Delaware
|
77-0632186
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
Common
Stock, $0.001 par value
|
OTC
Bulletin Board
|
(Title
of Each Class)
|
(Name
of each exchange on which
registered)
|
PART
I
|
|
1
|
ITEM
1
|
BUSINESS
|
1
|
The
Company
|
1
|
|
Strategies
|
2
|
|
Intellectual
Property and Product Lines
|
3
|
|
Market
Overview
|
5
|
|
Competition
|
8
|
|
Raw
Materials and Suppliers
|
10
|
|
Customers
|
11
|
|
Seasonality
|
11
|
|
Employees
|
12
|
|
Regulatory
Concerns
|
12
|
|
Environmental
Matters
|
12
|
|
Legal
Proceedings
|
12
|
|
Risk
Factors
|
12
|
|
ITEM
2
|
PROPERTY
|
23
|
ITEM
3
|
LEGAL
PROCEEDINGS
|
24
|
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
24
|
PART
ΙΙ
|
|
25
|
ITEM
5
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
25
|
ITEM
6
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
26
|
Overview
|
26
|
|
Going
Concern
|
26
|
|
Trends
and Uncertainties in Regulation and Government Policy in
China
|
27
|
|
Critical
Accounting Policies and Estimates
|
29
|
|
Major
Customers and Suppliers
|
30
|
|
Results
of Operations
|
31
|
|
Liquidity
and Capital Resources
|
33
|
|
Commitments
and Contingencies
|
34
|
|
Off-Balance
Sheet Arrangements
|
34
|
|
Related
Party Transactions
|
34
|
|
Recent
Accounting Pronouncements
|
34
|
|
ITEM
7
|
FINANCIAL
STATEMENTS
|
34
|
ITEM
8
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
34
|
ITEM
8A
|
CONTROLS
AND PROCEDURES
|
35
|
ITEM
8B
|
OTHER
INFORMATION
|
35
|
PART
III
|
36
|
ITEM
9
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CORPORATE GOVERANCE, CONTROL PERSONS
AND
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|
36
|
ITEM
10
|
EXECUTIVE
COMPENSATION
|
38
|
ITEM
11
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
41
|
ITEM
12
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
43
|
ITEM
13
|
EXHIBITS
|
43
|
ITEM
14
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
45
|
SIGNATURES
|
47
|
|
Index
to Consolidated Financial Statements
|
F-1
|
|
Independent
Auditor’s Report
|
F-2
|
|
Consolidated
Balance Sheets
|
F-3
|
|
Consolidated
Statements of Operations and Comprehensive Income
|
F-4
|
|
Consolidated
Statement of Stockholders’ Equity (Deficiency)
|
F-5
|
|
Consolidated
Statements of Cash Flows
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
l |
build
a platform for world-class biotechnological research and development
results to be commercialized into products for applications in
agriculture;
|
l |
invest
in mature technologies that will not require large amounts of research
expense to develop into commercial
products;
|
l |
establish
strategic alliances for research and development, sales and distribution
and customer acquisition with complimentary entities in the
biological-agriculture industry;
|
l |
establish
manufacturing capability in China by improving our existing facility,
constructing new facilities or acquiring established
facilities;
|
l |
enhance
overall management systems, operational structure and corporate
governance; and
|
l |
utilize
proprietary technology to supply products at lower cost than our
competitors.
|
l |
leveraging
government support and existing rural area distribution networks
to more
effectively reach end-users;
|
l |
cooperating
with special agricultural production materials distributors who also
help
farmers resell their products;
|
l |
focusing
on large-to-medium size wholesalers of agricultural production materials
at provincial and municipal levels;
|
l |
establishing
a three-level distribution network consisting of a company-centralized
sales office, prefectural representative office and direct distributors
in
villages and towns; and
|
l |
leveraging
existing sales channel network of affiliates’ products to save costs of
building the network from scratch.
|
l |
high
value crop (such as fruits and vegetables) growers and breed bases
in
China that supply major cities;
|
l |
agricultural
producers in China who export to Japan, Korea and other regional
markets;
and
|
l |
“green”
or organic growers throughout the
world.
|
1949
|
1978
|
%
|
1999
|
%
|
2004
|
%
|
||||||||||||||||
Grain
|
113,180
|
304,770
|
169
|
%
|
508,390
|
67
|
%
|
469,472
|
-8
|
%
|
||||||||||||
Cotton
|
444
|
2,167
|
388
|
%
|
3,831
|
77
|
%
|
6,324
|
65
|
%
|
||||||||||||
Oil-bearing
crops
|
2,564
|
5,218
|
104
|
%
|
26,012
|
399
|
%
|
30,659
|
18
|
%
|
||||||||||||
Sugar
crops
|
2,833
|
23,818
|
741
|
%
|
83,340
|
250
|
%
|
95,707
|
15
|
%
|
||||||||||||
Flue-cured
tobacco
|
43
|
1,052
|
2347
|
%
|
2,185
|
108
|
%
|
2,163
|
-1
|
%
|
||||||||||||
Tea
|
41
|
268
|
554
|
%
|
676
|
152
|
%
|
835
|
24
|
%
|
||||||||||||
Fruit
|
1,200
|
6,570
|
448
|
%
|
62,376
|
849
|
%
|
83,941
|
35
|
%
|
||||||||||||
Meat
|
2,200
|
8,563
|
289
|
%
|
59,609
|
596
|
%
|
72,448
|
22
|
%
|
||||||||||||
Aquatic
products
|
450
|
4,660
|
936
|
%
|
41,220
|
785
|
%
|
49,018
|
19
|
%
|
l |
highly
effective in increasing crop yield and quality while being environmentally
friendly;
|
l |
lower
price point and higher return on investment to end
users;
|
l |
powder-based
form making transportation and storage easier;
and
|
l |
complimentary
to existing use of chemical fertilizer which will help minimize switching
costs for end users.
|
|
Current
Status
|
|
Bodisen
Biotech, Inc.
|
|
Manufacturer
of bio compound fertilizers.
Listed
on AMEX.
|
|
|
|
China
Agritech, Inc.
|
|
Developer,
manufacturer and distributor of organic compound fertilizer, traded
on
OTCBB.
|
|
|
|
Shanxi
Kelin Environment Protection Center , Shanxi Province
|
|
Products
apparently still in the experimental stage.
|
|
|
|
Xinjin
Microbial Products Factory of Sichuan Agriculture University, Sichuan
Province
|
|
Currently
only sells in part of Sichuan Province with a relatively low sales
volume.
|
|
|
|
Shenyang
Fengyuan Bio-tech Products Co., Ltd ., Liaoning Province
|
|
A
wholly-owned Japanese company.
Three
years in production of photosynthesis-based fertilizer product.Annual
production of 2,000 tons (liquid).
|
|
|
|
Shanghai
Pudong Yiyijou Bio-engineering Co., Ltd ., Shanghai
|
|
In
business since 1999.
Covers
more than 10 provincial markets.
|
|
|
|
Chongyi
Bio-technology Development Center, She County, Hebei
Province
|
|
A
county-level plant.
Small
production scale.
Products
are sold in Linxi County in Shandong Province nearby.
|
|
|
|
Bierfu
Bio-engineering Co., Ltd ., Weihai, Shandong Province
|
|
Products
mostly sold in Jinan and Shouguang areas in Shandong
Province.
Sales
branches in Hebei, Nanjing & Fujian.
Annual
sales of 100 tons.
|
|
|
|
North
Design Institute, Protection Sub-Institute
|
|
Has
no commercial production.
Owns
the related intellectual property rights.
|
|
|
|
Wuhan
Shiruifu Bio- Technology Co., Ltd., Wuhan, Hubei Province
|
|
Its
target market is in Hubei Province.
Annual
production of 3,000 tons (liquid).
|
|
|
|
|
For
details, refer to the following section.
|
|
|
|
|
Beijing
Feishite Bio-engineering Co., Ltd ., Beijing
|
|
Expected
to establish two photosynthetic bacteria fertilizer production bases
in
Beijing with annual production of 5,000 tons
(liquid).
|
Company
Name
|
|
Current
Status
|
New
Hope Group Co., Ltd.
|
|
Yearly
feed production capacity exceeds 3,500,000 metric tons More than
200 sales
points in rural areas of China
|
|
|
|
Liu
He Group Co., Ltd.
|
|
Sold
3,400,000 metric tons of feed in 2005
|
|
|
|
Tong
Wei Group Co., Ltd.
|
|
Yearly
feed production capacity exceeds 4,000,000 metric tons
|
|
|
|
Guang
Dong Heng Xing Group, Co., Ltd.
|
|
Annual
feed production capacity exceeds 1,000,000 metric tons
|
|
|
|
Zheng
Hong Technologies Group Co., Ltd.
|
|
Annual
feed production capacity exceeds 2,000,000 metric tons
|
|
|
|
Xin
Jiang Tian Kang Feed Bio-Tech Co., Ltd.
|
|
Annual
feed production capacity exceeds 240,000 metric tons
|
|
|
|
Xing
Da Group Co., Ltd.
|
|
Annual
feed production capacity exceeds 660,000 metric tons
|
|
|
|
Guang
Dong Hai Da Group Co., Ltd.
|
|
Sold
approximately 800,000 metric tons of feed in the year
2005
|
|
|
|
Mu
He Industry Co., Ltd.
|
|
Annual
feed production capacity approximately 1,000,000 metric
tons
|
|
|
|
Yue
Yang Yue Tai Group Co., Ltd.
|
|
Annual
feed production capacity exceeds 1,200,000 metric
tons
|
l |
the
timing and size of orders from major
customers;
|
l |
budgeting
and purchasing cycles of customers;
|
l |
the
timing of enhancements to products or new products introduced by
us or our
competitors;
|
l |
changes
in pricing policies made by us, our competitors or suppliers, including
possible decreases in average selling prices of products in response
to
competitive pressures;
|
l |
fluctuations
in general economic conditions;
|
l |
the
status of operating cash; and
|
l |
natural
disasters and contagious animal
diseases.
|
Fiscal
Year 2005
|
High
|
Low
|
|||||
First
Quarter
|
$
|
0.059
|
$
|
0.0122
|
|||
Second
Quarter
|
$
|
0.023
|
$
|
0.007
|
|||
Third
Quarter
|
$
|
0.0155
|
$
|
0.0102
|
|||
Fourth
Quarter
|
$
|
0.014
|
$
|
0.0091
|
Fiscal
Year 2006
|
High
|
Low
|
|||||
First
Quarter
|
$
|
0.085
|
$
|
0.0062
|
|||
Second
Quarter
|
$
|
0.30
|
$
|
0.11
|
|||
Third
Quarter
|
$
|
0.32
|
$
|
0.171
|
|||
Fourth
Quarter
|
$
|
0.26
|
$
|
0.13
|
Fiscal
Year 2007
|
High
|
Low
|
|||||
January
1, 2007 through March 29, 2007
|
$
|
0.26
|
$
|
0.17
|
ITEM 8 |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM 9 |
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CORPORATE GOVERANCE, CONTROL PERSONS
AND
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
|
Name
|
|
Age
|
|
Position
|
Wei
Li
|
|
45
|
|
Chief
Executive Officer and Chairman of the Board of
Directors
|
Lian
jun Luo
|
|
37
|
|
Chief
Financial Officer and Director
|
Da
chang Ju
|
|
66
|
|
Director
|
Yun
long Zhang
|
|
43
|
|
Director
|
Juhua
Wang
|
|
52
|
|
Chief
Operating Officer
|
Wenbin
Li
|
43
|
Vice
president-Marketing
|
||
Qi
Wang
|
|
40
|
|
Vice
President - Technical
|
Xiaonan
Wu
|
|
41
|
|
Vice
President
|
Yvonne
Wang
|
28
|
Secretary
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)(1)
|
Stock
Awards
($)
|
Option
Awards
($)(2)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||
Wei
Li, CEO
|
2006
|
75,000
|
21,000
|
Nil
|
29,262
|
Nil
|
125,262
|
|||||||||||||||
Wei
Li, CEO
|
2005
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|||||||||||||||
Lian
jun Luo, CFO
|
2006
|
48,000
|
12,000
|
Nil
|
21,162
|
Nil
|
81,162
|
|||||||||||||||
Lianjun
Luo, CFO
|
2005
|
22,500
|
7,000
|
5,924
|
Nil
|
Nil
|
35,424
|
|||||||||||||||
Yvonne
Wang, Secretary
|
2006
|
48,000
|
Nil
|
Nil
|
20,026
|
Nil
|
68,026
|
|||||||||||||||
Yvonne
Wang, Secretary
|
2005
|
21,000
|
Nil
|
Nil
|
Nil
|
Nil
|
21,000
|
|||||||||||||||
Ju
hua Wang, COO
|
2006
|
12,500
|
3,125
|
Nil
|
19,257
|
Nil
|
34,882
|
|||||||||||||||
Ju
hua Wang, COO
|
2005
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|||||||||||||||
Xiao
nan Wu
|
2006
|
9,000
|
Nil
|
Nil
|
16,936
|
Nil
|
25,936
|
|||||||||||||||
Xiao
nan Wu
|
2005
|
9,000
|
Nil
|
Nil
|
Nil
|
Nil
|
9,000
|
(1) |
The
bonus amounts for the fiscal year of 2006 were accrued pursuant to
the
terms of Wei Li, Lian jun Luo and Ju hua Wang’s employment agreements with
the Company. Wei Li’s bonus payment is subject to approval of the Board of
Directors of the Company, Lianjun Luo and Ju hua Wang’s bonus payment is
subject to approval of Wei Li, our Chief Executive Officer. For material
terms of the employment agreements, see additional information below
under
subheading entitled “Employment Contracts and Termination of Employment
Upon a Change of Control.” The bonus paid to Lianjun Luo for the fiscal
year of 2005 was based on his former employment agreement with the
Company.
|
(2) |
Options
granted on December 12, 2006. For material terms of the grant, see
additional information below under subheading entitled “2004 Stock
Incentive Plan” under this Item 10. The fair value of these options at the
date of grant was estimated using a Black-Scholes option pricing
model.
|
Option
Awards
|
|||||
Name
|
Number
of Securities Underlying Unexercised Options Exercisable
(vested)
|
Number
of Securities Underlying Unexercised Options Unexercisable
(unvested)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
|
Option
Exercise
Price
|
Option
Expiration Date
|
Wei
Li
|
Nil
|
182,800
|
182,800(1)
|
0.175
|
December
11, 2016
|
Lian
jun Luo
|
Nil
|
132,200
|
132,200(1)
|
0.175
|
December
11, 2016
|
Ju
hua Wang
|
Nil
|
120,300
|
120,300(1)
|
0.175
|
December
11, 2016
|
Xiao
nan Wu
|
Nil
|
105,800
|
105,800(1)
|
0.175
|
December
11, 2016
|
Yvonne
Wang
|
Nil
|
125,100
|
125,100(1)
|
0.175
|
December
11, 2016
|
(1)
|
See
information contained in subheading entitled “Stock Option Grant” under
heading “2004 Stock Incentive Plan.”
|
Name
|
Number
of Stock Options Granted
|
Exercise
Price/shares
|
Expiration
Date
|
Grant
Date Present Value (1)
|
Year-end
Value (2)
|
|||||||||||
Wei
Li
|
182,800
|
0.175
|
2016-12-11
|
29,262
|
8,226
|
|||||||||||
Lian
jun Luo
|
132,200
|
0.175
|
2016-12-11
|
21,162
|
5,949
|
|||||||||||
Ju
hua Wang
|
120,300
|
0.175
|
2016-12-11
|
19,257
|
5,414
|
|||||||||||
Qi
Wang
|
121,500
|
0.175
|
2016-12-11
|
19,449
|
5,468
|
|||||||||||
Xiao
nan Wu
|
105,800
|
0.175
|
2016-12-11
|
16,936
|
4,761
|
|||||||||||
Yvonne
Wang
|
125,100
|
0.175
|
2016-12-11
|
20,026
|
5,630
|
|||||||||||
Wen
bin Li
|
120,300
|
0.175
|
2016-12-11
|
19,257
|
5,414
|
|||||||||||
Yun
long Zhang
|
153,900
|
0.175
|
2016-12-11
|
24,636
|
6,926
|
(1) |
The
fair value of these options at the date of grant was estimated using
a
Black-Scholes option pricing model.
|
(2) |
The
year-end value of unexercised options equals the difference between
the
option exercise price and the closing price of the Company stock
at fiscal
year end, multiplied by the number of shares underlying the options.
The
closing price of the Company stock on December 29, 2006, as reported
in
NASD OTC Bulletin Board was $0.22.
|
Name
(a)
|
Fees
Earned or Paid in Cash (b)
|
Stock
Awards ($) (c)
|
Option
Awards ($) (d)
|
All
Other Compensation ($) (g)
|
Total
($)
|
Wei
Li
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Lian
jun Luo
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Da
chang Ju
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Yun
long Zhang
|
Nil
|
Nil
|
24,639
(1)
|
Nil
|
24,639
|
(1) |
We
currently have no policy in effect for providing compensation to
our
directors for their services on our Board of Directors. In 2006,
we
granted 153,900 options valued at $24,639.39 to Yun long Zhang, who
is not
an employee of the Company. With the exception of the option grant
above,
in fiscal year 2006, we did not provide any compensation to our directors
for their service on our Board of Directors. Two of the directors,
Mr. Wei
Li and Mr. Lianjun Luo, are also executive officers of the Company
and
their respective compensation was provided for their service as employees
of the Company.
|
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Owner
|
Percent
of Class
|
Common
Stock
|
Wei
Li (1)
|
12,356,672
|
17.61
|
Common
Stock
|
Da
chang Ju (2)
|
10,062,088
|
14.34
|
Common
Stock
|
Lian
jun Luo
|
1,305,562
|
1.86
|
Common
Stock
|
Yun
long Zhang
|
308,916
|
*
|
Common
Stock
|
Ju
hua Wang
|
100,000
|
*
|
Common
Stock
|
All
Star Technology Inc. (1)
|
12,356,672
|
17.61
|
Common
Stock
|
InvestLink
(China) Limited (2)
|
10,062,088
|
14.34
|
Common
Stock
|
All
officers and directors as a group (5 persons)
|
24,133,238
|
34.40
|
*
|
Less
than 1%.
|
|
|
(1)
|
Consists
of shares held by All Star Technology Inc., a British Virgin Islands
international business company. Wei Li exercises voting and investment
control over the shares held by All Star Technology Inc. Wei Li is
a
principal stockholder 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. to the extent of his pecuniary
interest therein.
|
|
|
(2)
|
Consists
of 7,812,088 shares of common stock held directly by InvestLink (China)
Limited (“Investlink”) and 2,250,000 shares of common stock held by
InvestLink as custodian for Gui sheng Chen. InvestLink has the sole
power
to vote or direct the vote and dispose or direct the disposition
of
10,062,088 shares but
disclaims beneficial ownership of such shares except to the extent
of its
pecuniary interest therein. Da chang Ju exercises voting and investment
control over the shares held by InvestLink. Da chang Ju is a principal
stockholder of InvestLink and may be deemed to beneficially own such
shares, but disclaims beneficial ownership in such shares held by
InvestLink to the extent of his pecuniary interest
therein.
|
(a)
|
(b)
|
(c)
|
|
Plan
Category
|
Number of securities
to be issued upon exercise of outstanding options, warrants and
rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
Equity
compensation plans approved by security holders
|
2,000,000
|
$0.175
|
1,047,907
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
Total
|
2,000,000
|
—
|
1,047,907
|
Exhibit
No.
|
Description
|
Incorporated
by Reference in Document
|
Exhibit
No. in Incorporated Document
|
3.1
|
Certificate
of Incorporation, effective as of July 21, 2004.
|
Form
8-K filed on July
23
2004
|
3.1
|
3.2
|
Bylaws,
effective as of July 22, 2004.
|
Form
8-K filed on July
23, 2004
|
3.2
|
3.3
|
Certificate
of Amendment to Certificate of Incorporation, effective as of September
27, 2006.
|
Form
10-QSB filed on November 15, 2006
|
3.3
|
10.31
|
Advance
Agreement, dated December 31, 2005, between Kiwa Bio-Tech Products
(Shandong) Co. Ltd. and China Star Investment Management Co.
Ltd.
|
Form
10-KSB filed April 17, 2006
|
10.31
|
10.32
|
Stock
Purchase Agreement dated March 10, 2006 between Kiwa Bio-Tech Products
Group Corporation and Guilian Li Ziyang Zong
|
Form
8-K filed on March 15, 2006
|
10.1
|
10.33
|
Termination
Agreement between Kiwa Bio-Tech Products Group Corporation and Cornell
Capital dated on March 31, 2006
|
Form
8-K filed on April 4, 2006
|
10.1
|
10.34
|
Supplementary
Agreement for Stock Purchase Agreement dated April 13,
2006
|
Form
10-KSB filed on April 17, 2006
|
10.34
|
10.35
|
Supplementary
Agreement for Stock Purchase Agreement dated May 12, 2006
|
Form
10-QSB filed on May 15, 2006
|
10.35
|
10.36
|
Advance
Agreement, dated March 31, 2006, between Kiwa Bio-Tech Products (Shandong)
Co. Ltd. and China Star Investment Management Co. Ltd.
|
Form
10-QSB filed on May 15, 2006
|
10.36
|
Exhibit
No.
|
Description
|
Incorporated
by Reference in Document
|
Exhibit
No. in Incorporated
Document
|
10.37
|
Technology
Transfer Agreement dated May 8, 2006, between Kiwa Bio-Tech Products
Group
Corporation and Jinan Kelongboao Bio-Tech Co., Ltd.
|
Form
8-K filed on May 8, 2006
|
10.1
|
10.38
|
Acquisition
Framework Agreement between the Company and Beijing Huasheng Medicine
Co.,
dated May 10, 2006
|
Form
8-K filed on May 8, 2006
|
10.2
|
10.39
|
Securities
Purchase Agreement, dated as of June 29, 2006 between Kiwa Bio-Tech
Products Group Corporation and AJW Partners, LLC, AJW Offshore, Ltd.,
AJW
Qualified Partners, LLC, New Millennium Capital Partners II, LLC,
Double U
Master Fund LP, and Nite Capital LP (collectively, the
“Purchasers”)
|
Form
8-K filed on July 5, 2006
|
10.01
|
10.40
|
Registration
Rights Agreement, dated as of June 29, 2006 between Kiwa Bio-Tech
Products
Group Corporation and the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.02
|
10.41
|
Security
Agreement, dated as of June 29, 2006, between Kiwa Bio-Tech Products
Group
Corporation and the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.03
|
10.42
|
Intellectual
Property Security Agreement, dated as of June 29, 2006, between Kiwa
Bio-Tech Products Group Corporation and the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.04
|
10.43
|
Pledge
Agreement, dated as of June 29, 2006, among Kiwa Bio-Tech Products
Group
Corporation, Wei Li, and the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.05
|
10.44
|
Form
of Callable Secured Convertible Note, dated as of June 29, 2006,
issued by
Kiwa Bio-Tech Products Group Corporation to the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.06
|
10.45
|
Form
of Stock Purchase Warrant, dated as of June 29, 2006, issued by Kiwa
Bio-Tech Products Group Corporation to the Purchasers
|
Form
8-K filed on July 5, 2006
|
10.07
|
10.46
|
Contract
for Joint Venture dated July 11, 2006 between Kiwa Bio-Tech Products
Group
Corporation and Tianjin Challenge Feed Co., Ltd.
|
Form
8-K filed on July 14, 2006
|
10.01
|
10.47
|
Contract
for urea dated July 28, 2006 between Kiwa Bio-Tech Products Group
Ltd. and
China Hua Yang Roneo Corporation.
|
Form
8-K filed on August 2, 2006
|
10.1
|
10.48
|
Contract
for urea dated July 31, 2006 between Kiwa Bio-Tech Products Group
Ltd. and
Shengkui Technologies, Inc.
|
Form
8-K filed on August 2, 2006
|
10.2
|
10.49
|
Employment
Agreement dated July 31, 2006 between Kiwa Bio-Tech Products Group
Ltd.
and Wei Li
|
Form
8-K filed on August 7, 2006
|
10.1
|
10.50
|
Employment
Agreement dated July 31, 2006 between Kiwa Bio-Tech Products Group
Ltd.
and Lianjun Luo
|
Form
8-K filed on August 7, 2006
|
10.2
|
10.51
|
Employment
Agreement dated September 25, 2006 between Kiwa Bio-Tech Products
Group
Ltd. and Juhua Wang
|
Form
8-K/A filed on September 25, 2006
|
10.1
|
10.52
|
Amendment
to Registration Right Agreement dated as of October 31, 2006, by
and among
Kiwa
Bio-Tech Products Group Corporation and the Purchasers
|
Form
10-QSB filed on November 15, 2006
|
10.52
|
10.53
|
Contract
dated August 8, 2006, by and among Kiwa Bio-Tech Products Group Ltd.
and
UPB International Sourcing Limited
|
Form
10-QSB filed on November 15, 2006
|
10.53
|
10.54
|
Supplementary
Agreement, dated August 20, 2006, by and between Kiwa Bio-Tech Products
Group Ltd. and UPB International Sourcing Limited
|
Form
10-QSB filed on November 15, 2006
|
10.54
|
10.55
|
Short
Term Loan Agreement, dated as of October 23, 2006, by and among Kiwa
Bio-Tech Products (Shandong) Co., Ltd and China Star Investment Management
Co., Ltd.
|
Form
10-QSB filed on November 15, 2006
|
10.55
|
Exhibit
No.
|
Description
|
Incorporated
by Reference in Document
|
Exhibit
No. in Incorporated
Document
|
10.56
|
Agreement
on Joint Incorporation of Kiwa-CAU Bio-Tech Research & Development
Center, dated November 14, 2006, between China Agricultural University
and
Kiwa Bio-Tech Products (Shandong) Limited
|
Filed
herewith.
|
|
10.57
|
Annual
Distribution Contract, dated December 26, 2006, by and among Kiwa
Bio-Tech
Products (Shandong) Co., Ltd and Xinjiang Rundi Bio-Tech Co.,
Ltd.
|
Form
8-K filed on December 27, 2006
|
10.01
|
21
|
List
of Subsidiaries
|
Filed
herewith.
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
of the
Securities Exchange Act of 1934
|
Filed
herewith.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
of the
Securities Exchange Act of 1934
|
Filed
herewith.
|
|
32.1
|
Certification
of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed
herewith.
|
|
32.2
|
Certification
of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed
herewith.
|
KIWA
BIO-TECH PRODUCTS GROUP CORPORATION
|
||
By:
|
|
/s/
Wei Li
Wei
Li
Chief
Executive Officer and Chairman of the Board of Directors
(Principal
Executive Officer)
|
/s/
Wei Li
|
April
1, 2007
|
Chief
Executive Officer and
|
|
Wei
Li
|
Chairman of the Board of Directors | ||
|
|
(Principal
Executive Officer)
|
|
/s/
Lian jun Luo
|
April
1, 2007
|
Chief
Financial Officer and Director
|
|
Lian
jun Luo
|
(Principal
Financial Officer and
|
||
|
Principal
Accounting Officer)
|
||
/s/
Da chang Ju
|
April
1, 2007
|
Director
|
|
Da
chang Ju
|
|||
/s/
Yun long Zhang
|
April
1, 2007
|
Director
|
|
Yun
long Zhang
|
Page
|
|
Report
of Mao & Company CPAs, Inc. dated February 16, 2007
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2006 and 2005
|
F-3
|
Consolidated
Statements of Operations and Comprehensive Income for the years ended
December 31, 2006 and 2005
|
F-4
|
Consolidated
Statements of Stockholders’ Equity (Deficiency) for the period from
January 1, 2005 through December 31, 2006
|
F-5
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2006 and
2005
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
|
Year
Ended December 31,
|
||||||||||
|
2006
|
2005
|
||||||||
ASSETS
|
||||||||||
Current
assets
|
||||||||||
Cash
and cash equivalents
|
$
|
498,103
|
$
|
14,576
|
||||||
Accounts
receivable, net of bad debt allowance of $258,667
and
$82,942, respectively
|
929,446
|
701,486
|
||||||||
Inventories
|
541,340
|
495,597
|
||||||||
Prepaid
expenses
|
302,007
|
1,962
|
||||||||
Other
current assets
|
57,011
|
27,186
|
||||||||
Total
current assets
|
2,327,907
|
1,240,807
|
||||||||
Property,
Plant and Equipment:
|
||||||||||
Buildings
|
1,046,116
|
1,012,219
|
||||||||
Machinery
and equipment
|
585,282
|
447,361
|
||||||||
Automobiles
|
47,772
|
103,914
|
||||||||
Office
equipment
|
78,096
|
57,423
|
||||||||
Computer
software
|
9,240
|
8,940
|
||||||||
|
1,766,506
|
1,629,857
|
||||||||
Less:
accumulated depreciation
|
(286,039
|
)
|
(192,991
|
)
|
||||||
Property
plant and equipment - net
|
1,480,467
|
1,436,866
|
||||||||
Construction
in progress
|
34,548
|
33,429
|
||||||||
Intangible
asset-net
|
337,027
|
410,586
|
||||||||
Deferred
financing costs
|
211,793
|
-
|
||||||||
Deposit
to purchase the proprietary technology
|
126,443
|
-
|
||||||||
Total
assets
|
$
|
4,518,185
|
$
|
3,121,688
|
||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||||
Current
liabilities
|
||||||||||
Accounts
payable and accrued expenses
|
$
|
983,980
|
$
|
1,000,477
|
||||||
Construction
costs payable
|
366,879
|
372,338
|
||||||||
Due
to related parties
|
496,806
|
454,193
|
||||||||
Convertible
notes payable
|
-
|
407,135
|
||||||||
Current
portion of bank notes payables
|
5,405
|
13,647
|
||||||||
Total
current liabilities
|
1,853,070
|
2,247,790
|
||||||||
Long-term
liabilities, less current portion:
|
||||||||||
Unsecured
loans payable
|
1,472,717
|
1,424,996
|
||||||||
Bank
notes payable
|
1,351
|
13,895
|
||||||||
Long-term
convertible notes payable
|
2,365,962
|
-
|
||||||||
Discount
on warrants relating to long-term convertible notes
|
(1,371,446
|
)
|
-
|
|||||||
Total
long-term liabilities
|
2,468,584
|
1,438,891
|
||||||||
Minority
interest in a subsidiary
|
103,362
|
-
|
||||||||
Shareholders’
equity (deficiency)
|
||||||||||
Common
stock -$0.001 par value
Authorized
200,000,000 shares and 100,000,000 shares at
December 31,
2006 and 2005, respectively
Issued
and outstanding 70,149,556 and 59,235,930 shares at December 31, 2006
and 2005, respectively
|
70,150
|
59,236
|
||||||||
Preferred
stock -$0.001 par value
Authorized
20,000,000 shares, nil shares issued and outstanding at December 31,
2006 and 2005, respectively
|
-
|
-
|
||||||||
Additional
paid-in capital
|
8,311,975
|
4,835,968
|
||||||||
Stock-based
compensation reserve
|
(523,468
|
)
|
-
|
|||||||
Deficit
Accumulated
|
(7,766,654
|
)
|
(5,482,555
|
)
|
||||||
Accumulated
other comprehensive income
|
1,166
|
22,358
|
||||||||
Total
shareholders’ equity (deficiency)
|
93,169
|
(564,993
|
)
|
|||||||
Total
liabilities and stockholders’ equity
|
$
|
4,518,185
|
$
|
3,121,688
|
Year
Ended December 31,
|
|||||||
|
2006
|
2005
|
|||||
Net
sales
|
$
|
3,306,715
|
$
|
631,794
|
|||
Cost
of sales
|
2,711,419
|
232,692
|
|||||
Gross
profit
|
595,296
|
399,102
|
|||||
Operating
expenses:
|
|||||||
Consulting
and professional fees
|
852,107
|
614,532
|
|||||
Officers’
compensation
|
176,528
|
38,727
|
|||||
General
and administrative
|
605,071
|
509,674
|
|||||
Selling
expenses
|
521,608
|
72,021
|
|||||
Research
and development
|
119,719
|
11,264
|
|||||
Depreciation
and amortization
|
172,011
|
106,283
|
|||||
Allowance and provision
|
220,148
|
82,942
|
|||||
Total
costs and expenses
|
2,667,192
|
1,435,443
|
|||||
Operating
loss
|
(2,071,896
|
)
|
(1,036,341
|
)
|
|||
Interest
expense, net
|
(231,559
|
)
|
(293,834
|
)
|
|||
Other
income
|
-
|
2,416
|
|||||
Minority
interest in a subsidiary’s loss
|
19,356
|
-
|
|||||
Net
loss
|
$
|
(2,284,099
|
)
|
$
|
(1,327,759
|
)
|
|
Other
comprehensive income (loss):
|
|||||||
Translation adjustment
|
(95,776
|
)
|
22,358
|
||||
Comprehensive
loss
|
$
|
(2,379,875
|
)
|
$
|
(1,305,401
|
)
|
|
Net
loss per common share
-basic
and diluted
|
$
|
(0.036
|
)
|
$
|
(0.026
|
)
|
|
Weighted
average number of common shares outstanding
-basic
and diluted
|
63,646,482
|
50,957,995
|
Common
Stock
|
Additional
Paid-in
Capital
|
Stock-based
Compensation
Reserve
|
Accumulated
Deficits
|
Other
Comprehensive
income
|
Total
Stockholders’
Deficiency
|
|||||||||||||||||
|
Shares
|
Amount
|
||||||||||||||||||||
Balance, January 1, 2005 |
40,873,711
|
$ |
40,874
|
$ | 4,393,415 |
-
|
($4,154,796 | ) |
-
|
$ | 279,493 | |||||||||||
Issuance
of common stock to Cornell Capital in the first nine months of 2005,
as
repayments in conjunction with Promissory Note dated on January 4,
2005
|
18,362,219
|
18,362
|
294,503
|
-
|
-
|
-
|
312,865
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the issuance of convertible
promissory notes in June 2005
|
-
|
-
|
21,700
|
-
|
-
|
-
|
21,700
|
|||||||||||||||
Beneficial
conversion feature of convertible note payable funded in June,
2005
|
-
|
-
|
106,666
|
-
|
-
|
-
|
106,666
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the various advances from
a
director in May 2005
|
-
|
-
|
8,633
|
-
|
-
|
-
|
8,633
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the advances from a related
party dated June 29, 2005
|
-
|
-
|
5,417
|
-
|
-
|
-
|
5,417
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the advances from a related
party dated September 30, 2005
|
-
|
-
|
5,021
|
-
|
-
|
-
|
5,021
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the advances from a related
party dated December 31, 2005
|
-
|
-
|
613
|
-
|
-
|
-
|
613
|
|||||||||||||||
Net
loss for the year ended December 31, 2005
|
-
|
-
|
-
|
-
|
(1,327,759
|
)
|
-
|
(1,327,759
|
)
|
|||||||||||||
Other
comprehensive income-Translation
adjustment
|
-
|
-
|
-
|
-
|
-
|
22,358
|
22,358
|
|||||||||||||||
Balance,
January 1, 2006
|
59,235,930
|
$
|
59,236
|
$
|
4,835,968
|
-
|
($5,482,555
|
)
|
$
|
22,358
|
($564,993
|
)
|
||||||||||
Issuance
of detachable warrants in conjunction with the advances from a related
party dated March 31, 2006
|
-
|
-
|
5,145
|
-
|
-
|
-
|
5,145
|
|||||||||||||||
Issuance
of 5 million shares of common stock pursuant to the Stock Purchase
Agreement dated as of March 10, 2006
|
5,000,000
|
5,000
|
740,416
|
-
|
-
|
-
|
745,416
|
|||||||||||||||
Issuance
of detachable warrants in conjunction with the issuance of convertible
promissory notes on June 29, 2006, August 15, 2006 and October 31,
2006
|
-
|
-
|
1,467,956
|
-
|
-
|
-
|
1,467,956
|
|||||||||||||||
Issuance
of warrants to a financing consultant in June and August, October
2006
|
-
|
-
|
231,544
|
(231,544
|
)
|
-
|
-
|
-
|
||||||||||||||
Amortization
of fair value of stock-based compensation reserve
|
-
|
-
|
-
|
30,801
|
-
|
-
|
30,801
|
|||||||||||||||
Issuance
of common stock for exercise of warrants at July 6, 2006
|
50,000
|
50
|
(50
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||
Issuance
of common stock for exercise of warrants at August 9, 2006
|
500,000
|
500
|
8,500
|
-
|
-
|
-
|
9,000
|
|||||||||||||||
Issuance
of common stock as compensation to a investor relation consultant
on
October 10, 2006
|
1,800,000
|
1,800
|
430,200
|
-
|
-
|
-
|
432,000
|
|||||||||||||||
Issuance
of common stock as compensation to an officer on October 10,
2006
|
996,646
|
997
|
45,355
|
-
|
-
|
-
|
46,352
|
|||||||||||||||
Issuance
of common stock for exercise of warrants at October 10,
2006
|
350,000
|
350
|
7,350
|
-
|
-
|
-
|
7,700
|
|||||||||||||||
Issuance
of common stock for exercise of warrants at October 10,
2006
|
750,000
|
750
|
16,500
|
-
|
-
|
-
|
17,250
|
|||||||||||||||
Issuance
of common stock for conversion of a convertible note on November
10,
2006
|
773,537
|
774
|
112,936
|
-
|
-
|
-
|
113,710
|
|||||||||||||||
Employee
stock option granted on December 12, 2006
|
-
|
-
|
326,810
|
(326,810
|
)
|
-
|
-
|
-
|
||||||||||||||
Amortization
of fair value of employee stock option in 2006
|
-
|
-
|
-
|
4,085
|
-
|
-
|
4,085
|
|||||||||||||||
Issuance
of common stock for conversion 6% Notes in the quarter of
2006
|
693,443
|
693
|
83,345
|
-
|
-
|
-
|
84,038
|
|||||||||||||||
Net
loss for the year ended December 31, 2006
|
-
|
-
|
-
|
-
|
(2,284,099
|
)
|
-
|
(2,284,099
|
)
|
|||||||||||||
Other
comprehensive income-Translation adjustment
|
-
|
-
|
-
|
-
|
-
|
(21,192
|
)
|
(21,192
|
)
|
|||||||||||||
Balance,
December31, 2006
|
70,149,556
|
$
|
70,150
|
$
|
8,311,975
|
($523,468
|
)
|
($7,766,654
|
)
|
$
|
1,166
|
$
|
93,169
|
Year
Ended December 31,
|
|||||||
|
2006
|
2005
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(2,284,099
|
)
|
$
|
(1,327,759
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
200,815
|
146,932
|
|||||
Amortization
of detachable warrants and option
|
137,374
|
78,447
|
|||||
Amortization
of beneficial conversion feature of convertible notes
|
-
|
106,666
|
|||||
Provision
for doubtful debt and inventory impairment
|
224,614
|
82,942
|
|||||
Fair
value of shares as compensation to an employee
|
46,352
|
-
|
|||||
(Gain)
loss on disposal of fixed assets
|
2,077
|
-
|
|||||
Minority
interest in subsidiary
|
(19,356
|
)
|
-
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(403,685
|
)
|
178,975
|
||||
Inventories
|
(94,632
|
)
|
(411,920
|
)
|
|||
Other
receivable
|
-
|
157,495
|
|||||
Prepaid
expenses
|
131,955
|
129,638
|
|||||
Other
current assets
|
(29,825
|
)
|
(846
|
)
|
|||
Accounts
payable and accrued expenses
|
22,162
|
439,603
|
|||||
Net
cash used in operating activities
|
(2,066,248
|
)
|
(419,827
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of property and equipment
|
(36,600
|
)
|
(229,989
|
)
|
|||
Acquisition
of intangible asset
|
(126,443
|
)
|
-
|
||||
Net
cash used in investing activities
|
(163,043
|
)
|
(229,989
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from issuance of common stock
|
754,416
|
-
|
|||||
Repayment
of short-term loans
|
-
|
(50,000
|
)
|
||||
Proceeds
from related parties
|
685,906
|
488,501
|
|||||
Repayment
to related parties
|
(651,069
|
)
|
(163,741
|
)
|
|||
Proceeds
from convertible notes payable
|
-
|
720,000
|
|||||
Repayment
of convertible notes payable
|
(307,135
|
)
|
(350,000
|
)
|
|||
Proceeds
from long-term convertible notes payable
|
2,204,000
|
-
|
|||||
Repayment
of long-term borrowings
|
(20,785
|
)
|
(12,190
|
)
|
|||
Net
cash provided by financing activities
|
2,665,333
|
632,570
|
|||||
Effect
of exchange rate changes on cash and cash
equivalents
|
47,486
|
14,773
|
|||||
Cash
and cash equivalents:
|
|||||||
Net
increase (decrease)
|
483,528
|
(2,473
|
)
|
||||
Balance
at beginning of year
|
14,575
|
17,049
|
|||||
Balance
at end of year
|
$
|
498,103
|
$
|
14,576
|
|||
Supplemental
Disclosures of Cash flow Information:
|
|||||||
Cash
paid for interest
|
$
|
103,313
|
$
|
6,354
|
|||
Cash
paid for taxes
|
$
|
-
|
$
|
-
|
|||
Non-cash
investing and financing activities:
|
|||||||
Fixed
assets invested by minority shareholder of subsidiary
|
$
|
120,000
|
$
|
-
|
|||
Beneficial
conversion feature of convertible notes payable
|
-
|
106,666
|
|||||
Issuance
of common stock for convertible notes payable and interest
|
197,748
|
312,865
|
|||||
Issuance
of common stock as compensation to a consultant
|
432,000
|
-
|
|||||
Issuance
of detachable warrants in conjunction with issuance
of
convertible notes payable
|
1,473,101
|
41,384
|
|||||
Issuance
of warrants as compensation and grant of stock option
|
558,534
|
-
|
|||||
Non-cash
exercise of warrants
|
50
|
-
|
|||||
Issuance
of stock for warrant exercise with accrued interest setoff
|
24,950
|
-
|
1. |
Background
and Basis of
Presentation
|
Buildings
|
20-35
years
|
Machinery
and equipment
|
4-12
years
|
Automobiles
|
8
years
|
Office
equipments
|
5
years
|
Computer
software
|
3
year
|
2. |
Recent
Accounting
Pronouncements
|
3. |
Accounts
Receivable
|
4. |
Inventories
|
Item
|
December
31, 2006
|
December
31, 2005
|
|||||
Raw
materials
|
$
|
439,828
|
$
|
417,237
|
|||
Semi-finished
goods
|
241
|
-
|
|||||
Finished
goods
|
101,271
|
78,360
|
|||||
Total
|
$
|
541,340
|
$
|
495,597
|
5. |
Prepaid
expenses
|
Item
|
Note
|
December
31, 2006
|
December
31, 2005
|
|||||||
Prepaid
stock-based compensation
to
investor relation consultant
|
(i)
|
|
$
|
256,800
|
$
|
-
|
||||
Prepaid
charges relating to
urea
entrepot trade
|
(ii)
|
|
30,097
|
-
|
||||||
Prepaid
insurance premium
|
-
|
892
|
||||||||
Others
|
15,110
|
1,070
|
||||||||
Total
|
$
|
302,007
|
$
|
1,962
|
6. |
Property,
Plant and Equipment
|
7. |
Intangible
Assets
|
Expected
Amortization
Period
|
Gross
carrying
value
|
Accumulated
amortization
|
Net
value
at
December 31, 2006
|
|
Patent
|
8.5
years
|
$480,411
|
$143,384
|
$337,027
|
Future
expected amortization
|
Amount
|
|||
2007
|
$
|
$54,653
|
||
2008
|
54,653
|
|||
2009
|
54,653
|
|||
2010
|
54,653
|
|||
2011
|
54,653
|
|||
Thereafter
|
$
|
$63,762
|
8. |
Deferred
Financing Costs
|
9. |
Deposit
to Purchase the Proprietary
Technology
|
10. |
Accounts
Payable and Accrued
Expenses
|
Item
|
December
31, 2006
|
December
31, 2005
|
|||||
Consulting
and professional payables
|
$
|
419,835
|
$
|
411,360
|
|||
Payables
to material suppliers
|
99,263
|
211,903
|
|||||
Insurance
payable
|
89,290
|
81,553
|
|||||
Interest
payable
|
80,775
|
106,880
|
|||||
Salary
payable
|
71,793
|
92,557
|
|||||
Credit
card balance
|
69,554
|
22,485
|
|||||
Office
rental payable
|
54,926
|
39,007
|
|||||
Rebates
payable to customers
|
40,651
|
-
|
|||||
Payables
to Kiwa-CAU R&D center
|
25,612
|
-
|
|||||
Payables
to equipment suppliers
|
14,222
|
13,761
|
|||||
Others
|
18,058
|
20,971
|
|||||
Total
|
$
|
983,980
|
$
|
1,000,477
|
11. |
Construction
Costs Payable
|
12. |
Related
Party Transactions
|
Item
|
Notes
|
December
31,
2006
|
December
31,
2005
|
|||||||
Mr.
Wei Li (“Mr. Li”)
|
(i)
|
|
$
|
32,398
|
$
|
191,861
|
||||
China
Star Investment Management Co., Ltd.
(“China
Star”)
|
(ii)
|
|
457,464
|
263,165
|
||||||
Unamortized
fair value of warrants
issued
to China Star
|
-
|
(833
|
)
|
|||||||
Translation
difference
|
6,944
|
-
|
||||||||
Total
|
$
|
496,806
|
$
|
454,193
|
13. |
Convertible
Notes Payable
|
14. |
Unsecured
Loans Payable
|
Item
|
December
31,
2006
|
December
31,
2005
|
|||||
Unsecured
loan payable to Zoucheng Municipal
Government,
non-interest bearing, becoming due within three years from Kiwa Shandong’s
first profitable year on a formula basis, interest has not been imputed
due to the undeterminable repayment date
|
$
|
$1,152,561
|
$
|
1,115,214
|
|||
Unsecured
loan payable to Zoucheng Science & Technology Bureau, non-interest
bearing, it is due in Kiwa Shandong’s first profitable year, interest has
not been imputed due to the undeterminable repayment date
|
320,156
|
309,782
|
|||||
Total
|
$
|
$1,472,717
|
$
|
1,424,996
|
15. |
Long-Term
Convertible Notes
Payable
|
16. |
Equity-Based
Transactions
|
17. |
Stock-based
Compensation
|
18. |
Concentration
of Customers and
Suppliers
|
19. |
Segment
Reporting
|
Item
|
Bio-fertilizer
|
Livestock
Feed
|
Urea
entrepot
trade
|
Corporate(1)
|
Total
|
|||||||||||
Fiscal
year ended
December
31, 2006
|
||||||||||||||||
Net
sales
|
46,926
|
2,459,789
|
800,000
|
-
|
3,306,715
|
|||||||||||
Gross
profit
|
9,786
|
170,510
|
415,000
|
-
|
595,296
|
|||||||||||
Operating
expenses
|
824,840
|
267,968
|
176,953
|
1,397,431
|
2,667,192
|
|||||||||||
Operating
profit (loss)
|
(815,054
|
)
|
(97,458
|
)
|
238,047
|
(1,397,431
|
)
|
(2,071,896
|
)
|
|||||||
Interest
income (expense)
|
(8,260
|
)
|
(1
|
)
|
(817
|
)
|
(222,482
|
)
|
(231,559
|
)
|
||||||
Minority
interest in subsidiary
|
-
|
(19,356
|
)
|
-
|
-
|
(19,356
|
)
|
|||||||||
Net
income (loss)
|
(823,314
|
)
|
(78,103
|
)
|
237,230
|
(1,619,912
|
)
|
(2,284,099
|
)
|
|||||||
Total
assets, as of
December
31, 2006
|
2,408,634
|
559,805
|
851,249
|
698,497
|
4,518,185
|
|||||||||||
Fiscal
year ended
December
31, 2005
|
||||||||||||||||
Net
sales
|
631,794
|
-
|
-
|
-
|
631,794
|
|||||||||||
Gross
profit
|
399,102
|
-
|
-
|
-
|
399,102
|
|||||||||||
Operating
expenses
|
394,558
|
-
|
-
|
1,040,885
|
1,435,443
|
|||||||||||
Operating
profit (loss)
|
4,544
|
-
|
-
|
(1,040,885
|
)
|
(1,036,341
|
)
|
|||||||||
Interest
income (expense)
|
(12,177
|
)
|
-
|
-
|
(281,657
|
)
|
(293,834
|
)
|
||||||||
Other
income
|
2,416
|
-
|
-
|
-
|
2,416
|
|||||||||||
Net
income (loss)
|
(5,216
|
)
|
-
|
-
|
(1,322,543
|
)
|
(1,327,759
|
)
|
||||||||
Total
assets, as of
December
31, 2005
|
3,110,583
|
-
|
-
|
11,105
|
3,121,688
|
(1) |
Beijing
Representative Office of Kiwa Shandong fulfills part of corporate
managerial function. Most of its expenses relating to this function
were
categorized into corporate segment.
|
20. |
Income
Tax
|
Years
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Income
(Loss) in U.S. before income taxes
|
$
|
(1,161,914
|
)
|
$
|
(1,088,694
|
)
|
|
Income
(Loss) in British Virgin Islands before income taxes
|
237,230
|
-
|
|||||
Income
(Loss) in Kiwa Shandong before income taxes
|
(1,281,312
|
)
|
(216,707
|
)
|
|||
Income
(Loss) in Kiwa Tianjin before income taxes
|
(78,103
|
)
|
|||||
Total
|
$
|
(2,284,099
|
)
|
$
|
(1,305,401
|
)
|
Years
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Deferred
tax assets
|
|||||||
Net
operating loss carryforwards
|
$
|
712,309
|
$
|
408,055
|
|||
Allowance
for doubtful accounts receivable
|
38,800
|
12,441
|
|||||
Value
difference of intangible assets
|
25,993
|
27,896
|
|||||
Deferred
financing cost
|
31,769
|
-
|
|||||
Impairment
of inventories
|
7,206
|
-
|
|||||
Accrued
expenses
|
93,708
|
116,222
|
|||||
909,785
|
564,615
|
||||||
Deferred
tax liabilities
|
|||||||
Prepaid
expenses
|
(47,568
|
)
|
(294
|
)
|
|||
(47,568
|
)
|
(294
|
)
|
||||
Valuation
allowance
|
(862,217
|
)
|
(564,320
|
)
|
|||
Net
deferred tax assets
|
$
|
-
|
$
|
-
|
Year
ended December 31,
|
Year
ended December 31,
|
||||||
2006
|
2005
|
||||||
Statutory
rate
|
33.0%
|
|
33.0%
|
|
|||
Income
tax holiday
|
(33.0%)
|
|
(33.0%)
|
|
|||
Effective
income tax rate
|
-
|
-
|
21. |
Commitments
and Contingencies
|
Fiscal
year
|
Amount
|
|||
2007
|
$
|
150,636
|
||
2008
|
98,208
|
|||
2009
|
51,200
|
|||
Total
|
$
|
300,044
|
22. |
Subsequent
Event
|