0001213900-23-064237.txt : 20230808 0001213900-23-064237.hdr.sgml : 20230808 20230808073032 ACCESSION NUMBER: 0001213900-23-064237 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 93 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230808 DATE AS OF CHANGE: 20230808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Kandi Technologies Group, Inc. CENTRAL INDEX KEY: 0001316517 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 870700927 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-33997 FILM NUMBER: 231149338 BUSINESS ADDRESS: STREET 1: JINHUA NEW ENERGY VEHICLE TOWN STREET 2: ZHEJIANG PROVINCE CITY: JINHUA STATE: F4 ZIP: 321016 BUSINESS PHONE: (86-0579) 82239851 MAIL ADDRESS: STREET 1: JINHUA NEW ENERGY VEHICLE TOWN STREET 2: ZHEJIANG PROVINCE CITY: JINHUA STATE: F4 ZIP: 321016 FORMER COMPANY: FORMER CONFORMED NAME: Kandi Technologies Corp DATE OF NAME CHANGE: 20070813 FORMER COMPANY: FORMER CONFORMED NAME: STONE MOUNTAIN RESOURCES INC DATE OF NAME CHANGE: 20050203 10-Q 1 f10q0623_kanditech.htm QUARTERLY REPORT

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2023

 

or

 

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 001-33997

 

KANDI TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in charter)

 

Delaware   90-0363723
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
 Jinhua New Energy Vehicle Town
Jinhua, Zhejiang Province
People’s Republic of China
  321016
(Address of principal executive offices)   (Zip Code)

 

(86 - 579) 82239856
(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  Trading Symbol(s)   Name of each exchange on which registered
Common Stock   KNDI   NASDAQ Global Select Market

 

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    No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes    No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

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

 

As of August 3, 2023, the registrant had 79,039,558 shares of common stock issued and outstanding, par value $0.001 per share. 

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
PART I — FINANCIAL INFORMATION  
   
Item 1. Financial Statements (Unaudited) 1
     
  Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2023 and December 31, 2022 1
     
  Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) –  Three Months and Six Months Ended June 30, 2023 and 2022 2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) –Three Months and Six Months Ended June 30, 2023 and 2022 3
     
  Condensed Consolidated Statements of Cash Flows (unaudited) –Six Months Ended June 30, 2023 and 2022 4
     
  Notes to Unaudited Condensed Consolidated Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 34
     
Item 4. Controls and Procedures 34
     
PART II — OTHER INFORMATION  
     
Item 1. Legal proceedings 35
     
Item 6. Exhibits 35

 

i

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,
2023
   December 31,
2022
 
   (Unaudited)     
CURRENT ASSETS        
Cash and cash equivalents  $69,406,103   $84,063,717 
Restricted cash   54,238,569    66,976,554 
Certificate of deposit   108,902,429    81,191,191 
Accounts receivable (net of allowance for doubtful accounts of $2,679,598 and $2,285,386 as of June 30, 2023 and December 31, 2022, respectively)   23,137,337    38,150,876 
Inventories   57,107,433    40,475,366 
Notes receivable   256,276    434,461 
Other receivables   9,813,439    11,912,615 
Prepayments and prepaid expense   3,159,764    2,970,261 
Advances to suppliers   2,073,612    3,147,932 
TOTAL CURRENT ASSETS   328,094,962    329,322,973 
           
NON-CURRENT ASSETS          
Property, plant and equipment, net   89,909,721    97,168,753 
Intangible assets, net   5,927,783    7,994,112 
Land use rights, net   2,725,604    2,909,950 
Construction in progress   36,854    199,837 
Deferred tax assets   1,427,290    1,432,527 
Long-term investment   137,851    144,984 
Goodwill   31,335,036    33,178,229 
Other long-term assets   9,911,534    10,630,911 
TOTAL NON-CURRENT ASSETS   141,411,673    153,659,303 
           
TOTAL ASSETS  $469,506,635   $482,982,276 
           
CURRENT LIABILITIES          
Accounts payable  $36,693,759   $35,321,262 
Other payables and accrued expenses   11,736,250    14,131,414 
Short-term loans   6,967,612    5,569,154 
Notes payable   16,310,719    19,123,476 
Income tax payable   1,011,755    1,270,617 
Other current liabilities   5,476,994    6,089,925 
TOTAL CURRENT LIABILITIES   78,197,089    81,505,848 
           
NON-CURRENT LIABILITIES          
Deferred taxes liability   1,172,820    1,378,372 
Contingent consideration liability       1,803,000 
Other long-term liabilities   465,784    602,085 
TOTAL NON-CURRENT LIABILITIES   1,638,604    3,783,457 
           
TOTAL LIABILITIES   79,835,693    85,289,305 
           
STOCKHOLDER’S EQUITY          
Common stock, $0.001 par value; 100,000,000 shares authorized; 75,010,171 and 77,668,730 shares issued and 75,010,171 and 74,180,171 outstanding at June 30,2023 and December 31,2022, respectively   75,010    77,669 
Less: Treasury stock (null shares and 3,488,559 shares with average price of $2.81 at June 30, 2023 and December 31, 2022 )
   
    (9,807,820)
Additional paid-in capital   446,260,170    451,373,645 
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at June 30, 2023 and December 31, 2022, respectively)   (12,640,763)   (16,339,765)
Accumulated other comprehensive loss   (46,029,611)   (28,333,239)
TOTAL KANDI TECHNOLOGIES GROUP, INC. STOCKHOLDERS’ EQUITY   387,664,806    396,970,490 
           
Non-controlling interests   2,006,136    722,481 
TOTAL STOCKHOLDERS’ EQUITY   389,670,942    397,692,971 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $469,506,635   $482,982,276 

 

See accompanying notes to unaudited condensed consolidated financial statements

1

 

 

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 

   Three Months Ended   Six Months Ended 
   June 30,
2023
   June 30,
2022
   June 30,
2023
   June 30,
2022
 
                 
REVENUES FROM UNRELATED PARTIES, NET  $35,953,339   $20,841,183   $58,815,447   $45,732,587 
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET   
    
         
                     
REVENUES, NET   35,953,339    20,841,183    58,815,447    45,732,587 
                     
COST OF GOODS SOLD   (22,218,767)   (18,122,316)   (37,051,645)   (40,626,557)
                     
GROSS PROFIT   13,734,572    2,718,867    21,763,802    5,106,030 
                     
OPERATING EXPENSE:                    
Research and development   (874,562)   (1,253,843)   (1,753,542)   (2,394,429)
Selling and marketing   (2,780,515)   (1,172,528)   (4,608,244)   (2,366,227)
General and administrative   (8,838,319)   (6,574,079)   (16,397,771)   (12,330,610)
Impairment of goodwill   (507,603)       (507,603)    
Impairment of long-lived assets   (962,737)       (962,737)    
TOTAL OPERATING EXPENSE   (13,963,736)   (9,000,450)   (24,229,897)   (17,091,266)
                     
LOSS FROM OPERATIONS   (229,164)   (6,281,583)   (2,466,095)   (11,985,236)
                     
OTHER INCOME (EXPENSE):                    
Interest income   1,954,563    1,378,774    4,054,906    2,601,078 
Interest expense   (194,239)   (138,433)   (367,609)   (286,577)
Change in fair value of contingent consideration   2,164,000    (391,000)   1,803,000    2,299,000 
Government grants   189,948    463,219    810,352    707,317 
Other income, net   807,315    2,373,528    1,073,780    2,417,310 
TOTAL OTHER INCOME, NET   4,921,587    3,686,088    7,374,429    7,738,128 
                     
INCOME (LOSS) BEFORE INCOME TAXES   4,692,423    (2,595,495)   4,908,334    (4,247,108)
                     
INCOME TAX (EXPENSE) BENEFIT   (305,223)   719,843    74,323    752,443 
                     
NET INCOME (LOSS)   4,387,200    (1,875,652)   4,982,657    (3,494,665)
                     
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS   659,088    61,619    1,283,655    58,662 
                     
NET INCOME (LOSS) ATTRIBUTABLE TO KANDI TECHNOLOGIES GROUP, INC. STOCKHOLDERS   3,728,112    (1,937,271)   3,699,002    (3,553,327)
                     
OTHER COMPREHENSIVE LOSS                    
Foreign currency translation adjustment   (19,279,059)   (19,966,230)   (17,696,372)   (18,956,419)
                     
COMPREHENSIVE LOSS  $(14,891,859)  $(21,841,882)  $(12,713,715)  $(22,451,084)
                     
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC   74,378,083    75,863,479    74,282,823    76,075,484 
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED   76,315,953    75,863,479    75,786,201    76,075,484 
                     
NET INCOME (LOSS) PER SHARE, BASIC  $0.06   $(0.02)  $0.07   $(0.05)
NET INCOME (LOSS) PER SHARE, DILUTED  $0.06   $(0.02)  $0.07   $(0.05)

 

See accompanying notes to unaudited condensed consolidated financial statements

 

2

 

 

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

   Number of
Outstanding
Shares
   Common
Stock
   Treasury
Stock
   Additional Paid-in
Capital
   Accumulated
Earning
(Deficit)
   Accumulated
Other
Comprehensive
Income
   Non-controlling
interests
   Total 
Balance, December 31, 2021   77,385,130   $77,385   $(2,392,203)  $449,479,461   $(4,216,102)  $251,786   $
   $443,200,327 
Stock issuance and award   25,000    25    
    92,925    
    
    
    92,950 
Stock buyback       
    (1,570,324)   (13,236)   
    
    
    (1,583,560)
Capital contribution from shareholder       
    
    
    
    
    1,198,398    1,198,398 
Net loss       
    
    
    (1,616,056)   
    (2,957)   (1,619,013)
Foreign currency translation       
    
    
    
    1,009,811    
    1,009,811 
                                         
Balance, March 31, 2022   77,410,130   $77,410   $(3,962,527)  $449,559,150   $(5,832,158)  $1,261,597   $1,195,441   $442,298,913 
Stock issuance and award   238,600    239        584,331                584,570 
Stock buyback           (1,974,490)   (22,578)               (1,997,068)
Net income (loss)                   (1,937,271)       61,619    (1,875,652)
Foreign currency translation                       (19,966,230)   (63,460)   (20,029,690)
                                         
Balance, June 30, 2022   77,648,730   $77,649   $(5,937,017)  $450,120,903   $(7,769,429)  $(18,704,633)   1,193,600   $418,981,073 

 

   Number of
Outstanding
Shares
   Common
Stock
   Treasury
Stock
   Additional
Paid-in
Capital
   Accumulated
Earning
(Deficit)
   Accumulated
Other
Comprehensive
Income
   Non-controlling
interests
   Total 
Balance, December 31, 2022   77,668,730   $77,669   $(9,807,820)  $451,373,645   $(16,339,765)  $(28,333,239)  $722,481   $397,692,971 
Stock issuance and award   10,000    10    
    22,290    
    
    
    22,300 
Stock based compensation       
    
    980,893    
    
    
    980,893 
Net income (loss)       
    
    
    (29,110)   
    624,567    595,457 
Foreign currency translation       
    
    
    
    1,582,687    
    1,582,687 
                                         
Balance, March 31, 2023   77,678,730   $77,679   $(9,807,820)  $452,376,828   $(16,368,875)  $(26,750,552)  $1,347,048   $400,874,308 
Stock issuance and award   820,000    820        2,706,780                2,707,600 
Stock based compensation               980,893                980,893 
Cancellation of the Treasury Stock   (3,488,559)   (3,489)   9,807,820    (9,804,331)                
Net income                   3,728,112        659,088    4,387,200 
Foreign currency translation                       (19,279,059)       (19,279,059)
                                         
Balance, June 30, 2023   75,010,171   $75,010   $   $446,260,170   $(12,640,763)  $(46,029,611)  $2,006,136   $389,670,942 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

   Six Months Ended 
   June 30,
2023
   June 30,
2022
 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss)  $4,982,657   $(3,494,665)
Adjustments to reconcile net (loss) income to net cash provided by operating activities          
Depreciation and amortization   6,044,494    6,447,548 
Impairments   1,470,340     
Provision of allowance for doubtful accounts   530,759    4,301 
Deferred taxes   (200,316)   (116,206)
Change in fair value of contingent consideration   (1,803,000)   (2,299,000)
Stock award and stock based compensation expense   4,724,507    639,690 
           
Changes in operating assets and liabilities:          
           
Accounts receivable   6,424,500    (9,108,858)
Notes receivable   588,417    1,925,896 
Inventories   (17,938,859)   (9,949,597)
Other receivables and other assets   1,302,745    (2,806,192)
Advances to supplier and prepayments and prepaid expenses   680,110    13,475,591 
           
Increase (Decrease) In:          
Accounts payable   20,729,603    32,751,997 
Other payables and accrued liabilities   (1,071,220)   4,198,349 
Notes payable   (15,133,991)   (7,788,622)
Income tax payable   (70,636)   (777,068)
Net cash provided by operating activities  $11,260,110   $23,103,164 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property, plant and equipment, net   (1,360,492)   (1,491,918)
Payment for construction in progress   (76,792)   (308,304)
Certificate of deposit   (33,214,435)   (21,617,615)
Net cash used in investing activities  $(34,651,719)  $(23,417,837)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
 Proceeds from short-term loans   7,928,212    5,070,582 
 Repayments of short-term loans   (6,398,565)   (4,570,582)
Contribution from non-controlling shareholder   
    787,499 
Purchase of treasury stock   
    (3,580,628)
 Net cash provided by (used in) financing activities  $1,529,647   $(2,293,129)
           
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH  $(21,861,962)  $(2,607,802)
Effect of exchange rate changes  $(5,533,637)  $(6,734,387)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR  $151,040,271   $168,676,007 
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD  $123,644,672   $159,333,818 
-CASH AND CASH EQUIVALENTS AT END OF PERIOD   69,406,103    87,098,779 
-RESTRICTED CASH AT END OF PERIOD   54,238,569    72,235,039 
           
SUPPLEMENTARY CASH FLOW INFORMATION          
Income taxes paid  $76,016   $140,831 
Interest paid  $198,793   $102,722 
           
SUPPLEMENTAL NON-CASH DISCLOSURES:          
Contribution from non-controlling shareholder by inventories, fixed assets and intangible assets  $
   $393,986 

 

 

See accompanying notes to unaudited condensed consolidated financial statements

4

 

 

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Kandi Technologies Group, Inc. (“Kandi Technologies”) was incorporated under the laws of the State of Delaware on March 31, 2004. As used herein, the terms “Company” or “Kandi” refer to Kandi Technologies and its operating subsidiaries, as described below.

 

Headquartered in Jinhua City, Zhejiang Province, People’s Republic of China (“China” or “PRC”), the Company is one of China’s leading producers and manufacturers of electric vehicle (“EV”) products, EV parts, and off-road vehicles for sale in the Chinese and the global markets. The Company conducts its primary business operations through its wholly-owned subsidiaries, Zhejiang Kandi Vehicles Co., Ltd. (“Kandi Vehicles”), Kandi Vehicles’ wholly and partially-owned subsidiaries, and SC Autosports, LLC (“SC Autosports”, d/b/a Kandi America) and its wholly-owned subsidiary, Kandi America Investment, LLC (“Kandi Investment”). In March 2021, Zhejiang Kandi Vehicles Co., Ltd. changed its name to Zhejiang Kandi Technologies Group Co., Ltd. (“Zhejiang Kandi Technologies”).

 

The Company’s organizational chart as of the date of this report is as follows:

 

 

5

 

 

NOTE 2 - LIQUIDITY

 

The Company had working capital of $249,897,873 as of June 30, 2023, an increase of $2,080,748 from the working capital of $247,817,125 as of December 31, 2022. As of June 30, 2023 and December 31, 2022, the Company’s cash and cash equivalents were $69,406,103 and $84,063,717, respectively, and the Company’s restricted cash was $54,238,569 and $66,976,554, respectively. As of June 30, 2023 and December 31, 2022, the Company had multiple certificates of deposit with a total amount of $108,902,429 and $81,191,191, respectively. These certificates of deposit have an annual interest rate from 3.10% to 3.99% which can be transferred when necessary without any penalty or any loss of interest and principal.

 

Although the Company expects that most of its outstanding trade receivables from customers will be collected in the next twelve months, there are uncertainties with respect to the timing in collecting these receivables.

  

The Company’s primary need for liquidity stems from its need to fund working capital requirements of the Company’s businesses, its capital expenditures and its general operations, including debt repayment. The Company has historically financed its operations through short-term commercial bank loans from Chinese banks, as well as its ongoing operating activities by using funds from operations, external credit or financing arrangements. Currently the Company has sufficient cash in hand to meet the existing operational needs, but the credit line is retained and can be utilized timely when the Company has special capital needs. The PRC subsidiaries have $2.8 million short-term bank loans and the US subsidiaries have $4.2 million short-term bank loans outstanding as of June 30, 2023.

 

NOTE 3 - BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In management’s opinion, the interim financial statements reflect all normal adjustments that are necessary to provide a fair presentation of the financial results for the interim periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for an entire fiscal year. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements as of such date. For a more complete understanding of the Company’s business, financial position, operating results, cash flows, risk factors and other matters, please refer to its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”) filed with SEC on March 16, 2023.

 

6

 

 

NOTE 4 - PRINCIPLES OF CONSOLIDATION

 

The Company’s condensed consolidated financial statements reflect the accounts of the Company and its ownership interests in the following subsidiaries:

 

(1)Continental Development Limited (“Continental”), a wholly-owned subsidiary of the Company, incorporated under the laws of Hong Kong;

 

(2)Zhejiang Kandi Technologies, a wholly-owned subsidiary of Continental, incorporated under the laws of the PRC;

 

(3)Kandi New Energy Vehicle Co. Ltd. (“Kandi New Energy”), formerly, a 50%-owned subsidiary of Zhejiang Kandi Technologies (Mr. Hu Xiaoming owned the other 50%), incorporated under the laws of the PRC. Pursuant to agreements executed in January 2011, Mr. Hu Xiaoming contracted with Zhejiang Kandi Technologies for the operation and management of Kandi New Energy and put his shares of Kandi New Energy into escrow. As a result, Zhejiang Kandi Technologies was entitled to 100% of the economic benefits, voting rights and residual interests of Kandi New Energy. Effective March 14, 2022, Mr. Hu Xiaoming transferred his 50% equity interests of Kandi New Energy to Zhejiang Kandi Technologies. As a result, Kandi New Energy has become a wholly-owned subsidiary of Zhejiang Kandi Technologies;

 

(4)Kandi Electric Vehicles (Hainan) Co., Ltd. (“Kandi Hainan”), a subsidiary 55% owned by Kandi New Energy and 45% owned by Zhejiang Kandi Technologies, incorporated under the laws of the PRC;

 

(5)Zhejiang Kandi Smart Battery Swap Technology Co., Ltd (“Kandi Smart Battery Swap”), a wholly-owned subsidiary of Zhejiang Kandi Technologies, incorporated under the laws of the PRC;

 

(6)Yongkang Scrou Electric Co, Ltd. (“Yongkang Scrou”), a wholly-owned subsidiary of Kandi Smart Battery Swap, incorporated under the laws of the PRC;

 

(7)SC Autosports, LLC (“SC Autosports”) (d/b/a Kandi America), a wholly-owned subsidiary of the Company formed under the laws of the State of Texas.

 

(8)China Battery Exchange (Zhejiang) Technology Co., Ltd. (“China Battery Exchange”), a wholly-owned subsidiary of Zhejiang Kandi Technologies, and its subsidiaries, incorporated under the laws of the PRC;

 

(9)Kandi America Investment, LLC (“Kandi Investment”), a wholly-owned subsidiary of SC Autosports formed under the laws of the State of Texas, USA;

 

  (10) Jiangxi Province Huiyi New Energy Co., Ltd. (“Jiangxi Huiyi”) and its subsidiaries, a wholly-owned subsidiary of Zhejiang Kandi Technologies, incorporated under the laws of the PRC; and
     
  (11) Hainan Kandi Holding New Energy Technology Co., Ltd. (“Hainan Kandi Holding”), a subsidiary of Kandi Hainan, incorporated under the laws of the PRC; Kandi Hainan owns 66.7% and a non-affiliate, Jiangsu Xingchi owns 33.3% of  Hainan Kandi Holding. Consequently, effective February 15, 2022, non-controlling interests of an aggregate of 33.3% of the equity interests of Hainan Kandi Holding held by an entity are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interest in the results of the Company are presented on the consolidated statement of operations as an allocation of the total income or loss for the period between non-controlling interest holders and the shareholders of the Company.

 

7

 

 

NOTE 5 - USE OF ESTIMATES

 

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenues and expenses during the reported period in the unaudited condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements primarily include, but are not limited to, allowances for doubtful accounts, lower of cost and net realizable value of inventory, assessment for impairment of long-lived assets and intangible assets, valuation of deferred tax assets, change in fair value of contingent consideration, determination of share-based compensation expenses as well as fair value of stock warrants.

 

Management bases the estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.

 

For both the three-month and six-month periods ended June 30, 2023, the Company recognized impairment loss of $507,603 for goodwill and impairment loss of $962,737 for finite-lived intangible assets, respectively.

 

NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Our significant accounting policies are detailed in “Note 6 - Summary of Significant Accounting Policies” of the Company’s 2022 Form 10-K.

 

NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS

 

Accounting Pronouncements Adopted

 

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer generally recognizes contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The ASU is applied prospectively to business combinations occurring on or after the effective date of the amendment (or if adopted early as of an interim period, as of the beginning of the fiscal year that includes the interim period of early application). The Company has adopted this accounting pronouncement from January 1, 2023, and there was no material impact on its consolidated financial statements from the adoption.

 

8

 

 

NOTE 8 - CONCENTRATIONS

 

(a) Customers

 

For the three-month period ended June 30, 2023 and 2022, the Company’s major customers, each of whom accounted for more than 10% of the Company’s consolidated revenue, were as follows:

 

   Sales   Trade Receivable 
   Three
Months
         
   Ended         
   June 30,   June 30,   December 31, 
Major Customers  2023   2023   2022 
Customer A   43%   
    1%
Customer B   17%   
    
 

 

   Sales   Trade Receivable 
   Three
Months
         
   Ended         
   June 30,   June 30,   December 31, 
Major Customers  2022   2022   2021 
Customer A   10%   4%   
 

 

For the six-month period ended June 30, 2023, the Company’s major customers, each of whom accounted for more than 10% of the Company’s consolidated revenue, were as follows:

 

   Sales   Trade Receivable 
   Six Months         
   Ended         
   June 30,   June 30,   December 31, 
Major Customers  2023   2023   2022 
Customer A   51%   
    1%
Customer B   11%   
    
 

 

For the six-month period ended June 30, 2022, there were no customers that accounted for more than 10% of the Company’s consolidated revenue.

 

9

 

 

(b) Suppliers

 

For the three-month period ended June 30, 2023, the Company’s material supplier, which accounted for more than 10% of the Company’s total purchases, was as follows:

 

   Purchases   Accounts Payable 
   Three
Months
         
   Ended         
   June 30,   June 30,   December 31, 
Major Suppliers  2023   2023   2022 
Fuzhou Bike Battery Co., Ltd   12%   
    
 

 

For the three-month period ended June 30, 2022, there were no suppliers that accounted for more than 10% of the Company’s total purchases.

 

For the six-month period ended June 30, 2023 and 2022, the Company’s material suppliers, each of whom accounted for more than 10% of the Company’s total purchases, were as follows:

 

   Purchases   Accounts Payable 
   Six Months         
   Ended         
   June 30,   June 30,   December 31, 
Major Suppliers  2023   2023   2022 
Fuzhou Bike Battery Co., Ltd   11%   
    
 

 

   Purchases   Accounts Payable 
   Six Months         
   Ended         
   June 30,   June 30,   December 31, 
Major Suppliers  2022   2022   2021 
ODES USA, Inc.   13%   
    1%

 

NOTE 9 - EARNINGS PER SHARE

 

The Company calculates earnings (loss) per share in accordance with ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings (loss) per share. Basic earnings (loss) per share are computed using the weighted average number of shares outstanding during the reporting period. Diluted earnings (loss) per share represents basic earnings (loss) per share adjusted to include the potentially dilutive effect of outstanding stock options and warrants (using treasury stock method).

 

Due to the average market price of the common stock during the period being below the exercise price of certain options and warrants, approximately 900,000 options and 8,131,332 warrants that were wholly expired in May 2023 were excluded from the calculation of diluted earnings per share, for the three-month and six-month period ended June 30, 2023. On September 7, 2022, the Compensation Committee of the Board of Directors of the Company approved the grant of 5,000,000 stock options, at an exercise price of $2.07 per share. There were dilutive effects of 1,937,870 shares for the three-month period ended June 30, 2023. There were dilutive effects of 1,503,378 shares for the six-month period ended June 30, 2023.

 

10

 

 

Due to the average market price of the common stock during the period being below the exercise price of the options, approximately 900,000 options and 8,131,332 warrants were excluded from the calculation of diluted earnings per share, for the three-month and six-month period ended June 30, 2022.

 

NOTE 10 - ACCOUNTS RECEIVABLE

 

Accounts receivable are summarized as follows:

 

   June 30,   December 31, 
   2023   2022 
Accounts receivable  $25,816,935   $40,436,262 
Less: allowance for doubtful accounts   (2,679,598)   (2,285,386)
Accounts receivable, net  $23,137,337   $38,150,876 

 

The following table sets forth the movement of provision for doubtful accounts:

 

   Allowance
for Doubtful
Accounts
 
BALANCE AT DECEMBER 31, 2021  $3,053,277 
Provision   456,974 
Recovery   (999,775)
Exchange rate difference   (225,090)
BALANCE AT DECEMBER 31, 2022  $2,285,386 
Provision   532,492 
Recovery   (1,733)
Exchange rate difference   (136,547)
BALANCE AT JUNE 30, 2023  $2,679,598 

 

NOTE 11 - INVENTORIES

 

Inventories are summarized as follows:

 

   June 30,   December 31, 
   2023   2022 
Raw material  $8,805,668   $6,551,450 
Work-in-progress   6,239,575    4,114,550 
Finished goods *   42,062,190    29,809,366 
Inventories  $57,107,433   $40,475,366 

 

*As of June 30, 2023, approximately $32.7 million of inventory of off-road vehicles and EVs held by SC Autosports were pledged as collateral for the $2,000,000 short-term loan.

 

11

 

 

NOTE 12 - PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plants and equipment as of June 30, 2023 and December 31, 2022, consisted of the following:

 

   June 30,   December 31, 
   2023   2022 
At cost:        
Buildings  $48,329,396   $49,239,626 
Machinery and equipment   72,585,881    77,845,979 
Office equipment   1,488,493    1,528,135 
Motor vehicles and other transport equipment   1,774,516    1,810,825 
Molds and others   12,640,030    10,983,573 
    136,818,316    141,408,138 
Less : Accumulated depreciation   (46,908,595)   (44,239,385)
Property, plant and equipment, net  $89,909,721   $97,168,753 

 

The Company’s Jinhua factory completed the relocation to a new industrial park in April 2021. The new location covers an area of more than 57,000 square meters and a construction area of more than 98,000 square meters. The Company’s off-road vehicles, EV battery packs, electric scooters battery packs, smart battery swap system and some EV parts are manufactured in the Jinhua factory. The Company’s Jinhua factory owns the above production facilities. The  Company’s  EV products, EV parts and electrical off-road vehicles, including Neighborhood EVs (“NEVs”), pure electric utility vehicles (“UTV”), pure electric golf cart and EV parts are manufactured in the Hainan factory. The Company’s Hainan factory expects to have production capacity with an annual output (three shifts) of 100,000 units of various models of EV products, EV parts and electrical off-road vehicles and owns the above facilities. Currently, the environmental protection, planning, fire protection, conservation of water and soil, and drainage of the Hainan factory have all passed the acceptance inspection, and are undergoing the archive acceptance. The Hainan factory is ready for formal production.

 

Depreciation expenses for the three months ended June 30, 2023 and 2022 were $2,531,916 and $2,584,011, respectively. Depreciation expenses for the six months ended June 30, 2023 and 2022 were $5,110,139 and $5,285,517, respectively.

 

NOTE 13 - INTANGIBLE ASSETS

 

Intangible assets include acquired other intangibles of patent and technology recorded at estimated fair values in accordance with purchase accounting guidelines for acquisitions.

 

The following table provides the gross carrying value and accumulated amortization for each major class of our intangible assets, other than goodwill:

 

   Remaining  June 30,   December 31, 
   useful life  2023   2022 
Gross carrying amount:           
Patent  2-3.67 years  $4,695,784    4,938,765 
Technology  3.5-4.5 years   7,009,732    10,003,915 
       11,705,516    14,942,680 
Less : Accumulated amortization             
Patent     $(2,903,535)   (2,744,024)
Technology      (1,955,190)   (1,573,079)
       (4,858,725)   (4,317,103)
Less : impairment for intangible assets      (919,008)   (2,631,465)
Intangible assets, net     $5,927,783   $7,994,112 

 

The aggregate amortization expenses for those intangible assets that continue to be amortized is reflected in amortization of intangible assets in the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income and were $390,140 and $493,400 for the three months ended June 30, 2023 and 2022, respectively. The aggregate amortization expenses for those intangible assets were $789,897 and $1,007,569 for the six months ended June 30, 2023 and 2022, respectively.

 

12

 

 

Amortization expenses for the next five years and thereafter are as follows:

 

Six months ended December 31, 2023  $789,897 
Years ended December 31,     
2024   1,579,794 
2025   1,517,736 
2026   1,274,402 
2027   765,954 
Thereafter   
 
Total  $5,927,783 

 

NOTE 14 - LAND USE RIGHTS, NET

 

The Company’s land use rights consist of the following:

 

   June 30,   December 31, 
   2023   2022 
Cost of land use rights  $3,621,801   $3,809,211 
Less: Accumulated amortization   (896,197)   (899,261)
Land use rights, net  $2,725,604   $2,909,950 

 

The amortization expenses for the three months ended June 30, 2023 and 2022, were $21,307 and $22,588, respectively. The amortization expenses for the six months ended June 30, 2023 and 2022, were $43,138 and $46,126, respectively. Amortization expenses for the next five years and thereafter is as follows:

 

Six months ended December 31, 2023  $43,138 
Years ended December 31,     
2024   86,276 
2025   86,276 
2026   86,276 
2027   86,276 
Thereafter   2,337,362 
Total  $2,725,604 

 

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NOTE 15 - OTHER LONG TERM ASSETS

 

Other long term assets as of June 30, 2023 and December 31, 2022, consisted of the following:

 

   June 30,   December 31, 
   2023   2022 
Prepayments for land use right (i)  $3,683,945    3,917,226 
Right - of - use asset (ii)   5,904,861    6,383,824 
Others   322,728    329,861 
Total other long-term asset  $9,911,534   $10,630,911 

 

(i) As of June 30, 2023 and December 31, 2022, the Company’s other long term assets included net value of prepayments for land use right of Hainan facility of $3,683,945 and $3,917,226, respectively. As of June 30, 2023, the land use right of Hainan was not recognized since the land certificate is still in process. The amortization expense for the three months ended June 30, 2023 and 2022 were $20,985 and $22,246, respectively. The amortization expense for the six months ended June 30, 2023 and 2022 were $42,487 and $45,429, respectively.

 

(ii) As of June 30, 2023 and December 31, 2022, the Company’s operating lease right-of-use assets in other long term assets included net value of land use right of Jinhua facility acquired in October 2020 and Jiangxi facility acquired in October 2021 of $5,361,237 and $5,697,720, respectively, as well as the amount of $543,624 and $686,104 related to the lease of Hangzhou office starting January 1, 2022. The amortization expense of land use right of Jinhua facility and Jiangxi facility for the three months ended June 30, 2023 and 2022 were $29,058 and $30,805, respectively. The amortization expense of land use right of Jinhua facility and Jiangxi facility for the six months ended June 30, 2023 and 2022 were $58,833 and $62,907, respectively.

 

NOTE 16 - TAXES

 

(a) Corporation Income Tax

 

Pursuant to the tax laws and regulations of the PRC, the Company’s applicable corporate income tax (“CIT”) rate is 25%. However, Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Jiangxi Huiyi and Kandi Hainan qualify as High and New Technology Enterprise (“HNTE”) companies in the PRC, and are entitled to a reduced income tax rate of 15% for the years presented. A HNTE Certificate is valid for three years. An entity may re-apply for an HNTE certificate when the prior certificate expires. Historically, Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Jiangxi Huiyi have successfully re-applied for such certificates when their prior certificates expired. Kandi Hainan has been qualified as a HNTE since December 2020. Therefore, it will apply for its first renewal when eligible. Additionally, Hainan Kandi Holding also has an income tax rate of 15% due to its local preferred tax rate in Hainan Free Trade Port. The applicable CIT rate of each of the Company’s other subsidiaries, Kandi New Energy, Yongkang Scrou, China Battery Exchange and its subsidiaries is 25%.

 

The Company’s provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, management makes a cumulative adjustment. For 2023, the Company’s effective tax rate is favorably affected by a super-deduction for qualified research and development costs and adversely affected by non-deductible expenses such as stock rewards for non-US employees, and part of entertainment expenses. The Company records valuation allowances against the deferred tax assets associated with losses and other timing differences for which we may not realize a related tax benefit. After combining research and development tax credits of 25% on certain qualified research and development expenses, the Company’s effective tax rate for the six months ended June 30, 2023 and 2022 was a tax benefit of 1.51% on a reported income before taxes of approximately $4.9 million, a tax benefit of 17.72% on a reported loss before taxes of approximately $4.2 million, respectively.

 

14

 

 

The quarterly tax provision, and the quarterly estimate of the Company’s annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting the Company’s pre-tax and taxable income and loss, acquisitions (including integrations) and investments, changes in its stock price, changes in its deferred tax assets and liabilities and their valuation, return to provision true-up, foreign currency gains (losses), changes in regulations and interpretations related to tax, accounting, and other areas. Additionally, the Company’s effective tax rate can be volatile based on the amount of pre-tax income or loss. The income tax provision for the six months ended June 30, 2023 and 2022 was tax benefit of $74,323 and tax benefit of $752,443, respectively.

 

Under ASC 740 guidance relating to uncertain tax positions, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of June 30, 2023, the Company did not have any liability for unrecognized tax benefits. The Company files income tax returns with the U.S. Internal Revenue Services (“IRS”) and those states where the Company has operations. The Company is subject to U.S. federal or state income tax examinations by the IRS and relevant state tax authorities. During the periods open to examination, the Company has net operating loss carry forwards (“NOLs”) for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs may be utilized in future periods, they remain subject to examination. The Company also files certain tax returns in the PRC. As of June 30, 2023, the Company was not aware of any pending income tax examinations by U.S. or PRC tax authorities. The Company records interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2023, the Company has no accrued interest or penalties related to uncertain tax positions.

 

The tax effected aggregate Net Operating Loss (“NOL”) was $8.5 million and $6.2 million in tax year 2022 and 2021, which were deriving from entities in the PRC, Hong Kong and U.S. Some of the NOLs will start to expire from 2026 if they are not used. The cumulative NOL in the PRC can be carried forward for five years in general, and ten years for entities qualify High and New Technology Enterprise (“HNTE”) treatment, which is $0.6 million and $7.9 million respectfully, to offset future net profits for income tax purposes. 

 

(b) Tax Holiday Effect

 

For the six months ended June 30, 2023 and 2022, the PRC CIT rate was 25%. Certain subsidiaries of the Company are entitled to tax exemptions (tax holidays) for the six months ended June 30, 2023 and 2022.

 

The combined effects of income tax expense exemptions and reductions available to the Company for the six months ended June 30, 2023 and 2022 are as follows:

 

   Six Months Ended 
   June 30, 
   2023   2022 
Tax benefit (holiday) credit  $955,847   $670,431 
Basic net income per share effect  $0.01   $0.01 

 

15

 

 

NOTE 17 - LEASES AND RIGHT-OF-USE-ASSETS

 

During October 2020, land use right of gross value of $3.5 million was acquired from the government as the new site of Jinhua Facility’s relocation as per the Repurchase Agreement. On October 31, 2021, the Company acquired $2.8 million of land use rights through the acquisition of Jiangxi Huiyi. This land use rights was wholly prepaid.

 

The Company has entered into a lease for Hangzhou office, with a term of 48 months from January 1, 2022 to December 31, 2025. The Company recorded operating lease assets and operating lease liabilities on January 1, 2022, with a remaining lease term of 48 months and discount rate of 3.70%. The annual lease payment for 2022 was prepaid as of January 1, 2022. As of June 30, 2023, the Company has paid the lease amount of both year 2022 and 2023 totaling $477,737.

 

As of June 30, 2023, the Company’s operating lease right-of-use assets (grouped in other long-term assets on the balance sheet) was $5,904,861 and lease liability was $537,485 (grouped in other current liabilities and other long-term liabilities on the balance sheet). For the three months ended June 30, 2023 and 2022, the Company’s operating lease expense were $85,314 and $90,443, respectively. For the six months ended June 30, 2023 and 2022, the Company’s operating lease expense were $172,731 and $184,693, respectively.

 

Supplemental information related to operating leases was as follows:

 

   Six Months Ended 
   June 30, 
   2023   2022 
Cash payments for operating leases  $172,731   $184,693 

 

Maturities of lease liabilities as of June 30, 2023 were as follow:

 

Maturity of Lease Liabilities:  Lease
payable
 
Six months ended December 31, 2023  $102,873 
Years ended December 31,     
2024   213,359 
2025   221,253 

 

16

 

 

NOTE 18 - CONTINGENT CONSIDERATION LIABILITY

 

On July 19, 2021, Zhejiang Kandi Technologies signed a share transfer agreement and its supplementary agreement (“No.1 Supplementary Agreement”) with the former shareholders of Jiangxi Huiyi (the “Transferors”). On October 31, 2021, the Company completed the acquisition of 100% of the equity of Jiangxi Huiyi. Pursuant to the share transfer agreement, the Company paid approximately RMB 50 million (approximately $7.9 million) at the closing of the transaction using cash on hand and, as agreed upon under No.1 Supplementary Agreement, may be required to pay future consideration of up to an additional 2,576,310 shares of common stock, or the total make good shares, upon the achievement of certain net income-based milestones in the next three years (“Evaluation Period”, as discussed below). Due to the latest COVID-19 outbreak and extended lockdown in some areas in China, in June 2022, the Company agreed with the Transferors and jointly signed a No.2 supplementary agreement (“No.2 Supplementary Agreement”, collectively with No.1 Supplementary Agreement, “Supplementary Agreements”) to revise the conditions of the annual profit target and extension of evaluation period for the first year, which were set under No.1 Supplementary Agreement. Pursuant to the No.2 Supplementary Agreement, the Transferors have the right to obtain 858,770 KNDI shares in each of the below-mentioned periods, provided that Jiangxi Huiyi achieves a net income of 1) RMB 8 million yuan or more during the period from July 1, 2021 to September 30, 2022 (“Period I”); 2) RMB 15 million yuan or more during the period from October 1, 2022 to September 30, 2023 (“Period II”); 3) RMB 15 million yuan or more during the period from October 1, 2023 to September 30, 2024 (“Period III”). If the net income of Jiangxi Huiyi fails to reach the respective target number in any of the three periods, the shares that the Transferors are entitled to obtain in that period will be adjusted accordingly: 1) if the difference between the net income in each Period and its Target Number is less than or equivalent to 20% of its Target Number (RMB 8 Million in Period I or RMB 15 Million in Period II or Period III), the transferee or KNDI has right to directly subtract 171,754 KNDI shares from the total make good shares, and the Transferor are entitled to obtain 687,016 KNDI shares; 2) if the difference between the net income in each Period and its Target Number (RMB 8 Million in Period I or RMB 15 Million in Period II or Period III) is more than 20% of its Target Number but less than 40% of its Target Number, the transferee or KNDI has the right to directly subtract 343,508 KNDI shares from the total make good shares, and the Transferors have the right to obtain 515,262 KNDI shares; 3) if the difference between the net income in each Period and its Target Number (RMB 8 Million in Period I or RMB 15 Million in Period II or Period III) is greater than or equal to 40% of its Target Number, the transferee of KNDI has the right to directly subtract 858,770 KNDI shares from the total make good shares, and the Transferors will not have the right to obtain any shares in such year.

 

In 2023, after evaluating the actual operation of Jiangxi Huiyi, the Company believes that taking over the management rights and conducting resources integration to combine Jiangxi Huiyi with the Company’s strategy are beneficial for improving the Company’s overall business performance. On August 3, 2023, Zhejiang Kandi Technologies and the Transferors signed an agreement on termination of make good shares (the “Termination Agreement”), pursuant to which the Supplementary Agreements were terminated, and there was no further Evaluation Period or make good shares. Zhejiang Kandi Technologies will take over the management rights while the Transferors shall not participate the management of Jiangxi Huiyi. The Company has also confirmed under such Termination Agreement that for Period I, Jiangxi Huiyi achieved its net profit target and therefore the Transferors would receive 858,770 shares of Kandi’s common stock, which was accrued during the year ended December 31, 2022, which will be transferred within 30 days after the signing of such Termination Agreement, subject to certain condition.

 

The Company recorded contingent consideration liability of the estimated fair value of the contingent consideration the Company currently expects to pay to the Transferors for the achievement of the milestones . The fair value of the contingent consideration liability associated with remaining shares of restrictive common stock was estimated by using the Monte Carlo simulation method, which took into account all possible scenarios. This fair value measurement is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurement and Disclosures. In accordance with ASC Topic 805, Business Combinations, the Company will re-measure this liability each reporting period and record changes in the fair value through a separate line item within the Company’s consolidated statements of income.

  

As of June 30, 2023 and December 31, 2022, the Company’s contingent consideration liability to the Transferors was $0 and $1,803,000, respectively.

 

NOTE 19 - COMMON SHARES

 

Retirement of Treasury Shares

 

On June 9, 2023, the Board of Directors of the Company approved to retire 3,488,559 shares of its common stock held in treasury, and the retirement was completed as of June 30, 2023. The shares were returned to the status of authorized but unissued shares. As a part of the retirement, the Company reduced its common stock and additional paid-in capital by $9,807,820.

 

Issuance of Shares

 

On May 25, 2023, the Company entered into a consulting agreement (“Consultant Agreement”) with a consulting firm to advise the Company on business growth and financial advisory services about which this consulting firm has knowledge or experience. Pursuant to the Consultant Agreement, the Company issued the consulting firm and its designees (the “Consultant”) an aggregate of 300,000 restricted shares of the Company’s common stock for its services from May 25, 2023 to May 24, 2024.

 

For the three months and six months ended June 30, 2023, the Company recognized $1,083,000 of expenses for stock issued to the Consultant.

 

17

 

 

NOTE 20 - STOCK OPTIONS

 

On September 7, 2022, the Compensation Committee of the Board of Directors of the Company approved the grant of stock options to purchase 5,000,000 shares of the Company’s common stock, at an exercise price of $2.07 per share, to the Company’s senior employees. The stock options will vest ratably over three years on October 7, 2023, October 7, 2024 and October 7, 2025, respectively, and expire on the tenth anniversary of the grant date. The Company valued the stock options at $6,704,829 and has amortized the stock compensation expense using the graded vesting method over the service period from September 7, 2022, through October 7, 2025. The value of the stock options was estimated using the Binomial Tree Model with an expected volatility of 79.83%, an expected life of 10 years, a risk-free interest rate of 3.27% and an expected dividend yield of 0.00%. There were $980,893 and $0 in stock compensation expenses associated with stock options booked for the three months ended June 30, 2023 and 2022, respectively. There were $1,961,787 and $0 in stock compensation expenses associated with stock options booked for the six months ended June 30, 2023 and 2022, respectively.

 

NOTE 21 - STOCK AWARD

 

In connection with the appointment of Mr. Henry Yu as a member of the Board of Directors (the “Board”), the Board authorized the Company to compensate Mr. Henry Yu with 5,000 shares of Company’s restricted common stock every six months as compensation, beginning in July 2011.

 

As compensation for Mr. Jerry Lewin’s services as a member of the Board, the Board authorized the Company to compensate Mr. Jerry Lewin with 5,000 shares of Company’s restricted common stock every six months, beginning in August 2011.

 

As compensation for Ms. Kewa Luo’s services as the Company’s investor relation officer, the Board authorized the Company to compensate Ms. Kewa Luo with 2,500 shares of the Company’s common stock every three months, beginning in September 2013.

 

On May 15, 2020, the Board appointed Mr. Jehn Ming Lim as the Chief Financial Officer. Mr. Lim was entitled to receive 6,000 shares of the common stock annually, which shall be issuable evenly on each six-month anniversary hereof.

 

On January 10, 2023, the Board appointed Dr. Xueqin Dong as the Chief Executive Officer, Dr. Dong was entitled to receive 20,000 shares of the common stock annually.

 

The fair value of stock awards with service condition is determined based on the closing price of the common stock on the date the shares are granted. The compensation costs for awards of common stock are recognized over the requisite service period.

 

On December 30, 2013, the Board approved a proposal (as submitted by the Compensation Committee) of an award (the “Board’s Pre-Approved Award Grant Sub-Plan under the 2008 Plan”) for certain executives and other key employees. The fair value of each award granted under the 2008 Plan is determined based on the closing price of the Company’s stock on the date of grant of such award. On September 26, 2016, the Board approved to terminate the previous Board’s Pre-Approved Award Grant Sub-Plan under the 2008 Plan and adopted a new plan to grant the total number of shares of common stock of the stock award for selected executives and key employees 250,000 shares of common stock for each fiscal year. On April 18, 2018, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On April 30, 2019, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On May 9, 2020, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On April 30, 2021, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On May 10, 2022, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On April 29, 2023 and May 5, 2023, the Company granted 520,000 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan.

 

On March 13, 2023, Kandi Technologies entered into an Equity Incentive Agreement (the “Equity Incentive Agreement”) with Pan Guoqing (the “Receiving Party”), who is the representative of the project management team of the project of crossover golf carts of Kandi Electric Vehicles (Hainan) Co., Ltd. (“Kandi EV Hainan”), a wholly owned subsidiary of the Company organized under the laws of the People’s Republic of China. The Receiving Party originally led the management team of golf crossover project of Hainan Kandi Holding New Energy Technology Co., Ltd. (“Hainan Kandi Holding”), a company organized under the laws of the People’s Republic of China. The Receiving Party and its management team has agreed to be employed as management team of Kandi EV Hainan, responsible for the operation of the golf crossover project of Kandi EV Hainan, and stop production and operation of Hainan Kandi Holding’s business.

 

18

 

 

Pursuant to the Equity Incentive Agreement, for the next three calendar years ending in December 31, 2025 (the “Incentive Period”), the Company will provide equity incentives to the Receiving Party, subject to the Receiving Party meeting certain performance milestones in its role as the management team of the golf crossover project (the “Crossover Project”) of Kandi EV Hainan. The performance milestones are measured in terms of the net profit of the Crossover Project after deducting relevant operating costs and income taxes, excluding various incentives, allowances and rebates, among others, and shall be audited and confirmed by the third party auditor designated by the granting party, or the Company. The net profit target (the “Net Profit Target”) for the Incentive Period is RMB 150 million (approximately $21,719,613), with an annual net profit target (the “Annual Net Profit Target”) of RMB 50 million (approximately $7,239,871). Should the Receiving Party meet or exceed the Net Profit Target over the Incentive Period, the Company will issue to the Receiving Party as incentive compensation up to a maximum of 5,957,811 shares (the “Maximum Incentive Shares”) of the Company’s common stock (the “Incentive Shares”) under the Company’s 2008 Omnibus Long-Term Incentive Plan, as amended. The amount of Incentive Shares issued within each calendar year of the Incentive Period is adjusted based on the net profit of the Crossover Project within that calendar year. If the net profit of every of the three calendar years is below 60% of the Annual Net Profit Target, the Receiving Party will receive no Incentive Shares. If the net profit of every of the three calendar years is at or above the Annual Net Profit Target, the Receiving Party will receive the Maximum Incentive Shares, with higher performance resulting in receiving the Incentive Shares earlier. If the net profit of every of the three calendar years fall between 60% of the Annual Net Profit Target and the Annual Net Profit Target, the Receiving Party will receive an amount of Incentive Shares below the Maximum Incentive Shares.

 

The Receiving Party has no relationship to the Company other than as described above.

 

For the three months ended June 30, 2023 and 2022, the Company recognized $1,656,796 and $616,765 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members and management under General and Administrative Expenses, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized $1,679,720 and $639,690 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members and management under General and Administrative Expenses, respectively.

 

NOTE 22 - COMMITMENTS AND CONTINGENCIES

 

Guarantees and pledged collateral for bank loans to other parties

 

(1) Guarantees for bank loans

 

On March 15, 2013, the Company entered into a guarantee contract to serve as the guarantor of Nanlong Group Co., Ltd. (“NGCL”) for NGCL’s $2,757,024 (RMB 20 million) loan from Shanghai Pudong Development Bank Jinhua Branch, for a term from March 15, 2013 to March 15, 2016. NGCL is not related to the Company. Under this guarantee contract, the Company agreed to assume joint liability as the loan guarantor. In April 2017, Shanghai Pudong Development Bank filed a lawsuit against NGCL, the Company and ten other parties in Zhejiang Province People’s Court in Yongkang City, alleging NGCL defaulted on a bank loan borrowed from Shanghai Pudong Development Bank for a principal amount of approximately $2.9 million and demanded that the guarantor bear the liability for compensation. On May 27, 2017, a judicial mediation took place in Yongkang City and parties reached a settlement in mediation, in which the plaintiff agreed NGCL would repay the loan principal and interest in installments. The settlement was executed starting from May 2019. If there were an event of default that NGCL could not repay the loan, the Company may be obligated to bear the liability of defaulted amount. According to the current financial situation of NGCL, the Company does not expect it will incur any losses in connection with this matter.  

 

(2) Pledged collateral for bank loans for which the parties other than the Company are the borrowers.

 

As of June 30, 2022 and December 31, 2021, none of the Company’s land use rights or plants and equipment were pledged as collateral securing bank loans for which the parties other than the Company are the borrowers.

 

19

 

 

Litigation

 

Beginning in March 2017, putative shareholder class actions were filed against Kandi Technologies Group, Inc. (“Kandi”) and certain of its current and former directors and officers in the United States District Court for the Central District of California and the United States District Court for the Southern District of New York. The complaints generally alleged violations of the federal securities laws based on Kandi’s disclosure in March 2017 that its financial statements for the years 2014, 2015 and the first three quarters of 2016 would need to be restated, and sought damages on behalf of putative classes of shareholders who purchased or acquired Kandi’s securities prior to March 13, 2017. Kandi moved to dismiss the remaining cases, all of which were pending in the New York federal court, that motion was granted in September 2019, and the time to appeal has run. In June 2020, a similar but separate putative securities class action was filed against Kandi and certain of its current and former directors and officers in California federal court. This action was transferred to the New York federal court in September 2020, Kandi moved to dismiss in March 2021, and that motion was granted in October 2021. The plaintiff in this case subsequently filed an amended complaint, Kandi moved to dismiss that complaint in January 2022, and the motion was granted in part and denied in part in September 2022. Discovery is ongoing as to the remaining claims and defendants.

 

Beginning in May 2017, purported shareholder derivative actions based on the same underlying events described above were filed against certain current and former directors of Kandi in the United States District Court for the Southern District of New York. The New York federal court confirmed the voluntary dismissal of these actions in April 2019.

 

In October 2017, a shareholder filed a books and records action against the Company in the Delaware Court of Chancery pursuant to 8 Del. C. Section 220 seeking the production of certain documents generally relating to the same underlying items described above as well as attorney’s fees (the “Section 220 Litigation”). On September 28, 2018, the parties, through their respective counsel, agreed to dismiss the Section 220 Litigation with prejudice and with each party bearing its own attorney’s fees, costs, and expenses, thereby concluding the action. In February 2019, this same shareholder commenced a derivative action against certain current and former directors of Kandi in the Delaware Court of Chancery. A motion to dismiss this derivative action was filed in May 2019 and that motion was denied on April 27, 2020. Discovery is ongoing.

 

Separately, in connection with allegations of misconduct identified in pre-suit demands made by putative shareholders of Kandi, Kandi formed a Special Litigation Committee (“SLC”) and retained a Delaware law firm as independent counsel to the SLC to aid in the SLC’s investigation of, and to ultimately report on, the allegations of misconduct set forth in the pre-suit demands. The SLC recommended to Kandi’s board of directors in June 2020 that the SLC be dissolved in light of the ongoing derivative action pending in the Delaware Court of Chancery, and this recommendation was adopted by the board in August 2020.

 

In December 2020, a putative securities class action was filed against Kandi and certain of its current officers in the United States District Court for the Eastern District of New York. The complaint generally alleges violations of the federal securities laws based on claims made in a report issued by Hindenburg Research in November 2020, and seeks damages on behalf of a putative class of shareholders who purchased or acquired Kandi’s securities prior to March 15, 2019. Kandi moved to dismiss in February 2022, and that motion remains pending.

 

While the Company believes that the claims in these litigations are without merit and will defend itself vigorously, the Company is unable to estimate the possible loss, if any, associated with these litigations. The ultimate outcome of any litigation is uncertain and the outcome of these matters, whether favorable or unfavorable, could have a negative impact on the Company’s financial condition or results of operations due to defense costs, diversion of management resources and other factors. Defending litigation can be costly, and adverse results in the litigations could result in substantial monetary judgments. No assurance can be made that litigation will not have a material adverse effect on the Company’s future financial position.

 

20

 

 

NOTE 23 - SEGMENT REPORTING

 

The Company has one operating segment. The Company’s revenue and long-lived assets are primarily derived from and located in China and the US. The Company does not have manufacturing operations outside of China.

 

The following table sets forth disaggregation of revenue:

 

   Three Months Ended
June 30,
 
   2023   2022 
   Sales
Revenue
   Sales
Revenue
 
Primary geographical markets        
U.S. and other countries/areas  $31,186,252   $10,446,475 
China   4,767,087    10,394,708 
Total  $35,953,339   $20,841,183 
           
Major products          
EV parts  $2,236,284   $588,775 
EV products   
-
    2,486,558 
Off-road vehicles and associated parts   31,252,364    10,092,141 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   224,212    1,217,074 
Battery exchange equipment and Battery exchange service   65,062    83,153 
Lithium-ion cells   2,175,417    6,373,482 
Total  $35,953,339   $20,841,183 
           
Timing of revenue recognition          
Products transferred at a point in time  $35,953,339   $20,841,183 
Total  $35,953,339   $20,841,183 

 

   Six Months Ended 
June 30,
 
   2023   2022 
   Sales
Revenue
   Sales
Revenue
 
Primary geographical markets        
U.S. and other countries/areas  $51,904,070   $21,182,850 
China   6,911,377    24,549,737 
Total  $58,815,447   $45,732,587 
           
Major products          
EV parts  $2,263,649   $4,256,553 
EV products   -    2,826,513 
Off-road vehicles and associated parts   52,038,498    20,805,882 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   370,203    3,344,439 
Battery exchange equipment and Battery exchange service   162,745    108,664 
Lithium-ion cells   3,980,352    14,390,536 
Total  $58,815,447   $45,732,587 
           
Timing of revenue recognition          
Products transferred at a point in time  $58,815,447   $45,732,587 
Total  $58,815,447   $45,732,587 

 

NOTE 24 - SUBSEQUENT EVENTS

 

On July 1, 2023, the Compensation Committee of the Board approved a proposal to grant 1) a total of 68,019 shares of Company’s common stock, with vesting condition waived; and 2) a total of 68,019 non-qualified stock options to acquire common stock from the Company at $3.96 per share, to certain employees of SC Autosports under the Company’s 2008 Omnibus Long-Term Incentive Plan as in effect, as an incentive for them to continue to contribute their efforts to the Company.

 

On July 12, 2023, pursuant to the Equity Transfer Agreement with the sole shareholder Northern Group, Inc (“NGI”) entered on June 17, 2023, the Company issued a total of 3,951,368 shares of restrictive stock to sole shareholder of NGI, which are being held in escrow with certain escrow restrictions, to be released contingent upon the achievement of certain agreed-upon milestones during the escrow period. The acquisition transaction of NGI was not closed as of August 8, 2023.

 

On August 3, 2023, the Company signed a termination agreement with the former shareholders of Jiangxi Huiyi. Please refer to Note 18 – Contingent Consideration Liability for details.

 

21

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This report contains forward-looking statements within the meaning of the federal securities laws that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminologies, such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential” or “continue” or the negative of such terms or other comparable terminologies, although not all forward-looking statements contain such terms.

 

In addition, these forward-looking statements include, but are not limited to, statements regarding implementing our business strategy; development and marketing of our products; our estimates of future revenue and profitability; our expectations regarding future expenses, including research and development, sales and marketing, manufacturing and general and administrative expenses; difficulty or inability to raise additional financing, if needed, on terms acceptable to us; our estimates regarding our capital requirements and our needs for additional financing; attracting and retaining customers and employees; sources of revenue and anticipated revenue; and competition in our market.

 

Forward-looking statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All of our forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors and the timing of any of those risk factors described in the 2022 Form 10-K and those set forth from time to time in our other filings with the SEC. These documents are available on the SEC’s Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov.

 

Critical Accounting Policies and Estimates

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly from actual results, the impact to the condensed consolidated financial statements may be material. There have been no material changes in our critical accounting policies and estimates other than those disclosed in on the 2022 Form 10-K. Please refer to Part II, Item 7 of such a report for a discussion of our critical accounting policies and estimates.

 

Overview

 

For the six months ended June 30, 2023, we recognized total revenue of $58,815,447 as compared to $45,732,587 for the same period of 2022, an increase of $13,082,860 or 28.6%. For the six months ended June 30, 2023, we recorded $21,763,802 of gross profit, an increase of 326.2% from the same period of 2022. Gross margin for the six months ended June 30, 2023 was 37.0%, compared to 11.2% for the same period of 2022. We recorded a net income of $4,982,657 for the six months ended June 30, 2023, compared to a net loss of $3,494,665 in the same period of 2022, an increase of $8,477,322 or 242.6% from the same period of 2022.

 

Thanks to our business strategy adjustment, we made considerable progress in electric off-road vehicles, despite the resurgences of COVID-19 in 2022, which has been causing frequent lockdowns in many cities and severe disruption of supply chain. Now with the global trend of “fuel to electrification” of off-road vehicles becoming more and more obvious, we have successfully developed electric crossover golf carts and put them on the market in batches, which have been favored by users. Next, we will successively launch various electric off-road vehicles, including electric crossover golf carts and electric UTVs. With the successively introduction of new products, we are confident to achieve sustained growth in the field of the pure electric off-road vehicles. As for our EV business, due to the fact that the Chinese EV market has not entered a healthy and orderly development stage, currently the Company will continue to operate in small-scale, and join back as appropriate when the EV market of China entered a healthy and orderly development stage.

 

On June 17, 2023, SC Autosports, a company formed under the laws of the State of Texas, a wholly-owned subsidiary of Kandi Technologies, entered into an equity transfer agreement (the “Equity Transfer Agreement”) with Olen Rice (the “Transferor”), who owns 100% equity interests of Northern Group, Inc. (“NGI”), a Wisconsin incorporated company, pursuant to which the Transferor agreed to transfer, and SC Autosports agreed to accept all the equity interests (100)% of NGI and its related rights and obligations, which includes but are not limited to general shareholder rights, the right to receive dividends, and the right to accept or subscribe for bonus shares or newly issued shares, but excluding any claims or impediments of the Transferor arising from events occurring prior to the date of the closing of the acquisition. The acquisition is for the purpose of expanding the SC Autosports’ and the Company’s sales pipelines through vertical integration. On July 12, 2023, pursuant to the Equity Transfer Agreement, the Company issued a total of 3,951,368 shares of restrictive stock to sole shareholder of NGI, which are being held in escrow with certain escrow restrictions, to be released contingent upon the achievement of certain agreed-upon milestones during the escrow period.

 

NGI was founded in 2000. It has extensive sales experience and sales channels in the United States rooted in wholesale, retail, supply chain and analytics solutions, including more than 20 team members, 16 major retailers and 20 suppliers and brands.

 

The acquisition of NGI was not closed as of the date of this report.

 

22

 

 

Results of Operations

 

Comparison of the Three Months Ended June 30, 2023 and 2022

 

The following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of operations and comprehensive income (loss) for the three months ended June 30, 2023 and 2022.

 

   Three Months Ended 
   June 30,
2023
   % of
Revenue
   June 30,
2022
   % of
Revenue
   Change in
Amount
   Change in
%
 
                         
REVENUES FROM UNRELATED PARTIES, NET  $35,953,339    100.0%  $20,841,183    100.0%   15,112,156    72.5%
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET       0.0%       0.0%        
                               
REVENUES, NET   35,953,339         20,841,183         15,112,156    72.5%
                               
COST OF GOODS SOLD   (22,218,767)   (61.8)%   (18,122,316)   (87.0)%   (4,096,451)   22.6%
                               
GROSS PROFIT   13,734,572    38.2%   2,718,867    13.0%   11,015,705    405.2%
                               
OPERATING EXPENSE:                              
Research and development   (874,562)   (2.4)%   (1,253,843)   (6.0)%   379,281    (30.2)%
Selling and marketing   (2,780,515)   (7.7)%   (1,172,528)   (5.6)%   (1,607,987)   137.1%
General and administrative   (8,838,319)   (24.6)%   (6,574,079)   (31.5)%   (2,264,240)   34.4%
Impairment of goodwill   (507,603)   (1.4)%            (507,603)    
Impairment of long-lived assets   (962,737)   (2.7)%            (962,737)    
TOTAL OPERATING EXPENSE   (13,963,736)   (38.8)%   (9,000,450)   (43.2)%   (4,963,286)   55.1%
                               
LOSS FROM OPERATIONS   (229,164)   (0.6)%   (6,281,583)   (30.1)%   6,052,419    (96.4)%
                               
OTHER INCOME (EXPENSE):                              
Interest income   1,954,563    5.4%   1,378,774    6.6%   575,789    41.8%
Interest expense   (194,239)   (0.5)%   (138,433)   (0.7)%   (55,806)   40.3%
Change in fair value of contingent consideration   2,164,000    6.0%   (391,000)   (1.9)%   2,555,000    (653.5)%
Government grants   189,948    0.5%   463,219    2.2%   (273,271)   (59.0)%
Other income, net   807,315    2.2%   2,373,528    11.4%   (1,566,213)   (66.0)%
TOTAL OTHER INCOME, NET   4,921,587    13.7%   3,686,088    17.7%   1,235,499    33.5%
                               
INCOME (LOSS) BEFORE INCOME TAXES   4,692,423    13.1%   (2,595,495)   (12.5)%   7,287,918    (280.8)%
                               
INCOME TAX (EXPENSE) BENEFIT   (305,223)   (0.8)%   719,843    3.5%   (1,025,066)   (142.4)%
                               
NET INCOME (LOSS)   4,387,200    12.2%   (1,875,652)   (9.0)%   6,262,852    (333.9)%

 

23

 

 

(a) Revenue

 

For the three months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue was $35,953,339 compared to $20,841,183 for the same period of 2022, representing an increase of $15,112,156 or 72.5%. The increase in revenue was mainly due to the increase in the sales volume and margin of off-road vehicles and associated parts.

 

The following table summarizes Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues by product types for the three months ended June 30, 2023 and 2022:

 

   Three Months Ended
June 30,
 
   2023   2022 
   Sales   Sales 
EV parts  $2,236,284   $588,775 
EV products   -    2,486,558 
Off-road vehicles and associated parts   31,252,364    10,092,141 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   224,212    1,217,074 
Battery exchange equipment and Battery exchange service   65,062    83,153 
Lithium-ion cells   2,175,417    6,373,482 
Total  $35,953,339   $20,841,183 

 

EV Parts

 

During the three months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues from the sales of EV parts were $2,236,284, representing an increase of $1,647,509 or 279.8% from $588,775 for the same quarter of 2022. The increase was primarily due to more sales of EV components were generated in the China market during the second quarter of 2023.

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ EV parts business line accounted for approximately 6.2% of the total net revenue for the three months ended June 30, 2023.

 

EV Products

 

During the three months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sale of EV Products was $0, representing a decrease of $2,486,558 or 100% from $2,486,558 for the same quarter of 2022. The decrease was primarily due to less demand from the market for our EV products. In addition, due to the large demand of off-road vehicles from the US market, the Company has been focusing on the production of off-road vehicles, especially crossover golf carts, which could bring in better profit margin.  

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ EV Products business line accounted for approximately 0% of the total net revenue for the three months ended June 30, 2023. 

 

Off-Road Vehicles and Associated Parts

 

During the three months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sales of off-road vehicles and associated parts, including go karts, all-terrain vehicles (“ATVs”) and others, were $31,252,364, representing an increase of $21,160,223 or 209.7% from $10,092,141, for the same quarter of 2022. The increase was primarily because of the increasing sales of our crossover golf carts in US market during the second quarter of 2023.

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ off-road vehicles business line accounted for approximately 86.9% of the total net revenue for the three months ended June 30, 2023.

 

Electric Scooters, Electric Self-Balancing Scooters and associated parts

 

During the three months ended June 30, 2023, Zhejiang Kandi Technologies, and its subsidiaries’ revenue from the sales of electric scooters, electric self-balancing scooters and associated parts, were $224,212, representing a decrease of $992,862 or 81.6% from $1,217,074, for the same quarter of 2022. The decrease was primarily due to the fact that the Company has been focusing on the production of off-road vehicles, especially crossover golf carts, which could bring in better profit margin due to the demand from the US market.

 

Zhejiang Kandi Technologies and its subsidiaries’ electric scooters, electric self-balancing scooters and associated parts business line accounted for approximately 0.6% of the total net revenue for the three months ended June 30, 2023.

 

24

 

 

Battery Exchange Equipment and Battery Exchange Service

 

During the three months ended June 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of battery exchange equipment and battery exchange service was $65,062, representing a decrease of $18,091 or 21.8% from $83,153 for the same period of 2022.

 

Zhejiang Kandi Technologies and its subsidiaries’ sale of battery exchange equipment and battery exchange service business line accounted for approximately 0.2% of the total net revenue for the three months ended June 30, 2023.

 

Lithium-ion cells

 

During the three months ended June 30, 2022, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of Lithium-ion cells was $2,175,417, representing a decrease of $4,198,065 or 65.9% from $6,373,482, for the same quarter of 2022. The decrease was primarily due to less demand from the market.

 

Zhejiang Kandi Technologies and its subsidiaries’ Lithium-ion cell business line accounted for approximately 6.1% of the total net revenue for the three months ended June 30, 2023.

 

The following table shows the breakdown of Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ net revenues:

 

   Three Months Ended
June 30,
 
   2023   2022 
   Sales
Revenue
   Sales
Revenue
 
Primary geographical markets        
U.S. and other countries/areas  $31,186,252   $10,446,475 
China   4,767,087    10,394,708 
Total  $35,953,339   $20,841,183 
           
Major products          
EV parts  $2,236,284   $588,775 
EV products   -    2,486,558 
Off-road vehicles and associated parts   31,252,364    10,092,141 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   224,212    1,217,074 
Battery exchange equipment and Battery exchange service   65,062    83,153 
Lithium-ion cells   2,175,417    6,373,482 
Total  $35,953,339   $20,841,183 
           
Timing of revenue recognition          
Products transferred at a point in time  $35,953,339   $20,841,183 
Total  $35,953,339   $20,841,183 

 

(b) Cost of goods sold

 

Cost of goods sold was $22,218,767 during the three months ended June 30, 2023, representing an increase of $4,096,451, or 22.6%, compared to $18,122,316 for the same period of 2022. The increase was primarily due to the corresponding increase in sales. Please refer to the Gross Profit section below for product margin analysis.

 

25

 

 

(c) Gross profit

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ margins by product for the three months ended June 30, 2023 and 2022 are as set forth below:

 

   Three Months Ended June 30, 
   2023   2022 
   Sales   Cost   Gross
Profit
   Margin
%
   Sales   Cost   Gross
Profit
   Margin
%
 
EV parts  $2,236,284    2,030,277    206,007    9.2%  $588,775    492,049    96,726    16.4%
EV products   -    -    -    -    2,486,558    2,337,473    149,085    6.0%
Off-road vehicles and associated parts   31,252,364    17,790,065    13,462,299    43.1%   10,092,141    8,210,368    1,881,773    18.6%
Electric Scooters, Electric Self-Balancing Scooters and associated parts   224,212    279,431    (55,219)   -24.6%   1,217,074    1,139,335    77,739    6.4%
Battery exchange equipment and Battery exchange service   65,062    69,384    (4,322)   -6.6%   83,153    101,775    (18,622)   -22.4%
Lithium-ion cells   2,175,417    2,049,610    125,807    5.8%   6,373,482    5,841,316    532,166    8.3%
Total  $35,953,339    22,218,767    13,734,572    38.2%  $20,841,183    18,122,316    2,718,867    13.0%

  

Gross profit for the second quarter of 2023 increased 405.2% to $13,734,572, compared to $2,718,867 for the same period last year. This was primarily attributable to product mix with higher concentration to our off-road vehicles, especially crossover golf carts, that brought us with significantly higher gross margin. Consequently, our gross margin increased to 38.2% compared to 13.0% for the same period of 2022.

 

(d) Research and development

 

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled $874,562 for the second quarter of 2023, a decrease of $379,281 or 30.2% compared to $1,253,843 for the same period in 2022. The decrease was mainly due to less research and development projects were being carried out in the current period.

 

(e) Sales and marketing

 

Selling and distribution expenses were $2,780,515 for the second quarter of 2023, compared to $1,172,528 for the same period in 2022, representing an increase of $1,607,987 or 137.1%. The increase was mainly due to higher commission offered for the sales of off-road vehicles, as well as higher shipping and related expenses incurred due to larger volume of exports to the US market.

 

(f) General and administrative expenses

 

General and administrative expenses were $8,838,319 for the second quarter of 2023, compared to $6,574,079 for the same period in 2022, representing an increase of $2,264,240 or 34.4%. The increase was primarily related to the increase of stock based compensation. For the three months ended June 30, 2023, general and administrative expenses included $3,720,689 as expenses for common stock awards and stock options to employees and Board members, and for stock issuance to the Consultant, compared to $616,765 of common stock awards and stock options expenses for the same period in 2022.

 

26

 

 

(g) Interest income

 

Interest income was $1,954,563 for the second quarter of 2023, representing an increase of $575,789 or 41.8% compared to $1,378,774 for the same period of last year. The increase was primarily attributable to the increased interest earned on increased certificate of deposit compared to the same period in 2022.

 

(h) Interest expenses

 

Interest expenses were $194,239 in the second quarter of 2023, representing an increase of $55,806 or 40.3% compared to $138,433 for the same period of last year. The increase was primarily due to interest expenses related to increased short-term loans of the Company compared to the same period in 2022.

 

(i) Change in fair value of contingent consideration

 

For the second quarter of 2023, the gain related to changes in the fair value of contingent consideration was $2,164,000, compared to loss related to changes in the fair value of contingent consideration of $391,000 for the same period in 2022, which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with the remaining shares of restrictive common stock (Please refer to NOTE 18 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all possible scenarios.

 

(j) Government grants

 

Government grants were $189,948 for the second quarter of 2023, compared to $463,219 for the same quarter last year, representing a decrease of $273,271, or 59.0%, which was largely attributable to the award for our research and development granted by Jinhua local government in the same period of 2022.

 

(k) Other income, net

 

Net other income was $807,315 for the second quarter of 2023, representing a decrease of $1,566,213 or 66.0% compared to net other income of $2,373,528 for the same period of last year, which was largely due to the fact that certain subsidies given by the local government in Jinhua during 2022 was no longer offered during current period.

 

(l) Income Taxes

 

In accordance with the relevant Chinese tax laws and regulations, the applicable corporate income tax rate of our Chinese subsidiaries is 25%. However, four of our subsidiaries, including Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Kandi Hainan and Jiangxi Huiyi are qualified as high technology companies in China and are therefore entitled to a reduced corporate income tax rate of 15%. Additionally, Hainan Kandi Holding also has an income tax rate of 15% due to its local preferred tax rate in Hainan Free Trade Port. 

 

Each of our other subsidiaries, Kandi New Energy, Yongkang Scrou, China Battery Exchange and its subsidiaries has an applicable corporate income tax rate of 25%.

 

Our actual effective income tax rate for the second quarter of 2023 was a tax expense of 6.50% on a reported income before taxes of approximately $4.7 million, compared to a tax benefit of 27.73% on a reported loss before taxes of approximately $2.6 million for the same period of last year.

 

(m) Net Income (loss)

 

Net income was $4,387,200 for the second quarter of 2023, representing an increase of $6,262,852 compared to net loss of $1,875,652 for the same period in 2022. The increase of net income was primarily attributable to the increase in gross profit resulted from a higher concentration of sales from off-road vehicles with larger gross margin.

 

27

 

 

Comparison of the Six Months Ended June 30, 2023 and 2022

 

The following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2023 and 2022.

 

   Six Months Ended 
   June 30,
2023
   % of
Revenue
   June 30,
2022
   % of
Revenue
   Change in
Amount
   Change in
%
 
                         
REVENUES FROM UNRELATED PARTIES, NET  $58,815,447    100.0%  $45,732,587    100.0%   13,082,860    28.6%
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET       0.0%       0.0%        
                               
REVENUES, NET   58,815,447    100.0%   45,732,587    100.0%   13,082,860    28.6%
                               
COST OF GOODS SOLD   (37,051,645)   (63.0)%   (40,626,557)   (88.8)%   3,574,912    (8.8)%
                               
GROSS PROFIT   21,763,802    37.0%   5,106,030    11.2%   16,657,772    326.2%
                               
OPERATING EXPENSE:                              
Research and development   (1,753,542)   (3.0)%   (2,394,429)   (5.2)%   640,887    (26.8)%
Selling and marketing   (4,608,244)   (7.8)%   (2,366,227)   (5.2)%   (2,242,017)   94.8%
General and administrative   (16,397,771)   (27.9)%   (12,330,610)   (27.0)%   (4,067,161)   33.0%
Impairment of goodwill   (507,603)   (0.9)%       0.0%   (507,603)    
Impairment of long-lived assets   (962,737)   (1.6)%       0.0%   (962,737)    
TOTAL OPERATING EXPENSE   (24,229,897)   (41.2)%   (17,091,266)   (37.4)%   (7,138,631)   41.8%
                               
LOSS FROM OPERATIONS   (2,466,095)   (4.2)%   (11,985,236)   (26.2)%   9,519,141    (79.4)%
                               
OTHER INCOME (EXPENSE):                              
Interest income   4,054,906    6.9%   2,601,078    5.7%   1,453,828    55.9%
Interest expense   (367,609)   (0.6)%   (286,577)   (0.6)%   (81,032)   28.3%
Change in fair value of contingent consideration   1,803,000    3.1%   2,299,000    5.0%   (496,000)   (21.6)%
Government grants   810,352    1.4%   707,317    1.5%   103,035    14.6%
Other income, net   1,073,780    1.8%   2,417,310    5.3%   (1,343,530)   (55.6)%
TOTAL OTHER INCOME, NET   7,374,429    12.5%   7,738,128    16.9%   (363,699)   (4.7)%
                               
INCOME (LOSS) BEFORE INCOME TAXES   4,908,334    8.3%   (4,247,108)   (9.3)%   9,155,442    (215.6)%
                               
INCOME TAX BENEFIT   74,323    0.1%   752,443    1.6%   (678,120)   (90.1)%
                               
NET INCOME (LOSS)   4,982,657    8.5%   (3,494,665)   (7.6)%   8,477,322    (242.6)%

 

28

 

 

(a) Revenue

 

For the six months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue was $58,815,447 compared to $45,732,587 for the same period of 2022, representing an increase of $13,082,860 or 28.6%. The increase in revenue was mainly due to the increase in the sales volume and margin of off-road vehicles and associated parts.

  

The following table summarizes Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues by product types for the six months ended June 30, 2023 and 2022:

 

   Six Months Ended
June 30
 
   2023   2022 
   Sales   Sales 
EV parts  $2,263,649   $4,256,553 
EV products   -    2,826,513 
Off-road vehicles and associated parts   52,038,498    20,805,882 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   370,203    3,344,439 
Battery exchange equipment and Battery exchange service   162,745    108,664 
Lithium-ion cells   3,980,352    14,390,536 
Total  $58,815,447   $45,732,587 

 

EV Parts

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues from the sales of EV parts were $2,263,649, representing a decrease of $1,992,904 or 46.8% from $4,256,553 for the same period of 2022. The decrease was primarily due to the reduced demand from the market during the first half of 2023. In addition, due to the large demand of off-road vehicles from the US market, the Company has been focusing on the production of off-road vehicles, especially crossover golf carts, which could bring in better profit margin.

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ EV parts business line accounted for approximately 3.8% of the total net revenue for the six months ended June 30, 2023.

 

EV Products

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sale of EV Products was $0, representing a decrease of $2,826,513 or 100% from $2,826,513 for the same period of 2022. The decrease was primarily due to less demand from the market for our EV products. In addition, due to the large demand from the US market, the Company has been focusing on the production of off-road vehicles, especially crossover golf carts, which could bring in better profit margin. 

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ EV Products business line accounted for approximately 0% of the total net revenue for the six months ended June 30, 2023. 

 

Off-Road Vehicles and Associated Parts

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sales of off-road vehicles and Associated Parts, including go karts, all-terrain vehicles (“ATVs”) and others, were $52,038,498, representing an increase of $31,232,616 or 150.1% from $20,805,882, for the same period of 2022. The increase was primarily because of the increasing sales of our crossover golf carts in US market during the first half of 2023.

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ off-road vehicles business line accounted for approximately 88.5% of the total net revenue for the six months ended June 30, 2023.

 

29

 

 

Electric Scooters, Electric Self-Balancing Scooters and associated parts

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sales of electric scooters, electric self-balancing scooters and associated parts, were $370,203, representing a decrease of $2,974,236 or 88.9% from $3,344,439, for the same period of 2022. The decrease was primarily due to the fact that the Company has been focusing on the production of off-road vehicles, especially crossover golf carts, which could bring in better profit margin due to the demand from the US market.

 

Zhejiang Kandi Technologies and its subsidiaries’ electric scooters, electric self-balancing scooters and associated parts business line accounted for approximately 0.6% of the total net revenue for the six months ended June 30, 2023.

 

Battery Exchange Equipment and Battery Exchange Service

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of battery exchange equipment and battery exchange service was $162,745, representing an increase of $54,081 or 49.8% from $108,664 for the same period of 2022.

 

Zhejiang Kandi Technologies and its subsidiaries’ sale of battery exchange equipment and battery exchange service business line accounted for approximately 0.3% of the total net revenue for the six months ended June 30, 2023.

 

Lithium-ion cells

 

During the six months ended June 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of Lithium-ion cells was $3,980,352, representing a decrease of $10,410,184 or 72.3% from $14,390,536, for the same quarter of 2022. The decrease was primarily due to less demand from the market.

 

Zhejiang Kandi Technologies and its subsidiaries’ Lithium-ion cells business line accounted for approximately 6.8% of the total net revenue for the six months ended June 30, 2023.  

 

The following table shows the breakdown of Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ net revenues:

 

   Six Months Ended
June 30,
 
   2023   2022 
   Sales
Revenue
   Sales
Revenue
 
Primary geographical markets        
U.S. and other countries/areas  $51,904,070   $21,182,850 
China   6,911,377    24,549,737 
Total  $58,815,447   $45,732,587 
           
Major products          
EV parts  $2,263,649   $4,256,553 
EV products   -    2,826,513 
Off-road vehicles and associated parts   52,038,498    20,805,882 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   370,203    3,344,439 
Battery exchange equipment and Battery exchange service   162,745    108,664 
Lithium-ion cells   3,980,352    14,390,536 
Total  $58,815,447   $45,732,587 
           
Timing of revenue recognition          
Products transferred at a point in time  $58,815,447   $45,732,587 
Total  $58,815,447   $45,732,587 

 

30

 

 

(b) Cost of goods sold

 

Cost of goods sold was $37,051,645 during the six months ended June 30, 2023, representing a decrease of $3,574,912, or 8.8%, compared to $40,626,557 for the same period of 2022. The decrease was primarily due to the product mix with larger concentration of sales generated from the products with higher gross margin. Please refer to the Gross Profit section below for product margin analysis.

 

(c) Gross profit

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ margins by product for the six months ended June 30, 2023 and 2022 are as set forth below:

 

   Six Months Ended June 30, 
   2023   2022 
   Sales   Cost   Gross
Profit
   Margin
%
   Sales   Cost   Gross
Profit
   Margin
%
 
EV parts  $2,263,649    2,065,643    198,006    8.7%  $4,256,553    3,820,252    436,301    10.3%
EV products   -    -    -    -    2,826,513    2,657,188    169,325    6.0%
Off-road vehicles and associated parts   52,038,498    30,447,216    21,591,282    41.5%   20,805,882    17,498,568    3,307,314    15.9%
Electric Scooters, Electric Self-Balancing Scooters and associated parts   370,203    423,661    (53,458)   -14.4%   3,344,439    2,994,450    349,989    10.5%
Battery exchange equipment and Battery exchange service   162,745    136,437    26,308    16.2%   108,664    133,495    (24,831)   -22.9%
Lithium-ion cells   3,980,352    3,978,688    1,664    0.0%   14,390,536    13,522,604    867,932    6.0%
Total  $58,815,447    37,051,645    21,763,802    37.0%  $45,732,587    40,626,557    5,106,030    11.2%

  

Gross profit for the first half of 2023 increased 326.2% to $21,763,802, compared to $5,106,030 for the same period last year. This was primarily attributable to product mix with higher concentration to our off-road vehicles, especially crossover golf carts, that brought us with significantly higher gross margin. Consequently, our gross margin increased to 37.0% compared to 11.2% for the same period of 2022.

 

(d) Research and development

 

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled $1,753,542 for the first half of 2023, a decrease of $640,887 or 26.8% compared to $2,394,429 for the same period in 2022. The decrease was mainly due to less research and development projects were being carried out in the current period.

 

(e) Sales and marketing

 

Selling and distribution expenses were $4,608,244 for the first half of 2023, compared to $2,366,227 for the same period in 2022, representing an increase of $2,242,017 or 94.8%. The increase was mainly due to higher commission offered for the sales of off-road vehicles, as well as higher shipping and related expenses incurred due to larger volume of exports to the US market.

 

31

 

 

(f) General and administrative expenses

 

General and administrative expenses were $16,397,771 for the first half of 2023, compared to $12,330,610 for the same period in 2022, representing an increase of $4,067,161 or 33.0%. For the six months ended June 30, 2023, general and administrative expenses included $4,724,507 as expenses for common stock awards and stock options to employees and Board members, and for stock issuance to the Consultant, compared to $639,690 of common stock awards and stock options expenses for the same period in 2022. Besides stock compensation expense, our net general and administrative expenses for the six months ended June 30, 2023 were $11,673,264, representing a decrease of $17,656 or 0.2%, from $11,690,920 for the same period in 2022, which was comparable.

  

(g) Interest income

 

Interest income was $4,054,906 for the first half of 2023, representing an increase of $1,453,828 or 55.9% compared to $2,601,078 for the same period of last year. The increase was primarily attributable to the increased interest earned on increased certificate of deposit compared to the same period in 2022.

 

(h) Interest expenses

 

Interest expenses were $367,609 in the first half of 2023, representing an increase of $81,032 or 28.3% compared to $286,577 for the same period of last year. The increase was primarily due to interest expenses related to increased short-term loans of the Company compared to the same period in 2022.

 

(i) Change in fair value of contingent consideration

 

For the first half of 2023, the gain related to changes in the fair value of contingent consideration was $1,803,000, compared to gain related to changes in the fair value of contingent consideration of $2,299,000 for the same period in 2022, which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with the remaining shares of restrictive common stock (Please refer to NOTE 18 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all possible scenarios.

 

(j) Government grants

 

Government grants were $810,352 for the first half of 2023, compared to $707,317 for the same period last year, representing an increase of $103,035, or 14.6%, which was primarily due to grants from Jinhua and Hainan local government in the first half of 2023.

  

(k) Other income, net

 

Net other income was $1,073,780 for the first half of 2023, representing a decrease of $1,343,530 or 55.6% compared to net other income of $2,417,310 for the same period of last year, which was largely due to the fact that certain subsidies given by the local government in Jinhua during 2022 was no longer offered during current period.

 

(l) Income Taxes

 

In accordance with the relevant Chinese tax laws and regulations, the applicable corporate income tax rate of our Chinese subsidiaries is 25%. However, four of our subsidiaries, including Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Kandi Hainan and Jiangxi Huiyi are qualified as high technology companies in China and are therefore entitled to a reduced corporate income tax rate of 15%. Additionally, Hainan Kandi Holding also has an income tax rate of 15% due to its local preferred tax rate in Hainan Free Trade Port. 

 

32

 

 

Each of our other subsidiaries, Kandi New Energy, Yongkang Scrou, China Battery Exchange and its subsidiaries has an applicable corporate income tax rate of 25%.

 

Our actual effective income tax rate for the first half of 2023 was a tax benefit of 1.51% on a reported income before taxes of approximately $4.9 million, compared to a tax benefit of 17.72% on a reported loss before taxes of approximately $4.2 million for the same period of last year.

 

(m) Net Income (loss)

 

Net income was $4,982,657 for the first half of 2023, representing an increase of $8,477,322 compared to net loss of $3,494,665 for the same period in 2022. The increase of net income was primarily attributable to the increase in gross profit resulted from a higher concentration of sales from off-road vehicles with larger gross margin.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flow

 

   Six Months Ended 
   June 30,
2023
   June 30,
2022
 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net cash provided by operating activities  $11,260,110   $23,103,164 
Net cash used in investing activities  $(34,651,719)  $(23,417,837)
Net cash provided by (used in) financing activities  $1,529,647   $(2,293,129)
           
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH  $(21,861,962)  $(2,607,802)
Effect of exchange rate changes  $(5,533,637)  $(6,734,387)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR  $151,040,271   $168,676,007 
           
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD  $123,644,672   $159,333,818 

 

For the first half of 2023, cash derived from operating activities was $11,260,110, as compared to derived from operating activities of $23,103,164 for the same period last year. Our operating cash inflows include cash received primarily from sales of our EV parts, off-road vehicles, electric Scooters, electric self-balancing scooters and associated parts and lithium-ion cells. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, employee compensation, and interest expenses of our financings. The major operating activities that provided cash for the first half of 2023 were an increase of accounts payable of $20,729,603. The major operating activity that used cash for first half of 2023 was an increase of inventories of $17,938,859 and a decrease of notes payable of $15,133,991.

 

For the first half of 2023, cash used in investing activities was $34,651,719, as compared to cash used in investing activities of $23,417,837 for the same period of last year. The major investing activities that used cash for first half of 2023 were an increase of certificate of deposit of $33,214,435.

 

For the first half of 2023, cash derived from financing activities was $1,529,647, as compared to cash used in financing activities of $2,293,129 for the same period of last year. The major financing activities that provided cash for the first half of 2023 were proceeds from short-term loans of $7,928,212. The major financing activities that used cash for the first half of 2023 were repayments of short-term bank loans of $6,398,565.

 

33

 

 

Working Capital

  

We had a working capital of $249,897,873 as of June 30, 2023, which reflects an increase of $2,080,748 from a working capital of $247,817,125 as of December 31, 2022.

 

Contractual Obligations and Off-balance Sheet Arrangements

 

Guarantees and pledged collateral for third party bank loans

 

For the discussion of guarantees and pledged collateral for third party bank loans, please refer to Note 22 – COMMITMENTS AND CONTINGENCIES under Notes to Unaudited Condensed Consolidated Financial Statements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

This item is not applicable to us. 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We have evaluated, under the supervision of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of June 30, 2023. Based on this evaluation, our CEO and CFO concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above.

 

Changes in Internal Control over Financial Reporting

 

There was no change to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

34

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Except as set forth in Note 22 - COMMITMENTS AND CONTINGENCIES under Notes to Condensed Consolidated Financial Statements, our management is currently not aware of any legal matters or pending litigation that would have a significant effect on the Company’s results of operation of financial statements. Furthermore, the Company is not aware of any other legal matters in which any director, officer, or any owner of record or beneficial owner of more than five percent of any class of voting securities of the Company, or any affiliate of any such director, officer, affiliate of the Company, or security holder, is a party adverse to the Company or has a material adverse interest to the Company. For the detailed discussion of our legal proceedings, please refer to Note 22 - COMMITMENTS AND CONTINGENCIES under Notes to Condensed Consolidated Financial Statements, which is incorporated by reference herein.

 

Item 6. Exhibits

 

Exhibit
Number
  Description
10.1   Equity Transfer Agreement by and between SC Autosports, LLC and Olen Rice.
10.2   English Translation of the Agreement on Termination of the Make Good Shares by and between Zhejiang Kandi Technologies Group Co., Ltd and the Former Shareholders of Jiangxi Province Huiyi New Energy Co., Ltd dated August 3, 2023.
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

35

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 8, 2023 By:  /s/ Dong Xueqin
    Dong Xueqin
    President and Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 8, 2023 By:  /s/ Jehn Ming Lim
    Jehn Ming Lim
    Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer)

 

 

37

 

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EX-10.1 2 f10q0623ex10-1_kanditech.htm EQUITY TRANSFER AGREEMENT BY AND BETWEEN SC AUTOSPORTS, LLC AND OLEN RICE

Exhibit 10.1

 

Certain information marked as redacted has been excluded from the Agreement because it is both not material and is the type that the registrant treats as private or confidential

 

SC 运动车辆有限责任公司

 

 

奥兰赖斯

 

关于

 

北方集团的股权转让协议

 

Equity Transfer Agreement

 

Of

 

Northern Group, Inc.

 

by and between

 

SC Autosports, LLC

 

And

 

Olen Rice

 

 

 

 

本股权转让协议(以下简称“本协议”)由下列双方于2023年6月17日签署。

 

THIS EQUITY TRANSFER AGREEMENT (this “Agreement”), dated as of June 17, 2023, is entered into by following two parities:

 

甲方:SC Autosports 有限责任公司(“受让方”)

Party A: SC Autosports, LLC (the “Transferee”),

 

乙方:奥兰赖斯(Olen Rice)(“转让方”)

Party B: Olen Rice (the “Transferor”),

 

转让方和受让方以下合称“双方”,单独称为“一方”。

The Transferor and Transferee are collectively referred to as the “Parties” and individually as a “Party.”

 

鉴于:

Whereas:

 

甲方拥有适应美国市场的多种产品,乙方全资控股的Northern Group, Inc.在美国拥有丰富的销售经验及销售渠道并预期在2023年6月1日至2024年5月31日、2024年6月1日至2025年5月31日、2025年6月1日至2026年5月31日分别可以实现460万、525万、600万美元的税前利润(“税前利润”)。

Party A has various products suitable for the US market, and Northern Group, Inc., wholly owned by Party B, has extensive sales experience and sales channels in the United States, and it is expected to achieve pretax income (“Pretax Income”) of $4.6 million, $5.25 million and $6 million during the periods of June 1, 2023 to May 31, 2024, June 1, 2024 to May 31, 2025, and June 1, 2025 to May 31, 2026, respectively.

 

甲方为了做大做强,本着平等互利的原则,双方经过友好协商,根据美国相关法律及其他相关的法律法规,由甲方全资收购乙方所持有Northern Group, Inc.的全部股权并达成如下协议,以兹遵守:

In order to expand and strengthen Party A, both parties, based on the principles of equality and mutual benefit and friendly negotiations, agree that Party A will acquire, in accordance with relevant US laws and regulations, all the equity of Northern Group, Inc held by Party B and reach the following agreement:

 

第一条:股权转让

Article 1: Transfer of Equity

 

按照本协议所约定的条件和条款,乙方同意向甲方转让,甲方同意自乙方受让Northern Group, Inc.全部(100%)的股权及其相关权利和义务,包括但不限于一般性的股东权利、一切接受红利及接受或认购红利股或增发新股的权利,但不包括转让方因交割日前发生的事件而产生的任何索赔或妨碍。

In accordance with the conditions and terms stipulated in this Agreement, Party B agrees to transfer to Party A, and Party A agrees to accept from Party B all (100%) the equity of NGI and its related rights and obligations, which include but are not limited to general shareholder rights, the right to receive dividends, and the right to accept or subscribe for bonus shares or newly issued shares, but excluding any claims or impediments of Transferor arising from events occurring prior to the date of Closing.

 

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第二条 转让价款的计算、支付与股权交割

Article 2: Calculation of Transfer Value, Payment, and Issuance of Shares

 

双方对北方集团(NGI )在2023年6月1日至2024年5月31日、2024年6月1日至2025年5月31日、2025年6月1日至2026年5月31日(“托管期”)的利润目标(税前利润)分别为: 460万美元、525万美元、600万美元。本协议中的税前利润应根据美国公认会计准则(US GAAP)对“税前利润“的定义来计算,并由甲方母公司康迪科技集团聘请的时任第三方上市公司年报审计师确认。

Both Parties target earnings (Pretax Income) of NGI for the period from June 1, 2023 to May 31, 2024, June 1, 2024 to May 31, 2025, and June 1, 2025 to May 31, 2026 (“Escrow Period”) to be $4.6 million, $5.25 million and $6 million, respectively. Pretax Income in this agreement shall be calculated based on the definition of “Pretax Income” in the United States Generally Accepted Accounting Principles (US GAAP) and shall be confirmed by a third-party auditor engaged then by Party A’s parent, i.e.: Kandi Technologies Group, Inc. upon its respective annual report audit.

 

2.1经甲乙双方协商后一致同意,转让价款以1300万美元计算,(以下简称“转让价款”),该转让价款由甲方母公司康迪科技集团(纳斯达克股票代码KNDI)向乙方发行价值1300万美元的限制性股票,并交付给乙方指定的人员,这些限制性股票载有某些托管限制(“托管股”)。

2.1 After mutual agreement between Party A and Party B, the transfer value is calculated at USD $13,000,000 (hereinafter referred to as the “Transfer Value”). For the transfer value, the parent company of Party A, Kandi Technologies GroupInc.(NASDAQ: KNDI), shall issue its restricted stock equivalent to US$13 million to Party B and delivered to the persons designated by Party B, bearing certain escrow restrictions (“Escrowed Stock”).

 

可发行给乙方的股票数量总额3,951,368股,计算方法为:1300万美元除以2023年6月1日前二十个交易日KNDI的平均收盘价(3.29美元)。

The total number of the Stock that will be issued to Party B is 3,951,368, calculated as $13 million divided by the average closing price of KNDI Stock $3.29for the twenty trading days prior June 1, 2023.

 

2.2 转让价款的支付

2.2 Transfer

 

在股权转让协议签署后,甲方应将3,951,368股KNDI股票,作为股权转让的对价,准备支付给乙方。但上述股票对价将受KNDI和甲方共同托管,并按以下方式交付给乙方:

After signing of the Equity Transfer Agreement, Party A shall prepare and deliver to Party B 3,951,368 shares of KNDI Stock as consideration of the equity transfer. However, the above shares will be jointly escrowed by KNDI and Party A and will be delivered to Party B as follows:

 

(1) 签署日后六十(60)个工作日内,甲方应向乙方发放3,951,368股的KNDI托管股;

(1)Within sixty (60) working days after the Signing Date, Party A shall issue 3,951,368 shares of Escrowed Stock to Party B.

 

(2) 乙方自收到上述托管股后的十(10)个工作日内,应协助甲方根据法律完成股东变更和其他权益移交手续;

(2) Within ten (10) working days after receiving the aforementioned Escrowed Stock, Party B shall assist Party A in completing the procedures for the transfer of the Securities and the change of shareholders and other right and interest transfer formalities in accordance with the law.

 

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(3) 对共计1300万美元的股票对价即3,951,368股(“托管股”)的托管限制,将在以下条件成就时,依次解除:

(3)The escrow restrictions on total consideration of $13,000,000.00 i.e. 3,951,368 shares (“Escrowed Stock”) will be removed sequentially under the following conditions:

 

条件一:当Northern Group, Inc.在2023年6月1日至2024年5月31日的期间内实现460万美元或以上的税前利润,在上述数值经康迪科技集团聘请的时任第三方上市公司年报审计师审计确认后,应解除对8,000,000.00美元即2,431,612股KNDI股票的托管限制。若Northern Group, Inc.在当期的税前利润未能达到460万美元,则待解除托管限制的KNDI股票的数量将按实际完成税前利润金额的百分比进行调整。当年如出现亏损,乙方应承担亏损并在约定的期限内偿还甲方,弥补亏损。

Condition 1: When Northern Group, Inc. achieves Pretax Income of $4.6 million or more during the period from June 1, 2023, to May 31, 2024, and such figure shall be confirmed by a third-party auditor engaged by Kandi Technologies Group, Inc. for its annual report audit then the escrow restrictions on $8,000,000.00 i.e. 2,431,612 shares of KNDI stock shall be removed. If Northern Group, Inc. fails to reach Pretax Income of $4.6 million in current period, the number of the KNDI stock to be removed escrow restrictions will be adjusted based on the percentage of the actual achieved Pretax Income. If there is any loss incurred in the current year, Party B shall assume the loss and make up the deficiency by paying back Party A within agreed timeframe.

 

尽管有上述规定,在2023年12月31日,乙方可根据条件1下实际实现的税前利润金额,申请解除等额股份的托管限制。可根据条件1下其实际完成的税前利润金额,申请解除同等金额的股票限制。例如,如果税前利润是350万美元,则应解除1,063,830股的托管限制(即1063830*3.29=3500000),但最高不能超过1,418,440股。

Notwithstanding the above, on December 31, 2023, Party B can apply for removing the escrow restrictions on the number of shares equal to the same value based on the actual amount of pre-tax income achieved under Condition 1. For example, if the pre-tax income is $3.5 million, the escrow restrictions on 1,063,830 shares should be removed (i.e. 1063,830 shares*$3.29= $3,500,000), but shall not exceed 1,418,440 shares.

 

条件二:当Northern Group, Inc.在2024年6月1日至2025年5月31日的期间内实现525万美元或以上的税前利润,在上述数值经康迪科技集团聘请的时任第三方上市公司年报审计师审计确认后,应解除对2,500,000.00美元即759,878股KNDI股票的托管限制。若Northern Group, Inc.在当期的税前利润未能达到525万美元,则待解除托管限制的KNDI股票的数量将按实际完成税前利润金额的百分比进行调整。当年如出现亏损,乙方应承担亏损并在约定的期限内偿还甲方,弥补亏损。

Condition 2: When Northern Group, Inc. achieves Pretax Income of $5.25 million or more during the period from June 1, 2024, to May 31, 2025, and such figure shall be confirmed by a third-party auditor engaged by Kandi Technologies Group, Inc for its annual report audit then, the escrow restrictions on $2,500,000.00 i.e.759,878 shares of KNDI stock shall be removed. If NGI fails to reach Pretax Income of $5.25 million in current period, the number of the KNDI Stock to be removed escrow restrictions will be adjusted based on the percentage of the actual achieved Pretax Income. If there is any loss in the current year, Party B shall assume the loss and make up the deficiency by paying back Party A within agreed timeframe.

 

条件三:当Northern Group, Inc.在2025年6月1日至2026年5月31日的期间内实现600万美元或以上的税前利润,在上述数值经康迪科技集团聘请的时任第三方上市公司年报审计师审计确认后,应解除对2,500,000.00美元即759,878股KNDI股票的托管限制。若Northern Group, Inc.在当期的税前利润未能达到600万美元,则待解除托管限制的KNDI股票的数量将按实际完成税前利润金额的百分比进行调整。当年如出现亏损,乙方应承担亏损并在约定的期限内偿还甲方,弥补亏损。

Condition 3: When Northern Group, Inc. achieves Pretax Income of $6.0 million or more during the period from June 1, 2025, to May 31, 2026, and such figure shall be confirmed by a third-party auditor engaged by Kandi Technologies Group, Inc. for its annual report audit then, the escrow restrictions on $2,500,000.00 i.e.759,878 shares of KNDI stock shall be removed. If NGI fails to reach Pretax Income of $6.0 million in current period, the number of the KNDI Stock to be removed escrow restrictions will be adjusted based on the percentage of the actual achieved Pretax Income. If there is any loss in the current year, Party B shall assume the loss and make up the deficiency by paying back Party A within agreed time frame.

 

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2.3在2023年6月1日至2024年5月31日,如果北方集团(NGI)的税前利润导致乙方获得的被授予的股票少于2,431,612股,双方有权选择终止协议,乙方将获得的KNDI股票退还给甲方母公司,相应的,甲方应将北方集团的股权退还给乙方。這個權力將在2024年8月1日自動失效.

2.3 In the event NGI’s Pretax Income during the period from June 1, 2023 to May 31, 2024 resulting in Party B receiving less than 2,431,612 shares of vested Stock, both parties shall have the option to terminate the Agreement. Party B shall return the received KNDI stocks to Party A’s parent and in return, Party A shall return the NGI’s equities to Party B. This option will expire automatically on August 1, 2024.

 

2.4在托管期间,乙方拥有该托管股票的投票权。

2.4. During the escrow period, Party B shall have the voting rights to the Escrowed Stock.

 

2.5自乙方收到转让托管股票之后五(5)个工作日内,乙方应向甲方或其指定的代表,移交或促使相关人士移交有关Northern Group, Inc.或由Northern Group, Inc.所有的一切资料、材料及信息,包括但不限于Northern Group, Inc.的公章、财务章、协议专用章、账户资料、财务凭证、账簿(包括但不限于将Northern Group, Inc.在银行预留的个人印鉴变更为甲方指定人士的个人印鉴)、批文、证照、许可、客户资料、协议、员工资料、技术资料等,并应采取一切必要的措施确保甲方能完全控制Northern Group, Inc.的全部资产和经营活动。

2.5. Within five (5) working days after receiving the Escrowed Stock, the Party B shall hand over or cause the persons concerned to hand over to Party A or its designees all documents, materials, and information related to NGI or owned by NGI. This includes, but is not limited to, NGI’s seal, financial seal, specialized agreement seal, account information, financial vouchers, books (including changing the personal seal reserved by NGI in the bank to the personal seal of the designated person by the acquirer), approvals, licenses, customer information, agreements, employee information, technical data, and shall take all necessary measures to ensure that the acquirer has complete control over all assets and business operations of NGI

 

2.6在托管期内,甲方不得使北方集团(NGI)实质性地改变其常规经营,包括对主代理协议的负面实质性变更。此外,在托管期内,乙方应保持目前的职务,继续担任北方集团(NGI)总裁,并监督北方集团(NGI)的运营。截至生效日,乙方将使北方集团(NGI)拥有足够的营运资金,为北方集团(NGI)的预期运营提供资金。如果在截至生效日,北方集团(NGI)保留的营运资金超过北方集团(NGI)未来实际营运资金需求,则北方集团(NGI)应将多余的营运资金作为雇佣奖金分配给乙方。

2.6. During the Escrow Period, Party A shall not cause NGI to materially change its ordinary course operations, including a negative material change to the Master Agency Agreement. In addition, during the Escrow Period, Party B shall remain in his current capacity as president of NGI and shall oversee the operations of NGI. As of the Effective Date, Party B will cause NGI to have sufficient working capital to fund the anticipated operations of NGI. To the extent that the working capital retained by NGI as of the Effective Date is in excess of the actual future working capital requirements of NGI, NGI shall distribute the excess working capital to Party B as an employment bonus.

 

第三条: 支付转让价款的先决条件

Article 3: Preconditions to Pay the Equity Transfer Price

 

3.1甲方向乙方支付转让价款的先决条件是:根据2023517日由HTL CPAs and Business Advisors LLC出具的《NORTHERN GROUP INC. Financial Due Diligence Report》报告相关数据,北方集团(NGI)没有发生或者经受任何实质性不利变化。附《NORTHERN GROUP INC. Financial Due Diligence Report》。

3.1 Preconditions to Pay the Equity Transfer Price by Party A to Party B shall be: There have no occurred or undergone any Substantial Adverse Changes in Northern Group, Inc. based on the data from the “NORTHERN GROUP INC. Financial Due Diligence Report” issued by HTL CPAs and Business Advisors LLC on May 17, 2023, which is attached hereto.

 

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3.2 甲方不得终止与北方集团(NGI)的主代理协议。

3.2 Party A shall not terminate the Master Agency Agreement with NGI.

 

第四条:税金和费用 

Article 4: Taxes and Expenses

 

4.1除本协议另有约定外,每一方应各自承担己方就磋商、签署或完成本协议和本协议所预期或相关的一切事宜所产生或有关的费用、收费及支出。

4.1. Unless otherwise stipulated in this agreement, each party shall bear its own expenses, fees, and costs incurred or related to the negotiations, signing, or completion of this agreement and any matters anticipated or related to this agreement.

 

4.2因签署和履行本协议而发生的法定税费,应由甲乙双方按照有关法律规定各自承担,相互之间不存在任何代付、代扣或代缴义务。

4.2 The statutory taxes and fees incurred as a result of the signing and execution of this agreement shall be borne by each party in accordance with the relevant laws, and there is no obligation for mutual payment, withholding, or payment on behalf of each other.

 

第五条:双方的陈述与保证

Article 5: Representations and Warranties of both Parties.

 

5.1 甲乙双方在此确认,本协议一经签署,即对各方具有法律约束力。

5.1. Both parties hereby acknowledge that this agreement, upon its signing, becomes a legally binding document for all Parties.

 

5.2 在签署本协议时,甲乙双方声明,在生效日之前向对方或其顾问(包括但不限于律师、审计师、评估师、财务顾问等)提供的一切陈述和资料都是真实、准确、完整和有效的。如与本协议有不一致之处,以本协议规定的条款和条件为准。

5.2. Upon signing this agreement, Party A and Party B declare that all statements and materials provided to each other or their advisors (including but not limited to lawyers, auditors, appraisers, financial advisors, etc.) before the Effective Date are true, accurate, complete, and valid. If there are any inconsistencies with this agreement, the terms and conditions set forth in this Agreement shall prevail.

 

5.3 双方同意,双方在本协议签订前达成的任何与本次股权转让有关的协议或其他文件,自本协议生效之日起自动失效。

5.3. Both parties agree that any agreements or other documents related to the transfer of equity concluded between the parties prior to the execution of this agreement shall automatically become invalid upon the effectiveness of this agreement.

 

5.4 双方应共同努力,相互配合,以完成与本次股权转让有关的一切手续,包括但不限于变更登记、备案等工作,由此产生的任何费用和申请费应由北方集团(NGI)承担。

5.4. Both parties shall make joint efforts and cooperate with each other to complete all procedures

related to the transfer of the Securities, including but not limited to changes in registration, filings,

and any resulting fees and application fees shall be borne by NGI.

 

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第六条:乙方的陈述和保证

Article 6 : Representations and Warranties of Party B

 

6.1截至交付日,乙方在本协议中作出的一切陈述和保证以及根据本协议提交给甲方的所有文件和资料都是真实、准确和完整的。

6.1. As of the Delivery Date, all statements and warranties made by Party B in this agreement and all documents and materials submitted to Party A in accordance with this agreement are true, accurate, and complete.

 

6.2不存在任何针对乙方或北方集团(NGI)的正在进行或即将发生的将会影响本协议签署或执行的诉讼、仲裁、其他司法程序或行政程序。

6.2. There are no ongoing or imminent litigation, arbitration, other judicial proceedings, or administrative proceedings against Party B or NGI that will affect the signing or execution of this agreement.

 

6.3乙方具有签署本协议并履行其全部义务的完全民事行为能力。乙方签署本协议并履行其全部义务,均不会与任何法律、法规、规定、政府机构的授权或批准、约束乙方的协议等相抵触或违反,也不会构成对上述规定的不遵守、不完全遵守或无法遵守。

6.3. Party B has full civil capacity to sign this agreement and fulfill all obligations. The signing of this agreement and the fulfillment of all obligations by Party B shall not violate or conflict with any laws, regulations, provisions, government authorizations or approvals, or agreements binding on Party B, nor constitute non-compliance, incomplete compliance, or inability to comply with the above provisions.

 

6.4乙方是被转让股权的合法所有人,并拥有将该股权转让给甲方的全部授权和权利。

6.4. Party B is the legal owner of the transferred equity and has full authorization and rights to transfer the equity to Party A.

 

6.5截至交割日,转让股权上不存在任何形式的索赔或妨碍(包括但不限于任何形式的期权、收购权、担保权或任何其他形式的第三方权利)。

6.5. As of the Closing Date, there are no claims or encumbrances of any kind on the Securities (including but not limited to any form of options, acquisition rights, guarantee rights, or any other form of third-party rights).

 

第七条:乙方的特别陈述和保证

Article 7: Special Representations and Warranties of Party B

 

7.1北方集团(NGI)是一家根据美国法律注册成立的企业法人,根据美国法律合规经营。

7.1. NGI is a legal corporate entity incorporated under the laws of the United States, operating in compliance with US laws.

 

7.2 北方集团(NGI)未受到过任何(已发生或可能发生的)调查、诉讼、争议、索赔或其他程序及任何行政处罚,该等事项将对北方集团(NGI)的未来运营产生重大影响。在生效日前,乙方已向甲方充分披露甲方要求的有关北方集团(NGI)的所有信息。

7.2. NGI has not been subject to any (past or potential) investigations, lawsuits, disputes, claims, or other proceedings, nor has it received any administrative penalties. that would materially impact the future operations of NGI. Furthermore, prior to the Effective Date, Party B has fully disclosed all information regarding NGI to Party A that has been requested by Party A.

 

7.3所有应由北方集团(NGI)支付给政府部门的所有税款、费用、收费和罚款均已全部支付完毕。截至生效日,北方集团(NGI)没有拖欠任何税款、费用、收费或罚款,也不拖欠政府部门要求的为弥补产品缺陷或纠正不当行为而应支付的任何成本和/或费用。

7.3. All taxes, fees, charges, and fines payable to government departments by NGI have been fully paid. As of the Effective Date, NGI not owe any taxes, fees, charges, or fines and does not owe any costs and/or expenses required by government departments for remedying product defects or rectifying improper actions.

 

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7.4北方集团(NGI)已获得了经营所需的一切批准、许可、同意,也已办理完成必需的登记备案,并严格按照美国相关法律法规进行经营。

7.4. NGI has obtained all necessary approvals, permission, licenses, and consents for its operations, and has completed the required registrations and filings. It operates in strict compliance with relevant laws and regulations in the United States.

 

7.5北方集团(NGI)的经营和业务完全符合所有相关法律法规的规定。如果北方集团(NGI)因在生效日之前发生的任何事项而遭受任何行政处罚,而截至生效日北方集团(NGI)的剩余营运资金不足以支付罚款,则乙方应补偿北方集团(NGI)该费用。

7.5. NGI operates and conducts its business in full compliance with all relevant laws and regulations. If NGI incurs any administrative penalties due to any issues occurring prior to the Effective Date, Party B shall reimburse NGI the cost thereof if the working capital remaining in NGI as of the Effective Date is not sufficient to cover the penalty.

 

7.6自生效日起,甲方有权向北方集团(NGI)派驻相关财务人员。从生效日至交割日,北方集团(NGI)的一切财务支出必须经甲方派驻的财务人员批准。

7.6. From the Effective Date, Party A has the right to deploy relevant financial personnel to NGI. From the Effective Date until the Delivery Date, all financial expense disbursements of NGI must be approved by the financial personnel deployed by Party A.

 

7.7在交割日前,乙方应负责北方集团(NGI)的正常运营和管理,并确保其运营和业务不会发生任何实质性不利变化。

7.7. Prior to the Closing Date, Party B shall be responsible for the regular operation and management of NGI and shall ensure that its operations and business do not undergo any substantial adverse changes.

 

7.8截至交割日,北方集团(NGI)未对任何公司或其他法人实体进行任何投资。

7.8. As of the Closing Date, NGI has not made any investments in any company or other legal entities.

 

7.9在生效日前,乙方已充分披露了北方集团(NGI)真实、完整的财务信息。截至交割日,这些信息仍然真实、准确和完整。

7.9. Prior to the Effective Date, Party B has fully disclosed true and complete financial information of NGI. As of the Closing Date, such information remains true, accurate, and complete.

 

7.10在交割日前,北方集团(NGI)已全部缴清美国法律所要求缴纳的所有税款。

7.10. Prior to the Closing Date, NGI has fully settled all tax payments required by U.S. law.

 

7.11截至交割日,北方集团(NGI)拥有的一切知识产权,包括但不限于专利、商标、专有技术等,均完全符合相关法律法规、标准和行业规范,不存在侵犯他人知识产权的情况。

7.11. As of the Closing Date, all intellectual property rights owned by NGI, including but not limited to patents, trademarks, and proprietary technologies, fully comply with relevant laws, regulations, standards, and industry rules, and there are no infringements on the intellectual property rights of others.

 

7.12如果乙方违反上述任何陈述和保证,或者如果乙方未能完成本协议中规定的任何先决条件,则甲方有权追究乙方的责任,并要求乙方赔偿甲方所遭受的所有直接和间接损失。

7.12. If Party B violates any of the aforementioned representations and warranties, or if Party B fails to fulfill any prerequisites specified in this agreement, Party A has the right to hold Party B liable and seek compensation for all direct and indirect losses suffered.

 

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7.13 乙方同意以本协议的附件形式签定“竞业禁止协议”。此外,乙方和北方集团(NGI)将以本合同附件的形式签订雇佣协议。乙方将促使北方集团的主要管理人员和技术人员按照甲方可接受的条款与北方集团(NGI)签订“竞业禁止协议⁴”。

7.13. The Party B agrees to enter into the “Non-Competition Agreement” in the form attached hereto. IN addition, Party B and NGI will enter into the Employment Agreement in the form attached hereto. Party B will cause the key management and technical personnel of NGI to enter into a “Non-Competition Agreements⁴“ with NGI upon terms acceptable to Party A.

 

第八条:甲方的陈述和保证

Article 8: Representations and Warranties of Party A

 

8.1甲方是一家依据美国法律注册成立的企业法人,并根据美国法律合规经营。

8.1. The Party A is a legal corporate entity incorporated under the laws of the United States, operating in compliance with US laws.

 

8.2甲方签署本协议和履行其全部义务,均不会与任何法律、法规、规定、政府机构的授权或批准、或以甲方作为一方或其受约束的任何协议抵触或违反,也不会构成对上述规定的不遵守、不完全遵守或不能遵守。

8.2 The signing of this agreement and the fulfillment of all obligations by Party A shall not violate or conflict with any laws, regulations, provisions, government authorizations or approvals, or any agreements to which Party A is a party or bound, nor constitute non-compliance, incomplete compliance, or inability to comply with the above provisions.

 

8.3不存在严重影响甲方签署或履行本协议义务的诉讼、仲裁或其他司法或行政程序。

8.3 There are no severe legal proceedings, arbitration, or other judicial or administrative procedures that would significantly affect Party A’s ability to sign or fulfill the obligations of this Agreement.

 

第九条:员工

Article 9: Employees

 

本次股权转让完成时,北方集团(NGI)的所有现有员工仍将受雇于北方集团(NGI)。聘用条件和待遇原则上参照现有标准并按照有关法律法规执行。之后,Northern Group, Inc.将按照其经营需要确定用工人数和用工制度等。

Upon the completion of this equity transfer, all existing employees of NGI will remain employed by NGI. In principle, the terms and benefits of employment shall refer to existing standards and be implemented in accordance with relevant laws and regulations. Thereafter, Northern Group, Inc. will determine number of employees and the employment system according to its business needs.

 

第十条:保密

Article 10: Confidentiality

 

10.1.一方已向另一方披露或可能向另一方披露有关其自身业务、财务状况及其他保密事项的秘密和专有信息(包括书面和非书面信息,以下简称“保密信息”)。除非另有约定,上述保密信息的接收方应当:

10.1.One party has disclosed or may disclose to the other party confidential and proprietary information regarding its own business, financial status, and other confidential matters (including written and non-written information, hereinafter referred to as “Confidential Information”). Unless otherwise agreed, the receiving party of such confidential information shall:

 

10.1.1. 对保密信息予以保密。

10.1.1. Maintain the confidentiality of the Confidential Information.

 

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10.1.2. 除对履行工作职责而需知晓保密资料的己方雇员外,不得向任何第三方披露保密资料。

10.1.2. Not disclose the Confidential Information to any third party, except for its own employees who need to know the Confidential Information to perform their job duties.

 

10.2. 第10.1.条不适用于下述信息:

10.2. Article 10.1 shall not apply to the following information:

 

10.2.1.在披露方向接收方披露之前,接收方已经拥有书面信息,且书面记录能证明该信息。

10.2.1. Information that the receiving party already possessed in written form prior to its disclosure by the disclosing party, as evidenced by written records.

 

10.2.2. 非因接受方违反本协议而为公众所知的资料。

10.2.2. Information that becomes publicly known without a breach of this agreement by the receiving party.

 

10.2.3. 接收方从不承担任何保密义务的第三方处获得的信息。

10.2.3. Information obtained by the receiving party from a third party who is not under any obligation to maintain confidentiality.

 

10.3. 对于曾为本协议一方的任何自然人或法人,即使其因转让在本协议项下的权利和义务而不再作为本协议一方,本协议保密规定仍然对其具有法律约束力。

10.3. Any natural person or legal entity who was once a party to this agreement, even if they are no longer a party to this agreement due to the transfer of rights and obligations under this agreement, shall still be legally bound by the confidentiality provisions of this agreement.

 

第十一条 违反陈述或保证的责任

Article 11: Liability for Breach of Representation or Warranty

 

11.1 如果一方的陈述或保证存在错误、遗漏、误导或不实的情况,对另一方签署本协议产生或可能产生重大影响,则另一方有权要求违约方全额赔偿因其错误、遗漏、误导性或不实陈述或保证而引起的任何损失(包括但不限于律师费、诉讼费、仲裁费)。

11.1. If any representation or warranty of a party contains any facts that are incorrect, omitted, misleading, or untrue and have or may have a material impact on the other party’s signing of this agreement, the other party has the right to claim full compensation from the defaulting party for any losses (including but not limited to attorney’s fees, litigation costs, and arbitration fees) caused by such incorrectness, omission, misleading nature, or untrue representation or warranty.

 

11.2 本协议中每项陈述和保证的解释均应是独立的。

11.2. The interpretation of each representation and warranty in this agreement shall be independent.

 

11.3 为避免歧义,乙方在此无条件且不可撤销地确认,乙方应对任何违反陈述或保证的行为承担责任。

11.3. To avoid ambiguity, Party B hereby unconditionally and irrevocably acknowledges that it shall be liable for any breach of representation or warranty.

 

第十二条:违约责任

Article 12: Breach Liability

 

12.1如果任何一方违反本协议,违约方应按本协议和美国法律的规定向另一方仅承担直接损害赔偿责任。如果双方均违约,则违约方应分别向另一方承担各自违约所引起的直接损害赔偿和其他责任。

12.1. If either party breaches this agreement, the defaulting party shall be liable to the other party in accordance with this agreement and the laws of the United States for direct damages only. If both parties breach, each breaching party shall be liable to the other party separately for the direct damages and any other liabilities caused by its own breach.

 

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12.2如果非因甲方故意或重大过失,乙方违反本协议中任何陈述、保证或义务的,乙方应赔偿甲方因此遭受的一切直接损失。

12.2. If Party B violates any representation, warranty, or obligation under this agreement, except in cases of willful misconduct or gross negligence on the part of Party A, Party B shall compensate Party A for all direct damages suffered as a result.

 

第十三条:不可抗力

Article 13: Force Majeure

 

13.1“不可抗力”指地震、台风、水灾、火灾、战争、政治动乱等特别事件,以及其他美国法律认定为“不可抗力”的事件。

13.1. “Force Majeure” refers to extraordinary events such as earthquakes, typhoons, floods, fires, wars, political unrest, and other events recognized as “Force Majeure” under U.S. law.

 

13.2当不可抗力发生时,受此事件影响的一方的义务以及该方在本协议中受约束的任何期限将在不可抗力发生期间中止,并自动顺延,延长期限与中止期相同。因不可抗力事件的发生,该方无须承担本协议所约定的违约责任。

13.2. When a Force Majeure event occurs, the obligations of the party affected by such event and any deadlines binding on that party under this agreement shall be suspended during the period of the Force Majeure event and shall automatically be extended for the same duration as the suspension period. The party shall not be liable for any default under this agreement due to the occurrence of a Force Majeure event.

 

13.3主张不可抗力的一方应立即以书面形式通知另一方,并在其后的五(5)个工作日内提供由公证机关出具的不可抗力发生及存续的证据。主张不可抗力的一方应尽最大努力消除不可抗力的不利影响。

13.3 The party claiming a Force Majeure event shall immediately notify the other party in writing and provide evidence of the occurrence and continuation of the Force Majeure event issued by a notary public within five (5) working days. The party claiming a Force Majeure should make utmost effort to eliminate the adverse effect of the Force Majeure.

 

第十四条:仲裁

Article 14: Arbitration

 

除本协议另有规定外,如果双方之间因本协议引起的或与本协议有关的任何争议(“争议”),该争议应根据国际商会仲裁条例(“国际商会仲裁条例”),由按照国际商会仲裁条例指定的三(3)位仲裁员最终仲裁解决。三(3)位仲裁员均应为律师,仲裁员在涉及合并、收购和其他的公司交易或商业事项的争议方面具有丰富经验。一(1)位仲裁员由原告指定,第二(2)位仲裁员由被告指定,第三(3)位仲裁员为仲裁庭庭长,由双方指定的仲裁员共同指定。仲裁地或法定地点为得克萨斯州。仲裁庭使用的语言为英语。仲裁庭有权根据受损害方的请求作出禁令或其他的衡平救济裁决,该等救济是对任何一方根据法律或衡平法可能享有的任何其他救济以外的救济。仲裁庭的任何裁决均为终局裁决,对双方均有约束力,裁决可由任何有管辖权的法院作出。

In the event of any dispute between the Parties arising out of or relating to this Agreement (a “Dispute”), such Dispute shall be finally settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) by three (3) arbitrators appointed in accordance with the ICC Rules except as otherwise provided in this Agreement. Each of the three (3) arbitrators shall be a lawyer with substantial experience in disputes involving mergers, acquisitions and other corporate transactions or commercial matters. One (1) arbitrator shall be nominated by the claimant(s), the second arbitrator shall be nominated by the respondent(s), and the third arbitrator, who shall act as the president of the tribunal, shall be jointly nominated by the two (2) party-nominated arbitrators. The seat, or legal place, of arbitration shall be Texas. The language of the arbitration shall be English. The arbitral tribunal shall have the authority to, upon the request of an aggrieved party, render an award for injunctive or other equitable relief, such remedy being in addition to any other remedy to which any party may be entitled at law or in equity. Any award of the arbitral tribunal shall be final and binding on the parties and judgment may be entered on the award in any court of competent jurisdiction.

 

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第十五条:适用法律

Article 15: Applicable Law

 

本协议的成立、效力、解释和执行应受美国法律,特别是得克萨斯州法律的制约,因本协议引起的一切争议应根据该等法律裁定。

The establishment, validity, interpretation, and execution of this agreement shall be governed by U.S. law, and in particular, the laws of the State of Texas and all disputes arising from this agreement shall be determined in accordance with such law.

 

第十六条:放弃

Article 16: Waiver

 

本协议任何一方未行使或延迟行使本协议项下的任何权利,不应构成对该项权利的放弃;单独一次或部分行使一项权利不排除将来对该项权利的行使。

The failure or delay by either party to exercise any right under this agreement shall not constitute a waiver of that right. The exercise of any right on one occasion or in part shall not exclude its exercise in the future.

 

第十七条:转让

Article 17: Assignment

 

除非另有规定,未经另一方事先书面同意,任何一方不得全部或部分地转让其在本协议中的任何权利或义务。

Unless otherwise provided, neither party shall assign any rights or obligations under this agreement, in whole or in part, without the prior written consent of the other party.

 

第十八条:修改

Article 18: Amendment

 

18.1本协议是为双方及其各自继受方和受让方的利益而签订的,对他们均有法律约束力。

18.1 This agreement is concluded for the benefit of both parties and their respective successors and assignee, and it is legally binding on them.

 

18.2本协议不得口头形式修改,对本协议的任何修改,必须采用书面形式并经双方签字后方可生效。

18.2 This agreement may not be orally amended, and any modification of this agreement shall be

effective only if it is in writing and signed by both parties.

 

第十九条:可分割性

Article 19: SEVERABILITY

 

本协议任何条款的无效,不影响任何其他条款的有效性。

The invalidity of any provision in this agreement shall not affect the validity of any other provisions.

 

第二十条:语言

Article 20: Language

 

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本协议以中文和英文书就,如出现中英文不一致的,以英文为准。

This agreement is written in both Chinese and English. In the event of any inconsistency between the Chinese and English versions, the English version shall prevail.

 

第二十一条:效力

Article 21: Effectiveness

 

本协议是根据双方2023年4月16日签订的合作意向书并经康迪科技集团董事会批准后的正式协议,本协议的中英文正本一式四(4)份,双方各持正本一(1)份,送股东变更登记部门正本一(1)份,剩余一(1)份由北方集团(NGI)存档。

This agreement is executed as an official agreement based on the cooperation letter of intent signed by both parties on April 16, 2023, and approved by the Board of Directors of Kandi Technologies Group, Inc. This agreement is made in four (4) copies in English and Chinese, each party holds one (1) original, and one (1) original is submitted to the Shareholder Change Registration Authority for filing, and the remaining one (1) original is archived by NGI.

 

第二十二条:通知

Article 22: Notices

 

22.1 除非另有规定,本协议下发出的任何通知或通讯应以中、英文书写,并通过速递服务或传真发送。以速递服务递交的通知或通讯,应于递交给速递服务公司五(5)个工作日内予以确认。按本协议规定发出的通知或通讯的生效日为收件的日期。如以传真发出,发出后的第三(3)个工作日应被视为收件日期,但应有传真确认报告为证。

22.1. Unless otherwise specified, any notices or communications to be given under this agreement shall be in writing in both Chinese and English and sent by courier service or fax. Notices or communications delivered by courier service shall be confirmed within five (5) working days after delivery to the courier service company. The effective date of notices or communications sent in accordance with this agreement shall be the date of receipt. If sent by fax, the third (3rd) working day after the date of transmission shall be deemed as the date of receipt, provided that there is a fax receipt confirmation report as evidence.

 

22.2 一切通知和通讯均应发送至以下地址:

22.2. All notices and communications shall be sent to the following addresses:

 

甲方通信地址:xxxxxxxx

 

Party A’s Mailing Address: xxxxxxxx

 

电话: xxxxxxxx

Phone: xxxxxxxx

 

传真号码: xxxxxxxx

Fax Number: xxxxxxxx

 

收件人:xxxxxxxx

Recipient: xxxxxxxx

 

乙方通信地址: xxxxxxxx

Party B’s Mailing Address: xxxxxxxx

 

 

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电话:xxxxxxxx

Phone: xxxxxxxx

 

传真号码:

Fax Number:

 

收件人:奥兰赖斯

Recipient: Olen Rice

 

第二十三条:全部协议

Article 23: Entire Agreement

 

本协议构成双方关于本协议约定的交易的全部协议,并取代双方之前就本协议项下交易全部讨论、谈判和协议。

This agreement constitutes the entire agreement between the parties regarding the transactions agreed upon in this agreement and supersedes all previous discussions, negotiations, and agreements between the parties regarding transactions under this agreement.

 

第二十四条:特别规定

Article 24: Special Provision

 

本协议经康迪科技集团董事会批准后执行。

This agreement shall be executed upon approval by the Board of Directors of Kandi Technologies Group, Inc.

 

以资证明,甲、乙双方于文首载明的日期签署本协议。

This is to certify that both Party A and Party B have signed this agreement on the date stated at the

beginning of this agreement.

 

甲方

Party A

SC Autosports, LLC

 

授权代表人签字:

Signature: /s/ Seal Affixed

 

乙方:

Party B

Olen Rice

 

签名:

Signature: /s/ Olen Rice

 

 

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EX-10.2 3 f10q0623ex10-2_kanditech.htm ENGLISH TRANSLATION OF THE AGREEMENT ON TERMINATION OF THE MAKE GOOD SHARES BY AND BETWEEN ZHEJIANG KANDI TECHNOLOGIES GROUP CO., LTD AND THE FORMER SHAREHOLDERS OF JIANGXI PROVINCE HUIYI NEW ENERGY CO., LTD DATED AUGUST 3, 2023

Exhibit 10.2 

 

Certain information marked as redacted has been excluded from the Agreement because it is both not material and is the type that the registrant treats as private or confidential

 

关于终止对赌协议的协议

Agreement on Termination of the Make Good Shares

 

甲方:浙江康迪科技集团有限公司

Party A: Zhejiang Kandi Technologies Group Co., Ltd.

 

方:廖宗江(身份证号码:xxxxxxx)

廖春生(身份证号码:xxxxxxx)

廖财金(身份证号码:xxxxxxx)

 

Party B:Liao Zongjiang ID No. xxxxxxx

Liao Chunsheng ID No. xxxxxxx

Liao Caijin ID No. xxxxxxx

 

丙方:江西省汇亿新能源有限公司(下称“汇亿公司”)

Party C: Jiangxi Province Huiyi New Energy Co., Ltd. (hereinafter referred to as “Jiangxi Huiyi”)

 

鉴于:甲、乙双方分别于2021年7月13日签订的关于丙方《股权转让协议》和《股权转让协议之补充协议》,及2022年6月20日签订的《股权转让协议之补充协议(二)》。在第二个对赌期间(2022年10月1日-2023年6月30日),甲、乙双方就丙方实际经营进行评估,结合集团战略进行资源整合,以提高效益。各方经认真协商乙方同意甲方收回经营权。现就终止《股权转让协议之补充协议》和《股权转让协议之补充协议(二)》等事宜,双方于2023年8月2日,在甲方二楼会议室达成并签订如下协议:

Whereas: The equity transfer agreement (“Equity Transfer Agreement”) and its supplementary agreement (“Supplementary Agreement”) relating to the purchase of 100 equity interest of Party C by and between Party A and Party B were signed on July 13, 2021, respectively, and the supplementary agreement (II) (“Supplementary Agreement No.2”, collectively with Supplementary Agreement, “Supplementary Agreements”) to the Equity Transfer Agreement was signed on June 20, 2022. During the second evaluation period (October 1, 2022 - June 30, 2023), Party A and Party B made evaluation on actual operation of Party C and conducted resources integration combined with the Group’s strategy to improve economic performance. After serious negotiation of the parties, Party B agrees that Party A takes over management rights of Party C. In connection with termination of the Supplementary Agreements, both parties hereby reached and signed the following agreement on August 2, 2023 in the meeting room on the 2nd Fl, office building of Party A:

 

一、各方一致同意本协议生效后终止《股权转让协议之补充协议》和《股权转让协议之补充协议(二)》。

The parties unanimously agree to terminate the Supplementary Agreements upon taking effect of this Agreement.

 

 

 

 

二、各方对审计结果无异议,各方一致确认乙方完成第一个对赌期间(2021年7月1日至2022年9月30日)的对赌,乙方可获得858770 股康迪科技集团股票(股票代码“KNDI”),乙方在签订《一致行动人承诺书》(见附件一)的前提下,甲方同意在签订本协议之日起30日内,由康迪科技集团向其股权转让代理发出股票发行指示函,通知其发行858770 股康迪科技集团流通股股票给乙方,并协助廖宗江、廖春生、廖财金收取该释放股票到指定账户内。如在股票发放过程中产生因程序、乙方原因等问题造成延误的,不作为甲方违约,但应及时告知乙方并积极解决。

All parties have no objection to the audit results and unanimously confirm that Party B achieved its net profit target for the first evaluation period from July 1, 2021 to September 30, 2022 and can receive 858,770 shares of common stock of Kandi Technologies Group, Inc. (NASDAQ: “KNDI”). On the premise that Party B has signed the Commitment Letter on Concerted Actions (see Appendix A), Party A agrees to deliver related share issuance instruction letter by Kandi Technologies Group to its stock transfer agent notifying it to issue 858,770 shares of KNDI outstanding stock within 30 days from the date of signing this Agreement and assist Liao Zongjiang, Liao Chunsheng and Liao Caijin to receive the shares released into the designated accounts. Party A shall not be deemed to be in breach of agreement if any delay occurs in the process of issuing the shares due to procedures problem or Party B’s reasons, etc, but Party A shall inform Party B of it timely and solve it actively.

 

三、任何一方不得从事损害其他方的利益的行为,除本协议有约定外,任何一方不得以其他任何理由向其他方主张任何权利(如有)。包括但不限于不能向甲方和其关联公司作任何方式的诉告或除了本协议提到的条款以外的其他索赔。另外,如果在甲方、汇亿公司和其关联公司之后的审计和其他流程当中需要乙方的协助,乙方必须全力配合。

No party shall engage in any acts that damages interests of any other party. Except as stipulated in this Agreement, no party shall claim any right (if any) against any other party for any other reason, including but not limited to the following: 1) no sue or action filed against Party A and its affiliates in any way, or any other claims other than those mentioned in this Agreement. In addition, Party B must cooperate fully when Party A, Party C and its affiliates need Party B’s assistance in their future audits and other procedures.

 

四、股权收购前的丙方的对外责任由乙方承担,对赌期间(2021年7月1日至本协议签署解除生效日)由乙方承担管理责任。终止协议生效后由甲方接管,乙方退出管理,丙方经营责任由甲方承担。

Party C’s external responsibility prior to the equity acquisition shall be borne by Party B, and Party B shall assume management responsibility during the evaluation period (from July 1, 2021 to the effective date of this termination Agreement ). After the termination Agreement becomes effective, Party A shall take over and Party B shall withdraw from management rights, and Party A shall be responsible for Party C’s business operations .

 

五、本协议自各方签署之日起生效。凡因本协议引起或本协议有关的任何争议,应友好协商解决,协商不成的由本协议签署地人民法院裁决。

This Agreement shall take effect on the date signed by the parties. Any dispute arising from or related to this Agreement shall be settled through friendly negotiation. If no agreement can be reached through negotiation, the dispute shall be decided by the people’s court at the place where this Agreement is signed.

 

六、本协议中文正本一式伍份,甲、丙方各持有正本一份,乙方各持有正本每人一份。

This Agreement is made in Chinese in five originals, with one original held by party A and C, respectively, original held by each of party B.

 

(以下无正文)

(no text below)

 

2/3

 

 

甲方:浙江康迪科技集团有限公司(盖章)

Party A: Zhejiang Kandi Technologies Group, Co., Ltd.

 

签字:

Signatures:

By: /s/ Seal Affixed  
Name:  Zhejiang Kandi Technologies Group, Co., Ltd.  

 

乙方:廖宗江、廖春生、廖财金

Party B: Liao Zongjiang, Liao Chunsheng, Liao Caijin

 

签字:

Signatures:

By: /s/ Liao Zongiiang  
Name: Liao Zongjiang  
     
By: /s/ Liao Chunsheng  
Name:  Liao Chunsheng  
     
By: /s/ Liao Caijin  
Name: Liao Caijin  

 

丙方:江西省汇亿新能源有限公司(盖章)

Party C: Jiangxi Province Huiyi New Energy Co., Ltd.

 

签字:

Signatures:

By: /s/ Seal Affixed  
Name:  Jiangxi Province Huiyi New Energy Co., Ltd.  

 

 

3/3

 

EX-31.1 4 f10q0623ex31-1_kanditech.htm CERTIFICATION

Exhibit 31.1

 

Certification Pursuant to
Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended

 

I, Xueqin Dong, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Kandi Technologies Group, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 8, 2023  
   
/s/ Dong Xueqin  
Dong Xueqin  
President and Chief Executive Officer  
(Principal Executive Officer)  

  

EX-31.2 5 f10q0623ex31-2_kanditech.htm CERTIFICATION

Exhibit 31.2

 

Certification Pursuant to
Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended

 

I, Jehn Ming Lim, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Kandi Technologies Group, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 8, 2023  
   
/s/ Jehn Ming Lim  
Jehn Ming Lim  
Chief Financial Officer  
(Principal Financial Officer and
Principal Accounting Officer)
 

 

EX-32.1 6 f10q0623ex32-1_kanditech.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Report”) of Kandi Technologies Group, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof, we, Dong Xueqin, President and Chief Executive Officer, and Jehn Ming Lim, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Dong Xueqin  
Dong Xueqin  
President and Chief Executive Officer  
(Principal Executive Officer)  
   
/s/ Jehn Ming Lim  
Jehn Ming Lim  
Chief Financial Officer  
(Principal Financial Officer and
Principal Accounting Officer)
 
   
August 8, 2023  

 

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