Item 4.02 Non-Reliance on Previously
Issued Financial Statements or a Related Audit Report or Completed Interim
Review
.
(a) During the course of Kandi
Technologies Group, Inc.s (the Company) preparation of its Annual Report on
Form 10-K for the year ended December 31, 2016, and during preparation of
responses to comments from the staff of the Securities and Exchange Commission
(SEC), Division of Corporate Finance, the Companys management identified
certain areas in the Companys previously issued financial statements for the
years ended December 31, 2015 and 2014, and the first three quarters for the
year ended December 31, 2016 (the Previously Issued Financial Statements),
that require adjustment as described below and in more detail in the Companys
annual report on Form 10-K/A for the fiscal year ended December 31, 2015 (Form
10-K/A), to be filed with the SEC. As a result, on March 7, 2017, the board of
directors (the Board) of the Company, based on the recommendation of the
Companys audit committee, and in consultation with management, concluded that
the Companys Previously Issued Financial Statements should no longer be relied
upon. The Company will, in the Form 10-K/A, restate the Previously Issued
Financial Statements, which restatement will include separate audited financial
statements for the JV Company (the Restatements). The Restatements will have
no effect on the net income of the Company as reported in the Previously Issued
Financial Statements. The Company will endeavor to file its Annual Report on
Form 10-K for the fiscal year ended December 31, 2016, pursuant to SECs rules
(including timing guidelines), and will file the Form 10-K/A as soon as
practicably possible.
The Restatements will include separate audited financial
statements for the Companys equity investment in the JV Company, corrections to
the classification of notes receivable and notes payable in the Companys
statements of cash flow, revisions in the Companys financial statement
presentation to separately identify certain related party accounts on the face
of the Balance Sheets and the Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss), certain amendments to Note 20 Taxes of the Notes
to the Companys Consolidated Financial Statements, the adjustment of previously
recorded construction-in-progress back to prepayment in Note 16 -
Construction-in-Progress of the Notes to the Companys Consolidated Financial
Statements, expansions of two tables of sales to and purchases from the JV
Company in Note 24 - Summarized Information of Investment in the JV Company of
the Notes to the Companys Consolidated Financial Statements from two years to
three years, and the removal of unaudited labels from certain tables in Note
20 - Taxes of the Notes to the Companys Consolidated Financial Statements.
The Company will also amend its unaudited quarterly data for
the first three quarters ended December 31, 2016, as set forth in its upcoming
Annual Report on Form 10-K for the year ended December 31, 2016. The Company has
not filed and does not intend to file amendments to its Quarterly Reports on
Form 10-Q for the quarterly periods affected. Accordingly, investors should no
longer rely upon the Companys previously released financial statements for
those periods or any earnings releases or other communications relating to those
periods. The Companys Quarterly Reports on Form 10-Q for fiscal year 2017 will
include restated results for the corresponding interim periods of fiscal year
2016.
In addition, in conjunction with the Restatements, the Company
is reassessing its internal controls over its financial reporting and compliance
programs. The result of this reassessment could lead the Company to conclude
that there were deficiencies in its internal controls over financial reporting
that constitute material weaknesses and could therefore affect its conclusions
regarding effectiveness as previously expressed in Item 9A, Controls and
Procedures, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2015. Accordingly, managements report on internal controls over
financial reporting as of December 31, 2015, and the associated report of AWC
(CPA) Limited, the Companys former principal accountant (AWC), should no longer be
relied upon. The Public Company Accounting Oversight Board revoked the
registration of AWC on May 18, 2016. The Company dismissed AWC and engaged BDO
China Shu Lun Pan Certified Public Accountants LLP (BDO China) as its new
independent registered public accounting firm on April 12, 2016, as previously
reported. The Company is committed to maintaining an effective control
environment and making all necessary changes to enhance control effectiveness.
The chair of the Companys audit committee, on behalf of the
audit committee, and the management have discussed the matters disclosed in this
Item 4.02(a) of this Current Report on Form 8-K with BDO China.
Caution Regarding Forward-Looking Statements
This Current Report on Form 8-K includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that relate to future events or performance. These forward-looking statements
are based on the Companys current beliefs, assumptions and expectations
regarding future events, which in turn are based on information currently
available to the Company. Such forward-looking statements include statements
regarding materiality or significance, the quantitative effects of the
Restatements, and any anticipated conclusions of the Board or the Companys
management with respect to the matters relating to the Companys accounting. By
their nature, forward-looking statements address matters that are subject to
risks and uncertainties. A variety of factors could cause actual events
and results, as well as the Companys expectations regarding materiality or
significance, the Restatements quantitative effects, the effectiveness of the
Companys disclosure controls and procedures and the effectiveness of the
Companys internal control over financial reporting, to differ materially from
those expressed in or contemplated by the forward-looking statements. These
factors include, without limitation, the risk that additional information may
become known prior to the expected filing with the SEC of the Form 10-K/A, or
that other subsequent events may occur that would require Company to make
additional adjustments to its financial statements. Other risk factors affecting
the Company are discussed in detail in the Companys filings with the SEC,
including its Annual Reports on Form 10-K. The Company undertakes no obligation
to publicly update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise, except to the extent required by
applicable securities laws.