock options previously awarded to any named executive officers during ~~2018~~2019 and ~~2017~~2018.

Director Compensation for ~~2018~~2019

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 ~~2018~~2019 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 ~~April~~May 1229, ~~2019~~2020 certain information with respect to the beneficial ownership of our common ~~stock~~ 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 16282,~~120~~385,~~465~~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 ~~April~~May 1229, ~~2019~~2020. None of the shares listed below are issuable pursuant to stock options or warrants of the Company.

Title of class	Name and Address of Beneficial Ownership(1)	Amount and Nature of Beneficial Owner (2)		Percentage of class
Common Stock	Yvonne Wang		240,000		10.281	%
Common Stock	Feng Li (3)		1,965,326		100.527	%
Common Stock	Qi Wang		-		-
Common Stock	~~Yong~~All ~~Lin~~officers ~~Song~~and directors as a group		-2,205,326		-0.8	%
Common Stock	All officers and directors as a group		2,205,326		11.81	%
Ser. A Pref. Stock	Yvonne Wang		250,000		50.00	%
Ser. A Pref. Stock	Feng Li		250,000		50.00	%
Ser. A Pref. Stock	All officers and directors as a group		500,000		100.00	%
Ser. B Preferred	Wei Li		811,148		100.00	%
5% Holders:
Common Stock	Wei Li (3)		2,734,690		13.56	%
Common Stock	Tianao Zhang		1,540,000		7.64	%
Common Stock	Zheng JunWei		1,165,000		5.78	%

	(1)	The address for all holders is 3200 Guasti Road, Ste. 100, Ontario, California 91761.
	(2)	In determining beneficial ownership of our Common Stock and Series A Preferred Stock, the number of shares shown includes shares which the beneficial owner may acquire upon exercise of debentures, warrants and options which may be acquired within 60 days. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.
	(3)	Includes 61,784 shares of common stock held by All Star Technology, Inc., a British Virgin Islands international business company. Feng Li’s father, Wei Li, exercises voting and investment control over the shares held by All Star Technology, Inc. Wei Li is a principal shareholder of All Star Technology, Inc. and may be deemed to beneficially own such shares, but disclaims beneficial ownership in such shares held by All Star Technology, Inc. except to the extent of his pecuniary interest therein. Mr. Li has pledged all of his common stock of the Company as collateral security for the Company’s obligations under certain 6% Convertible Notes owed by the Company.

(3)

Includes 61,784 shares of common stock held by All Star Technology, Inc., a British Virgin Islands international business company. Feng Li’s father, Wei Li, exercises voting and investment control over the shares held by All Star Technology, Inc. Wei Li is a principal shareholder of All Star Technology, Inc. and may be deemed to beneficially own such shares, but disclaims beneficial ownership in such shares held by All Star Technology, Inc. except to the extent of his pecuniary interest therein. Mr. Li has pledged all of his common stock of the Company as collateral security for the Company’s obligations under certain 6% Convertible Notes owed by the Company.

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 ~~2018~~2019 and ~~2017~~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 ~~2018~~2019 paid and payable to Friedman LLP were approximately $~~205~~220,000. The aggregate audit fees for ~~2017~~2018 paid and payable to Friedman LLP ~~and DYH & Company~~ were approximately $~~144~~205,000~~, of which, $135,000 paid and payable to Friedman, LLP and $9,000 paid to DYH & Company~~.

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

Audit-Related Fees

Audit-related fees for ~~2018~~2019 and ~~2017~~2018 were $0.

Tax Fees

Tax fees for ~~2018~~2019 and ~~2017~~2018 were $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 ~~2018~~2019 and ~~2017~~2018. All of the services provided and fees charged by our independent registered accounting firms in 2018 and 2017 were approved by the board of directors. There is no non-audit services provided by our independent auditors during the year of ~~2018~~2019 and ~~2017~~2018.

Part IV

ITEM 15. Exhibits and Financial Statement Schedules

Exhibit No.		Description

23.1		CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

3029

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~April~~May 1229, ~~2019~~2020

KIWA BIO-TECH PRODUCTS GROUP CORPORATION. By: /s/ ~~Yvonne~~Wade ~~Wang~~Li ~~Yvonne~~Wade ~~Wang~~Li Chief Executive Officer (Principal Executive Officer) By: /s/ Hon Man Yun Hon Man Yun Chief Financial Officer (Principal Financial and Accounting Officer)

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the registrant and in the capacities and on the dates indicated.

/s/ Yvonne Wang	Chief Executive Officer and Director	April 12, 2019
/s/ Wade Li	Chief Executive Officer and Director	May 29, 2020
Yvonne Wang	(Principal Executive Officer)
Wade Li	(Principal Executive Officer)
/s/ Hon Man Yun	Chief Financial Officer	~~April~~May 1229, ~~2019~~2020
Hon Man Yun	(Principal Financial and Accounting Officer)

3130

Kiwa Bio-Tech Products Group Corporation

Index to Consolidated Financial Statements

		Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Income and Comprehensive Income (Loss)		F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)		F-3
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)		F-4
Consolidated Statements of Cash Flows		F-5
Notes to Consolidated Financial Statements		F-6

3231

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Kiwa Bio-Tech Products Group Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Kiwa Bio-Tech Products Group Corporation and its subsidiaries (collectively, the “Company”) as of December 31, ~~2018~~2019 and ~~2017~~2018, and the related consolidated statements of ~~income~~operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, ~~2018~~2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2018~~2019, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had an accumulated deficit of $1421,~~803~~158,~~530~~508 and $14,~~583~~803,~~080~~530 as at December 31, ~~2018~~2019 and ~~2017~~2018, respectively, ~~and~~the ~~negative~~Company ~~operating~~incurred ~~cash~~a ~~flow~~net loss of $16,~~648~~635,~~963 and~~296 ~~$5,649,151~~ for the year ended December 31, ~~2018 and 2017, respectively~~ 2019. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding this matter are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement. We believe that our audits provide a reasonable basis for our opinion.

/s/ Friedman LLP

We have served as the Company’s auditor since 2017.

New York, New York

~~April~~May 1229, ~~2019~~2020

F-1

KIWA BIO-TECH PRODUCTS GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2018			December 31, 2017
	December 31, 2019			December 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	7,~~859~~965		$	17,~~083,539~~859
Accounts receivable		6,751,113			28,620
Accounts receivable, net		-			6,751,113
Prepaid expenses		21,~~259~~091,~~565~~927			2,~~474~~259,~~272~~565
Rent deposits and other receivables		323,362			44,423
Other receivables, net		2,208,199			323,362
Advance to suppliers		15,763,198			12,660,793
Loan to a third party		2,046,822			-
Due from related parties - non-trade		12,108			19,017
Notes receivable		7,140,335			-
Inventories		1,643,033			2,745,991
Advance to suppliers		10,274,222			15,763,198
Deferred cost of goods sold		4,929,855			16,726
Due from related parties - non-trade		34,380			12,108
Total current assets		31,690,093			19,073,381
Inventories		31,506			1,643,033
Property, plant and equipment - net		93,181			90,500
Deferred cost of goods sold		-			4,929,855
Rent deposits-non current		613			72,631
Total current assets		22,835,356			31,690,093
Deposit for long-term investment		727,155			768,074
Property, plant and equipment - net		33,260			93,181
Total non-current assets		820,949			931,205
Operating lease right-of-use assets		54,345			-
Total assets	$	32,511,042		$	20,004,586
Rent deposits-non current		3,865			613
Deferred tax asset		426,786			-
Deposit for long-term investment		715,717			727,155
Total non-current assets		1,233,973			820,949
Total assets	$	24,069,329		$	32,511,042
LIABILITIES AND stockholders’ EQUITY
Current liabilities
Accounts payable	$	1135,~~611,273~~504		$	1,~~800~~611,~~614~~273
Advances from customers		~~580~~1,~~720~~096,392			~~543~~580,~~581~~720
Due to related parties		~~570~~248,~~921~~617			~~320~~570,~~199~~921
Convertible notes payable, net of discount of $99,908 and $1,977 at December 31, 2018 and 2017, respectively		971,086			273,200
Convertible notes payable, net of discount of $273,559 and $99,907 at December 31, 2019 and 2018, respectively		2,376,948			971,086
Derivative liabilities		~~6,621~~-			~~247~~6,~~933~~621
Notes payable		360,000			360,000
Salary payable		1875,~~024,959~~266			~~291~~1,~~401~~024,959
Income taxes payable		23,~~946~~476,~~926~~676			12,~~142~~946,~~973~~926
Interest payable		2,~~020~~785,~~821~~927			12,~~756~~020,~~275~~821
Other payables and accruals		2,940,088			2,108,873
Operating lease liabilities – current		24,993			-
Deferred revenue		6,751,113			28,620
Other payables and accruals		2,873,556			2,940,088
Total current liabilities		19,784,528			8,873,669
Deferred revenue		-			6,751,113
Convertible notes payable-non-current, net of discount of $0 and $384,799 at December 31, 2018 and 2017, respectively		-			460,082
Total current liabilities		14,253,879			19,784,528
Total liabilities		19,784,528			9,333,751
Non-Current Liabilities
Convertible note payable - non current		97,895			-
Operating lease liabilities – non current		32,267			-
Total non-current liabilities		130,162			-
Total liabilities		14,384,041			19,784,528
STOCKHOLDERS’ EQUITY
Preferred stock - $0.001 par value, Authorized 20,000,000 shares. Series A - Issued and outstanding 500,000 and 500,000 shares (liquidation preference in $1,000,000) at December 31, 2018 and December 31, 2017, respectively; Series B - Issued and outstanding 811,148 and 811,148 shares (liquidation preference in $1,054,492) at December 31, 2018 and December 31, 2017, respectively.		1,311			1,311
Preferred stock - $0.001 par value, Authorized 20,000,000 shares. Series A - Issued and outstanding 500,000 and 500,000 shares (liquidation preference in $1,000,000) at December 31, 2019 and 2018, respectively; Series B - Issued and outstanding 811,148 and 811,148 shares (liquidation preference in $1,054,492) at December 31, 2019 and 2018, respectively.		1,311			1,311
Common stock - $0.001 per value. Authorized 100,000,000 shares. Issued and outstanding 16,885,260 and 15,202,965 shares at December 31, 2018 and 2017, respectively.		16,886			15,203
Common stock - $0.001 per value. Authorized 300,000,000 shares. Issued and outstanding 82,531,999 and 16,885,260 shares at December 31, 2019 and 2018, respectively.		82,532			16,886
Additional paid-in capital		2730,~~047~~890,~~457~~661			2427,~~455~~047,~~291~~457
Statutory Reserve		1742,~~022,605~~287			~~458~~1,~~334~~022,605
Accumulated deficit		(1421,~~803~~158,~~530~~508	)		(14,~~583~~803,~~080~~530	)
Accumulated other comprehensive gain (loss)		(558,215	)		323,776
Accumulated other comprehensive loss		(872,995	)		(558,215	)
Total stockholders’ equity		129,~~726~~685,~~514~~288			1012,~~670~~726,~~835~~514
Total liabilities and stockholder’s equity	$	3224,~~511~~069,~~042~~329		$	2032,~~004~~511,~~586~~042

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

F-2

KIWA BIO-TECH PRODUCTS GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERTIONS AND COMPREHENSIVE INCOME/(LOSS)

	Years Ended December 31,
	2018			2017
	2019			2018
Revenue	$	3040,~~650~~089,~~402~~457		$	1730,~~270~~650,~~069~~402
Cost of goods sold		(2230,~~391~~757,~~952~~460	)		(1122,~~845~~391,~~874~~952	)
Gross profit		89,~~258~~331,~~450~~997			58,~~424~~258,~~195~~450
Operating expenses
Research and development expenses		122,774			147,992
Provision for deferred cost of goods sold		2,411,006			-
Selling expenses		617,387			483,045
Research and development expenses		-			122,774
General and administrative expenses		4,928,943			2,997,027
Selling expenses		199,664			617,387
Total operating expenses		5,669,104			3,628,064
General and administrative expenses		4,379,851			4,928,943
Operating Income		2,589,346			1,796,131
Loss on disposal of subsidiaries		3,527,254			-
Total operating expenses		10,517,775			5,669,104
Operating Income		(1,185,778	)		2,589,346
Other income/(expense), net
Change in fair value of derivative liabilities		~~241~~101,~~312~~765			~~321~~241,~~851~~312
Interest expense		(~~634~~3,~~874~~943,751	)		(~~524~~634,~~333~~874	)
Other income/(expense)		(137,~~185~~253	)		~~382~~(1,~~126~~185	)
Exchange gain/(loss)		5515,~~444~~296			~~(58~~55,~~757~~444	)
Total other income/(expense), net		(339,303	)		120,887
Total other expense, net		(3,789,437	)		(339,303	)
Income from continuing operations before income taxes		2,250,043			1,917,018
Income (loss) from operations before income taxes		(4,975,215	)		2,250,043
Income taxes		(1,906,222	)		(1,103,315	)
Provision for income taxes
Income from continuing operations		343,821			813,703
Current		(2,091,736	)		(1,906,222	)
Discontinued operations:
Deferred		431,655			-
Loss from discontinued operations, net of taxes		-			(16,849	)
Total provision for income taxes		(1,660,081	)		(1,906,222	)
Gain on disposal of discontinued operations, net of taxes		-			4,512,182
Net income (loss)		(6,635,296	)		343,821
Income from discontinued operations, net of taxes		-			4,495,333
Net income		343,821			5,309,036
Other comprehensive income
Foreign currency translation adjustment		(~~881~~314,~~991~~780	)		~~378~~(881,~~153~~991	)
Total comprehensive income/(loss)	$	(538,170	)	$	5,687,189
Total comprehensive loss	$	(6,950,076	)	$	(538,170	)
Earnings per share - Basic:
Income from continuing operations		0.02			0.08
Net income (loss)		(0.29	)		0.02
Income from discontinued operations		-			0.43
Net income		0.02			0.51
Earnings per share - Diluted:
Income from continuing operations		0.02			0.07
Net income (loss)		(0.29	)		0.02
Income from discontinued operations		-			0.36
Weighted average number of common shares outstanding - basic		22,814,035			16,522,099
Net income		0.02			0.43
Weighted average number of common shares outstanding - diluted		22,814,035			16,522,099
Weighted average number of common shares outstanding - basic		16,522,099			10,471,725
Weighted average number of common shares outstanding - diluted		16,522,099			12,541,946

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

F-3

KIWA BIO-TECH PRODUCTS GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHODERS’ EQUITY

																		Accumulated			~~Total~~
									Additional									Other			~~Stockholders’~~Total
	Preferred Stock				Common Stock				Paid-in			Statutory			Accumulated			Comprehensive			~~Equity~~Stockholders’
	Shares		Amount		Shares		Amount		Capital			Reserve			Deficit			Gain/(Loss)			~~(Deficiency)~~Equity
Balance, December 31, 2016		500,000		500		8,728,981		8,729		15,234,878			127,473			(19,561,255	)		(54,377	)		(4,244,052	)
Issuance of common stock for cash		-		-		4,350,750		4,351		6,340,777			-			-			-			6,345,128
Issuance of preferred stock for liabilities settlement		811,148		811		-		-		1,053,681			-			-			-			1,054,492
Issuance of common stock for consulting services		-		-		2,003,988		2,004		1,687,893			-			-			-			1,689,897
Fair value of beneficial conversion feature of convertible note		-		-		-		-		45,094			-			-			-			45,094
Conversion of convertible note		-		-		119,246		119		92,968			-			-			-			93,087
Net income		-		-		-		-		-			-			5,309,036			-			5,309,036
Statutory reserve		-		-		-		-		-			330,861			(330,861	)		-			-
Foreign currency translation adjustments		-		-		-		-		-			-			-			378,153			378,153
Balance, December 31, 2017		1,311,148	$	1,311		15,202,965	$	15,203	$	24,455,291		$	458,334		$	(14,583,080	)	$	323,776		$	10,670,835
Issuance of common stock for cash		-		-		247,700		248		307,352			-			-			-			307,600
Issuance of common stock for consulting services		-		-		1,277,918		1,278		2,181,271			-			-			-			2,182,549
Issuance of common shares for salary payment		-		-		30,632		31		25,270												25,301
Conversion of convertible note		-		-		126,045		126		78,273			-			-			-			78,399
Net income		-		-		-		-		-			-			343,821			-			343,821
Statutory reserve		-		-		-		-		-			564,271			(564,271	)		-			-
Foreign currency translation adjustments		-		-		-		-		-			-			-			(881,991	)		(881,991	)
Balance, December 31, 2018		1,311,148	$	1,311		16,885,260	$	16,886	$	27,047,457		$	1,022,605		$	(14,803,530	)	$	(558,215	)	$	12,726,514
Issuance of common stock for cash		-		-		220,000		220		175,780			-			-			-			176,000
Issuance of common stock for consulting services		-		-		784,999		785		672,065			-			-			-			672,850
Issuance of common shares for salary payment		-		-		124,484		124		34,614												34,738
Conversion of convertible note		-		-		62,523,923		62,524		510,705			-			-			-			573,229
Issuance of common shares as convertible note issuance costs						273,333		273		121,551												121,824
Issuance of common shares for Liabilities settlement						300,000		300		221,700												222,000
Issuance of common shares for convertible notes						1,420,000		1,420		(1,420	)											-
Fair value of beneficial conversion feature of convertible note										1,430,509												1,430,509
Financing expense of issuance of convertible note										677,700												677,700
Net loss		-		-		-		-		-						(6,635,296	)		-			(6,635,296	)
Appropriation of statutory Reserve													307,736			(307,736	)					-
Reverse of statutory reserve for disposal of subsidiaries													(588,054	)		588,054						-
Foreign currency translation adjustments		-		-		-		-		-			-			-			(314,780	)		(314,780	)
Balance, December 31, 2019		1,311,148	$	1,311		82,531,999	$	82,532	$	30,890,661		$	742,287		$	(21,158,508	)	$	(872,995	)	$	9,685,288

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

F-4

KIWA BIO-TECH PRODUCTS GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2018			2017
	2019			2018
Cash flow from continuing operating activities:
Net income	$	343,821		$	5,309,036
Net income (loss)	$	(6,635,296	)	$	343,821
Income from discontinued operations, net of taxes		-			(4,495,333	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) continuing operating activities:
Net Income from continuing operations		343,821			813,703
Depreciation and amortization		47,953			27,947
Adjustments to reconcile net income to net cash used in continuing operating activities:
Bad debt		254,922			19,844
Depreciation		27,947			46,491
Provision for deferred cost of goods sold		2,411,006			-
Bad debt		19,844			-
Impairment loss on equipment		8,299			-
Accrued interest		~~634~~1,~~874~~369,135			~~524~~634,~~333~~874
Stock compensation for consulting services and salary payment		21,~~207~~853,~~850~~704			~~697~~2,~~673~~207,850
Gain on derivative liabilities		(241,312	)		(321,851	)
Financing cost of convertible note		704,900			-
Gain on derivative liabilities		(101,765	)		(241,312	)
Loss on disposal of subsidiaries		3,527,254			-
Changes in continuing operating assets and liabilities:
Accounts receivable		(63,~~989~~405,~~810~~344	)		1(6,~~126~~989,~~584~~810	)
Prepaid expenses		521,~~895~~167,522			~~(66~~52,~~315~~895	)
Rent deposits and other receivables		(221,388	)		(37,412	)
Other receivables		50,998			(221,388	)
Advance to suppliers		(3,926,197	)		(10,264,884	)
Notes receivable		(7,221,795	)		-
Due from related parties-non-trade		6,128			1,546,691
Advance to suppliers		(316,776	)		(3,926,197	)
Inventories		994,483			(2,645,053	)
Due from related parties-non-trade		(22,719	)		6,128
Deferred cost of goods sold		(5,108,265	)		(16,112	)
Inventories		1,603,772			994,483
Accounts payable		(97,108	)		631,324
Deferred cost of goods sold		-			(5,108,265	)
Salary payable		763,005			102,469
Deferred tax assets		(431,655	)		-
Taxes payable		1,938,545			674,414
Accounts payable		(1,466,971	)		(97,108	)
Advances from customers		68,711			523,600
Salary payable		478,786			763,005
Other payables and accruals		887,204			987,626
Taxes payable		2,118,185			1,938,545
Deferred revenue		6,989,810			27,568
Advances from customers		535,753			68,711
Net cash used in continuing operating activities		(1,648,963	)		(5,649,151	)
Lease liability		(14,155	)		-
Net cash provided by discontinued operations		-			-
Other payables and accruals		262,010			887,204
Net cash used in operating activities		(1,648,963	)		(5,649,151	)
Deferred revenue		(3,405,344	)		6,989,810
Net cash provided by (used in) operating activities		183,067			(1,648,963	)
Cash flows from investing activities:
Payment of deposit for long-term investment		-			(739,841	)
Loan to a third party		(2,070,173	)		-
Purchase of property, plant and equipment		~~(52,992~~-	)		(7552,~~285~~992	)
Net cash used in investing activities		(52,992	)		(815,126	)
Cash disposed in subsidiaries		(349	)		-
Net cash used in investing activities		(2,070,522	)		(52,992	)
Cash flows from financing activities:
Working capital borrowed from related parties, net of payments to related parties		252,171			219,420
Working capital borrowed from (repaid to) related parties		(322,164	)		252,171
Proceeds from sale of common stock		~~307~~176,~~600~~000			6307,~~345,128~~600
Proceeds from convertible note		-1,628,250			~~969,808~~-
Net cash provided by financing activities		~~559~~1,~~771~~482,086			7559,~~534,356~~771
Effect of exchange rate change		66405,~~504~~475			(966,504	)
Cash and cash equivalents:
Net increase/(decrease)		~~(1,075,680~~106	)		(1,~~070~~075,~~070~~680	)
Balance at beginning of year		17,~~083,539~~859			131,~~469~~083,539
Balance at end of year	$	7,~~859~~965		$	17,~~083,539~~859
SUPPLEMENTARY DISCLOSURES OF CASH FLOW FOR NON-CASH TRANSACTION:
Issuance of preferred stock for debt settlement	$	-		$	1,054,492
Issuance of common stock for consulting services	$	2,242,550		$	1,689,896
Issuance of common stock for financing related services	$	-		$	1,433,156
Conversion of convertible note	$	78,399		$	93,088
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	460,853

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

F-5

KIWA BIO-TECH PRODUCTS GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2018~~2019

1. Description of Business and Organization

Organization

~~Kiwa~~The ~~Bio-Tech Products Group Corporation (“the~~ Company”) istook ~~the~~its ~~result~~present ofcorporate aform ~~share~~in ~~exchange transaction accomplished on~~ March ~~12,~~ 2004 ~~between~~when ~~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~~entered into a share exchange ~~resulted in~~transaction. aThe ~~change~~share ofexchange ~~control~~transaction ofleft ~~Tintic,~~the ~~with~~shareholders ~~former~~of Kiwa BVI ~~stockholders~~ owning ~~approximately~~a ~~89%~~majority of Tintic ~~on a fully diluted basis~~ and Kiwa BVI ~~surviving as~~ a wholly-owned subsidiary of Tintic. ~~Subsequent~~For toaccounting ~~the~~purposes ~~share~~this ~~exchange~~ transaction, ~~Tintic~~was ~~changed~~treated ~~its~~as an acquisition of Tintic ~~name~~by toKiwa BVI in the form of a reverse triangular merger and a recapitalization of Kiwa BVI and its wholly owned subsidiary, Kiwa Bio-Tech Products ~~Group~~(Shandong) ~~Corporation~~Co., Ltd. (“Kiwa Shandong”). On July 21, 2004, ~~the~~we ~~Company~~ completed ~~its~~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~~ currently mainly operates its business through Kiwa ~~Baiao~~ Bio-Tech (~~Beijing~~Yangling) Co., Ltd. (“Kiwa ~~Beijing~~Yangling”), ~~which~~ ~~was incorporated in China in January 2016, Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. (“Kiwa Shenzhen”),~~ which ~~was~~ incorporated in ~~China~~March ~~in November 2016~~2018, Kiwa Bio-Tech Products (Hebei) Co., Ltd. (“Kiwa Hebei”), which was incorporated in China in December 2016, Kiwa Bio-Tech Products (Shenzhen) Co., Ltd. Xian Branch Company, (“Kiwa Xian”), which was incorporated in China in December 2017, Kiwa Bio-Tech (Yangling) Co., Ltd. (“Kiwa Yangling”), which incorporated in March 2018, and The Institute of Kiwa-Yangling Ecological Agriculture and Environment Research Co., Ltd. (“Kiwa Institute”), which incorporated in March 2018. 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, Kiwa Xian, Kiwa Institue and Kiwa Hebei.

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 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. (“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 Hong Kong Sano Group Co., Ltd. for a consideration of 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, the Company conduct the same business of 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.

F-6

Business

2. ~~Going concern~~Liquidity

The Company’s 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 December 31, ~~2018~~2019 and ~~2017~~2018, the Company had an accumulated deficit of $1421,~~803~~158,~~530~~508 and $14,~~583~~803,~~080~~530, respectively, and the Company ~~had~~incurred a ~~negative~~net ~~operating~~loss ~~cash flow~~ of $16,~~648~~635,~~963~~296 ~~and $5,649,150~~ for the year ended December 31, ~~2018 and 2017, respectively~~2019. 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 Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements. In assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. ~~As of December 31, 2018, Kiwa Hebei is committed to pay a RMB10,000,000 based on the payment milestone in an equity purchase agreement.~~

The Company engages in the business for organically bio-fertilizer and its customers are mainly agricultural cooperative company and distributors who then resell its 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 the Company’s distributors. The Company’s 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, the Company’s accounts receivable turnover ratio is normally low due to the nature of the Company’s business. In addition, the Company’s business is capital intensive as the Company needs to make advance payment to its 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 the working capital requirements of the Company.

As of December 31, 2018, the Company’s working capital was approximately $12.6 million and the Company had only cash of approximately $8,000, with remaining current assets mainly composed of advance to suppliers, accounts receivables, prepaid expenses and deferred cost of goods sold. In addition, the Company sold Convertible Promissory Notes (“Notes”) in the aggregate principal amount of $1,665,000.00 in February and March 2019.

Although the Company believes that it can realize its current assets in the normal course of business, the Company’s ability to repay its current obligations will depend on the future realization of its current assets and the future operating revenues generated from its products. Because the Chinese Government is continuously to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry, the Company expects its revenues from its innovated and highly effective products, Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer, will continue to grow in its business. In addition, the Company’s marketing team is expanding to the Western areas of China and Hainan province and it expects its revenues will continue to grow in 2019. Meanwhile, the Company expects to continue to gain market shares in its 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. The Company believes these factors will enable it sufficiently to support its working capital needs for the next twelve months.

Management has considered its historical experience, the economic environment, trends in the Agricultural industry, the realization of the accounts receivables and advance to suppliers as of December 31, 2018. The Company expects to realize the balance of its current assets within the normal operating cycle of a twelve-month period. If the Company is unable to realize its current assets within the normal operating cycle of a twelve-month period, the Company may have to consider supplementing its available sources of funds through the following sources:

● the Company will continuously seek additional equity financing to support its working capital; ● other available sources of financing from PRC banks and other financial institutions; ● financial support and credit guarantee commitments from the Company’s major shareholder.

Based on the above considerations, the Company’s management is of the opinion that it may not have sufficient funds to meet the Company’s working capital requirements and debt obligations as they become due one year from the date of this report. If the Company can’t raise enough funds, it might be unable to fund its future cash requirement on a timely basis and under acceptable terms and conditions and may not have sufficient liquidity to maintain operations and repay its liabilities for the next twelve months. As a result, the Company may be unable to implement its current plans for expansion, repay its debt obligations or respond to competitive pressures, any of which would have a material adverse effect on its business, prospects, financial condition and results of operations.

F-7

The Company sold Convertible Promissory Notes (“Notes”) in the aggregate principal amount of $1,901,250 for the year ended December 31, 2019. As of December 31, 2019, the Company’s working capital was approximately $8.6 million, however, the Company had only cash of $7,965, with remaining current assets mainly composed of advance to suppliers, notes receivable, other receivables, and prepaid expenses.

Although the Company believes that it can realize its current assets in the normal course of business, the Company’s ability to repay its current obligations will depend on the future realization of its current assets and the future operating revenues generated from its products. Because the Chinese Government is continuously to promote green environment and implement quality standards and environmentally sensitive policies in the Agricultural industry, the Company expects its revenues from its innovated and highly effective products, Compound Microbial Fertilizer and Bio-Water Soluble Fertilizer, will continue to grow in its business. In addition, the Company’s marketing team is expanding to the Western areas of China and Hainan province and it expects its revenues will continue to grow in 2020. Meanwhile, the Company expects to continue to gain market shares in its 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.

Management has considered its historical experience, the economic environment, trends in the Agricultural industry, the realization of the notes receivables, other receivables, advance to suppliers and other receivables as of December 31, 2019. The Company expects to realize the balance of its current assets within the normal operating cycle of a twelve-month period. If the Company is unable to realize its current assets within the normal operating cycle of a twelve-month period, the Company may have to consider supplementing its available sources of funds through the following sources:

	●	the Company will continuously seek additional equity financing to support its working capital;
	●	other available sources of financing from PRC banks and other financial institutions;
	●	financial support and credit guarantee commitments from the Company’s major shareholder.

Based on the above considerations, management is of the opinion that it does not have sufficient funds to meet its working capital requirements and debt obligations as they become due one year from the date of this report. If the Company can’t raise enough funds, it might be unable to fund its future cash requirement on a timely basis and under acceptable terms and conditions and may not have sufficient liquidity to maintain operations and repay its liabilities for the next twelve months. As a result, the Company may be unable to implement its current plans for expansion, repay its debt obligations or respond to competitive pressures, any of which would have a material adverse effect on its business, prospects, financial condition and results of operations.

3. Summaries of Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).

Principle of Consolidation

These consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries, Kiwa BVI, Kiwa Asia Holdings Company, Kiwa Beijing, Kiwa Shenzhen, Kiwa Hebei, Kiwa Asia, Kiwa Yangling, ~~Kiwa Shanxi,~~ and Kiwa Institute. All significant inter-company balances or transactions are eliminated on consolidation.

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, derivative liabilities, 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~~F-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.8

Certain of the Company’s 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 the Company’s industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of the Company’s accounting estimates annually based on these conditions and record adjustments when necessary.

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Restricted cash is excluded from cash and cash equivalents.

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 receivable are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted.

Inventory

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 materials, direct labor and a portion of manufacturing overhead. Net realizable value is the estimated based on selling price in the ordinary course of business, less estimated costs to complete and dispose.

F-8

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
Leasehold improvement		The shorter of the lease term and useful life

F-9

Impairment of Long-Lived Assets

The Company’s long-lived assets consist of property, plant and equipment. 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. 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.

Leases

Prior to December 31, 2018, leases are classified as either capital or operating leases. Leases that transfer substantially all the benefits and risks incidental to the ownership of assets are accounted for as capital leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases and the lease expense is included in the consolidated statements of operations on a straight-line basis over the term of the leases.

On January 1, 2019, the Company adopted ASU 2016-02, Leases (ASC Topic 842). This update supersedes the lease accounting guidance found under ASC 840, Leases (“ASC 840”) and requires the recognition of right-of-use (“ROU”) assets and lease obligations (“lease liabilities”) by lessees for those leases currently classified as operating leases under existing lease guidance. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Short term leases with a term of 12 months or less are not required to be recognized. The Company elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. There is no impact from the adoption of ASC 842 on January 1, 2019 as the Company did not have any existing material leases with a lease term in excess of twelve months on January 1, 2019.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating leases liabilities, and operating leases, non-current on our consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under capital leases, and obligations under capital leases, non-current on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Financial Instruments

The Company analyzes all financial instruments with features of both liabilities and equity under FASB Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” and FASB ASC Topic 815 “Derivatives and Hedging”.

Embedded conversion features of convertible debentures not considered to be derivative instruments

The embedded conversion features of convertible debentures not considered to be derivative instruments provide for a rate of conversion that is below market value. Such feature is normally characterized as a “beneficial conversion feature” (“BCF”). The relative fair values of the BCF were recorded as discounts from the face amount of the respective debt instrument. The Company amortized the discount using the straight-line method which approximates the effective interest method through maturity of such instruments.

F-10

Embedded conversion features of convertible debentures that are classified as derivative liabilities

The embedded conversion features of convertible debentures that are classified as derivative liabilities are recorded at fair value as a discount from the face amount of the respective debt instrument. The discount is being amortized to interest expense over the life of the note using the straight-line method, which approximates the effective interest method. These instruments are accounted for as derivative liabilities and marked-to-market each reporting period. The change in the value of the derivative liabilities is charged against or credited to income in the captioned “change in fair value of derivative liabilities” in the accompanying consolidated statements of operations and comprehensive income.

F-9

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 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. Derivative instruments are carried at fair value, estimated using the Black Scholes Merton model.

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.

F-11

Revenue Recognition

On January 1, 2018, wethe 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. This did not result in an adjustment to the retained earnings upon adoption of this new guidance as the Company’s revenue was ~~recognized~~ recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations.

~~F-10~~The Company accounts for a contract with a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable.

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 co-ops and distributors, it will take approximately similar time frame of 3 to 9 months for farmers to harvest crops and to realize profits to repay them. 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. Collectability 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, these sales contracts 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 product for which all revenue recognition criteria under the five-step model have not yet been met. Though these contracts are not considered 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, the Company recognizes a receivable and a corresponding deferred revenue upon shipment. Deferred cost of goods sold 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 recognized. The Company’s provision for deferred cost of goods sold is made based on historical collection experience on such related accounts receivable and realizability of deferred revenue. The Company has $2,411,006 and nil provision of deferred cost of goods sold for the years ended December 31, 2019 and 2018, respectively.

F-12

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 allowance when it is more likely than not that the assets will not be recovered.

FASB 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. United States federal, state and local income tax returns prior to 2015 are not subject to examination by any applicable tax authorities. PRC tax returns filed for ~~2015~~2016, ~~2016~~2017 and ~~2017~~2018 are subject to examination by any applicable tax authorities.

F-11

Stock Based Compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. The Company records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the Company’s current and expected dividend policy.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Under FASB ASC Topic 718 and FASB ASC Subtopic 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.

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”) and Hong Kong Dollar (“HKD”), being the functional 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 and nine months ended December 31, 2018 and 2017 represented foreign currency translation adjustments and were included in the consolidated statements of operations and comprehensive income.F-13

~~The~~Other ~~exchange~~comprehensive ~~rates~~income ~~used~~for tothe ~~translate~~years ~~amounts~~ended inDecember ~~RMB~~31, ~~into~~2019 ~~U.S.~~and ~~Dollars~~2018 ~~for~~represented ~~the~~foreign ~~purposes~~currency oftranslation ~~preparing~~adjustments and were included in the ~~consolidated~~unaudited ~~financial~~condensed consolidated statements ~~were~~ asof ~~follows:~~operations and comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the ~~consolidated~~unaudited condensed consolidated financial statements were as follows:

	As of December 31,
	2018		2017
	2019		2018
Balance sheet items, except for equity accounts		6.~~8761~~9860		6.~~5098~~8761

	Years ended December 31,
	2018		2017
	2019		2018
Items in the statements of operations and comprehensive income/(loss)		6.~~6146~~9072		6.~~7582~~6146

The exchange rates used to translate amounts in HKD into U.S. Dollars for the purposes of preparing the consolidated financial statements were as follows:

	As of December 31,
	2018		2017
	2019		2018
Balance sheet items, except for equity accounts		7.~~8297~~7872		7.~~8149~~8297

	Years ended December 31,
	2018		2017
	2019		2018
Items in the statements of operations and comprehensive income/(loss)		7.~~8370~~8346		7.~~7921~~8370

F-12

Earnings 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. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share.

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 unassured claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unassured 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.

F-14

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.

Cash Flow 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;

(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.

F-13

Recent Accounting Pronouncements

In February ~~2016~~2018, the FASB issued ~~Accounting~~ASU ~~Standards~~2018-02, ~~Update~~Income ~~No.~~Statement ~~2016~~-02 ~~(ASU~~Reporting ~~2016-02),~~Comprehensive ~~Leases~~Income (Topic ~~842~~220).: ~~ASU~~Reclassification ~~2016-02 requires~~of aCertain ~~lessee~~Tax toEffects ~~record~~from aAccumulated ~~right-of-use~~Other ~~asset~~Comprehensive ~~and~~Income. aThe ~~corresponding~~amendments ~~lease~~in ~~liability,~~this ~~initially~~Update ~~measured~~affect atany ~~the~~entity ~~present~~that ~~value~~is ~~of the lease~~required ~~payments,~~to onapply the ~~balance~~provisions ~~sheet~~of ~~for~~Topic ~~all~~220, ~~leases~~Income ~~with~~Statement ~~terms~~– ~~longer~~Reporting ~~than~~Comprehensive ~~12 months~~Income, asand ~~well~~has asitems ~~the~~of ~~disclosure~~other ofcomprehensive income ~~key~~for ~~information~~which ~~about leasing~~the ~~arrangements.~~related ~~ASU~~tax ~~2016-02~~effects ~~requires~~are ~~recognition~~presented in ~~the~~other ~~statement~~comprehensive ofincome ~~operations~~as ofrequired aby ~~single~~GAAP. ~~lease~~The ~~cost,~~amendments ~~calculated~~in ~~so that~~this ~~the~~Update ~~cost~~are ofeffective ~~the~~for ~~lease~~all isentities ~~allocated~~for ~~over~~fiscal ~~the~~years ~~lease~~beginning ~~term.~~after ~~ASU~~December ~~2016-02~~15, ~~requires~~2018, ~~classification~~and ofinterim ~~all~~periods ~~cash payments~~ within ~~operating~~those fiscal ~~activities~~years. inEarly ~~the~~adoption ~~statement~~ of ~~cash~~the ~~flows.~~amendments ~~Disclosures~~in ~~are~~this ~~required~~Update tois ~~provide the amount~~permitted, ~~timing~~including ~~and~~adoption ~~uncertainty~~in ofany ~~cash~~interim ~~flows arising~~period, ~~from~~(1) ~~leases.~~for Apublic business ~~modified~~entities ~~retrospective~~for ~~transition~~reporting ~~approach~~periods ~~is required~~ for ~~lessees~~which ~~for~~financial ~~capital~~statements ~~and~~have ~~operating~~not ~~leases~~yet ~~existing at,~~been orissued ~~entered~~and ~~into~~(2) ~~after,~~for ~~the~~all ~~beginning~~other ofentities for ~~the~~reporting ~~earliest~~periods ~~comparative~~for ~~period~~which ~~presented in the~~ financial statements, ~~with~~have ~~certain practical~~not ~~expedients~~yet ~~available.~~been ~~ASU~~made ~~2016-02~~available ~~is effective~~ for ~~fiscal~~issuance. ~~years~~The ~~beginning~~amendments ~~after~~in ~~December~~this ~~15, 2018, including interim~~Update ~~periods~~should ~~within~~be ~~those~~applied ~~fiscal~~either ~~years.~~in ~~Early~~the ~~application~~period isof ~~permitted.~~adoption Weor ~~adopted~~retrospectively ~~ASU~~to ~~2016-02~~each onperiod ~~January~~(or 1,periods) ~~2019~~in ~~and~~which ~~determined that~~ the effect of ~~recognizing~~the ~~additional~~change in ~~right~~the ofU.S. ~~use~~federal ~~(“ROU”)~~corporate ~~assets~~income ~~and~~tax ~~operating~~rate ~~liabilities~~in ~~under~~the ~~current~~Tax ~~leasing standards~~Cuts ~~for~~and ~~existing~~Jobs ~~operating~~Act ~~leases~~is ~~with~~recognized. aThe ~~term~~adoption ~~longer~~of ~~than~~this 12ASU ~~months~~did ~~are~~not ~~immaterial~~have a tomaterial ~~our~~effect ~~consolidated~~on ~~financial statements for~~ the ~~period~~Company’s ~~beginning~~consolidated ~~January~~financial ~~1, 2019~~statements.

In ~~February~~August 2018, the FASB Accounting Standards Board issued ASU No. 2018-0213, ~~Income~~“Fair ~~Statement~~Value -Measurement ~~Reporting Comprehensive Income~~ (Topic ~~220~~820): ~~Reclassification of~~Disclosure ~~Certain~~Framework ~~Tax~~Changes ~~Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required~~ to ~~apply~~ the ~~provisions~~Disclosure ofRequirements ~~Topic~~for ~~220,~~Fair ~~Income~~Value ~~Statement~~Measurement” –(“ASU ~~Reporting~~2018-13”). ~~Comprehensive~~ASU ~~Income,~~2018-13 ~~and has items of other comprehensive~~modifies ~~income for which~~ the ~~related~~disclosure ~~tax~~requirements ~~effects~~on ~~are~~fair ~~presented~~value ~~in other comprehensive income as required by GAAP~~measurements. ~~The~~ASU ~~amendments~~2018-13 inis ~~this Update are~~ effective for ~~all~~public entities for fiscal years beginning after December 15, ~~2018~~2019, ~~and~~with ~~interim~~early ~~periods within those fiscal years. Early~~ adoption ~~of the amendments in this Update is~~ permitted, ~~including~~for ~~adoption in~~ any ~~interim~~removed ~~period,~~or ~~(1)~~modified ~~for~~disclosures. ~~public business~~The ~~entities~~removed ~~for~~and ~~reporting~~modified ~~periods~~disclosures will ~~for~~be ~~which~~adopted ~~financial~~on ~~statements~~a ~~have~~retrospective ~~not~~basis ~~yet been issued~~ and ~~(2)~~the ~~for~~new ~~all~~disclosures ~~other~~will ~~entities for~~be ~~reporting~~adopted ~~periods~~on ~~for~~a ~~which~~prospective ~~financial statements have not yet been made available for issuance~~basis. The ~~amendments in this Update should be applied either in the period of~~ adoption ~~or retrospectively to each period (or periods) in which the effect~~ of ~~the change~~this inASU ~~the~~on ~~U.S.~~January ~~federal~~1, ~~corporate~~2020 ~~income~~did ~~tax rate in the Tax Cuts and Jobs Act is recognized. The Company does~~ not ~~believe the adoption of this ASU would~~ have a material effect on the Company’s consolidated financial statements.

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in Update 2016-13 address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual reporting periods beginning after December 15, 2019. The adoption of this ASU on January 1, 2020 did not have a material effect on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated financial statement presentation or disclosures.

4. Accounts ~~Receivable~~receivable, net

As of December 31, ~~2018~~2019 and ~~2017~~December 31, 2018, we had ~~$6,751,113~~ nil and $286.8 million,~~620,~~ respectively, of accounts receivable ~~due~~ from the Company’s customers. The Company’s current payment terms on these customers are ranging typically from 60 days to 9 months after receipts of the goods depending on the creditworthiness of these customers. These customers are either agricultural cooperative company or distributors who then resell the Company’s products to individual farmers.

F-15

The Company’s provision on allowance for doubtful accounts 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 and come up with an aging allowance method. The Company’s management has continued to evaluate the reasonableness of the valuation allowance policy and update it if necessary.

F-14

Accounts receivable consisted of the following:

	December 31, 2018		December 31, 2017
	December 31, 2019		December 31, 2018
Accounts receivable	$	~~6,751,113~~-	$	836,~~860~~751,113
Less: Allowance for doubtful debt		-		~~(55,240~~-	)
Accounts receivable, net	$	~~6,751,113~~-	$	286,~~620~~751,113

5. ~~Prepaid~~Other ~~Expenses~~receivables, net

Other receivables consisted of the following:

	December 31, 2019			December 31, 2018
Consideration receivable from sales of subsidiaries (1)	$	2,183,070		$	-
Rent deposits and others		277,176			323,362
Other receivables	$	2,460,246		$	323,362
Allowance for other receivables		(252,047	)		-
Other receivables, net	$	2,208,199		$	323,362

(1)

6. Loan to a third party

		December 31, 2019		December 31, 2018
Yangling SanKang Life Agricultural Development Co. Ltd		2,046,822		-
Loan to third parties	$	2,046,822	$	-

On October 10, 2019, the Company loan approximately RMB 14.3 million (approximately US$ 2.0 million) to Yangling Sankang Agriculture Development Ltd. The repayment date is June 30, 2020, the monthly interest rate is 1% after January 1, 2020.

7. Prepaid expenses

Prepaid expenses consisted of the following:

	Notes		~~December 31, 2018~~		December 31, 2019		~~December 31, 2017~~		December 31, 2018
Prepaid office rent			$	~~4,921~~	$	1,491	$	~~41,487~~	$	4,921
Prepaid License Fee (for fertilizer)				-				26,115
Prepaid government filing expense						6,000				7,000
Prepaid government filing expense				7,000				5,000
Prepaid consulting expenses		(1)				1,084,436				2,230,553
Prepaid consulting expenses	(1)			2,230,553				2,392,273
Others						-				17,091
Others				17,091				9,397
Total					$	1,091,927			$	2,259,565
Total			$	2,259,565			$	2,474,272

(1) Prepaid consulting expenses represent issuance of common stock for prepaid services. As of December 31, 2018, the Company evaluated the performance of the consultants and concluded all the contracts were on schedule of delivery. The company amortized the consulting fee over the service periods per agreements based on the progress of services delivered. For the year ended December 31, 2018 and 2017, the prepaid consulting expenses totaled $2,242,050 and $1,689,896, respectively. For the year ended December 31, 2018 and 2017, the amortization of consulting expense was $2,403,770 and $697,673, respectively.F-16

6(1) Prepaid consulting expenses represent issuance of common stock for prepaid services. As of December 31, 2019, the Company evaluated ~~Advance~~the toperformance ~~suppliers~~of the consultants and concluded all the contracts were on schedule of delivery. The company amortized the consulting fee over the service periods per agreements based on the progress of services delivered. For the years ended December 31, 2019 and 2018, the prepaid consulting expenses totaled $672,849 and $2,242,050, respectively. For the years ended December 31, 2019 and 2018, the amortization of consulting expense was $1,890,628 and $2,403,770, respectively.

~~Advance to suppliers are mainly funds deposited for future raw material and finished goods purchases~~8. ~~As a common practice in China’s~~ ~~agriculture~~Advance ~~industry, many of these vendors require a certain amount~~ to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis as well as securing the current agreed upon purchase price. Since the Company anticipated the price of raw materials continues to be on the rise, the Company agreed to make large amount of advances to suppliers~~. As of December 31, 2018 and 2017, such advance to suppliers was $15,763,198 and $12,660,793, respectively.~~

7Advance to suppliers are mainly funds deposited for future raw material and finished goods purchases. The Company’s major vendors ~~Inventory~~require deposits with them as a guarantee that the Company will complete its purchases on a timely basis as well as securing the current agreed upon purchase price. Since the Company anticipated the price of raw materials continues to be on the rise, the Company agreed to make large amount of advances to suppliers.

As of December 31, 2019 and December 31, 2018, advance to suppliers consisted of the following:

	December 31, 2019		December 31, 2018
Advance to suppliers	$	10,274,222	$	15,763,198
Less: provisions for advance to suppliers		-		-
Advance to suppliers, net	$	10,274,222	$	15,763,198

9. Inventory

Inventory consisted of the following:

	December 31, 2018		December 31, 2017
	December 31, 2019		December 31, 2018
Raw materials	$	~~1,358,384~~-	$	21,~~745~~358,~~991~~384
Finished goods		~~253~~31,~~331~~506		-253,331
Packing materials		~~31,318~~-		-31,318
Total	$	131,~~643,033~~506	$	21,~~745~~643,~~991~~033

~~F-15~~10. Property, Plant and Equipment

8. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:

	December 31, 2018			December 31, 2017
	December 31, 2019			December 31, 2018
Property, Plant and Equipment
Office equipment	$	175,~~451~~586		$	1517,~~899~~451
Furniture		27,312			23,331
Furniture and fixture		8,225			27,312
Leasehold improvements		~~130~~43,~~357~~172			91130,~~609~~357
Construction in progress		~~25,305~~-			2625,~~729~~305
Others		~~1,047~~-			1,~~106~~047
Property, plant and equipment - total		~~201~~56,~~472~~983			~~158~~201,~~674~~472
Less: accumulated depreciation		(~~108~~23,~~291~~723	)		(68108,~~174~~291	)
Property, plant and equipment - net	$	9333,~~181~~260		$	9093,~~500~~181

Depreciation expense was $2730,~~947~~850, and $4627,~~491~~947 for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively.

911. Deposit for ~~Long~~long-~~Term~~term ~~Investment~~investment

On June 8, 2017, Kiwa Hebei 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 for approximately RMB 15,000,000 (approximately US$ 2.31 million). As of December 31, ~~2018~~2019, Kiwa Hebei has made deposit payment of RMB 5,000,000 (approximately $0.7 million). ~~Due~~Since ~~to certain~~the ~~administrative~~Company ~~approval~~had ~~process~~received ~~from~~an ~~the~~approval ~~Chinese~~from ~~government~~relevant ~~and~~authorities ~~the~~to ~~establishment~~obtain ofa ~~Yangling~~land ~~base~~purchase indiscount ~~October~~from ~~2018,~~ the ~~closing of~~Yangling ~~the~~Free ~~equity~~Trade ~~purchase~~Zone to ~~agreement~~construct ~~has~~a ~~been~~new ~~delayed.~~manufacturing ~~RMB~~facility 6for bio-fertilizers,~~500,000~~ ~~(approximately~~the ~~$1.0~~Company ~~million)~~decided ~~will~~to beabandon ~~paid~~its ~~upon~~plan ~~completion~~to ~~of the~~build ~~land~~a ~~use~~production ~~rights~~base in ~~ownership~~Penglai ~~transfer~~ and ~~RMB~~has ~~3,500,000~~initiated ~~(approximately~~the ~~$0.5~~process ~~million)~~of ~~will~~refund ~~be paid upon completion~~ of the ~~business licenses transfer~~deposits. The Company ~~estimated~~expected ~~the~~to ~~completion~~collect all of the ~~transfer~~deposits ~~will~~within one ~~be in December 2019~~year.

~~10. Salary payable~~F-17

	December 31, 2018		December 31, 2017
Ms. Yvonne Wang (“Ms. Wang”)	$	259,000	$	175,000
Hon Man Yun (“Mr. Yun”)		60,702		-
Other Employees		705,257		116,401
Total	$	1,024,959	$	291,401

12. Salary payable

Ms. Wang served as Chairman of the Board since November 2015 and served as CEO since August 2016. No salary was paid to Ms. Wang since December 2015. Mr. Yun was the Chief Financial Officer of the Company since April 2018. The Company expects to be in negotiations with Mr. Yun and Ms. Wang to settle these obligations.

	December 31, 2019		December 31, 2018
Ms. Yvonne Wang (“Ms. Wang”)	$	343,000	$	259,000
Hon Man Yun (“Mr. Yun”)		164,992		60,702
Other Employees		367,274		705,257
Total	$	875,266	$	1,024,959

11Ms. ~~Related~~Wang ~~Party~~served ~~Transactions~~as Chairman of the Board since November 2015 and served as Secretary since March 2020. No salary was paid to Ms. Wang since December 2015. Mr. Yun was the Chief Financial Officer of the Company since April 2018. The Company expects to be in negotiations with Mr. Yun and Ms. Wang to settle these obligations.

13. Related party transactions

Due from related parties – non-trade

Amounts due from related parties consisted of the following as of December 31, ~~2018~~2019 and ~~2017~~2018:

Item	Nature		Notes		December 31, ~~2018~~2019		December 31, ~~2017~~2018
Mr. Wei Li		Non-trade		(1)		-		19,017
Mr. Xiaoqiang Yu		Non-trade		(1)		11,240		12,108
Mr. Xiaoqiang Yu		Non-trade		(2)		12,108		-
Ms. Feng Li (“Ms. Li”)		Non-trade		(2)		23,140		-
Total					$	1234,~~108~~830	$	1912,~~017~~108

~~F-16~~(1) Mr. Xiaoqiang Yu

~~(1)~~During the year ended December 31, 2019, Mr. ~~Wei~~Xiaoqiang LiYu, the COO of the Company, obtained a cash advance from the Company for operational purpose. As of December 31, 2019 and December 31, 2018, the amount due from Mr. Xiaoqiang Yu was $11,240 and $12,108, respectively.

~~During~~(2) ~~the year ended December 31, 2017, Mr~~Ms. ~~Wei~~Feng Li~~, the former chairman and CEO, founder and major shareholder of the Company, obtained a cash advance from the Company for operational purpose. The balance was repaid in March 2018.~~

~~(2)~~Ms. MrFeng Li is a member of the Company’s board of directors and shareholder of the Company. ~~Xiaoqiang~~Ms. YuLi held approximately 11% of the Company’s Common Stock and 50% of the Company’s Series A Preferred Stock. Ms. Feng Li obtained a cash advance from the company for operational purpose. As of December 31, 2019 and December 31, 2018, the amount due from Ms. Feng Li was $23,141 and nil, respectively.

During the year ended December 31, 2018, Mr. Xiaoqiang Yu, the COO of the Company, obtained a cash advance from the Company for operational purpose. As of December 31, 2018 and 2017, the amount due from Mr. Xiaoqiang Yu was $12,108 and $0, respectively.

Due to related parties

Amounts due to related parties consisted of the following as of December 31, ~~2018~~2019 and ~~2017~~2018:

Item	Nature		Notes		December 31, ~~2018~~2019		December 31, ~~2017~~2018
Ms. Wang		Non-trade		(1)		~~534~~247,~~563~~619		~~320~~534,~~199~~563
Ms. Feng Li (“Ms. Li”)		Non-trade		(2)		~~36,358~~-		-36,358
Total					$	570,921	$	320,199
Yangling Kangxi Agricultural Technology Development Co., Ltd.		Non-trade		(3)		1,002
Total					$	248,617	$	570,921

F-18

(1) Ms. Wang

Effective November 20, 2015, the Company appointed Ms. Wang as the Chairman of the Board and 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 April 15, 2018, Ms. Wang turned over the Acting Chief Financial Officer to her successor. 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.

During the years ended December 31, ~~2018~~2019 and ~~2017~~2018, Ms. Wang paid various expenses on behalf of the Company. As of December 31, ~~2018~~2019 and ~~2017~~2018, the amount due to Ms. Wang was $~~534~~247,~~563~~619 and $~~320~~534,~~199~~563, respectively.

(2) Ms. Feng Li

Ms. Feng Li is a member of the Company’s board of directors and shareholder of the Company. Ms. Li held approximately 11% of of the Company’s Common Stock and 50% of the Company’s Series A Preferred Stock. Ms. Feng Li paid various expenses on on behalf of the Company. As of December 31, ~~2018~~2019 and ~~December 31~~2018, ~~2017,~~ the amount due to Ms. Feng Li was ~~$36,358~~nil and $036,358, respectively.

~~12.~~(3) ~~Convertible~~Yangling ~~Notes~~Kangxi ~~Payable~~Agricultural Technology Development Co., Ltd. (Kangxi)

Yangling Kangxi Agricultural Technology Development Co., Ltd. (Kangxi) is the Company’s affiliate established by Kiwa Yangling on November 21, 2019 with registered capital of RMB 1 million. Kiwa Yangling owned 40% of shareholder interests of Kangxi. As of December 31, 2019, Kiwa Yangling has not made any capital contribution Kangxi’s business will be focusing on soil remediation projects. As of December 31, 2019, Kangxi has not commenced operations. The balance due to Kangxi represents the advance for assisting to handle Kangxi’s business license. The amount was subsequently recorded as other income upon the service completion..

14. Convertible notes payable

Convertible notes payable consisted of the following:

	December 31, 2018			December 31, 2017
	December 31, 2019			December 31, 2018
6% secured convertible notes – FirsTrust Group Inc. (1)	$	~~125~~185,~~692~~867		$	~~121~~125,~~562~~692
15% convertible notes- Mr. Geng Liu (2)		~~145~~143,~~431~~145			~~153~~145,~~615~~431
15% convertible notes- Mr. Junwei Zheng (3)		~~799~~787,~~870~~294			~~844~~799,~~881~~870
Less: notes discount		(99,907	)		(386,776	)
12% convertible notes- Labrys (4)		940,250			-
Convertible notes payable - total		971,086			733,282
12% convertible notes- TFK (5)		-			-
Non-current		-			(460,082	)
12% convertible notes- EMA (6)		303,847
Current	$	971,086		$	273,200
12% convertible notes- Firstfire (7)		100,000
12% convertible notes- GRR (8)		153,000
12% convertible notes- Morningview (9)		135,000
Less: notes discount		(273,559	)		(99,907	)
Convertible notes payable - total	$	2,474,844		$	971,086
Non-current		97,895			-
Current	$	2,376,949		$	971,086

F-17

Convertible notes payable consists of $125,692 of 6% secured convertible notes issued to FirsTrust Group Inc. on June 29, 2006, $145,431 of 15% convertible note issued to Mr. Geng Liu on January 17, 2017 and $799,870 of 15% convertible note issued to Mr. Junwei Zheng on May 9, 2017.

(1) 6% secured convertible notes – FirsTrust Group Inc.

On June 29, 2006, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with six institutional investors (collectively, the “Purchasers”) for the issuance and sale of 6% secured convertible notes, due three years from the date of issuance, in the aggregate principal amount of $2,450,000 (the “6% Convertible Notes”), convertible into shares of the Company’s common stock.

F-19

On June 29, 2009, the 6% Notes were due. The Company informed the Purchasers of its inability to repay the outstanding balance on the due date. Therefore, the 6% Notes are in default and the default interest rate of 15% per annum is being charged on the 6% Notes.

On August 12, 2013, the Company, entered into a Settlement Agreement and Release (the “Release”) with the holders (the “Holders”) of the “6% Convertible Notes” in the aggregate principal amount of $2,000,000. Pursuant to the terms of the Release, the Company paid the Holders $75,000 for a full release, including the forgiveness of past defaults of unpaid principal amounts, interests and penalties. On March 18, 2008, FirsTrust Group, Inc. (“FirsTrust”) purchased the three remaining 6% Convertible Notes, totaling $168,000 ($59,100, $50,400 and $59,100 respectively), from Nite Capital, one of the six institutional investors which purchased a total of $300,000 of the Note in three tranches ($105,000, $90,000, $105,000 respectively), for a cash payment of $100,000. After the Release and conversion, FirsTrust is the only holder of the outstanding 6% Convertible Note with outstanding principal amount of $150,250.

The Company also incurs a financial liquidated damages 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 any 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 Purchase Agreement, the Company has accrued the amounts of $7578,~~280~~540 and $8175,~~930~~280 for liquidated damages for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively. The Company also accrued $1619,~~914~~939 and $2116,~~897~~914 for interest at the rate of 15% per annum for the years ended December 31, ~~2018~~2019 and ~~2017~~2018, respectively. The total 15% accrued interests were $~~177~~174,~~179~~911 and $~~182~~177,~~858~~372 at December 31, ~~2018~~2019 and ~~2017~~2018, respectively. The total accrued liquidated damages were $~~555~~592,~~538~~078 and $~~522~~555,~~257~~538 at December 31, ~~2018~~2019 and ~~2017~~2018, respectively.

The Company’s obligations under the Notes are secured by a first priority security interest in the Company’s intellectual property pursuant to an Intellectual Property Security Agreement with the Holders. In addition, Mr. Li, the Company’s former Chief Executive Officer, has pledged all of his common stock of the Company as collateral for the Company’s obligations under the 6% Convertible Notes.

On October 19, 2017, the Company issued total 14,151 common shares at $1.04 per share price to FirsTrust Group, Inc. for the conversion of convertible note. According to the convertible note agreement, the conversion price is based on a 40% discount to the average of the lowest three days trading price of the Company’s common stock on the OTC Bulletin Board over a 20-day trading period per the convertible notes agreement. As the carrying value of the notes and the intrinsic value of that conversion feature equaled to the fair value of the 14,151 common shares at $2.25 per share, no gain or loss were recognized upon this conversion.

On December 13, 2017, the Company issued total 105,095 common shares at $0.75 per share price to FirsTrust Group, Inc. for the conversion of convertible note. According to the convertible note agreement, the conversion price is based on a 40% discount to the average of the lowest three days trading price of the Company’s common stock on the OTC Bulletin Board over a 20-day trading period per the convertible notes agreement. As the carrying value of the notes and the intrinsic value of that conversion feature equaled to the fair value of the 105,095 common shares at $2.3 per share, no gain or loss were recognized upon this conversion.

F-18

On April 27, 2018, the Company issued total 126,045 common shares to FirsTrust Group, Inc. for the conversion of convertible note. According to the convertible note agreement, the conversion price is based on a 40% discount to the average of the lowest three days trading price of the Company’s common stock on the OTC Bulletin Board over a 20-day trading period per the convertible notes agreement.

On September 19, 2018, the Company has entered a Settlement Agreement and Release (“Settlement Agreement”) with FirsTrust to settle the 6% secured convertible notes and interest and penalties. The Company has agreed to allow FirsTrust to effect a conversion in accordance with the terms of the 6% Note by October 18, 2018, and to make a cash payment of $500,000 by December 17, 2018. If the payment is not timely made, then FirsTrust shall be permitted to immediately effect further conversion in accordance with the terms of the 6% Notes into the Company’s shares, and the Company shall make a final cash payment of $340,000 by February 28, 2019. The Settlement Agreement has not been carried out by the Company as agreed as of December 31, 2018. The interest and penalties on this Note are continuously accrued in accordance with the original terms.

On October 18, 2018, FirsTrust requested a conversion in accordance with the terms of the 6% Notes into the Company’s shares. The Company had failed to convert and thus incurred a financial liquidated damage at $245 per day for a total of $18,130 as of December 31, 2018, which had been added to the principle amount of the Note. On March 26, 2019, the Company issued 395,959 shares to FirsTrust for the conversion.F-20

On ~~March~~October 2618, ~~2019~~2018, ~~the~~FirsTrust ~~Company~~requested ~~has entered into~~ a ~~First~~conversion ~~Amendment~~in toaccordance ~~Settlement Agreement and Release (“First Amendment Agreement”)~~ with ~~FirsTrust~~the toterms ~~settle~~of the 6% ~~secured~~Notes ~~convertible~~into ~~notes together with~~ the ~~promissory~~Company’s ~~notes~~shares. The asCompany ~~disclosed~~had ~~under~~failed ~~Note~~to 12convert ~~plus interest~~ and ~~penalties~~thus ~~with~~incurred a ~~total~~financial ~~payable~~liquidated ofdamage ~~approximately~~at $~~2.3~~245 ~~million~~per asday offor ~~the~~a ~~date~~total of ~~the~~$18,130 ~~First~~as ~~Amendment~~of December ~~Agreement~~31, ~~was~~2018, ~~entered. The~~which ~~Company~~had ~~has~~been ~~agreed~~added to ~~make~~the aprinciple ~~payment~~amount of ~~approximately~~the ~~$29,789~~Note. ~~(RMB200,000),~~On ~~which~~March ~~has been paid on April 1~~26, 2019, tothe ~~enter into~~Company ~~this~~issued ~~Amendment~~395,959 ~~and~~shares to ~~settled~~FirsTrust ~~with~~for the ~~total outstanding balance of $1~~conversion.3 ~~million~~According to ~~be due under~~ the ~~terms~~convertible ofnote ~~the First Amendment Agreement by June 30~~agreement, ~~2019.~~the Ifconversion ~~such~~price ~~settled~~is ~~outstanding~~based ~~balance~~on ~~was~~a ~~not~~40% ~~made~~discount to bythe ~~June~~average ~~30,~~of ~~2019, it will deem~~ the ~~First~~lowest ~~Amendment Agreement~~three todays betrading ~~ineffective~~price ~~and~~of the Company’s ~~will~~common ~~need~~stock toon ~~continue~~the toOTC ~~pay~~Bulletin ~~FirsTrust~~Board ~~the~~over ~~amount~~a ~~set~~20-day trading ~~forth~~period inper the ~~Settlement~~convertible ~~Agreement~~notes agreement.

On March 26, 2019, the Company has entered into a First Amendment to Settlement Agreement and Release (“First Amendment Agreement”) with FirsTrust to settle the 6% secured convertible notes together with the promissory notes as disclosed under Note 13 plus interest and penalties with a total payable of approximately $2.3 million as of the date of the First Amendment Agreement was entered. The Company has agreed to make a payment of approximately $29,789 (RMB200,000), which has been paid on April 1, 2019, to enter into this Amendment and settled with the total outstanding balance of $1.3 million to be due under the terms of the First Amendment Agreement by June 30, 2019. If such settled outstanding balance was not made by June 30, 2019, it will deem the First Amendment Agreement to be ineffective and the Company will need to continue to pay FirsTrust the amount set forth in the Settlement Agreement.

As of this date, the Company remains in default of the Settlement Agreement and Release and is in the process of raising funds to retire these obligations. Notwithstanding, there is no guarantee that the Company will be successful in these efforts and that FirsTrust will not exercise all rights available to it under the applicable agreements between the parties.

On February 13, 2019, the Company received notice from FirsTrust that the Company has failed to make cash payment according to Sections 1 and 2 of the Settlement Agreement. FirsTrust advised the Company that it was in breach of the Settlement Agreement and that all interest and penalties applicable to the Promissory Note and 6% Note will continue to accrue so long as the Promissory Note and 6% Note remain in default. FirsTrust advised the Company that it believed that it had the right to immediately effect further conversions of 6% Note and that they would be reviewing various options to enforce the Company’s payment obligations under the Promissory Note, 6% Note and Settlement Agreement. In the meantime, FirsTrust has continued to effect conversions pursuant to the Promissory Note and 6% Note.

In January and February of 2020, the Company issued a total of 13,773,125 common shares to FirsTrust Group, Inc. for the conversion of convertible note. According to the convertible note agreement, the conversion price is based on a 40% discount to the average of the lowest three days trading price of the Company’s common stock on the OTC Bulletin Board over a 20-day trading period per the convertible notes agreement. As the carrying value of the notes and the intrinsic value of that conversion feature equaled to the fair value of the 13,773,125 common shares at $0.01 per share, no gain or loss were recognized upon this conversion.

(2) 15% convertible notes- Mr. Geng Liu

On January 17, 2017, the Company entered a Convertible Note Agreement with Mr. Geng Liu ~~with~~and received principal of RMB 31 million, ~~approximately~~ approximately $~~145~~140,000. The note bears interest at 15% per annum and matured on January 16, 2018. Before the maturity date, the ~~Note~~ Note holder has an option to convert partial or all of the outstanding principal to the Company’s common shares with a conversion price of $0.90 per share. ~~Subsequently,~~The ~~the~~maturity ~~Company~~date ~~reached~~of ~~an agreement with Mr. Geng Liu that~~ the ~~maturity~~note ~~date~~has ~~will~~been be extended to June 30, ~~2019~~2020.

The notes are convertible into shares of the common stock, at conversion price is $0.90 which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $45,094 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital, and the remainder proceeds of $99,850 from issuance of the convertible note was allocated to convertible notes payable.

For the year ended December 31, 2018 and 2017, the Company recorded interest expense of $24,945 and $64,305 on the note, including the amortization of the debt discount resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2018 was $145,431.F-21

For the years ended December 31, 2019 and 2018, the Company recorded interest expense of $21,746 and $24,945 on the note, including the amortization of the debt discount resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $143,145.

(3) 15% convertible notes- Mr. Junwei Zheng

On May 9, 2017, the Company entered a Convertible Note Agreement with Mr. Junwei Zheng with principal of RMB 30 million. The note bears interest at 15% per annum and will mature on May 8, 2019. 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 $3.5 per share. On August 17, 2018, the Company does not expect that the remaining funds will ever be so advanced. As of December 31, ~~2018~~2019, the Company has received principal totaled RMB 5.5 million ($~~799~~787,~~871~~294 equivalent USD at December 31, ~~2018~~2019) out of the RMB 30 million Convertible Note Agreement. On May 7, 2019, the Company reached an agreement with Mr. Junwei Zheng that the maturity date will be extended to May 8, 2020.

F-19

The notes are convertible into shares of the common stock, at conversion price is $3.5 which is higher than the price of the Company’s common stock on the date of issue, therefore the conversion feature embedded in the note did not meet the definition of BCF. The Company determined that conversion option embedded in the note meet the definition of a derivative instrument. Since the embedded conversion price of the conversion feature is denominated in U.S. dollar, a currency other than the convertible note payable currency. As a result, the embedded conversion feature is not considered indexed to the Company’s own stock due to the variable exchange rate between U.S. Dollar and RMB, and as such, the Company determined that the embedded conversion feature to be carried as a liability and re-measured at fair value at each financial reporting date until such time as the conversion feature is exercised or expired. The Company evaluated the fair value of the embedded conversion feature at the issue date and recorded the amount into as discount to convertible note payable. The discount to convertible note payable is being amortized to interest expense over the life of the note using the straight-line method, which approximates the effective interest method.

On May 7, 2019, due to the extension of the convertible notes and embedded conversion feature continued to be considered as a derivative instrument, the Company determined that the embedded conversion feature to be carried as a liability and re-measured at fair value at each financial reporting date until such time as the conversion feature is exercised or expired. The Company evaluated the fair value of the embedded conversion feature at the renewal date and recorded the amount into as discount to convertible note payable. The discount to convertible note payable is being amortized to interest expense over the life of the note using the straight-line method, which approximates the effective interest method.

The fair value of embedded conversion feature were calculated using the BlackScholesMerton model based on the following variables at inception on May 9, 2017:

	●	Strike price of $3.5, for the conversion options

	●	Expected volatility of 260.8% calculated using the Company’s historical price of its common stock

	●	Expected dividend yield of 0%

	●	Risk-free interest rate of 1.37%, for the conversion options

	●	Expected lives of 2.0 years

	●	Market price at issuance date of $2.7

The fair value of embedded conversion feature were calculated using the BlackScholesMerton model based on the following variables on December 31, 2017:

● Strike price of $3.5, for the conversion options ● Expected volatility of 151.9% calculated using the Company’s historical price of its common stock ● Expected dividend yield of 0% ● Risk-free interest rate of 1.80%, for the conversion options ● Expected lives of 1.33 years ● Market price at re-measurement date of $2.0

The fair value of embedded conversion feature was calculated using the BlackScholesMerton model based on the following variables on December 31, 2018:

● Strike price of $3.5, for the conversion options ● Expected volatility of 204.73% calculated using the Company’s historical price of its common stock ● Expected dividend yield of 0% ● Risk-free interest rate of 2.49%, for the conversion options ● Expected lives of 0.33 years ● Market price at re-measurement date of $0.50

	●	Strike price of $3.5, for the conversion options

	●	Expected volatility of 204.73% calculated using the Company’s historical price of its common stock

F-2022

~~For the~~● ~~year~~Expected ~~ended~~dividend ~~December~~yield ~~31,~~of ~~2018,~~0% ~~the~~● ~~Company~~Risk-free ~~recorded~~ interest ~~expense~~rate of ~~$409~~2.49%,~~798~~ onfor the ~~note,~~conversion ~~including~~options ~~the~~● ~~amortization~~Expected ~~of the~~lives ~~debt discount resulting from the value~~ of ~~the~~0.33 ~~embedded~~years ~~conversion~~● ~~feature,~~Market ~~and~~price ~~the~~at ~~carrying~~re-measurement ~~value~~date of ~~the note as of December 31, 2018 was~~ $~~699,963~~0.50

~~13.~~The ~~Note~~fair ~~payable~~value of embedded conversion feature were calculated using the BlackScholesMerton model based on the following variables on May 7, 2019:

	●	Strike price of $3.5, for the conversion options

	●	Expected volatility of 192.48% calculated using the Company’s historical price of its common stock

	●	Expected dividend yield of 0%

	●	Risk-free interest rate of 2.37%, for the conversion options

	●	Expected lives of 1.00 years

	●	Market price at re-measurement date of $0.95

The fair value of embedded conversion feature was calculated using the BlackScholesMerton model based on the following variables on December 31, 2019:

	●	Strike price of $3.5, for the conversion options

	●	Expected volatility of 204.73% calculated using the Company’s historical price of its common stock

	●	Expected dividend yield of 0%

	●	Risk-free interest rate of 1.57%, for the conversion options

	●	Expected lives of 0.33 years

	●	Market price at re-measurement date of $0.02

For the years ended December 31, 2019 and 2018, the Company recorded interest expense of $281,470 and $409,798, respectively on the note, including the amortization of the debt discount resulting from the value of the embedded conversion feature, and the carrying value of the note as of December 31, 2019 and 2018 was $754,110 and $699,963, respectively.

(4) 12% convertible notes- Labrys

On February 27, 2019, the Company entered into a Convertible Note Agreement with Labrys Fund, LP (“Labrys”), for the principal amount of $1,365,000 (the “Note”). The Note carries an Original Issue Discount of $102,375, bears interest at the rate of 12% per annum and must be repaid on or before 180 calendar days after the funding date of the respective tranche. The amounts advanced under the Note may be converted by Labrys at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion. As of December 31, 2019, the Company has received principal totaled $1,213,250 out of the $1,365,000 Convertible Note Agreement.

In addition, the Company issued 50,000 shares of the Company’s common stock with a fair value of $40,000, determined using the closing price of the issuance date of $0.80 per shares in connection with these issuances along with the original issue discount of $90,994 were recognized as discounts from the principal amount to be amortized over 180 days.

F-23

Furthermore, the notes are convertible into shares of the common stock, at conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $1,071,506 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

On August 28, 2019, the Company released 420,000 shares of the Company’s common stock with a fair value of $336,000 to Labrys as a penalty due to the Company was not able to repay the Note upon the maturity date. On September 15, 2019, the Company released 390,000 shares of the Company’s common stock with a fair value of $210,600 to Labrys as a penalty due to the Company was not able to repay the Note upon the maturity date. The fair value of the released shares are determined using the closing price of the date of Note default. The Company recorded $546,600 as financing expense during the year ended December 31, 2019.

On September 25, 2019, the Company repaid $90,000 to Labrys. On October 12, 2019, the Company repaid $202,691 to Labrys.

On October 24, 2019, the Note became default due to insufficient shares for issuance. For the year ended December 31, 2019, the Company recorded $498,564 default penalty amount.

For the year ended December 31, 2019, the Company issued total 25,017,964 common shares to Labrys for the conversion of $115,612 interests and $109,928 default penalties of the convertible note. For the year ended December 31, 2019, the Company recorded interest expense of $1,362,983 on the note, including the amortization of the debt discount of $1,202,500 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $940,250.

On February 5, 2020, the Company executed a Securities Purchase Agreement (the “SPA”) between Labrys Fund, LP and the Company, pursuant to which Labrys purchased from the Company a Convertible Promissory Note in the principal amount of $375,000 (the “Note”) dated February 5, 2020. The Note carries an Original Issue Discount of $37,500, bears interest at the rate of 12% per annum and must be repaid on or before 180 calendar days after the funding date of each respective tranche (each a “Maturity Date”). The Note may be prepaid at any time before Maturity Date without any prepayment penalty. The amounts advanced under the Note may be converted by Labrys at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 70% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

(5) 12% convertible notes- TFK

On March 21, 2019, the Company entered into a Convertible Note Agreement with TFK Investments Inc. (“TFK”), for the principal amount of $300,000 (the “Note”). The Note carries an Original Issue Discount of $28,500, bears interest at the rate of 12% per annum and must be repaid on or before 180 calendar days after the funding date of the respective tranche. The amounts advanced under the Note may be converted by TFK at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion. As of December 31, 2019, the Company has received principal totaled $150,000 out of the $300,000 Convertible Note Agreement.

In addition, the Company issued 7,500 shares of the Company’s common stock with a fair value of $6,975, determined using the closing price of the issuance date of $0.93 per shares in connection with these issuances along with the original issue discount of $14,250 were recognized as discounts from the principal amount to be amortized over 180 days.

Furthermore, the notes are convertible into shares of the common stock, at conversion price equal to 70% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $128,775 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

F-24

On September 22, 2019, the Company released 230,000 shares of the Company’s common stock with a fair value of $131,100 to TFK as a penalty due to the Company was not able to repay the Note upon the maturity date. The fair value of the released shares are determined using the closing price of the date of Note default. The Company recorded $131,100 as financing expense during the year ended December 31, 2019.

On October 24, 2019, the Note became default due to insufficient shares for issuance. For the year ended December 31, 2019, the Company recorded $75,000 default penalty amount.

For the year ended December 31, 2019, the Company issued total 37,109,964 common shares to TFK for the conversion of $150,000 principle amounts, $17,089 interests, and $75,000 default penalties of the convertible note. For the year ended December 31, 2019, the Company recorded interest expense of $173,761 on the note, including the amortization of the debt discount of $150,000 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $0.

On February 5, 2020, the Company executed a Securities Purchase Agreement (the “SPA”) between TFK Investments, LLC (“TFK”) and the Company, pursuant to which TFK purchased from the Company a Convertible Promissory Note in the principal amount of $375,000 (the “Note”) dated February 5, 2020. The Note carries an Original Issue Discount of $37,500, bears interest at the rate of 12% per annum and must be repaid on or before 180 calendar days after the funding date of the respective tranche (each a “Maturity Date”). The Note may be prepaid at any time before Maturity Date without any prepayment penalty. The Note may be prepaid at any time before Maturity Date without any prepayment penalty. The amounts advanced under the Note may be converted by Labrys at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 70% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

(6) 12% convertible notes- EMA

On September 12, 2019, the Company entered into a Convertible Note Agreement with EMA Financial LLC. (“EMA”), for the principal amount of $150,000 (the “Note”). The Note carries an Original Issue Discount of $9,000, bears interest at the rate of 12% per annum and must be repaid on or before June 5, 2020. The amounts advanced under the Note may be converted by EMA at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 70% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

In addition, the Company issued 7,500 shares of the Company’s common stock with a fair value of $3,975, determined using the closing price of the agreement date of $0.53 per shares in connection with these issuances along with the original issue discount of $9,000 were recognized as discounts from the principal amount to be amortized over 264 days.

Furthermore, the notes are convertible into shares of the common stock, at conversion price equal to 70% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $56,494 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

On October 24, 2019, the Note became default due to insufficient shares for issuance. For the year ended December 31, 2019, the Company recorded $153,847 default principle amount.

For the year ended December 31, 2019, the Company recorded interest expense of $42,541 on the note, including the amortization of the debt discount of $28,156 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $262,534.

F-25

On February 12, 2020, the Company completed a debt settlement, repaid $250,000 of principal, interest and penalty balances to EMA Financial, LLC.

(7) 12% convertible notes- Firstfire

On September 19, 2019, the Company entered into a Convertible Note Agreement with Firstfire Global Opportunities Fund LLC. (“Firstfire”), for the principal amount of $100,000 (the “Note”). The Note carries an Original Issue Discount of 5,000, bears interest at the rate of 12% per annum and must be repaid on or before 12 months after the funding date of the respective tranche. The amounts advanced under the Note may be converted by Firstfire at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

In addition, the Company issued 83,333 shares of the Company’s common stock with a fair value of $45,000, determined using the closing price of the agreement date of $0.54 per shares in connection with these issuances along with the original issue discount of $5,000 were recognized as discounts from the principal amount to be amortized over 365 days.

Furthermore, the notes are convertible into shares of the common stock, at conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $45,000 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

For the year ended December 31, 2019, the Company recorded interest expense of $28,989 on the note, including the amortization of the debt discount of $25,767 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $30,767.

On February 10, 2020, the Company completed a debt settlement, repaid $135,000 of principal, interest and penalty balances to Firstfire Global Opportunities Fund LLC.

(8) 12% convertible notes- GRR

On October 7, 2019, the Company entered into a Convertible Note Agreement with Geneva Roth Remark Holdings, Inc. (“GRR”), for the principal amount of $153,000 (the “Note”). The Note bears interest at the rate of 12% per annum and must be repaid on or before April 7, 2021. The amounts advanced under the Note may be converted by GRR at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

In addition, the notes are convertible into shares of the common stock, at conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $64,984 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

For the year ended December 31, 2019, the Company recorded interest expense of $14,004 on the note, including the amortization of the debt discount of $9,879 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $97,913.

(9) 12% convertible notes- Morningview

On October 7, 2019, the Company entered into a Convertible Note Agreement with Morningveiw Financial, LLC. (“Morningview”), for the principal amount of $135,000 (the “Note”). The Note carries an Original Issue Discount of 6,750, bears interest at the rate of 12% per annum and must be repaid on or before 12 months after the funding date of the respective tranche. The amounts advanced under the Note may be converted by Morningview at any time after 180 days from the date of the Note into shares of Company common stock at a conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion.

F-26

In addition, the Company issued 125,000 shares of the Company’s common stock with a fair value of $25,875, determined using the closing price of the agreement date of $0.21 per shares in connection with these issuances along with the original issue discount of $6,750 were recognized as discounts from the principal amount to be amortized over 365 days.

Furthermore, the notes are convertible into shares of the common stock, at conversion price equal to 60% of the lowest trading price during the 20 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF as $63,750 at the issue date. The relative fair values of the BCF were recorded into additional paid in capital.

For the year ended December 31, 2019, the Company recorded interest expense of $25,290 on the note, including the amortization of the debt discount of $21,695 resulting from the value of beneficial conversion feature, and the carrying value of the note as at December 31, 2019 was $60,258.

15. Note payable

On May 29, 2007, the Company issued a $360,000 promissory note (the “Promissory Note”) to an unrelated individual (the “Original Note holder”). This note bears interest at 18% per annum and was 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 shares of the Company’s common stock owned by Investlink (China) Limited (the “Pledged Shares”). In 2016, the Original Note holder informed the Company that all right, title and interests in the Promissory Note has been assigned and transferred to FirsTrust.

On September 19, 2018, the Company has entered a Settlement Agreement and Release with Firs Trust to settle the Notes and interest. The Company has agreed to make a cash payment of $200,000 and issue 300,000 Shares to FirsTrust by October 18, 2018 and to make a final cash payment of $260,000 by February 28, 2019. However, the Company has not performed its obligations in the Settlement Agreement as of December 31, 2018, and considered the payment terms as default and continued to accrue its interest after September 19, 2018.

AsOn ofMarch ~~December 31~~26, ~~2018~~2019, ~~all~~the ofCompany ~~$360,000~~has ofentered ~~Promissory~~into ~~Note~~the toFirst Amendment Agreement with FirsTrust isto ~~still~~settle ~~outstanding,~~the promissory notes together with the 6% secured convertible notes as disclosed under Note 13 plus interest and penalties with a total ~~accrued~~payable ~~interest~~of approximately $2.3 million as of the ~~Promissory~~ ~~Note~~date isof ~~$1,039,300~~the First Amendment Agreement was entered. The Company ~~accrued~~has agreed to make a payment of $9029,789 (RMB200,000) ), which has been paid on April 1, 2019, to enter into this Amendment, and settled with the total outstanding balance of $901.3 million to be due under the terms of the First Amendment Agreement by June 30, 2019. On March 26, 2019, the Company issued 300,000 ~~interest~~shares ~~expense~~to onFirsTrust ~~note~~Group ~~payable~~Inc. for debt settlement under the ~~years~~terms ~~ended~~of ~~December~~the Settlement Agreement and Release (“Settlement 31Agreement”) with FirsTrust to settle the Promissory Note. The Company has not performed its obligations in the First Amendment Agreement, ~~2018~~and considered the payment terms as default and ~~2017~~continued to accrue its interest after June 30, ~~respectively~~2019.

OnAs ~~March~~of 26December 31, 2019, ~~the~~all ~~Company~~of ~~has~~$360,000 ~~entered~~of ~~into~~Promissory ~~the~~Note ~~First~~to ~~Amendment Agreement with~~ FirsTrust tois ~~settle~~still ~~the~~outstanding, ~~promissory notes together with the 6% secured convertible notes as disclosed under Note 11 plus interest~~ and ~~penalties with a~~ total ~~payable~~accrued ofinterest ~~approximately $2.3 million as~~ of the Promissory ~~date~~Note ofis ~~the First Amendment Agreement was entered~~$1,129,300. The Company ~~has~~accrued ~~agreed to make a payment of~~ $2990,~~789 (RMB200,~~000) ~~), which has been paid on April 1, 2019, to enter into this Amendment,~~ and ~~settled with the total outstanding balance of~~ $~~1.3~~90,000 ~~million~~interest toexpense beon ~~due~~note ~~under~~payable ~~the~~for ~~terms of~~ the ~~First~~years ~~Amendment~~ended ~~Agreement by June 30, 2019. If such settled outstanding balance~~December ~~was not made by June 30~~31, 2019, ~~it will deem the First Amendment Agreement to be ineffective~~ and ~~the Company will need to continue to pay FirsTrust the amount set forth in the Settlement Agreement. On March 26~~2018, ~~2019, the Company issued 300,000 shares to FirsTrust Group Inc~~respectively. ~~for debt settlement under the terms of the Settlement Agreement and Release (“Settlement Agreement”) with FirsTrust to settle the Promissory Note.~~

On November 15, 2019, FirsTrust Group, Inc. filed a Complaint for Breach of Contract in Cobb County Superior Court, Georgia (Matter # 19108353) seeking damages in the aggregate amount of $3,914,447, which included accrued interest through October 31, 2019. On January 28, 2020, FirsTrust Group filed a Motion for Default Judgment against the Company regarding 6% secured convertible notes (Note 14) and the Promissory Note in the principal amount of $2,286,000 plus interest and other damages in the amount of $114,850, attorney fees in the amount of $240,190 and costs in the amount of $299.91. On March 11, 2020, the Cobb County Superior ~~Other~~Court ~~payable~~issuawarded a Default Judgment against the Company in the amount prayed. Interest accrues on this judgment at the annual rate of 15% as of the date the judgment was granted (i.e., March 11, 2020). The amount of daily interest currently accruing on this judgment is $1,100.89. The Company has not paid any amount of this judgment as of the date of this disclosure. The Company has not discussed a potential settlement with the judgment creditor as of the date of this disclosure. The Company will discuss with FirsTrust which respect to a potential settlement of this matter, however, there is no guarantee that any settlement will be reached. As of date of this disclosure, to the best of the Company’s knowledge, FirsTrust has not undertaken any collection activities other than obtaining the Default Judgment. At this time, it is not possible to predict the ultimate outcome of the matter and ~~accruals~~the financial impact, if any, as a result thereof aside from the liability of the judgment itself and the interest currently accruing thereon.

F-27

16. Other payable and accruals

Other payable consisted of the following:

Notes

December 31, ~~2018~~2019

December 31, ~~2017~~2018

Stock subscription proceeds received in advance

(1)

1,~~692~~685,~~454~~134

1,~~718~~692,~~642~~454

Accrued expenses

~~219~~241,~~033~~206

36219,~~240~~033

R&D expense payable

431,009

~~309~~431,~~555~~009

Others

~~597~~516,~~592~~207

44597,~~436~~592

2,~~940~~873,~~088~~556

2,~~108~~940,~~873~~088

(1) The Company received $~~465~~458,~~379~~059 (RMB 3.2 million, revalued as $~~465~~458,~~379~~059 as at December 31, ~~2018~~2019) in 2016 from two unrelated potential investors, and additionally received $1,227,075 in 2017 from three unrelated potential investors pending for stock issuances. The Company is in the process of negotiating the issuance price per shares of these stock subscriptions with the investors.

~~F-21~~17. Stockholders’ equity

15. Stockholders’ Equity

Preferred stock

On December 14, 2015, the Company issued 500,000 shares of preferred stock series A for the aggregate amount of $1,000,000 as debt cancellation owed to two related party individuals.

These shares of Series A Preferred Stock shall have voting rights equal to aggregate of 75% of total shares entitled to vote by both (i) the holders of all of the then outstanding shares of Common Stock (whether or not such holders vote) and (ii) the holders of all of the then outstanding shares of the Company. The holders of preferred stock are entitled to receive noncumulative dividends, when and if declared by the board of directors. Dividends are not mandatory and shall not accrue. The Company shall have the right to redeem the Series A Preferred Stock, plus any accrued and unpaid dividends at a cash redemption price equal to the aggregate issuance price of $2.0 per share.

On December 28, 2017, the Company issued 811,148 shares of preferred stock series B for the aggregate amount of $1,054,492 as debt cancellation owed to one related party individual.

These shares of Series B Preferred Stock has a liquidation preference which is same with the Company’s Series A Preferred Stock, and is entitled to vote on an as-converted basis as the holder of common stock, and is convertible into the Company’s common stock on a one-for-one basis at any time at the option of the holder. The holders of preferred stock are entitled to receive noncumulative dividends, when and if declared by the board of directors. Dividends are not mandatory and shall not accrue. The Company shall have the right to redeem the Series B Preferred Stock, plus any accrued and unpaid dividends at a cash redemption price equal to the aggregate issuance price of $1.3 per share.

Authorized common stock

On October 22, 2019, the Board of Directors of the Company amend the Company’s Articles of Incorporation to increase the number of authorized Company Common Shares from 100,000,000 to 300,000,000.

F-28

Common stock

During the year ended December 31, 2018, the Company issued 247,700 common shares to five individuals residing in China for net proceeds of $307,600. The sales were completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

During the year ended December 31, 2018, the Company entered into eleven consulting agreements and issued 1,277,918 shares of common stock to consultants for IR, Training system, and business development services based on market price of the shares at the transaction dates. The valuation of the shares utilized an average issuance price of $1.71 per share.

During the year ended December 31, 2018, the Company issued 30,632 common shares to one officer for salary payment based on the average stock price of his service period which valued at $25,299.

During the year ended December 31, 2019, the Company issued 220,000 common shares to two individuals residing in China for net proceeds of $176,000. The sales were completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

During the year ended December 31, 2019, the Company entered into three consulting agreements and issued 784,999 shares of common stock to consultants for IR and business development services based on market price of the shares at the transaction dates. The valuation of the shares utilized an average issuance price of $0.86 per share.

During the year ended December 31, 2019, the Company issued 124,484 common shares to one officer for salary payment based on the average stock price of his service period which valued at $34,738.

During the year ended December 31, 2019, the Company issued 1,420,000 common shares as a contingent shares to be released to the holders of the Convertible Notes if the Company is not able to repay the Convertible Notes at maturity date. As of December 31, 2019, 1,040,000 common shares are released to the holders of the Convertible Notes as discussed in Note 14 (4 & 5).

Conversion of convertible note

AsDuring ~~disclosed~~the inyear ~~Note~~ended ~~12(1),~~December ~~on October 19~~31, ~~2017~~2018, the Company issued total 14126,~~151~~045 common shares at ~~$1.04~~an ~~per~~average ~~share~~issuance price ~~to FirsTrust~~of ~~Group, Inc~~$$0.62 per share for the conversion of convertible note.

AsDuring ~~disclosed~~the inyear ~~Note~~ended ~~12(1), on~~ December 1331, ~~2017~~2019, the Company issued total ~~105~~62,~~095~~523,923 common shares at ~~$0.75~~an ~~per~~average ~~share~~issuance price to ~~FirsTrust~~of ~~Group, Inc~~$$0.01 per share for the conversion of convertible note.

As disclosed in Note 12(1), on April 27, 2018, the Company issued total 126,045 common shares at $0.62 per share price to FirsTrust Group, Inc. for the conversion of convertible note.

F-22

Additional paid-in-capital

As disclosed in Note ~~11(1)~~14, onin ~~January~~February, 17March, ~~2017~~September, and October 2019, the Company issued ~~RMB~~in 1the ~~million~~principal ~~($144,944~~amount ~~equivalent).~~of ~~Convertible Note to Mr.~~$1,901,250 ~~Geng~~convertible ~~Liu~~notes with BCF embedded. The Company evaluated the intrinsic value of the BCF as $451,~~094~~430,509, at the issue date and recorded the amount into additional paid in capital. All other amounts recorded in additional paid in capital are derived from issuance of preferred shares or common shares as disclosed in the above.

1618. Stock-based ~~Compensation~~compensation

On March 15, 2017, the Board of Directors approved a new stock option plan with ten years’ term. As of December 31, ~~2018~~2019, the Company has not granted any incentive compensation under this plan.

1719. Fair ~~Value~~value ~~Measurements~~measurements

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities recorded at fair value on recurring basis that were accounted for at fair value as of:

F-29

December 31, 2018

Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
Derivative liabilities		—		—	$	6,621	$	6,621
Total		—		—	$	6,621	$	6,621

~~December~~The following is a reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for the years ended December 31, ~~2017~~2019 and 2018:

Recurring Fair Value Measures	Level 1			Level 2			Level 3		Total
	Year ended December 31, 2019			Year ended December 31, 2018
Derivative liabilities		—			—		$	247,933	$	247,933
Beginning balance	$	6,621		$	247,933
Total		—			—		$	247,933	$	247,933
Increase in derivative liabilities		95,144			-
Change in fair value of derivative liabilities		(101,765	)		(241,312	)
Ending balance	$	-		$	6,621

~~The~~20. ~~following~~Income ~~is a reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2018 and 2017:~~taxes

	Year ended December 31, 2018			Year ended December 31, 2017
Beginning balance	$	247,933		$	-
Fair value of derivative liabilities at inception		-			569,784
Change in fair value of derivative liabilities		(241,312	)		(321,851	)
Ending balance	$	6,621		$	247,933

In accordance with the current tax laws in the U.S., the Company is subject to a federal corporate tax rate of 21% on its taxable income for the years ended December 31, 2019 and 2018. No provision for taxes is made for U.S. income tax for the years ended December 31, 2019 and 2018 as the Company has no taxable income in the U.S for these years.

18On December 22, 2017, the “Tax Cuts and Jobs Act” (“The 2017 Tax Act”) was enacted in the United States. ~~Income~~The 2017 Tax Act imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits.

~~In accordance~~For ~~with~~purposes of the ~~current~~inclusion ~~tax~~of ~~laws in the U.S.~~GILTI, the Company ishas ~~subject~~determined tothe ataxable ~~corporate~~off-shore ~~tax~~earnings ~~rate~~in ofthe ~~21%~~amount ~~and~~of ~~34%~~$904,487 ~~on its taxable income~~ for the ~~years~~year ended December 31, ~~2018~~2019, ~~and~~which has ~~2017.~~been Nofully ~~provision~~offset ~~for~~by ~~taxes~~the iscurrent ~~made~~year ~~for~~tax ~~U.S.~~loss ~~income~~of ~~tax~~Kiwa ~~for~~US in the ~~years~~amount ~~ended December~~of 31$5.0 million. Therefore, ~~2018~~this ~~and~~is no ~~2017~~accrual asof itUS ~~has~~income notax ~~taxable~~for ~~income~~GILTI inas ~~the~~of UDecember 31, 2019.S.

OnIn ~~December~~accordance ~~22,~~with ~~2017,~~ the ~~“Tax~~current ~~Cuts~~tax ~~and~~laws ~~Jobs~~in ~~Act”~~China, ~~(“The~~Kiwa ~~2017~~Beijing, ~~Tax~~Kiwa ~~Act”)~~Shenzhen, ~~was~~Kiwa ~~enacted~~Xian, inKiwa ~~the~~Hebei, ~~United~~Kiwa ~~States. Under~~Yangling, ~~the~~and ~~provisions~~Kiwa ofInstitute are ~~the~~subject ~~Act,~~to ~~the~~a ~~U.S.~~ corporate income tax rate ~~decreased~~of ~~from 34~~25% toon ~~21%. Accordingly, the Company has re-measured~~ its ~~deferred~~taxable ~~tax~~income. ~~assets~~Kiwa onBeijing, ~~net~~Kiwa ~~operating~~Shenzhen, ~~loss~~Kiwa ~~carry~~Xian, ~~forwards~~Kiwa inHebei, ~~the~~and Kiwa ~~U.S~~Institute athave ~~the~~not ~~lower~~provided ~~enacted~~for ~~cooperated~~any ~~tax~~corporate ~~rate~~income oftaxes ~~21%. However,~~since ~~this~~each ~~re-measurement~~had ~~has~~ no ~~effect~~taxable onincome for the ~~Company’s~~year ~~income~~ended ~~tax~~December ~~expenses~~31, 2019. asFor the ~~Company~~year ~~has~~ended ~~provided~~December a31, ~~100% valuation~~2019, ~~allowance~~Kiwa onYangling ~~its~~recorded ~~deferred~~income tax ~~assets~~provision ~~previously~~for approximately $1,660,081.

F-23

Additionally, the 2017 Tax Act implemented a modified territorial tax system and imposing a tax on previously untaxed accumulated earnings and profits (“E&P”) of foreign subsidiaries (the “Toll Charge”). The Toll Charge is based in part on the amount of E&P held in cash and other specific assets as of December 31, 2017. The Toll Charge can be paid over an eight-year period, starting in 2018, and will not accrue interest. The 2017 Tax Act also imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits.

The Company has determined that this one-time Toll Charge has no effect on the Company’s income tax expenses as the Company has no undistributed foreign earnings at either of the two testing dates of November 2, 2017 and December 31, 2017.

For purposes of the inclusion of GILTI, the Company has determined the taxable off-shore earnings in the amount of $3.5 million in the year ended December 31, 2018, which has been fully offset by the current year loss of $3.2 million and NOL carryforwards of $0.3 million of Kiwa US. Therefore, this is no accrual of US income tax for GILTI as of December 31, 2018.

In accordance with the current tax laws in China, Kiwa Beijing, Kiwa Shenzhen, Kiwa Xian, Kiwa Hebei, Kiwa Yangling, Kiwa Shanxi, and Kiwa Institute are subject to a corporate income tax rate of 25% on its taxable income. Kiwa Shenzhen, Kiwa Xian, Kiwa Hebei, Kiwa Shanxi, and Kiwa Institute have not provided for any corporate income taxes since each had no taxable income for the year ended December 31, 2018. For the year ended December 31, 2018, Kiwa Beijing recorded income tax provision for approximately $457,583, Kiwa Yangling recorded income tax provision for approximately $1,448,639.

In accordance with the relevant tax laws in the British Virgin Islands, Kiwa BVI, as an International Business Company, is exempt from income taxes in the BVI.

A reconciliation of the provision for income taxes from continuing operation determined at the local income tax rate to the Company’s effective income tax rate is as follows:

	Years ended December 31,
	2018			2017
	2019			2018
Pre-tax income from continuing operation	$	2,250,043		$	1,917,018
Pre-tax income (loss)	$	(4,975,215	)	$	2,250,043
U.S. federal corporate income tax rate		21	%		3421	%
Income tax expense computed at U.S. federal corporation income tax rate		~~472~~(1,~~509~~044,795	)		~~651~~472,~~786~~509
Reconciling items:
Rate differential		~~260~~355,~~451~~645			~~(255~~260,~~888~~451	)
Utilization of NOL		734,564			-
Change of valuation allowance		1,577,292			438,698
Change of valuation allowance		438,698			707,416
Deductible loss from disposal of subsidiaries		581,997			-
Effective tax expenses	$	1,906,222		$	1,103,314
Utilization of NOL		189,942			734,564
Income tax expenses	$	1,660,081		$	1,906,222

F-2430

The Company had deferred tax assets from continuing operation as follows:

	December 31, 2018			December 31, 2017
	December 31, 2019			December 31, 2018
Net operating losses carried forward by parent Company in the US	$	12,~~676~~123,~~335~~316		$	1,~~746~~676,~~802~~335
Net operating losses carried forward by China Subsidiaries		~~821~~35,~~089~~079			~~311~~821,~~925~~089
Less: Valuation allowance		(2,497,424	)		(2,058,727	)
Provision for deferred cost of goods sold		5,915			-
Net deferred tax assets	$	-		$	-
Accrued expense		357,859
Allowance for bad debt		63,012
Less: Valuation allowance		(2,158,395	)		(2,497,424	)
Net deferred tax assets	$	426,786		$	-

As of December 31, ~~2018~~2019 and ~~2017~~2018, the Company had approximately $1110.3 million and $911.53 million net operating loss carryforwards available to reduce future taxable income. Net operating loss of the parent 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 ~~Shenzhen~~Institute, Kiwa ~~Xian, Kiwa~~ Hebei, ~~Kiwa Institute,~~ and Kiwa ~~Shanxi~~Yangling 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~~parent company, Kiwa Institute and Kiwa Hebei, which generated future earnings to offset with the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets of the parent company, Kiwa Institute and Kiwa Hebei. Kiwa Yangling is making profits thus there is no allowance provided on the deferred tax assets of Kiwa Yangling.

As of December 31, ~~2018~~2019 and ~~2017~~2018, 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 the years ended December 31, ~~2018~~2019 and ~~2017~~2018, and no provision for interest and penalties is deemed necessary as of December 31, ~~2018~~2019 and ~~2017~~2018.

1921. ~~Commitments and Contingencies~~ Leases

~~The~~In January 2019, the Company ~~has~~entered into a new office lease agreement with a 3-year lease term starting in April 2019 and terminating in April 2022. Upon adoption of ASU 2016-02, the ~~following~~Company ~~material~~recognized ~~contractual~~lease ~~obligations:~~labilities of approximately $57,260, with corresponding right-of-use (“ROU”) asset in the same amount based on the present value of the future minimum rental payments of the new lease, using an effective interest rate of 4.75%, which is determined using the company’s incremental borrowing rate in the PRC. The remaining lease term of the lease is 2.26 years.

~~(1)~~The ~~Investment~~Company’s inlease ~~manufacturing~~agreements ~~facilities~~do innot ~~Penglai~~contain ~~City,~~any ~~Shandong~~material ~~Province~~residual invalue ~~China~~guarantees or material restrictive covenants.

AsFor ~~disclosed~~the inyears ~~Note~~ended 7,2019 onand ~~June 8~~2018, ~~2017,~~lease ~~Kiwa~~expenses ~~Hebei~~amounted ~~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 for approximately RMB 15,000,000 (approximately US~~$ ~~2.3 million). As of December 31~~62,793 ~~2018~~ and ~~2017, Kiwa Hebei has made deposit payment of RMB 5,000,000 (approximately~~ $~~0.7 million) and is committed to pay the remaining RMB10~~317,~~000~~377,~~000~~ ~~based on the payment milestone in the equity purchase agreement~~respectively. ~~RMB~~ ~~6,500,000~~The ~~(approximately~~three-year ~~$1.0~~maturity ~~million) will be paid upon completion~~ of the ~~land use rights ownership transfer and RMB 3,500,000~~Company’s ~~(approximately~~lease ~~$0.5~~obligations ~~million)~~is ~~will~~presented ~~be paid upon completion of the business licenses transfer.~~below:

(2) Lease payments

Year Ended December 31,	Operating lease amount
2020	$	25,709
2021		34,068
2022		-
Total lease payments		59,777
Less: interest		(2,517	)
Present value of lease liabilities	$	57,260

~~The Company entered various lease agreements for business purpose. The future lease payments at December~~ F-31~~, 2018 are summarized below:~~

2019	$	43,595
2020	$	10,592
2021	$	2,181
Thereafter	$	-
Total minimum lease payment		56,369

22. Commitments and Contingencies

~~F-25~~As disclosed in Note 9, on June 8, 2017, Kiwa Hebei 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 for approximately RMB 15,000,000 (approximately US$ 2.1 million). As of December 31, 2019, Kiwa Hebei has made deposit payment of RMB 5,000,000 (approximately $0.7 million) and is committed to pay the remaining RMB10,000,000 based on the payment milestone in the equity purchase agreement. However, since the Company had decided to abandon the acquisition plan and initiated the process of refund of the deposits, the Company expected no more payment will be made for the agreement.

2023. Concentration of Risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash ~~and accounts receivable~~. As of December 31, ~~2018~~2019, and ~~2017~~2018, $7,~~859~~965, and $17,~~083,539~~859 were deposited with various major financial institutions located in the PRC, respectively. 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 earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

Customer and vendor concentration risk

For the year ended December 31, ~~2018~~2019, ~~four~~three customers accounted for 4346%, 2331%, 1923%, ~~14%~~ of the Company’s sales, respectively. For the year ended December 31, ~~2017~~2018, ~~three~~four customers accounted for 4643%, 2623%, 1719%, 14% of the Company’s sales, respectively.

As of December 31, ~~2018~~2019, ~~three~~there ~~customers~~were ~~accounted~~no ~~for 42%, 30%, 27% of the Company’s~~ accounts receivable. As of December 31, ~~2017~~ 2018, three customers accounted for 5242%, 2230%, ~~and 14~~27%, respectively, of the Company’s accounts receivable.

For the year ended December 31, ~~2018~~2019, ~~three~~one ~~suppliers~~supplier accounted for 4294%, ~~40%, and 10%~~ of the Company’s total purchases. For the year ended December 31, ~~2017~~2018, ~~two~~three suppliers accounted for 4942%, 40%, and 4710%, respectively, of the Company’s total purchases.

As of December 31, ~~2018~~2019, one supplier accounted for 8495% of the Company’s accounts payable. As of December 31, ~~2017~~2018, ~~two~~one ~~suppliers~~supplier accounted for 6784% ~~and 27%~~ of the Company’s accounts payable.

2124. ~~Subsequent~~Supplemental ~~Events~~cash flows information

OnSupplemental ~~January~~cash ~~11,~~flow ~~2019,~~disclosures ~~the~~and ~~Company~~supplemental ~~issued~~disclosures ~~180,000~~of ~~common~~cash ~~shares~~flow ~~to WSMG Advisors~~ for ~~their~~non-cash ~~consulting~~transactions ~~service~~are toas ~~assist the Company in investor relationship management. The number of shares was determined based on the fair value of the service. The agreement has a one year term.~~flows:

On February 27, 2019, Kiwa Bio-Tech Products Group Corporation (the “Company”) executed a Securities Purchase Agreement (the “SPA”) between Labrys Fund, LP (“Labrys”) and the Company, pursuant to which Labrys purchased from the Company a Convertible Promissory Note in the principal amount of $1,365,000.00 (the “Note”) dated February 27, 2019. The Company issued 860,000 common shares to Labrys according to the agreement.

	Years Ended December 31,
	2019		2018

SUPPLEMENTARY DISCLOSURES OF CASH FLOW FOR NON-CASH TRANSACTION:
Issuance of common stock for debt settlement	$	222,000	$	-
Issuance of common stock for consulting services	$	672,850	$	2,242,550
Issuance of common stock as convertible note issuance costs	$	121,824	$	-
Conversion of convertible note	$	573,229	$	78,399
Unpaid receivable from sales of subsidiaries	$	2,169,862	$	-
Operating lease right of use assets obtained in exchange for operating lease obligations	$	72,608		-
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest	$	19,631	$	-
Cash paid for income taxes	$	2,084	$	-

On*See ~~March~~Notes ~~21,~~25 ~~2019,~~for ~~Kiwa~~details ~~Bio-Tech~~of ~~Products~~assets ~~Group Corporation (the “Company”) executed a Securities Purchase Agreement (the “SPA”) between TFK investments LLC (“TFK”)~~ and ~~the~~liabilities ~~Company,~~disposed ~~pursuant~~under todisposed ~~which TFK purchased from the Company a Convertible Promissory Note in the principal amount of $300,000 (the “Note”) dated March 21, 2019~~subsidiaries. ~~The Company issued 237,500 common shares to TFK according to the agreement.~~

~~On March 26, 2019, Kiwa Bio~~F-Tech Products Group Corporation (the “Company”) issued 300,000 shares to FirsTrust Group Inc. for debt settlement under the terms of the Settlement Agreement and Release (“Settlement Agreement”) with FirsTrust to settle the promissory note.32

~~On March 26, 2019, Kiwa Bio-Tech Products Group Corporation (the “Company”) issued 395,959 shares to FirsTrust Group Inc~~25. ~~for conversion of shares of debt settlement under the terms of the Settlement Agreement and Release (“Settlement Agreement”)~~ ~~with~~Disposed ~~FirsTrust to settle the 6% secured convertible notes and interest and penalties.~~subsidiaries

FOn October 21, 2019, the Company transferred all of its right, title and interest in Kiwa Asia, Kiwa Beijing, Kiwa Shenzhen, and Kiwa Xian, to the Hong Kong Sano Group Co., Ltd. for 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-26technological products business to Kiwa Yangling, the Company conduct the same business of bio-technological products before and after the disposal of these entities. 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 ASC 205.

The following table summarizes the assets and liabilities of the subsidiaries in the disposal at October 21, 2019:

	October 21, 2019
ASSETS
Cash and cash equivalents		341
Advance to suppliers		5,639,129
Deferred cost of goods sold		2,417,946
Total assets	$	8,057,416

LIABILITIES
Advances from customers		4,838
Salary payable		605,962
Accrued expenses		373
Other payable		317,344
Tax payable		1,497,884
Total liabilities	$	2,426,401

Total net assets		5,631,015
Total consideration		(2,169,862	)
Currency translation adjustment		66,101
Total loss on disposal of subsidiaries	$	3,527,254

26. Subsequent Events

In December 2019, a novel strain of coronavirus, or COVID-19, surfaced and it has spread rapidly to many parts of China and other parts of the world, including the United States. The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in China from January 2020 to March 2020. Substantially all of the Company’s revenue is concentrated in China. Consequently, the COVID-19 outbreak may materially adversely affect the Company’s business operations, financial condition and operating results for 2020, including but not limited to material negative impact on the Company’s total revenues, slower collection of accounts receivables, additional allowance for doubtful accounts, slower usage of inventories, additional allowance for inventories obsolescence, slower usage of advance to suppliers and additional allowance for advance to suppliers. In late March 2020, the temporary closure of stores and facilities, or the ‘shelter in place’ order, in China was lifted and many businesses have resumed normal operations. The epidemic had a short-term negative effect on the Company’s business during the first quarter of 2020. Because of the significant uncertainties surrounding the COVID-19 outbreak, the extent of the business disruption and the related financial impact for the remaining periods in 2020 cannot be reasonably estimated at this time. There is no guarantee that the Company’s total revenues will grow or remain at a similar level as compared to 2019.

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On February 6, 2020, the Company issued 20,000 common shares to Qingxia for her consulting service to assist the Company in marketing projects. The number of shares was determined based on the fair value of the service. The agreement has a one year term.

On February 10, 2020, the Company completed a debt settlement, repaid $135,000 of principal, interest and penalty balances to Firstfire Global Opportunities Fund LLC.

On February 12, 2020, the Company completed a debt settlement, repaid $250,000 of principal, interest and penalty balances to EMA Financial, LLC, and EMA returns the commitment shares of 230,000 to the Company.

On March 3, 2020, the Board of Directors of the Company amend the Company’s Articles of Incorporation to increase the number of authorized Company Common Shares from 300,000,000 to 3,000,000,000.

On March 23, Yangling Qinchuan Water Saving Irrigation Equipment Engineering Co., Ltd. applied to freeze Kiwa Yangling's RMB 85,768 of funds in bank from March 24, 2020 to March 23, 2021.

Subsequently from December 31, 2019 to the date of this report, the Company issued a total of 200,063,207 shares to Labrys, TFK, Firstrust, EMA and GRR from conversion of convertible notes.

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Filing Compare · KIWA BIO-TECH PRODUCTS GROUP CORP