0001213900-23-084510.txt : 20231108 0001213900-23-084510.hdr.sgml : 20231108 20231108073058 ACCESSION NUMBER: 0001213900-23-084510 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 92 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231108 DATE AS OF CHANGE: 20231108 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: 231385963 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 f10q0923_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 September 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 November 3, 2023, the registrant had 87,522,800 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 September 30, 2023 and December 31, 2022 1
     
  Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) – Three Months and Nine Months Ended September 30, 2023 and 2022 2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three Months and Nine Months Ended September 30, 2023 and 2022 3
     
  Condensed Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2023 and 2022 4
     
  Notes to 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 35
     
Item 4. Controls and Procedures 35
     
PART II — OTHER INFORMATION  
     
Item 1. Legal Proceedings 36
     
Item 6. Exhibits 36

 

i

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

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

(UNAUDITED)

 

   September 30,
2023
   December 31,
2022
 
   (Unaudited)     
CURRENT ASSETS        
Cash and cash equivalents  $72,900,121   $84,063,717 
Restricted cash   61,957,395    66,976,554 
Certificate of deposit   109,676,181    81,191,191 
Accounts receivable (net of allowance for doubtful accounts of $2,795,798 and $2,285,386 as of September 30, 2023 and December 31, 2022, respectively)   16,350,519    38,150,876 
Inventories   57,860,989    40,475,366 
Notes receivable   41,129    434,461 
Other receivables   11,068,946    11,912,615 
Prepayments and prepaid expense   1,689,174    2,970,261 
Advances to suppliers   1,540,949    3,147,932 
TOTAL CURRENT ASSETS   333,085,403    329,322,973 
           
NON-CURRENT ASSETS          
Property, plant and equipment, net   98,754,578    97,168,753 
Intangible assets, net   5,561,878    7,994,112 
Land use rights, net   2,690,181    2,909,950 
Construction in progress   36,652    199,837 
Deferred tax assets   1,427,290    1,432,527 
Long-term investment   137,095    144,984 
Goodwill   31,193,706    33,178,229 
Other long-term assets   9,756,037    10,630,911 
TOTAL NON-CURRENT ASSETS   149,557,417    153,659,303 
           
TOTAL ASSETS  $482,642,820   $482,982,276 
           
CURRENT LIABILITIES          
Accounts payable  $34,475,667   $35,321,262 
Other payables and accrued expenses   8,364,215    14,131,414 
Short-term loans   9,065,350    5,569,154 
Notes payable   22,129,999    19,123,476 
Income tax payable   688,633    1,270,617 
Other current liabilities   5,273,881    6,089,925 
TOTAL CURRENT LIABILITIES   79,997,745    81,505,848 
           
NON-CURRENT LIABILITIES          
Long-term loans   8,225,000    
-
 
Deferred taxes liability   1,172,820    1,378,372 
Contingent consideration liability   
-
    1,803,000 
Other long-term liabilities   410,182    602,085 
TOTAL NON-CURRENT LIABILITIES   9,808,002    3,783,457 
           
TOTAL LIABILITIES   89,805,747    85,289,305 
           
STOCKHOLDER’S EQUITY          
Common stock, $0.001 par value; 100,000,000 shares authorized; 84,997,369 and 77,668,730 shares issued and 84,997,369 and 74,180,171 outstanding at September 30,2023 and December 31,2022, respectively   84,997    77,669 
Less: Treasury stock (null shares and 3,488,559 shares with average price of $2.81 at September 30, 2023 and December 31, 2022 )   
-
    (9,807,820)
Additional paid-in capital   450,242,032    451,373,645 
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at September 30, 2023 and December 31, 2022, respectively)   (11,771,861)   (16,339,765)
Accumulated other comprehensive loss   (48,131,857)   (28,333,239)
TOTAL KANDI TECHNOLOGIES GROUP, INC. STOCKHOLDERS’ EQUITY   390,423,311    396,970,490 
           
Non-controlling interests   2,413,762    722,481 
TOTAL STOCKHOLDERS’ EQUITY   392,837,073    397,692,971 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $482,642,820   $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   Nine Months Ended 
   September 30,
2023
   September 30,
2022
   September 30,
2023
   September 30,
2022
 
                 
REVENUES FROM UNRELATED PARTIES, NET  $36,426,201   $33,673,201   $95,241,648   $79,405,788 
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET    
-
    
-
    
-
    
-
 
                     
REVENUES, NET   36,426,201    33,673,201    95,241,648    79,405,788 
                     
COST OF GOODS SOLD    (25,507,180)   (27,304,038)   (62,558,825)   (67,930,595)
                     
GROSS PROFIT   10,919,021    6,369,163    32,682,823    11,475,193 
                     
OPERATING EXPENSE:                     
Research and development    (917,893)   (1,433,649)   (2,671,435)   (3,828,078)
Selling and marketing    (4,152,246)   (1,440,995)   (8,760,490)   (3,807,222)
General and administrative    (9,457,877)   (5,686,233)   (25,855,648)   (18,016,843)
Impairment of goodwill    7,539    
-
    (500,064)   
-
 
Impairment of long-lived assets    14,299    
-
    (948,438)   
-
 
TOTAL OPERATING EXPENSE    (14,506,178)   (8,560,877)   (38,736,075)   (25,652,143)
LOSS FROM OPERATIONS   (3,587,157)   (2,191,714)   (6,053,252)   (14,176,950)
OTHER INCOME (EXPENSE):                     
Interest income    1,927,494    2,138,130    5,982,400    4,739,208 
Interest expense    (354,999)   (177,417)   (722,608)   (463,994)
Change in fair value of contingent consideration    
-
    434,995    1,803,000    2,733,995 
Government grants    667,944    829,539    1,478,296    1,536,856 
Other income, net    2,611,239    536,726    3,685,019    2,954,036 
TOTAL OTHER INCOME , NET    4,851,678    3,761,973    12,226,107    11,500,101 
INCOME (LOSS) BEFORE INCOME TAXES    1,264,521    1,570,259    6,172,855    (2,676,849)
INCOME TAX BENEFIT (EXPENSE)    12,007    (497,211)   86,330    255,232 
NET INCOME (LOSS)   1,276,528    1,073,048    6,259,185    (2,421,617)
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS    407,626    694,029    1,691,281    752,691 
NET INCOME (LOSS) ATTRIBUTABLE TO KANDI TECHNOLOGIES GROUP, INC. STOCKHOLDERS   868,902    379,019    4,567,904    (3,174,308)
OTHER COMPREHENSIVE LOSS                     
Foreign currency translation adjustment    (2,102,246)   (20,932,870)   (19,798,618)   (39,889,289)
COMPREHENSIVE LOSS   $(825,718)  $(19,859,822)  $(13,539,433)  $(42,310,906)
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC    79,174,343    75,741,399    75,931,247    75,962,899 
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED    81,234,002    75,885,630    77,645,533    76,061,190 
NET INCOME (LOSS) PER SHARE, BASIC   $0.02   $0.01   $0.08   $(0.03)
NET INCOME (LOSS) PER SHARE, DILUTED   $0.02   $0.01   $0.08   $(0.03)

 

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 
Stock issuance and award   10,000    10    
-
    22,290    
-
    
-
    
-
    22,300 
Stock based compensation        
 
    
 
    250,673    
 
    
 
    
 
    250,673 
Stock buyback   -    
-
    (911,714)   (12,872)   
-
    
-
    
-
    (924,586)
Capital contribution from shareholder   -    
-
    
-
    
-
    
-
    
-
    337,557    337,557 
Net income (loss)   -    
-
    
-
    
-
    379,019    
-
    694,029    1,073,048 
Foreign currency translation   -    
-
    
-
    
-
    
-
    (20,932,870)   (66,006)   (20,998,876)
                                         
Balance, September 30, 2022   77,658,730   $77,659   $(6,848,731)  $450,380,994   $(7,390,410)  $(39,637,503)   2,159,180   $398,741,189 

 

   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 
Stock issuance and award   9,987,198    9,987    
-
    2,974,599    
-
    
-
    
-
    2,984,586 
Stock based compensation   -    
-
    
-
    1,007,263    
-
    
-
    
-
    1,007,263 
Cancellation of the Treasury Stock                       
-
    
-
    
-
    
-
 
Net income   -    
-
    
-
    
-
    868,902    
-
    407,626    1,276,528 
Foreign currency translation   -    
-
    
-
    
-
    
-
    (2,102,246)   
-
    (2,102,246)
                                         
Balance, September 30, 2023   84,997,369   $84,997   $
-
   $450,242,032   $(11,771,861)  $(48,131,857)  $2,413,762   $392,837,073 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

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

 

   Nine Months Ended 
   September 30, 2023   September 30, 2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss)  $6,259,185   $(2,421,617)
Adjustments to reconcile net (loss) income to net cash provided by operating activities          
Depreciation and amortization   8,952,016    9,512,970 
Impairments   1,448,502    
-
 
Provision of allowance for doubtful accounts   658,707    4,220 
Deferred taxes   (200,316)   (116,206)
Change in fair value of contingent consideration   (1,803,000)   (2,733,995)
Stock award and stock based compensation expense   8,716,981    913,288 
           
Changes in operating assets and liabilities:          
           
Accounts receivable   11,846,717    (20,932,970)
Notes receivable   744,574    1,927,621 
Inventories   (18,498,142)   (13,183,546)
Other receivables and other assets   157,318    (10,264,805)
Advances to supplier and prepayments and prepaid expenses   2,710,917    12,405,615 
           
Increase (Decrease) In:          
Accounts payable   34,021,872    46,796,615 
Other payables and accrued liabilities   (4,480,660)   4,951,022 
Notes payable   (23,509,907)   (13,574,849)
Income tax payable   (367,848)   (60,313)
Net cash provided by operating activities  $26,656,916   $13,223,050 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property, plant and equipment, net   (13,103,838)   (1,674,445)
Payment for construction in progress   (75,651)   (278,777)
(Loan to) Repayment from third party   
-
    (4,545,386)
Certificate of deposit   (34,143,774)   (22,726,928)
Net cash used in investing activities  $(47,323,263)  $(29,225,536)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from short-term loans   12,153,286    20,642,224 
Repayments of short-term loans   (8,398,565)   (15,987,912)
Proceeds from long-term loans   8,225,000    
-
 
Contribution from non-controlling shareholder   
-
    772,716 
Purchase of treasury stock   
-
    (4,505,213)
Net cash provided by financing activities  $11,979,721   $921,815 
           
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH  $(8,686,626)  $(15,080,671)
Effect of exchange rate changes  $(7,496,129)  $(13,710,508)
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  $134,857,516   $139,884,828 
-CASH AND CASH EQUIVALENTS AT END OF PERIOD   72,900,121    99,029,118 
-RESTRICTED CASH AT END OF PERIOD   61,957,395    40,855,710 
           
SUPPLEMENTARY CASH FLOW INFORMATION          
Income taxes paid  $149,585   $274,037 
Interest paid  $384,012   $225,479 
           
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:

 

 

NOTE 2 - LIQUIDITY

 

The Company had working capital of $253,087,658 as of September 30, 2023, an increase of $5,270,533 from the working capital of $247,817,125 as of December 31, 2022. As of September 30, 2023 and December 31, 2022, the Company’s cash and cash equivalents were $72,900,121 and $84,063,717, respectively, and the Company’s restricted cash was $61,957,395 and $66,976,554, respectively. As of September 30, 2023 and December 31, 2022, the Company had multiple certificates of deposit with a total amount of $109,676,181 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 $6.9 million short-term bank loans and the US subsidiaries have $2.2 million short-term bank loans and $8.2 million long-term bank loans outstanding as of September 30, 2023.

 

5

 

 

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.

 

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”), 95% owned by Zhejiang Kandi Technologies and 5% owned by Kandi New Energy, 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”) 95% owned by Zhejiang Kandi Technologies and 5% owned by Kandi New Energy, 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.

 

6

 

 

 

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 the nine-month periods ended September 30, 2023, the Company recognized impairment loss of $500,064 for goodwill and impairment loss of $948,438 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.

 

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NOTE 8 - CONCENTRATIONS

 

(a) Customers

 

For the three-month period ended September 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    
   Three Months         
   Ended   Trade Receivable 
   September 30,   September 30,   December 31, 
Major Customers  2023   2023   2022 
Customer A   19%   5%   
         -
 
Customer B   17%   24%   11%

 

   Sales    
   Three Months         
   Ended   Trade Receivable 
   September 30,   September 30,   December 31, 
Major Customers  2022   2022   2021 
Customer C   39%   13%   
        -
 

 

For the nine-month period ended September 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    
   Nine Months         
   Ended   Trade Receivable 
   September 30,   September 30,   December 31, 
Major Customers  2023   2023   2022 
Customer C   33%         1%          1%
Customer A   14%   5%   
-
 

 

   Sales    
   Nine Months         
   Ended   Trade Receivable 
   September 30,   September 30,   December 31, 
Major Customers  2022   2022   2021 
Customer C   19%   13%   
      -
 

 

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(b) Suppliers

 

For the three-month period ended September 30, 2023 and 2022, the Company’s material supplier, the purchase made by which accounted for more than 10% of the Company’s total purchases, was as follows:

 

   Purchases    
   Three Months         
   Ended   Accounts Payable 
   September 30,   September 30,   December 31, 
Major Suppliers  2023   2023   2022 
Zhejiang Kandi Supply Chain Management Co., Ltd.(1)   23%   23%   32%

 

   Purchases    
   Three Months         
   Ended   Accounts Payable 
   September 30,   September 30,   December 31, 
Major Suppliers  2022   2022   2021 
Zhejiang Kandi Supply Chain Management Co., Ltd.(1)   29%   28%   11%

 

(1)Zhejiang Kandi Technologies owns 10% equity interest of the supplier.

 

For the nine-month period ended September 30, 2023 and 2022, the Company’s material supplier, the purchase made by which accounted for more than 10% of the Company’s total purchases, was as follows:

 

   Purchases    
   Nine Months         
   Ended   Accounts Payable 
   September 30,   September 30,   December 31, 
Major Suppliers  2023   2023   2022 
Zhejiang Kandi Supply Chain Management Co., Ltd.(1)   10%   23%   32%

 

 

   Purchases    
   Nine Months         
   Ended   Accounts Payable 
   September 30,   September 30,   December 31, 
Major Suppliers  2022   2022   2021 
Zhejiang Kandi Supply Chain Management Co., Ltd.(1)   16%   28%   11%

 

(1)Zhejiang Kandi Technologies owns 10% equity interest of the supplier.

 

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NOTE 9 - EARNINGS (LOSS) 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 968,019 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 nine-month period ended September 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 2,059,659 shares for the three-month period ended September 30, 2023. There were dilutive effects of 1,714,286 shares for the nine-month period ended September 30, 2023.

 

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 were excluded from the calculation of diluted earnings per share, for the three-month and nine-month period ended September 30, 2022. 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 144,231 shares and 98,291 shares for the three-month and nine-month period ended September 30, 2022.  

 

NOTE 10 - ACCOUNTS RECEIVABLE

 

Accounts receivable are summarized as follows:

   September 30,   December 31, 
   2023   2022 
Accounts receivable  $19,146,317   $40,436,262 
Less: allowance for doubtful accounts   (2,795,798)   (2,285,386)
Accounts receivable, net  $16,350,519   $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   662,670 
Recovery   (3,962)
Exchange rate difference   (148,296)
BALANCE AT SEPTEMBER 30, 2023  $2,795,798 

 

NOTE 11 - INVENTORIES

 

Inventories are summarized as follows:

 

   September 30,   December 31, 
   2023   2022 
Raw material  $7,873,230   $6,551,450 
Work-in-progress   6,354,973    4,114,550 
Finished goods *   43,632,786    29,809,366 
Inventories  $57,860,989   $40,475,366 

 

*As of September 30, 2023, approximately $43.3 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.

 

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NOTE 12 - PROPERTY, PLANT AND EQUIPMENT, NET

 

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

 

   September 30,   December 31, 
   2023   2022 
At cost:        
Buildings*  $60,592,894   $49,239,626 
Machinery and equipment   72,232,045    77,845,979 
Office equipment   1,532,919    1,528,135 
Motor vehicles and other transport equipment   673,990    1,810,825 
Molds and others   12,580,413    10,983,573 
    147,612,261    141,408,138 
Less : Accumulated depreciation   (48,857,683)   (44,239,385)
Property, plant and equipment, net  $98,754,578   $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 58,000 square meters and a construction area of more than 96,000 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 the property archive have passed the acceptance. The Hainan factory has started formal production.

 

Depreciation expenses for the three months ended September 30, 2023 and 2022 were $2,504,272 and $2,510,531, respectively. Depreciation expenses for the nine months ended September 30, 2023 and 2022 were $7,614,411 and $7,796,048, respectively.

 

* As of September 30, 2023, approximately $12.4 million of buildings held by Kandi Investment were pledged as collateral for the $8,225,000 long-term loan.

 

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  September 30,   December 31, 
   useful life  2023   2022 
Cost:             
Patent  1.75-3.42 years  $4,670,032    4,938,765 
Technology  3.25-4.25 years   9,459,571    10,003,915 
       14,129,603    14,942,680 
Less : Accumulated amortization             
Patent     $(3,034,062)   (2,744,024)
Technology      (2,131,415)   (1,573,079)
       (5,165,477)   (4,317,103)
Less : Accumulated impairment for intangible assets      (3,402,248)   (2,631,465)
Intangible assets, net     $5,561,878   $7,994,112 

  

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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 were $334,240 and $482,010 for the three months ended September 30, 2023 and 2022, respectively. The aggregate amortization expenses for those intangible assets were $1,124,137 and $1,489,579 for the nine months ended September 30, 2023 and 2022, respectively.

 

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

 

Three months ended December 31, 2023  $334,240 
Years ended December 31,     
2024   1,355,288 
2025   1,294,152 
2026   1,081,327 
2027   747,396 
Thereafter   749,475 
Total  $5,561,878 

 

NOTE 14 - LAND USE RIGHTS, NET

 

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

 

   September 30,   December 31, 
   2023   2022 
Cost of land use rights  $3,601,940   $3,809,211 
Less: Accumulated amortization   (911,759)   (899,261)
Land use rights, net  $2,690,181   $2,909,950 

  

The amortization expenses for the three months ended September 30, 2023 and 2022, were $20,608 and $21,764, respectively. The amortization expenses for the nine months ended September 30, 2023 and 2022, were $63,746 and $67,889, respectively. Amortization expenses for the next five years and thereafter are as follows:

 

Three months ended December 31, 2023  $20,608 
Years ended December 31,     
2024   82,433 
2025   82,433 
2026   82,433 
2027   82,433 
Thereafter   2,339,841 
Total  $2,690,181 

 

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NOTE 15 - OTHER LONG TERM ASSETS

 

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

 

   2023   2022 
Prepayments for land use right (i)  $3,643,576    3,917,226 
Right - of - use asset (ii)   5,790,489    6,383,824 
Others   321,972    329,861 
Total other long-term asset  $9,756,037   $10,630,911 

 

(i)As of September 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 $3,643,576 and $3,917,226, respectively. As of September 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 September 30, 2023 and 2022 were $20,297 and $21,436, respectively. The amortization expense for the nine months ended September 30, 2023 and 2022 were $62,784 and $66,865, respectively.

 

(ii)As of  September 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 $5,303,911 and $5,697,720, respectively, as well as the amount of $486,578 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 September 30, 2023 and 2022 were $28,106 and $29,682, respectively. The amortization expense of land use right of Jinhua facility and Jiangxi facility for the nine months ended September 30, 2023 and 2022were $86,939 and $92,590, 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 nine months ended September 30, 2023 and 2022 were a tax benefit of 1.40% on a reported income before taxes of approximately $6.2 million, a tax benefit of 9.53% on a reported loss before taxes of approximately $2.7 million, respectively.

 

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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 nine months ended September 30, 2023 and 2022 was tax benefit of $86,330 and tax benefit of $255,232, 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 September 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 September 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 September 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 nine months ended September 30, 2023 and 2022, the PRC CIT rate was 25%. Certain subsidiaries of the Company are entitled to tax exemptions (tax holidays) for the nine months ended September 30, 2023 and 2022.

 

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

 

   Nine Months Ended 
   September 30, 
   2023   2022 
Tax benefit (holiday) credit  $2,210,952   $1,129,332 
Basic net income per share effect  $0.03   $0.01 

  

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NOTE 17 - LEASES

 

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 September 30, 2023, the Company has paid the lease amount of both year 2022 and 2023 totaling $475,117.

 

As of September 30, 2023, the Company’s operating lease right-of-use assets (grouped in other long-term assets on the balance sheet) was $5,790,489 and lease liability was $483,383 (grouped in other current liabilities and other long-term liabilities on the balance sheet). For the three months ended September 30, 2023 and 2022, the Company’s operating lease expense were $82,517 and $87,146, respectively. For the nine months ended September 30, 2023 and 2022, the Company’s operating lease expense were $255,248 and $271,839, respectively.

 

Supplemental information related to operating leases was as follows:

 

   Nine Months Ended 
   September 30, 
   2023   2022 
Cash payments for operating leases  $255,248   $271,839 

 

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

 

Maturity of Lease Liabilities:  Lease
payable
 
Three months ended December 31, 2023  $51,154 
Years ended December 31,     
2024   212,189 
2025   220,040 

 

15

 

 

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.

 

For the period from July 1, 2021 to September 30, 2022, Jiangxi Huiyi achieved its net profit target. Accordingly, the Transferors received 858,770 shares of Kandi’s restrictive common stock in October 2023.

 

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. Zhejiang Kandi Technologies will take over the management rights while the Transferors shall not participate the management of Jiangxi Huiyi, and there was no further Evaluation Period or make good shares.

 

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

 

16

 

 

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 in June, 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 nine months ended September 30, 2023, the Company recognized $0 and $1,083,000 of expenses for stock issued to the Consultant, respectively.

 

On June 17, 2023, SC Autosports 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. On July 12, 2023, pursuant to the Equity Transfer Agreement, the Company issued a total of 3,951,368 shares of restrictive stock to the Transferor, 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 November 8, 2023 and the process is being finalized.

 

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%.

 

On July 1, 2023, the Compensation Committee of the Board of Directors of the Company approved the grant of stock options to purchase 68,019 shares of the Company’s common stock, at an exercise price of $3.96 per share, to the Company’s employees. The stock options will vest ratably over three years on July 1, 2024, July 1, 2025 and July 1, 2026, respectively, and expire on the tenth anniversary of the grant date. The Company valued the stock options at $172,601 and has amortized the stock compensation expense using the graded vesting method over the service period from July 1, 2023, to July 1, 2026. The value of the stock options was estimated using the Binomial Tree Model with an expected volatility of 78.08%, an expected life of 10 years, a risk-free interest rate of 3.81% and an expected dividend yield of 0.00%.

 

There were $1,007,263 and $250,673 in stock compensation expenses associated with stock options booked for the three months ended September 30, 2023 and 2022, respectively. There were $2,969,050 and $250,673 in stock compensation expenses associated with stock options booked for the nine months ended September 30, 2023 and 2022, respectively.

 

17

 

 

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. Mr. Lim was entitled to receive 10,000 shares of the common stock per year which shall be issuable evenly on each six-month anniversary as per the renewed contract effective on May 15, 2023.

 

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 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, May 5, 2023 and July 1, 2023 the Company granted 588,019 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.

 

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 Equity Awards”) of the Company’s common stock (the “Award Shares”) under the Company’s 2008 Omnibus Long-Term Incentive Plan, as amended (the “2008 Plan”). The amount of Award Shares issued within each calendar year of the Vesting 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 Equity Awards. 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 Equity Awards, with higher performance resulting in receiving the Equity Awards 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 Equity Awards below the Maximum Equity Awards. On August 28, 2023, both parties agreed to issue 5,957,811 shares ahead of the original timeline due to the good performance achieved from January to July 2023. These shares are Restricted Shares under the 2008 Plan, to be to be vested upon the achievement of certain performance targets.

 

18

 

 

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

 

On September 18, 2023, the Company issued a total of 5,957,811 Restricted Shares under the 2008 Plan but have not been vested to the relevant members of the project management team.

 

For the three months ended September 30, 2023 and 2022, the Company recognized $2,985,211 and $22,925 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 nine months ended September 30, 2023 and 2022, the Company recognized $4,664,931 and $662,615 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 $2,741,905 (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 September 30, 2023 and December 31, 2022, 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.

 

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.

 

19

 

 

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.

 

On September 21, 2023, the SEC filed a settled administrative order (the “Order”) against Kandi alleging violations of certain provisions of the United States’ securities laws. The Order sets forth certain findings, which the Company neither admits nor denies, regarding statements the Company made in its periodic filings and press releases that issued during the years 2020 and 2019. These statements concerned the Company’s then plans to sell highway passenger electric vehicles in the United States. Pursuant to the Order, the Company agreed to settle and paid a settlement of $710,000 by September 30, 2023.

 

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
September 30,
 
   2023   2022 
   Sales Revenue   Sales Revenue 
Primary geographical markets        
U.S. and other countries/areas  $26,447,482   $20,480,662 
China   9,978,719    13,192,539 
Total  $36,426,201   $33,673,201 
           
Major products          
EV parts  $2,192,871   $2,624,505 
EV products   
-
    1,726,681 
Off-road vehicles and associated parts   30,246,941    21,748,245 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   275,736    1,167,208 
Battery exchange equipment and Battery exchange service   516,368    71,184 
Lithium-ion cells   3,194,285    6,335,378 
Total  $36,426,201   $33,673,201 
           
Timing of revenue recognition          
Products transferred at a point in time  $36,426,201   $33,673,201 
Total  $36,426,201   $33,673,201 

 

   Nine Months Ended
September 30,
 
   2023   2022 
   Sales Revenue   Sales Revenue 
Primary geographical markets        
U.S. and other countries/areas  $78,351,552   $41,663,512 
China   16,890,096    37,742,276 
Total  $95,241,648   $79,405,788 
           
Major products          
EV parts  $4,456,520   $6,881,058 
EV products   -    4,553,194 
Off-road vehicles and associated parts   82,285,439    42,554,127 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   645,939    4,511,647 
Battery exchange equipment and Battery exchange service   679,113    179,848 
Lithium-ion cells   7,174,637    20,725,914 
Total  $95,241,648   $79,405,788 
           
Timing of revenue recognition          
Products transferred at a point in time  $95,241,648   $79,405,788 
Total  $95,241,648   $79,405,788 

 

NOTE 24 - SUBSEQUENT EVENT

 

On October 4, 2023, the Company issued an aggregate of 858,770 shares of Common Stock, bearing a standard restrictive legend under the Securities Act of 1933, as amended, as the make good shares after Jiangxi Huiyi achieved its net profit target for the period from July 1, 2021 to September 30, 2022 based on the share transfer agreement by and between Zhejiang Kandi Technologis and shareholders of Jiangxi Huiyi dated July 13, 2021, and Supplementary Agreements ..

 

On October 13, 2023, the Company issued a total of 1,666,661 shares of Common Stock to certain employees pursuant to the Company’s 2008 Plan and the non-qualified stock option agreements. These shares are without restrictive legend and freely tradable.

 

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 nine months ended September 30, 2023, our operating entities recognized total revenue of $95,241,648 as compared to $79,405,788 for the same period of 2022, an increase of $15,835,860 or 19.9%. For the nine months ended September 30, 2023, our operating entities recorded $32,682,823 of gross profit, an increase of $21,207,630 or 184.8% from the same period of 2022. Gross margin for the nine months ended September 30, 2023 was 34.3%, compared to 14.5% for the same period of 2022. Our operating entities recorded a net income of $6,259,185 for the nine months ended September 30, 2023, compared to a net loss of $2,421,617 in 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.

 

22

 

 

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 and the process is being finalized

 

Results of Operations

 

Comparison of the Three Months Ended September 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 September 30, 2023 and 2022.

 

   Three Months Ended             
   September 30,
2023
   % of
Revenue
   September 30,
2022
   % of
Revenue
   Change in
Amount
   Change in
%
 
                         
REVENUES FROM UNRELATED PARTIES, NET  $36,426,201    100.0%  $33,673,201    100.0%   2,753,000    8.2%
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET   -    0.0%   -    0.0%   -    - 
                               
REVENUES, NET   36,426,201         33,673,201         2,753,000    8.2%
                               
COST OF GOODS SOLD   (25,507,180)   (70.0%)   (27,304,038)   (81.1)%   1,796,858    (6.6)%
                               
GROSS PROFIT   10,919,021    30.0%   6,369,163    18.9%   4,549,858    71.4%
                               
OPERATING EXPENSE:                              
Research and development   (917,893)   (2.5)%   (1,433,649)   (4.3)%   515,756    (36.0)%
Selling and marketing   (4,152,246)   (11.4)%   (1,440,995)   (4.3)%   (2,711,251)   188.2%
General and administrative   (9,457,877)   (26.0)%   (5,686,233)   (16.9)%   (3,771,644)   66.3%
Impairment of goodwill   7,539    0.0%   -    0.0%   7,539    - 
Impairment of long-lived assets   14,299    0.0%   -    0.0%   14,299    - 
TOTAL OPERATING EXPENSE   (14,506,178)   (39.8)%   (8,560,877)   (25.4)%   (5,945,301)   69.4%
                               
LOSS FROM OPERATIONS   (3,587,157)   (9.8)%   (2,191,714)   (6.5)%   (1,395,443)   63.7%
                               
OTHER INCOME (EXPENSE):                              
Interest income   1,927,494    5.3%   2,138,130    6.3%   (210,636)   (9.9)%
Interest expense   (354,999)   (1.0)%   (177,417)   (0.5)%   (177,582)   100.1%
Change in fair value of contingent consideration   -    0.0%   434,995    1.3%   (434,995)   (100.0)%
Government grants   667,944    1.8%   829,539    2.5%   (161,595)   (19.5)%
Other income, net   2,611,239    7.2%   536,726    1.6%   2,074,513    386.5%
TOTAL OTHER INCOME , NET   4,851,678    13.3%   3,761,973    11.2%   1,089,705    29.0%
                               
INCOME BEFORE INCOME TAXES   1,264,521    3.5%   1,570,259    4.7%   (305,738)   (19.5)%
                               
INCOME TAX BENEFIT (EXPENSE)   12,007    0.0%   (497,211)   (1.5)%   509,218    (102.4)%
                               
NET INCOME   1,276,528    3.5%   1,073,048    3.2%   203,480    19.0%

 

23

 

 

(a) Revenue

 

For the three months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue was $36,426,201, compared to $33,673,201 for the same period of 2022, representing an increase of $2,753,000 or 8.2%. 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 September 30, 2023 and 2022:

 

   Three Months Ended
September 30,
 
   2023   2022 
   Sales   Sales 
EV parts  $2,192,871   $2,624,505 
EV products   -    1,726,681 
Off-road vehicles and associated parts   30,246,941    21,748,245 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   275,736    1,167,208 
Battery exchange equipment and Battery exchange service   516,368    71,184 
Lithium-ion cells   3,194,285    6,335,378 
Total  $36,426,201   $33,673,201 

 

EV Parts

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues from the sales of EV parts were $2,192,871, representing a decrease of $431,634 or 16.4% from $2,624,505 for the same quarter of 2022. The decrease was primarily due to the reduced demand from the market during the third quarter 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 6.0% of the total net revenue for the three months ended September 30, 2023.

 

EV Products

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sale of EV Products was $0, representing a decrease of $1,726,681 or 100% from $1,726,681 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.  

 

24

 

 

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 September 30, 2023.

 

Off-Road Vehicles and associated parts

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”), others and associated parts, were $30,246,941, representing an increase of $8,498,696 or 39.1% from $21,748,245, 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 third quarter of 2023.

 

Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ off-road vehicles business line accounted for approximately 83.0% of our operating entities’ total net revenue for the three months ended September 30, 2023.

 

Electric Scooters, Electric Self-Balancing Scooters and associated parts

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of electric scooters, electric self-balancing scooters and associated parts was $275,736, representing a decrease of $891,472 or 76.4% from $1,167,208 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 0.8% of the total net revenue for the three months ended September 30, 2023.

 

Battery exchange equipment and Battery exchange service

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of battery exchange equipment and battery exchange service was $516,368, representing an increase of $445,184 or 625.4% from $71,184 for the same period of 2022. The increase was primarily because battery exchange equipment, as additional product, was sold in the current period but none was sold during the three months ended September 30, 2022.

 

Zhejiang Kandi Technologies and its subsidiaries’ sale of battery exchange equipment and battery exchange service business line accounted for approximately 1.4% of the total net revenue for the three months ended September 30, 2023.

 

Lithium-ion cells

 

During the three months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of Lithium-ion cells was $3,194,285, representing a decrease of $3,141,093 or 49.6% from $6,335,378, 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 8.8% of the total net revenue for the three months ended September 30, 2023.

 

25

 

 

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

 

   Three Months Ended
September 30,
 
   2023   2022 
   Sales Revenue   Sales Revenue 
Primary geographical markets        
U.S. and other countries/areas  $26,447,482   $20,480,662 
China   9,978,719    13,192,539 
Total  $36,426,201   $33,673,201 
           
Major products          
EV parts  $2,192,871   $2,624,505 
EV products   -    1,726,681 
Off-road vehicles and associated parts   30,246,941    21,748,245 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   275,736    1,167,208 
Battery exchange equipment and Battery exchange service   516,368    71,184 
Lithium-ion cells   3,194,285    6,335,378 
Total  $36,426,201   $33,673,201 
           
Timing of revenue recognition          
Products transferred at a point in time  $36,426,201   $33,673,201 
Total  $36,426,201   $33,673,201 

  

(b) Cost of goods sold

 

Cost of goods sold was $25,507,180 during the three months ended September 30, 2023, representing a decrease of $1,796,858, or 6.6%, compared to $27,304,038 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.

 

26

 

 

(c) Gross profit

 

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

 

   Three Months Ended September 30, 
   2023   2022 
   Sales   Cost   Gross
Profit
   Margin
%
   Sales   Cost   Gross
Profit
   Margin
%
 
EV parts  $2,192,871    2,077,271    115,600    5.3%  $2,624,505    2,408,952    215,553    8.2%
EV products   -    -    -    -    1,726,681    1,527,679    199,002    11.5%
Off-road vehicles and associated parts   30,246,941    18,915,320    11,331,621    37.5%   21,748,245    16,275,896    5,472,349    25.2%
Electric Scooters, Electric Self-Balancing Scooters and associated parts   275,736    226,613    49,123    17.8%   1,167,208    1,178,742    -11,534    -1.0%
Battery exchange equipment and Battery exchange service   516,368    461,540    54,828    10.6%   71,184    67,519    3,665    5.1%
Lithium-ion cells   3,194,285    3,826,436    (632,151)   -19.8%   6,335,378    5,845,250    490,128    7.7%
Total  $36,426,201    25,507,180    10,919,021    30.0%  $33,673,201    27,304,038    6,369,163    18.9%

 

Gross profit for the three months ended September 30, 2023 increased 71.4% to $10,919,021, compared to $6,369,163 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 30.0% compared to 18.9% 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 $917,893 for the three months ended September 30, 2023, a decrease of $515,756 or 36.0% compared to $1,433,649 for the same period of last year. 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 $4,152,246 for the three months ended September 30, 2023, compared to $1,440,995 for the same period last year, representing an increase of $2,711,251 or 188.2%. 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.

 

27

 

 

(f) General and administrative expenses

 

General and administrative expenses were $9,457,877 for the three months ended September 30, 2023, compared to $5,686,233 for the same period last year, representing an increase of $3,771,644 or 66.3%. For the three months ended September 30, 2023, general and administrative expenses included $3,992,474 as expenses for common stock awards and stock options to employees and Board members, and for stock issuance to the Consultant, compared to $273,598 for the same period in 2022. Besides stock compensation expense, our operating entities’ net general and administrative expenses for the three months ended September 30, 2023 were $5,465,403, representing an increase of $52,768 or 1.0% from $5,412,635 for the same period of 2022, which was comparable.

 

(g) Interest income

 

Interest income was $1,927,494 for the three months ended September 30, 2023, representing a decrease of $210,636 or 9.9% compared to $2,138,130 for the same period of last year. The decrease was primarily attributable to the decreased interest earned on deposit compared to the same period in 2022.

 

(h) Interest expenses

 

Interest expenses were $354,999 in the three months ended September 30, 2023, representing an increase of $177,582 or 100.1% compared to $177,417 for the same period of last year. The increase was primarily due to interest expenses related to increased short-term and long-term loans of the Company compared to the same period in 2022.

 

(i) Change in fair value of contingent consideration

 

For the three months ended September 30, 2023, the gain related to changes in the fair value of contingent consideration was $0 compared to gain related to changes in the fair value of contingent consideration of $434,995 for the same period of last year, 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 $667,944 for the three months ended September 30, 2023, compared to $829,539 for the same quarter last year, representing a decrease of $161,595, or 19.5%, which was largely attributable to the decreased grants received from Jiangxi local government compare to the same period in 2022.

 

(k) Other income, net

 

Other income, net was $2,611,239 for the three months ended September 30, 2023, compared to $536,726 for the same period of last year, representing an increase of $2,074,513, or 386.5%, which was largely attributable to a research service project rendered for a third party customer that was completed during the quarter ended September 30, 2023.

 

(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 third quarter of 2023 was a tax benefit of 0.95% on a reported income before taxes of approximately $1.3 million, compared to a tax expense of 31.66% on a reported income before taxes of approximately $1.6 million for the same period of last year.

 

28

 

 

(m) Net income (loss)

 

Net income was $1,276,528 for the three months ended September 30, 2023, representing an increase of $203,480 compared to net income of $1,073,048 for the same period of last year. 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.

 

Comparison of the Nine Months Ended September 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 nine months ended September 30, 2023 and 2022.

 

   Nine Months Ended 
   September 30,
2023
   % of
Revenue
   September 30,
2022
   % of
Revenue
   Change in
Amount
   Change
in %
 
                         
REVENUES FROM UNRELATED PARTIES, NET  $95,241,648    100.0%  $79,405,788    100.0%   15,835,860    19.9%
REVENUES FROM THE FORMER AFFILIATE COMPANY AND RELATED PARTIES, NET   -    0.0%   -    0.0%   -    - 
                               
REVENUES, NET   95,241,648    100.0%   79,405,788    100.0%   15,835,860    19.9%
                               
COST OF GOODS SOLD   (62,558,825)   (65.7)%   (67,930,595)   (85.5)%   5,371,770    (7.9)%
                               
GROSS PROFIT   32,682,823    34.3%   11,475,193    14.5%   21,207,630    184.8%
                               
OPERATING EXPENSE:                              
Research and development   (2,671,435)   (2.8)%   (3,828,078)   (4.8)%   1,156,643    (30.2)%
Selling and marketing   (8,760,490)   (9.2)%   (3,807,222)   (4.8)%   (4,953,268)   130.1%
General and administrative   (25,855,648)   (27.1)%   (18,016,843)   (22.7)%   (7,838,805)   43.5%
Impairment of goodwill   (500,064)   (0.5)%   -    0.0%   (500,064)   - 
Impairment of long-lived assets   (948,438)   (1.0)%   -    0.0%   (948,438)   - 
TOTAL OPERATING EXPENSE   (38,736,075)   (40.7)%   (25,652,143)   (32.3)%   (13,083,932)   51.0%
                               
LOSS FROM OPERATIONS   (6,053,252)   (6.4)%   (14,176,950)   (17.9)%   8,123,698    (57.3%)
                               
OTHER INCOME (EXPENSE):                              
Interest income   5,982,400    6.3%   4,739,208    6.0%   1,243,192    26.2%
Interest expense   (722,608)   (0.8)%   (463,994)   (0.6)%   (258,614)   55.7%
Change in fair value of contingent consideration   1,803,000    1.9%   2,733,995    3.4%   (930,995)   (34.1)%
Government grants   1,478,296    1.6%   1,536,856    1.9%   (58,560)   (3.8)%
Other income, net   3,685,019    3.9%   2,954,036    3.7%   730,983    24.7%
TOTAL OTHER INCOME, NET   12,226,107    12.8%   11,500,101    14.5%   726,006    6.3%
                               
INCOME (LOSS) BEFORE INCOME TAXES   6,172,855    6.5%   (2,676,849)   (3.4)%   8,849,704    (330.6)%
                               
INCOME TAX BENEFIT   86,330    0.1%   255,232    0.3%   (168,902)   (66.2)%
                               
NET INCOME (LOSS)   6,259,185    6.6%   (2,421,617)   (3.0)%   8,680,802    (358.5)%

 

(a) Revenue

 

For the nine months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue was $95,241,648 compared to $79,405,788 for the same period of 2022, representing an increase of $15,835,860 or 19.9%. The increase in revenue was mainly due to the increase in the sales volume and margin of off-road vehicles and associated parts.

 

29

 

 

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

 

   Nine Months Ended
September 30,
 
   2023   2022 
   Sales   Sales 
EV parts  $4,456,520   $6,881,058 
EV products   -    4,553,194 
Off-road vehicles and associated parts   82,285,439    42,554,127 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   645,939    4,511,647 
Battery exchange equipment and Battery exchange service   679,113    179,848 
Lithium-ion cells   7,174,637    20,725,914 
Total  $95,241,648   $79,405,788 

 

EV Parts

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenues from the sales of EV parts were $4,456,520, representing a decrease of $2,424,538 or 35.2% from $6,881,058 for the same period of 2022. The decrease was primarily due to the reduced demand from the market during the nine months ended September 30, 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 4.7% of the total net revenue for the nine months ended September 30, 2023.

 

EV Products

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sale of EV Products was $0, representing a decrease of $4,553,194 or 100% from $4,553,194 for the same period of 2022. The decrease was primarily due to the reduced demand from the market during the first three quarters 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 Products business line accounted for approximately 0% of the total net revenue for the nine months ended September 30, 2023. 

 

30

 

 

Off-Road Vehicles and associated parts

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies, its subsidiaries and SC Autosports’ revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”), others and associated parts, were $82,285,439, representing an increase of $39,731,312 or 93.4% from $42,554,127, 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 86.4% of our operating entities’ total net revenue for the nine months ended September 30, 2023.

 

Electric Scooters, Electric Self-Balancing Scooters and associated parts

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of electric scooters, electric self-balancing scooters and associated parts was $645,939, representing a decrease of $3,865,708 or 85.7% from $4,511,647 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 0.7% of the total net revenue for the nine months ended September 30, 2023.

 

Battery exchange equipment and Battery exchange service

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of Battery exchange equipment and Battery exchange service was $679,113, representing an increase of $499,265 or 277.6% from $179,848 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 0.7% of the total net revenue for the nine months ended September 30, 2023.

 

Lithium-ion cells

 

During the nine months ended September 30, 2023, Zhejiang Kandi Technologies and its subsidiaries’ revenue from the sale of Lithium-ion cells was $7,174,637, representing a decrease of $13,551,277 or 65.4% from $20,725,914, 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 7.5% of the total net revenue for the nine months ended September 30, 2023.  

 

31

 

 

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

 

   Nine Months Ended
September 30,
 
   2023   2022 
   Sales Revenue   Sales Revenue 
Primary geographical markets        
U.S. and other countries/areas  $78,351,552   $41,663,512 
China   16,890,096    37,742,276 
Total  $95,241,648   $79,405,788 
           
Major products          
EV parts  $4,456,520   $6,881,058 
EV products   -    4,553,194 
Off-road vehicles and associated parts   82,285,439    42,554,127 
Electric Scooters, Electric Self-Balancing Scooters and associated parts   645,939    4,511,647 
Battery exchange equipment and Battery exchange service   679,113    179,848 
Lithium-ion cells   7,174,637    20,725,914 
Total  $95,241,648   $79,405,788 
           
Timing of revenue recognition          
Products transferred at a point in time  $95,241,648   $79,405,788 
Total  $95,241,648   $79,405,788 

 

(b) Cost of goods sold

 

Cost of goods sold was $62,558,825 during the nine months ended September 30, 2023, representing a decrease of $5,371,770, or 7.9%, compared to $67,930,595 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 nine months ended September 30, 2023 and 2022 are as set forth below:

 

   Nine Months Ended September 30, 
   2023   2022 
   Sales   Cost   Gross Profit   Margin %   Sales   Cost   Gross Profit   Margin % 
EV parts  $4,456,520    4,142,914    313,606    7.0%  $6,881,058    6,229,204    651,854    9.5%
EV products   -    -    -    -    4,553,194    4,184,867    368,327    8.1%
Off-road vehicles and associated parts   82,285,439    49,362,536    32,922,903    40.0%   42,554,127    33,774,464    8,779,663    20.6%
Electric Scooters, Electric Self-Balancing Scooters and associated parts   645,939    650,274    (4,335)   -0.7%   4,511,647    4,173,192    338,455    7.5%
Battery exchange equipment and Battery exchange service   679,113    597,977    81,136    11.9%   179,848    201,014    (21,166)   -11.8%
Lithium-ion cells   7,174,637    7,805,124    (630,487)   -8.8%   20,725,914    19,367,854    1,358,060    6.6%
Total  $95,241,648    62,558,825    32,682,823    34.3%  $79,405,788    67,930,595    11,475,193    14.5%

 

Gross profit for the nine months ended September 30, 2023 increased 184.8% to $32,682,823, compared to $11,475,193 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 34.3% compared to 14.5% for the same period of 2022.

 

32

 

 

(d) Research and development

 

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled $2,671,435 for the nine months ended September 30, 2023, a decrease of $1,156,643 or 30.2% compared to $3,828,078 for the same period of last year. 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 $8,760,490 for the nine months ended September 30, 2023, compared to $3,807,222 for the same period last year, representing an increase of $4,953,268 or 130.1%. 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 $25,855,648 for the nine months ended September 30, 2023, compared to $18,016,843 for the same period last year, representing an increase of $7,838,805 or 43.5%. For the nine months ended September 30, 2023, general and administrative expenses included $8,716,981 as expenses for common stock awards and stock options to employees and Board members, and for stock issuance to the Consultant, compared to $913,288 for the same period in 2022. Besides stock compensation expense, our net general and administrative expenses for the nine months ended September 30, 2023 were $17,138,667, representing an increase of $35,112 or 0.2%, from $17,103,555 for the same period of 2022, which was comparable.

 

(g) Interest income

 

Interest income was $5,982,400 for the nine months ended September 30, 2023, representing an increase of $1,243,192 or 26.2% compared to $4,739,208 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 $722,608 for the nine months ended September 30, 2023, representing an increase of $258,614 or 55.7% compared to $463,994 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 nine months ended September 30, 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 $2,733,995 for the same period of last year, 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 $1,478,296 for the nine months ended September 30, 2023, compared to $1,536,856 for the same quarter last year, representing a decrease of $58,560, or 3.8%, which was largely attributable to the decreased grants received from Jiangxi local government compare to the same period in 2022.

 

33

 

 

(k) Other income, net

 

Other income, net was $3,685,019 for the nine months ended September 30, 2023, representing an increase of $730,983 or 24.7% compared to $2,954,036 for the same period of last year, which was largely due to a research service project rendered for a third party customer that was completed during the quarter ended September 30, 2023.

 

(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 first three quarters of 2023 was a tax benefit of 1.40% on a reported income before taxes of approximately $6.2 million, compared to a tax benefit of 9.53% on a reported loss before taxes of approximately $2.7 million for the same period of last year.

 

(m) Net income (loss)

 

Net income was $6,259,185 for the nine months ended September 30, 2023, representing an increase of $8,680,802 compared to net loss $2,421,617 for the same period of last year. 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

 

   Nine Months Ended 
   September 30,
2023
   September 30,
2022
 
         
Net cash provided by operating activities  $26,656,916   $13,223,050 
Net cash used in investing activities  $(47,323,263)  $(29,225,536)
Net cash provided by financing activities  $11,979,721   $921,815 
           
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH  $(8,686,626)  $(15,080,671)
Effect of exchange rate changes  $(7,496,129)  $(13,710,508)
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  $134,857,516   $139,884,828 

 

For the nine months ended September 30, 2023, cash provided by operating activities was $26,656,916, as compared to cash provided by operating activities of $13,223,050 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 nine months ended September 30, 2023 were an increase of accounts payable of $34,021,872. The major operating activity that used cash for the nine months ended September 30, 2023 was a decrease of notes payable of $23,509,907.

 

For the nine months ended September 30, 2023, cash used in investing activities was $47,323,263, as compared to cash used in investing activities of $29,225,536 for the same period of last year. The major investing activities that used cash for the nine months ended September 30, 2023 were an increase of certificate of deposit of $34,143,774.

 

For the nine months ended September 30, 2023, cash provided by financing activities was $11,979,721, as compared to cash provided by financing activities of $921,815 for the same period of last year. The major financing activities that provided cash for the nine months ended September 30, 2023 were proceeds from short-term bank loans of $12,153,286. The major financing activities that used cash for the nine months ended September 30, 2023 were repayments of short-term bank loans of $8,398,565.

 

34

 

 

Working Capital

 

We had a working capital of $253,087,658 as of September 30, 2023, which reflects an increase of $5,270,533 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 September 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.

 

35

 

 

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   Supplementary Agreement to Equity Incentive Agreement on Project of Crossover Golf Carts by and between Kandi Technologies Group, Inc. and Project Management Team of Kandi Electric Vehicles (Hainan) Co., Ltd.
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934
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).

 

36

 

 

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: November 8, 2023 By:  /s/ Dong Xueqin
    Dong Xueqin
    President and Chief Executive Officer
    (Principal Executive Officer)
     
Date: November 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 f10q0923ex10-1_kanditech.htm SUPPLEMENTARY AGREEMENT TO EQUITY INCENTIVE AGREEMENT ON PROJECT OF CROSSOVER GOLF CARTS BY AND BETWEEN KANDI TECHNOLOGIES GROUP, INC. AND PROJECT MANAGEMENT TEAM OF KANDI ELECTRIC VEHICLES (HAINAN) CO., LTD

Exhibit 10.1

 

康迪科技集团有限公司

 

 

康迪电动汽车(海南)有限公司

管理团队

 

关于

 

高尔夫跨界车项目

 

股权激励协议之补充协议

 

 

 

Supplementary Agreement to Equity Incentive Agreement on Project of

 

Crossover Golf Carts

 

by and between 

 

Kandi Technologies Group, Inc.

 

And

 

Project Management Team of Kandi Electric Vehicles (Hainan) Co., Ltd.

 

2

 

 

本股权激励协议之补充协议(以下简称“协议或本协议”)由下列双方于2023828日在中国浙江省金华市签署。

This Supplementary Agreement to the Equity Incentive Agreement (hereinafter referred to as this “Agreement”) is signed on August 28, 2023 in Jinhua City Zhejiang Province, People’s Republic of China, by and between:

 

甲方:康迪科技集团有限公司(KNDI)(以下简称“授予方”

业务授权代表:胡晓明

Party A: Kandi Technologies Group, Inc. (hereinafter referred to as “Granting Party”)

Authorized Representative: Hu Xiaoming

 

乙方:康迪电动汽车(海南)有限公司高尔夫跨界车项目管理团队

团队代表人:潘国庆(以下简称“接受方”)

以下授予方和接受方合称“双方”,单独称为“一方”。

Party B: Management Team of Project of Crossover Golf Carts of Kandi Electric Vehicles (Hainan) Co., Ltd.

Team Representative: Pan Guoqing (hereinafter referred to asReceiving Party)

 

The following Granting Party and Receiving Party are hereinafter collectively referred to as the “parties” and individually as a “party”.

 

鉴于:

Whereas:

 

1、双方于2023年3月13日签订的《关于高尔夫跨界车项目股权激励协议》,该协议约定乙方确保康迪电动汽车(海南)有限公司的高尔夫跨界车项目(以下简称“跨界车项目”)在2023年1月1日至2025年12月31日的三年期间内累计实现不低于1.5亿元人民币的经营净利润。如果未来三年的净利润能达到甲方的预期,甲方愿意授予乙方相应的股票奖励,且将于第三年对赌期期末对激励实现情况进行累计考核,以保证三年累计对赌利润与累计对赌收益的一致性。

The Equity Incentive Agreement on the Project of Crossover Golf Carts signed by both parties on March 13, 2023, which specifies that Party B shall ensure that the Project of Crossover Golf Carts of Kandi Electric Vehicles (Hainan) Co., Ltd. (hereinafter referred to as the “Crossover Project”) realize an accumulative net operating profit of no less than RMB150 million for the three-year period from January 1, 2023 to December 31, 2025. Pursuant to the Equity Incentive Agreement Party A is willing to grant Party B the appropriate stock awards and will perform a cumulative evaluation on such profit realization at the end of the third year of evaluation period to ensure the consistency of the cumulative evaluation profits and cumulative evaluation earnings of the three years, provided that the net profit in the next three years can meet the expectations of Party A.

 

3

 

 

2、经内部审计,跨界车项目在2023年1月1日至2023年7月31日期间已实现经营净利润超过5000万元人民币。为了稳定队伍和鼓励跨界车项目管理团队的积极性,促进跨界车项目效益稳步增长,甲方同意对限制性股票激励时间进行调整,现经双方友好协商并达成以下补充条款:

The internal audit identified that the Crossover Project achieved an operating net profit of more than RMB50 million from January 1, 2023 to July 31, 2023. In order to stabilize the team, fully mobilize enthusiasm of the management team of the Crossover Project and promote the steady growth of benefits of the Crossover Project, Party A agrees to make adjustment to the incentive time of the restricted stocks, and both parties have reached the following supplementary terms through friendly negotiation:

 

一、根据内部审计结果,跨界车项目在2023年1-7月份已超额完成2023年全年的利润目标,为此甲方同意提前发放KNDI激励股票5957811股的限制性股票(“托管股”),交付给乙方指定的人员,这些载有特定托管限制的限制性股票拥有投票权。

Based on the internal audit results, the Crossover Project, during the period of January to July 2023, has over-achieved profit target for the whole year of 2023, therefore, Party A agrees to issue 5,957,811 KNDI restricted shares (the “Restricted Shares”) ahead of time to the designee(s) of Party B, and Party B shall have voting rights on these Restricted Shares containing specific escrow restrictions.

 

二、上述限制性托管股票将在三年对赌期满后,按《关于高尔夫跨界车项目股权激励协议》进行累计考核。对赌期间如果出现亏损,则由乙方在每一相应年度的审计报告出具后30个工作日内,对跨界车项目实际亏损以现金方式进行补偿。同样在每一相应年度的审计报告出具后30个工作日内按原协议对赌条件解除相应数量股票的托管限制。如果累计条件未能100%达标,则按最终的结算后的数据计算,未能达标的部分将由甲方收回相应数量的股票

The above Restricted Shares will be cumulatively assessed according to the Equity Incentive Agreement on Project of Crossover Golf Carts upon the expiration of the three-year evaluation period. If there is a loss during the evaluation period, Party B shall compensate in cash the actual loss of the Crossover Project within 30 working days after the audit report of each corresponding year is issued. Similarly, the escrow restrictions on Restricted Shares shall be released within 30 working days after the issuance of the audit report of each corresponding year according to the evaluation conditions in the original agreement. If the cumulative conditions are not 100% achieved, Party A shall take back the corresponding number of shares for the portion that are not up to the conditions based on the final audit results.

 

甲方(授予方)、乙方(接受方)于文首载明的日期签署本协议,以资证明。

IN WITNESS HEREOF, Party A and Party B have executed this Agreement as of the date first above written.

 

三、本协议以中文书就,中文正本一式四份,授予方和接受方各持有正本二份。

This Agreement is written in Chinese, and the Chinese original is made in quadruplicate.

 

The Receiving Party and the Granting Party hold two originals each.

 

4

 

 

以下无正文

(no text below)

 

甲方:康迪科技集团有限公司(KNDI)(“授予方”

Party A: Kandi Technologies Group, Inc. (KNDI) (the “Granting Party”)

 

授权代表人签字:_________________________

Signature of authorized representative: _________________________

 

 

乙方:康迪电动汽车(海南)有限公司高尔夫跨界车项目管理团队

团队代表人:潘国庆(“接受方”)

Party B: Project Management Team of the Project of Crossover Golf Carts of Kandi Electric Vehicles (Hainan) Co., Ltd.

Team representative: Pan Guoqing (the “Receiving Party”)

 

授权代表人签字:__________________________

Signatures of authorized representative: __________________________

 

 

5

 

 

EX-31.1 3 f10q0923ex31-1_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, Dong Xueqin, 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: November 8, 2023  
   
/s/ Dong Xueqin  
Dong Xueqin  
President and Chief Executive Officer  
(Principal Executive Officer)  

 

EX-31.2 4 f10q0923ex31-2_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: November 8, 2023  
   
/s/ Jehn Ming Lim  
Jehn Ming Lim  
Chief Financial Officer  
(Principal Financial Officer and
Principal Accounting Officer)
 

 

EX-32.1 5 f10q0923ex32-1_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 September 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)
 
   
November 8, 2023  

 

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Disclosure - Stock Award link:presentationLink link:definitionLink link:calculationLink 027 - Disclosure - Commitments and Contingencies link:presentationLink link:definitionLink link:calculationLink 028 - Disclosure - Segment Reporting link:presentationLink link:definitionLink link:calculationLink 029 - Disclosure - Subsequent Event link:presentationLink link:definitionLink link:calculationLink 030 - Disclosure - Concentrations (Tables) link:presentationLink link:definitionLink link:calculationLink 031 - Disclosure - Accounts Receivable (Tables) link:presentationLink link:definitionLink link:calculationLink 032 - Disclosure - Inventories (Tables) link:presentationLink link:definitionLink link:calculationLink 033 - Disclosure - Property, Plant and Equipment, Net (Tables) link:presentationLink link:definitionLink link:calculationLink 034 - Disclosure - Intangible Assets (Tables) link:presentationLink link:definitionLink link:calculationLink 035 - Disclosure - Land Use Rights, Net (Tables) link:presentationLink link:definitionLink link:calculationLink 036 - Disclosure - Other Long Term Assets (Tables) link:presentationLink link:definitionLink link:calculationLink 037 - Disclosure - Taxes (Tables) link:presentationLink link:definitionLink link:calculationLink 038 - Disclosure - Leases (Tables) link:presentationLink link:definitionLink link:calculationLink 039 - Disclosure - Segment Reporting (Tables) link:presentationLink link:definitionLink link:calculationLink 040 - Disclosure - Liquidity (Details) link:presentationLink link:definitionLink link:calculationLink 041 - Disclosure - Principles of Consolidation (Details) link:presentationLink link:definitionLink link:calculationLink 042 - Disclosure - Use of Estimates (Details) link:presentationLink link:definitionLink link:calculationLink 043 - Disclosure - Concentrations (Details) link:presentationLink link:definitionLink link:calculationLink 044 - Disclosure - Concentrations (Details) - Schedule of Major Customers link:presentationLink link:definitionLink link:calculationLink 045 - Disclosure - Concentrations (Details) - Schedule of Material Supplier link:presentationLink link:definitionLink link:calculationLink 046 - Disclosure - Earnings (Loss) Per Share (Details) link:presentationLink link:definitionLink link:calculationLink 047 - Disclosure - Accounts Receivable (Details) - Schedule of Accounts Receivable link:presentationLink link:definitionLink link:calculationLink 048 - Disclosure - Accounts Receivable (Details) - Schedule of Provision for Doubtful Accounts link:presentationLink link:definitionLink link:calculationLink 049 - Disclosure - Inventories (Details) link:presentationLink link:definitionLink link:calculationLink 050 - Disclosure - Inventories (Details) - Schedule of Inventories link:presentationLink link:definitionLink link:calculationLink 051 - Disclosure - Property, Plant and Equipment, Net (Details) link:presentationLink link:definitionLink link:calculationLink 052 - Disclosure - Property, Plant and Equipment, Net (Details) - Schedule of Property, Plants and Equipment link:presentationLink link:definitionLink link:calculationLink 053 - Disclosure - Intangible Assets (Details) link:presentationLink link:definitionLink link:calculationLink 054 - Disclosure - Intangible Assets (Details) - Schedule of Major Class of Our Intangible Assets, Other than Goodwill link:presentationLink link:definitionLink link:calculationLink 055 - Disclosure - Intangible Assets (Details) - Schedule of Amortization Expenses link:presentationLink link:definitionLink link:calculationLink 056 - Disclosure - Land Use Rights, Net (Details) link:presentationLink link:definitionLink link:calculationLink 057 - Disclosure - Land Use Rights, Net (Details) - Schedule of Land Use Rights link:presentationLink link:definitionLink link:calculationLink