BEIJING and CLAREMONT, Calif., Nov. 7 /Xinhua-PRNewswire/ -- Kiwa Bio-Tech Products Group Corporation (OTC Bulletin Board: KWBT) announced that revenues for the first nine months of 2007 were $6,214,712 an increase of 567% over $930,442 in the first nine months of 2006.
Revenues for the third quarter of 2007 were $2,957,972 an increase of 226% compared to $906,068 in the third quarter of 2006. These significant increases are due to the growth of Kiwa's new bio-enhanced feed business, reaching revenues of $2.85 million for the quarter. Revenues of bio-fertilizer products were just over $100,000 and reflect the re-opening of the Shandong factory at the end of the period.
Review of Third Quarter
Costs of sales were $2,718,712 and $852,885 for the three months ended September 30, 2007 and 2006, respectively. The increase in cost of sales was primarily due to the rapid increase of sales. Gross profit was $239,260 for the three months ended September 30, 2007, representing an average profit margin of 8.1%. The profit margins for bio-fertilizer and bio-enhanced feed were 60% and 6.2%, respectively.
Net loss decreased by 6% to $598,521 (including non-cash expenses of $322,023) for the three-month period ended September 30, 2007 compared to $636,278 for the three months ended September 30, 2006. This decrease resulted from the following factors: (1) a significant increase in gross profit of $186,077; (2) a increase in operating expenses of $31,796; (3) an increase in interest expenses of $100,959; and (4) a $15,699 of profit shared with a minority shareholder in a subsidiary in 2007 and was only $134 in 2006
Please refer to documents filed today with the Securities and Exchange Commission for additional information on the results for the third quarter and first nine months of 2007.
Mr. Wei Li, Chairman and CEO of Kiwa, stated, "Our growth reflects the significant growth of our joint venture located in Wuqing District in Tianjin. During the first two quarters of the year we shipped approximately 5,000 tons of bio-feed and in the third quarter alone we shipped 7,550 tons. During the third quarter we completed the first stage of upgrading of the Shandong manufacturing facility for fertilizer products and began shipping. We announced that we had registered products with the Shandong Provincial Soil and Fertilizer Station and had six products certified as organic by the China Green Food Association of the Agriculture Ministry."
PRODUCT OFFERINGS
Kiwa is currently producing and distributing six kinds of bio-fertilizer products. Five are bio-fertilizer products with bacillus spp and/or photosynthetic bacteria as core ingredients. They greatly boost overall plant health and the productivity of agricultural products. Kiwa has obtained five fertilizer registration certificates from the Chinese government - four covering our bacillus bacteria fertilizer and one covering our photosynthetic bacteria fertilizer.
Mass use of chemical fertilizer products has led to severe problems including damage to the soil structure, natural biodiversity and ecological system stability. Promoting the use of bio-fertilizer together with chemical fertilizer is one of the solutions to solve these problems, creating a very large market potential for bio-fertilizer. Kiwa's commercialized products, with bacillus and/or Photosynthesis Biological Catalyst as core ingredients, capitalize on this market trend. Kiwa hopes to become one of the leaders in developing green technologies for productive, more sustainable agriculture in China.
Currently Kiwa has different proprietary, concentrated Bio-feed formulas for fowls, fishes and pigs at different growth stages. The Chinese livestock industry is suffering from a lack of major feed producers that are capable of manufacturing high-quality, environment-friendly bio-enhanced feed in a cost-effective manner to satisfy the increasing demand of the market. Consequently, Kiwa has concluded that the livestock feed market is a good opportunity for the Company.
Kiwa is working on developing production for a veterinary drug product used for preventing and curing Avian Influenza virus (Bird flu). We expect it will become just one of Kiwa's high profit, veterinary drug products. Our planed AF-01 anti-viral aerosol is very much different from other ordinary veterinary drugs. Therefore we expect we will face limited competition once the commercialized product is in the market.
Kiwa Bio-Tech Third Quarter Revenues Up 226%
COMPETITIVE ADVANTAGES
Kiwa Bio-Tech has made significant investments over the last four years in bio-fertilizer and bio-feed development. Kiwa also has field tested a great number or products for application with specific vegetables and target markets. The close cooperation between Kiwa and China Agricultural University of Beijing known as Kiwa CAU is the key factor in building the Company into a strong market competitor. Of course, food safety has become a problem that the Chinese government and the Chinese people are greatly concerned about. The reason for the China Green Food Association recommending Kiwa's products is that Kiwa's products are taking the leading position in food safety field.
STRATEGIC PARTNERSHIPS
The Company has formed numerous strategic cooperation partnerships with big fertilizer dealers, large agri-business group corporations and relevant government agencies. China Green Food Association is one of Kiwa's main strategic partners. China Green Food Association is granted the function of supervising and checking on Chinese food safety by the Ministry of Agriculture. Our strategic agreement has the objective to allow Kiwa's products to have an important contribution to China's food safety control process. China Green Food Association has specified over 13 million hectare of government Green Food Planting Base as the main market objective for Kiwa's products in 2008.
GOALS
Kiwa's development strategy and plan call for 2008 to be the first year for Kiwa to make profit on sales of twice 2007. The plan calls for the years 2009 and 2010 to demonstrate rapid development.
Kiwa's products have entered this huge Chinese market step by step. We have built a mature distribution system on the basis of current products. The next 5-10 years is seen by many as a period of sustainable development for the Chinese economy. The bio-agriculture industry will also develop on rapidly. These factors create a favorable environment for Kiwa's operations in a market valued at several hundred billion US dollars. Kiwa's management team and largest stockholders are confident in the Company's future development.
ABOUT KIWA BIO-TECH PRODUCTS GROUP CORPORATION
The Company develops, manufactures, distributes and markets innovative, cost-effective, and environmentally safe bio-technological products for agricultural and natural resources and environmental conservation. The Company's 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. For more information about the Company, please review documents filed with the SEC (http://www.sec.gov) or visit the Company's website at http://www.kiwabiotech.com.
This press release contains information that constitutes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from any future results described by the forward-looking statements. Risk factors that could contribute to such differences include those matters more fully disclosed in the Company's reports filed with the Securities and Exchange Commission. The forward-looking information provided herein represents the Company's estimates as of the date of the press release, and subsequent events and developments may cause the Company's estimates to change. The Company specifically disclaims any obligation to update the forward-looking information in the future. Therefore, this forward-looking information should not be relied upon as representing the Company's estimates of its future financial performance as of any date subsequent to the date of this press release.
-- TABLES FOLLOW --
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net sales $2,957,972 $906,068 $6,214,712 $930,442
Cost of sales 2,718,712 852,885 5,763,387 872,840
Gross profit 239,260 53,183 451,325 57,602
Operating expenses:
Consulting and
professional fees 161,241 244,566 618,380 532,880
Officers' compensation 58,811 48,381 213,280 163,451
General and
administrative 275,532 167,473 651,055 329,380
Selling expenses 77,650 40,133 284,916 46,611
Research and
development 41,931 46,891 134,730 63,253
Depreciation and
amortization (excluding
depreciation of
production and research
facilities) 35,234 23,060 96,098 93,291
Allowance and provision (60) 48,039 604 51,138
Total operating
expenses 650,339 618,543 1,999,063 1,280,004
Operating loss (411,079) (565,360) (1,547,738) (1,222,402)
Interest expenses (171,743) (70,784) (573,647) (120,635)
Loss before minority
interest in a
subsidiary's profit (582,822) (636,144) (2,121,385) (1,343,037)
Minority interest in a
subsidiary's profit (15,699) (134) (8,778) (134)
Loss from continuing
operations (598,521) (636,278) (2,130,163) (1,343,171)
Loss on discontinued
operations:
Discontinued urea
entrepot trade -
Commission paid to a
related party -- -- (414,509) --
Net loss ($598,521) ($636,278) ($2,544,672) ($1,343,171)
Other comprehensive
income (loss):
Translation adjustment (7,653) 12,159 (34,234) 28,356
Comprehensive loss ($606,174) ($624,119) ($2,578,906) ($1,314,815)
Net loss from
continuing operations
per common share -basic
and diluted ($0.01) ($0.01) ($0.03) ($0.02)
Net loss on
discontinued operations
per common share -basic
and diluted -- -- -- --
Weighted average number
of common shares
outstanding-basic and
diluted 76,122,358 64,565,278 74,033,591 61,801,131
Condensed Consolidated Balance Sheet
September 30, December 31,
2007 2006
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $49,752 $498,103
Accounts receivable, net of bad debt
allowance of $269,546 and $258,667,
respectively 441,583 929,446
Inventories 696,267 541,340
Prepaid expenses 102,822 302,007
Other current assets 65,844 57,011
Total current assets 1,356,268 2,327,907
Property, Plant and Equipment:
Buildings 1,094,238 1,046,116
Machinery and equipment 642,147 585,282
Automobiles 74,063 47,772
Office equipment 90,671 78,096
Computer software 9,606 9,240
Property plant and equipment - total 1,910,725 1,766,506
Less: accumulated depreciation (390,212) (286,039)
Property plant and equipment - net 1,520,513 1,480,467
Construction in progress 101,333 34,548
Intangible asset - net 303,682 337,027
Deferred financing costs 150,293 211,793
Deposit to purchase the proprietary
technology 126,443 126,443
Total assets $3,558,532 $4,518,185
LIABILITIES AND SHAREHOLDERS’ EQUITY
(DEFICIENCY)
Current liabilities
Accounts payable and accrued expenses $1,632,627 $983,980
Construction costs payable 308,202 366,879
Due to related parties-non-trade 454,438 496,806
Due to related parties-trade 70,000 --
Current portion of bank notes
payables 2,810 5,405
Total current liabilities 2,468,077 1,853,070
Long-term liabilities, less current
portion:
Unsecured loans payable 1,531,129 1,472,717
Bank notes payable 18,243 1,351
Long-term convertible notes payable 2,120,562 2,365,962
Less: discount relating to warrants (958,312) (1,371,446)
Long-term convertible notes payable -
net 1,162,250 994,516
Total long-term liabilities 2,711,622 2,468,584
Minority interest in a subsidiary 110,278 103,362
Shareholders' equity (deficiency)
Common stock - $0.001 par value
Authorized 200,000,000 shares at
September 30, 2007 and December 31,
2006 respectively. Issued and
outstanding 76,847,710 and
70,149,556 shares at September 30,
2007 and December 31, 2006,
respectively 76,848 70,150
Preferred stock - $0.001 par value
Authorized 20,000,000 shares, nil
shares issued and outstanding at
September 30, 2007 and December 31,
2006, respectively -- --
Additional paid-in capital 8,844,813 8,311,975
Stock-based compensation reserve (348,198) (523,468)
Deficit accumulated (10,311,326) (7,766,654)
Accumulated other comprehensive
income 6,418 1,166
Total shareholders' equity
(deficiency) (1,731,445) 93,169
Total liabilities and stockholders'
equity $3,558,532 $4,518,185
