Kiwa Bio-Tech Products Group Corp. said its previous accounting firm advised the company that it failed to properly disclose certain related party transactions with Kangtan Gerui (Beijing) Bio-Tech Co. starting in 2016.
The fertilizer manufacturer also failed to disclose that its director Feng Li, who owns about 20% of Kiwa's common stock and 50% of its series A preferred stock, held a 23% stake in Kangtan Gerui.
According to the accounting firm, the information was not disclosed in the annual financial statements for 2016 as well as for 2017 in the quarters ended March 31 and June 30.
Kiwa said it reported other receivables due of $1,522,435 and recognized license revenue of $786,329 from Kangtan Gerui in 2016.
In a separate letter, Kiwa's previous accounting firm noted that the company also failed to disclose the related party relationship in its 2016 financial reports for the quarter ended March 31, June 30 and Sept. 30.
The firm also believed that Kiwa's interim financial reports for the period of three and nine months ended Sept. 30, 2016, should be restated due to the material overstatement of prepaid expenses and equity of about $1.6 million.
Kiwa said its board is reviewing the issues with its new accountant and will take required action, which may include a re-audit of its 2016 financial statements.