The following selected consolidated financial data should be
read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements
and the related notes included elsewhere in this Annual Report on Form 10-K.
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF CASH
FLOW
FOR THE
YEARS
ENDED
DECEMBER
31, 2016, 2015 AND 2014
|
|
Year Ended
|
|
|
|
December 31,
2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
As Restated
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
$
|
(6,510,757
|
)
|
$
|
14,665,495
|
|
$
|
12,271,338
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
4,863,277
|
|
|
5,788,780
|
|
|
5,571,465
|
|
Assets Impairments
|
|
(40,142
|
)
|
|
194,366
|
|
|
0
|
|
Deferred taxes
|
|
3,651,362
|
|
|
1,446,345
|
|
|
1,579,855
|
|
Change in fair value of
financial instruments
|
|
(3,823,590
|
)
|
|
(8,519,295
|
)
|
|
(6,531,308
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss (income) in investment
in associated companies
|
|
0
|
|
|
0
|
|
|
54,308
|
|
Share of profit after tax of JV Company
|
|
7,307,510
|
|
|
(11,841,855
|
)
|
|
(4,490,266
|
)
|
Decrease in reserve for fixed
assets
|
|
0
|
|
|
0
|
|
|
(302,023
|
)
|
Stock Compensation cost
|
|
14,913,212
|
|
|
22,306,987
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(40,962,889
|
)
|
|
(16,240,270
|
)
|
|
13,739,774
|
|
Notes receivable
|
|
1,383,605
|
|
|
1,708,223
|
|
|
0
|
|
Notes receivable from the JV Company and
related parties
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
4,952,792
|
|
|
(3,497,460
|
)
|
|
(6,280,502
|
)
|
Other receivables
|
|
(43,650,395
|
)
|
|
(193,954
|
)
|
|
315,071
|
|
Due from employee
|
|
41,529
|
|
|
(7,596
|
)
|
|
5,139
|
|
Prepayments and prepaid expenses
|
|
(9,209,955
|
)
|
|
6,664,779
|
|
|
2,609,162
|
|
Amount due from JV Company
|
|
(111,996,250
|
)
|
|
(127,667,063
|
)
|
|
(62,142,181
|
)
|
Due from related party
|
|
28,715,113
|
|
|
(42,249,905
|
)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
112,150,789
|
|
|
164,704,112
|
|
|
43,114,334
|
|
Other payables and accrued liabilities
|
|
(3,790,859
|
)
|
|
5,300,095
|
|
|
2,694,689
|
|
Notes payable
|
|
(8,480,858
|
)
|
|
(15,398,471
|
)
|
|
(1,951,788
|
)
|
Customer deposits
|
|
(48,312
|
)
|
|
(2,496,382
|
)
|
|
2,588,830
|
|
Income Tax payable
|
|
1,008,274
|
|
|
(1,039,187
|
)
|
|
482,020
|
|
Net cash (used in ) provided by operating
activities
|
$
|
(49,526,543
|
)
|
$
|
(6,372,255
|
)
|
$
|
3,327,918
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
(Purchases)/Disposal of plant
and equipment, net
|
|
(275,801
|
)
|
|
(827,059
|
)
|
|
(2,101,355
|
)
|
(Purchases)/Disposal of land use rights and
other intangible assets
|
|
(3,388
|
)
|
|
1,589,165
|
|
|
(1,668,534
|
)
|
(Purchases)/Disposal of
construction in progress
|
|
(6,001,664
|
)
|
|
1,128,443
|
|
|
(58,860,969
|
)
|
Disposal of associated company
|
|
0
|
|
|
0
|
|
|
(96,299
|
)
|
Issuance of notes receivable
|
|
0
|
|
|
(9,411,720
|
)
|
|
(9,450,642
|
)
|
Repayment of notes receivable
|
|
10,335,807
|
|
|
6,410,154
|
|
|
15,043,109
|
|
Long Term Investment
|
|
0
|
|
|
(1,522,411
|
)
|
|
0
|
|
Short Term Investment
|
|
(3,088,327
|
)
|
|
(1,679,051
|
)
|
|
0
|
|
Net cash provided by (used
in) investing activities
|
$
|
966,627
|
|
$
|
(4,312,479
|
)
|
$
|
(57,134,690
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
2,257,268
|
|
|
(4,006,346
|
)
|
|
(13,010,291
|
)
|
Proceeds from short-term and long-term
bank loans
|
|
65,912,237
|
|
|
50,640,214
|
|
|
48,306,743
|
|
Repayments of
short-term and long-term bank loans
|
|
(35,815,325
|
)
|
|
(47,595,391
|
)
|
|
(46,517,604
|
)
|
Proceeds from notes payable
|
|
12,038,765
|
|
|
0
|
|
|
13,011,917
|
|
Repayment of notes
payable
|
|
0
|
|
|
0
|
|
|
(27,650,324
|
)
|
Repayment of bond payable
|
|
0
|
|
|
0
|
|
|
(13,011,917
|
)
|
Fund raising through
issuing common stock and warrants
|
|
0
|
|
|
0
|
|
|
78,358,991
|
|
Option exercise, stock awards &
other financing
|
|
0
|
|
|
0
|
|
|
8,431,247
|
|
Warrant exercise
|
|
434,666
|
|
|
0
|
|
|
21,101,039
|
|
Net cash provided by
(used in) financing activities
|
$
|
44,827,611
|
|
$
|
(961,523
|
)
|
$
|
69,019,801
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
(3,732,305
|
)
|
|
(11,646,257
|
)
|
|
15,213,029
|
|
Effect of exchange rate
changes on cash
|
|
(770,333
|
)
|
|
2,005,356
|
|
|
(1,595,938
|
)
|
Cash and cash equivalents at beginning of
year
|
|
16,738,559
|
|
|
26,379,460
|
|
|
12,762,369
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
$
|
12,235,921
|
|
$
|
16,738,559
|
|
$
|
26,379,460
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
$
|
2,598,846
|
|
$
|
2,496,654
|
|
$
|
1,932,392
|
|
Interest paid
|
$
|
1,671,372
|
|
$
|
2,188,223
|
|
$
|
3,475,893
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress transferred back to
prepayments
|
$
|
35,035,762
|
|
$
|
-
|
|
$
|
7,969,799
|
|
Accounts payable transferred to construction
in progress
|
$
|
4,191,246
|
|
$
|
-
|
|
$
|
-
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
$
|
43,707,157
|
|
$
|
99,147,703
|
|
$
|
13,548,659
|
|
Settlement of accounts
receivables with notes receivable from unrelated parties
|
$
|
15,052,339
|
|
$
|
23,292,896
|
|
$
|
1,706,188
|
|
Assignment of notes
receivable to supplier to settle accounts payable
|
$
|
59,355,952
|
|
$
|
119,107,737
|
|
$
|
14,311,483
|
|
Settlement of accounts
payable with notes payables
|
$
|
8,146,783
|
|
$
|
13,781,830
|
|
$
|
5,707,027
|
|
F-7
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Kandi
Technologies changed its name from Stone Mountain Resources, Inc. to Kandi
Technologies, Corp. on August 13, 2007. On December 21, 2012, Kandi Technologies
changed its name to Kandi Technologies Group, Inc. As used herein, the term the
Company means Kandi Technologies and its operating subsidiaries, as described
below.
Headquartered in the Jinhua city, Zhejiang Province, China, the
Company is one of Chinas leading producers and manufacturers of electrical
vehicle products, electrical vehicle parts and off road vehicles for sale in the
Peoples Republic of China (China) and global markets. The Company conducts
its primary business operations through its wholly-owned subsidiary, Zhejiang
Kandi Vehicles Co., Ltd. (Kandi Vehicles), and the partial and wholly-owned
subsidiaries of Kandi Vehicles.
The Companys organizational chart is as follows:
F-8
Operating Subsidiaries:
Pursuant to relevant agreements executed in January 2011, Kandi
Vehicles is entitled to 100% of the economic benefits, voting rights and
residual interests (100% of profits and losses) of Jinhua Kandi New Energy
Vehicles Co., Ltd. (Kandi New Energy), a company in which Kandi Vehicles has a
50% ownership interest. Mr. Hu Xiaoming owns the other 50%, and has entrusted
Kandi Vehicles to manage Kandi New Energy. Kandi New Energy currently holds
battery packing production licensing rights and supplies battery packs to the JV
Company (as such term is defined below). It did not maintain special-purpose
vehicle production licensing rights to manufacture Kandi brand electric utility
vehicles. Pursuant to the JV Agreement (as such term is defined below),Kandi is
not allowed to produce EVs. To avoid the maintenance fee on this license, the
Company anticipates selling its special-purpose vehicle production licensing
rights to a third party. The Ministry of Industrial and Information Technology
of the Peoples Republic of China has approved this transaction and the transfer
is in process.
In April 2012, pursuant to a share exchange agreement, the
Company acquired 100% of Yongkang Scrou Electric Co, Ltd. (Yongkang Scrou), a
manufacturer of automobile and EV parts. Yongkang Scrou currently manufactures
and sells EV drive motors, EV controllers, air conditioners and other electrical
products to the JV Company.
In March 2013, pursuant to a joint venture agreement (the JV
Agreement) entered into by Kandi Vehicles and Shanghai Maple Guorun Automobile
Co., Ltd. (Shanghai Guorun), a 99%-owned subsidiary of Geely Automobile
Holdings Ltd. (Geely), the parties established Zhejiang Kandi Electric
Vehicles Co., Ltd. (the JV Company) to develop, manufacture and sell EV
products and related auto parts. Each of Kandi Vehicles and Shanghai Guorun has
50% ownership interest in the JV Company. In March 2014, the JV Company changed
its name to Kandi Electric Vehicles Group Co., Ltd. At present, the JV Company
is a holding company with products that are manufactured by its subsidiaries.
For JV Companys better development, Zhejiang Geely Holding Group, the parent
company of Geely, became the direct holding company of the JV Company on October
26, 2016 by completing the purchase of the 50% equity of the JV Company held by
Shanghai Guorun with a premium price, or a purchase price exceeding the cash
amount of the aggregate of the original investment and the shared profits over
the years.
In March 2013, Kandi Vehicles formed Kandi Electric Vehicles
(Changxing) Co., Ltd. (Kandi Changxing) in the Changxing (National) Economic
and Technological Development Zone. Kandi Changxing is engaged in the production
of EV products. In the fourth quarter of 2013, Kandi Vehicles entered into an
ownership transfer agreement with the JV Company pursuant to which Kandi
Vehicles transferred 100% of its ownership in Kandi Changxing to the JV Company.
The Company, indirectly through its 50% ownership interest in the JV Company,
has 50% economic interest in Kandi Changxing.
In July 2013, Zhejiang ZuoZhongYou Electric Vehicle Service
Co., Ltd. (the Service Company) was formed. The Service Company is engaged in
various pure EV leasing businesses, which is called Micro Public Transportation
(MPT) program. The Company has 9.5% ownership interest in the Service Company
through Kandi Vehicles.
In November 2013, Kandi Electric Vehicles Jinhua Co., Ltd.
(Kandi Jinhua) was formed by the JV Company. The JV Company has 100% ownership
interest in Kandi Jinhua, and the Company, indirectly through its 50% ownership
interest in the JV Company, has 50% economic interest in Kandi Jinhua.
In November 2013, Zhejiang JiHeKang Electric Vehicle Sales Co.,
Ltd. (JiHeKang) was formed by the JV Company and is engaged in car sales
business. The JV Company has 100% ownership interest in JiHeKang, and the
Company, indirectly through its 50% ownership interest in the JV Company, has
50% economic interest in JiHeKang.
In December 2013, the JV Company entered into an ownership
transfer agreement with Shanghai Guorun pursuant to which the JV Company
acquired 100% ownership of Kandi Electric Vehicles (Shanghai) Co., Ltd. (Kandi
Shanghai) . As a result, Kandi Shanghai is a wholly-owned subsidiary of the JV
Company, and the Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest in Kandi Shanghai.
In January 2014, Kandi Electric Vehicles Jiangsu Co., Ltd.
(Kandi Jiangsu) was formed by the JV Company. The JV Company has 100%
ownership interest in Kandi Jiangsu, and the Company, indirectly through its 50%
ownership interest in the JV Company, has 50% economic interest in Kandi
Jiangsu. The company is mainly engaged in EV research and development,
manufacturing and sales.
F-9
In November 2015, Hangzhou Puma Investment Management Co., Ltd.
(Puma Investment) was formed by the JV Company, which focuses on the
investment and consulting service. The JV Company has 50% ownership interest in
Puma Investment(the other 50% was owned by Zuozhongyou Electric Vehicles Service
(Hangzhou) Co.,Ltd., a subsidiary of Service Company, and the Company,
indirectly through its JV Company, has 25% economic interest in Puma Investment.
The other 50% ownership is held by the Service Company.
In November 2015, Hangzhou JiHeKang Electric Vehicle Service
Co., Ltd. (JiHeKang Service Company) was formed by the JV Company, which
focuses on the after-market service for the EV products sold. The JV Company has
100% ownership interest in JiHeKang Service Company, and the Company, indirectly
through its JV Company, has 50% economic interest in JiHeKang Service Company.
In January 2016, Kandi Electric Vehicles (Hainan) Co., Ltd.
(Kandi Hainan) was renamed from Kandi Electric Vehicles (Wanning) Co., Ltd.
(Kandi Wanning) which was originally formed in Wanning City of Hainan Province
by Kandi Vehicles and Kandi New Energy in April 2013 and then was transferred to
Haikou City in January 2016. Kandi Vehicles has 90% ownership in Kandi Hainan,
and Kandi New Energy has the remaining 10% interest. However, Kandi Vehicles is,
effectively, entitled to 100% of the economic benefits, voting rights and
residual interests (100% profits and losses) of Kandi Hainan.
In August 2016, Jiangsu JiDian Electric Vehicle Sales Co., Ltd.
(Jiangsu JiDian) was formed by JiHeKang and is engaged in the car sales
business. Since JiHeKang is 100% owned by the JV Company, the JV Company has a
100% ownership interest in Jiangsu JiDian, and the Company, indirectly through
its 50% ownership interest in the JV Company, has a 50% economic interest in
Jiangsu JiDian.
In October 2016, JiHeKang acquired Tianjin BoHaiWan Vehicle
Sales Co., Ltd. (Tianjin BoHaiWan), which is engaged in the car sales
business. Since JiHeKang is 100% owned by the JV Company, the JV Company has a
100% ownership interest in Tianjin BoHaiWan, and the Company, indirectly through
its 50% ownership interest in the JV Company, has a 50% economic interest in
Tianjin BoHaiWan.
In November 2016, Changxing Kandi Vehicle Maintenance Co., Ltd.
(Changxing Maintenance) was formed by Kandi Changxing and is engaged in the
car repair and maintenance business. Since Kandi Changxing is 100% owned by the
JV Company, the JV Company has a 100% ownership interest in Changxing
Maintenance, and the Company, indirectly through its 50% ownership interest in
the JV Company, has a 50% economic interest in Changxing Maintenance.
The Companys primary business operations are designing,
development, manufacturing and commercialization of EV products, EV parts and
off-road vehicles. As part of its strategic objective to become a leading
manufacturer of EV products (through the JV Company) and related services, the
Company has increased its focus on pure EV related products with a particular
emphasis on expanding its market shares in China.
NOTE 2 - LIQUIDITY
The Company had a working capital surplus of $86,348,025 as of
December 31, 2016, an increase of $18,883,935 from a working capital surplus of
$67,464,090 as of December 31, 2015.
F-10
As of December 31, 2016, the Company had credit lines from
commercial banks of $34,265,065. The Company believes that its cash flows
generated internally may not be sufficient to support the growth of future
operations and to repay short-term bank loans for the next twelve (12) months.
However, the Company believes its access to existing financing sources and
established relationships with PRC banks will enable it to meet its obligations
and fund its ongoing operations.
The Company has historically financed its operations through
short-term commercial bank loans from PRC banks. The term of these loans is
typically for one year, and upon the payment of all outstanding principal and
interest in a particular loan, the banks have typically rolled over the loan for
an additional one-year term, with adjustments made to the interest rate to
reflect prevailing market rates. The Company believes this practice has been
ongoing year after year and that short-term bank loans remain available on
normal trade terms if needed.
NOTE 3 - BASIS OF PRESENTATION
The Company maintains its general ledger and journals with the
accrual method accounting for financial reporting purposes. The financial
statements and notes are representations of management. Accounting policies
adopted by the Company conform to generally accepted accounting principles in
the United States and have been consistently applied in the presentation of
financial statements.
NOTE 4 PRINCIPLES OF CONSOLIDATION
The consolidated financial statements reflect the accounts of
the Company and its ownership interest in the following subsidiaries:
(1)
|
Continental, a wholly-owned subsidiary of the
Company;
|
|
|
(2)
|
Kandi Vehicles, a wholly-owned subsidiary of
Continental;
|
|
|
(3)
|
Kandi New Energy, a 50% owned subsidiary of Kandi
Vehicles, Mr. Hu Xiaoming has owned the other 50% equity. Pursuant to
relevant agreements executed in January 2011, Mr. Hu Xiaoming contracted
Kandi Vehicles for the operation and management of Kandi New Energy and
had his shares escrowed. As a result, Kandi Vehicles is entitled to 100%
of the economic benefits, voting rights and residual interests of Kandi
New Energy;
|
|
|
(4)
|
Yongkang Scrou, a wholly-owned subsidiary of Kandi
Vehicles; and
|
|
|
(5)
|
Kandi Hainan, a subsidiary, 10% owned by Kandi New Energy
and 90% owned by Kandi Vehicles.
|
F-11
Equity
Method
Investees
The consolidated net income also includes the Companys
proportionate share of the net income or loss of its equity method investees as
following:
(6)
|
The JV Company, 50% owned subsidiary of Kandi
Vehicles;
|
|
|
(7)
|
Kandi Changxing, a wholly-owned subsidiary of the JV
Company. The Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest;
|
|
|
(8)
|
Kandi Jinhua, a wholly-owned subsidiary of the JV
Company. The Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest;
|
|
|
(9)
|
JiHeKang, a wholly-owned subsidiary of the JV Company.
The Company, indirectly through its 50% ownership interest in the JV
Company, has 50% economic interest;
|
|
|
(10)
|
Kandi Shanghai, a wholly-owned subsidiary of the JV
Company. The Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest;
|
|
|
(11)
|
Kandi Jiangsu, a wholly-owned subsidiary of the JV
Company. The Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest;
|
|
|
(12)
|
JiHeKang Service Company, a wholly-owned subsidiary of
the JV Company. The Company, indirectly through its 50% ownership interest
in the JV Company, has 50% economic interest.
|
|
|
(13)
|
Tianjin BoHaiWan, a wholly-owned subsidiary of the JV
Company. The Company, indirectly through its 50% ownership interest in the
JV Company, has 50% economic interest;
|
|
|
(14)
|
Changxing Maintenance, a wholly-owned subsidiary of the
JV Company. The Company, indirectly through its 50% ownership interest in
the JV Company, has 50% economic interest;
|
All intra-entity profits and losses
with the Companys equity method investees have been eliminated.
F-12
NOTE 5 USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements, and the reported amounts
of revenue and expenses during the reporting period. Management makes these
estimates using the best information available at the time the estimates are
made; however actual results when ultimately realized could differ from those
estimates.
NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Economic and Political Risks
The Companys operations are conducted in the PRC. As a result,
the Companys business, financial condition and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC economy. In addition, the Companys earnings are
subject to movements in foreign currency exchange rates when transactions are
denominated in Renminbi (RMB), which is the Companys functional currency.
Accordingly, the Companys operating results are affected by changes in the
exchange rate between the U.S. dollar and the RMB.
The Companys operations in the PRC are subject to special
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environment and foreign currency
exchange. The Companys performance may be adversely affected by changes in the
political and social conditions in the PRC, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency conversion, remittances abroad, and rates and methods of taxation,
among other things.
(b) Fair Value of Financial Instruments
ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. The hierarchy prioritizes
the inputs into three levels based on the extent to which inputs used in
measuring fair value are observable in the market.
F-13
These tiers include:
Level 1defined as observable inputs such as quoted prices in
active markets;
Level 2defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and
Level 3defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its own
assumptions.
The companys financial instruments primarily consist of cash
and cash equivalents, restricted cash, accounts receivable, notes receivable,
other receivable, accounts payable, other payables and accrued liabilities,
short-term bank loans, notes payable, and warrants.
The carrying value of cash and cash equivalents, restricted
cash, accounts receivable, notes receivable, other receivable, accounts payable,
other payables and accrued liabilities and notes payable approximate fair value
because of the short term nature of these items. The estimated fair values of
short-term bank loans were not materially different from their carrying value as
presented due to the short maturities and that the interest rates on the
borrowing approximate those that would have been available for loans of similar
remaining maturity and risk profile. As the carrying amounts are reasonable
estimates of the fair value, these financial instruments are classified within
Level 1 of the fair value hierarchy. The Company identified notes payable as a
Level 2 instrument due to the fact that the inputs to the valuation are
primarily based upon readily observable pricing information. The balance of
notes payable, which was measured and disclosed at fair value, was $14,797,325
and $3,850,478 at December 31, 2016 and December 31, 2015, respectively.
Warrants, which are accounted as liabilities, are treated as
derivative instruments, and are measured at each reporting date for their fair
value using Level 3 inputs. The fair value of warrants was $0 and $3,823,590 at
December 31, 2016 and December 31, 2015, respectively. Also see Note 6(t).
(c) Cash and Cash Equivalents
The Company considers highly-liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Restricted cash, as of December 31, 2016 and December 31, 2015,
includes time deposits on account for earning interest income. As of December
31, 2016 and December 31, 2015, the Companys restricted cash was $12,957,377
and $16,172,009, which includes a one-year Certificate of Time Deposit (CD) of
$11,517,669 with Hangzhou Bank Jinhua Branch, among which $5,758,834 will mature
on September 29, 2017 and the remaining will mature on October 29, 2017.
F-14
(d) Inventories
Inventories are stated at the lower of cost or net realizable
value (market value). The cost of raw materials is determined on the basis of
weighted average. The cost of finished goods is determined on the weighted
average basis and comprises direct materials, direct labor and an appropriate
proportion of overhead.
Net realizable value is based on estimated selling prices less
selling expenses and any further costs expected to be incurred for completion.
Adjustments to reduce the cost of inventory to its net realizable value are
made, if required, for estimated excess, obsolescence, or impaired balances.
(e) Accounts Receivable
Accounts receivable are recognized and carried at net
realizable value. An allowance for doubtful accounts is recorded in periods in
which the Company determines a loss is probable, based on its assessment of
specific factors, such as troubled collections, historical experience, accounts
aging, ongoing business relations and other factors. Accounts are written off
after an exhaustive collection effort. If accounts receivable are to be provided
for, or written off, they are recognized in the consolidated statement of
operations within the operating expenses line item. As of December 31, 2016 and
December 31, 2015, the Company had no allowance for doubtful accounts, as per
the managements judgment based on their best knowledge.
As of December 31, 2016 and December 31, 2015, the credit terms
with the Companys customers were typically 210 to 720 days and 150 to 180 days
respectively after delivery. The Company extended the credit term with its
customers this year to a much longer period as referenced above due to the
delayed subsidy payments from the government on EV sales.
(f) Notes receivable
Notes receivable represent short-term loans to third parties
with the maximum term of six months. Interest income will be recognized
according to each agreement between a borrower and the Company on an accrual
basis. If notes receivable are paid back or written off, that transaction will
be recognized in the relevant year. If notes receivable are paid back, or
written off, that transaction will be recognized in the relevant year if the
loan default is probable, reasonably assured and the loss can be reasonably
estimated. The Company will recognize income if the written-off loan is
recovered at a future date. In case of any foreclosure proceedings or legal
actions being taken, the Company provides an accrual for the related foreclosure
expenses and related litigation expenses. The Company also receives notes
receivable from the JV Company and other parties to settle the accounts
receivable. If the Company wants to discount the notes receivables for the
purpose of receiving immediate cash, the current discount rate is approximately
in the range of 2.70% to 6.00% annually. As at the end of December 31, 2016, the
Company had notes receivables of $400,239, which typically mature within 6
months.
F-15
(g) Prepayments
Prepayments represent cash paid in advance to suppliers, which
also includes advances to raw material suppliers, mold manufacturers, and
suppliers of equipment.
As of December 31, 2015, the Company made a total prepayment of
RMB 353 million (approximately $50,821,714) to our supplier Nanjing Shangtong as
an advance to purchase a production line and develop a new EV model for Hainan
project. Nanjing Shangtong is a total solution contractor for Kandi Hainan
project to provide all the equipment and EV product design and research
services. In June 2016, Kandi Hainan made the prepayment of RMB 70 million
(approximately $10,077,960) to Nanjing Shangtong for the design and development
of a new EV model. In July 2016 and August 2016, two prepayments of RMB 30
million (approximately $4,319,126) and RMB 90 million (approximately
$12,957,377) respectively, were made to Nanjing Shangtong for the same purpose.
In November 2016 and December 2016, another two prepayments of RMB 51 million
(approximately $7,342,514) and RMB 150 million (approximately $21,595,629)
respectively, were made to Nanjing Shangtong for the same purpose. As of
December 31, 2016, $27,054,181 of the advance payment related to Hainan project
construction to Nanjing Shangtong was transferred to construction -in-progress
as described in Note 15 and $24,844,149 of the advance payment related to the
development of a new EV model was expensed.
Advances for raw materials purchases typically are settled
within two months by the Companys receipt of raw materials. Prepayment is
offset against purchase amount after equipment or materials are delivered.
(h) Property, Plant and Equipment
Property, Plant and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over the assets estimated
useful lives, using the straight-line method. Leasehold improvements are
amortized over the life of the asset or the term of the lease, whichever is
shorter. Estimated useful lives are as follows:
Buildings
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30 years
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Machinery and equipment
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10 years
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Office equipment
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5 years
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Motor vehicles
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5 years
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Molds
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5 years
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The cost and related accumulated depreciation of assets sold or
otherwise retired are eliminated from the accounts and any gain or loss is
included in the statements of income. The cost of maintenance and repairs is
charged to expense as incurred, whereas significant renewals and betterments are
capitalized.
F-16
(i) Construction in Progress
Construction in progress (CIP) represents the direct costs of
construction, the acquisition cost of buildings or machinery. Capitalization of
these costs ceases, and the construction in progress is transferred to plant and
equipment, when substantially all the activities necessary to prepare the assets
for their intended use are completed. No depreciation is provided until the
assets are completed and ready for their intended use. No interest expense has
been capitalized for CIP as of December 31, 2016, as the Company did not get
loans for CIP.
(j) Land Use Rights
According to Chinese laws, land in the PRC is owned by the
government and land ownership rights cannot be sold to an individual or to a
private company. However, the government grants the user a land use right to
use the land. The land use rights granted to the Company are being amortized
using the straight-line method over a term of fifty years.
(k) Accounting for the Impairment of Long-Lived Assets
The Company periodically evaluates the carrying value of
long-lived assets to be held and used, including intangible assets subject to
amortization, when events and circumstances warrant such a review, pursuant to
the guidelines established in Statement of Financial Accounting Standards
(SFAS) No. 144 (now known as ASC 360). The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flow from
such asset is separately identifiable and is less than its carrying value. In
that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair market value of the long-lived asset. Fair market value is
determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved. Losses on long-lived assets to be disposed
of are determined in a similar manner, except that fair market values are
reduced for the cost to dispose.
During the reporting period, no impairment loss was recognized.
(l) Revenue Recognition
Revenue represents the invoiced value of goods sold. Revenue is
recognized when the Company ships the goods to its customers and all of the
following criteria are met:
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Persuasive evidence of an arrangement exists;
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Delivery has occurred or services have been
rendered;
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F-17
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The sellers price to the buyer is fixed or
determinable; and
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Collectability is reasonably assured.
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The Company recognized revenue when the products and the risk
they carry are transferred to the other party.
(m) Research and Development
Expenditures relating to the development of new products and
processes, including significant improvements to existing products, are expensed
as incurred. Research and development expenses were $26,504,650, $3,482,511 and
$2,755,637 for the years ended December 31, 2016, 2015 and 2014, respectively.
(n) Government Grants
Grants and subsidies received from the PRC Government are
recognized when the proceeds are received or collectible and the related
milestones have been reached and all contingencies have been resolved.
For the years ended December 31, 2016, 2015 and 2014,
$25,913,540, $1,645,032 and $288,498, respectively, were received by the
Companys subsidiaries from the PRC government.
(o) Income Taxes
The Company accounts for income tax using an asset and
liability approach, which allows for the recognition of deferred tax benefits in
future years. Under the asset and liability approach, deferred taxes are
provided for the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The accounting for deferred tax
calculation represents the managements best estimate on the most likely future
tax consequences of events that have been recognized in our financial statements
or tax returns and related future anticipation. A valuation allowance is
provided for deferred tax assets if it is more likely than not these items will
either expire before the Company is able to realize their benefits, or that
future realization is uncertain.
(p) Foreign Currency Translation
The accompanying consolidated financial statements are
presented in U. S. dollars. The functional currency of the Company is the RMB.
Capital accounts of the consolidated financial statements are translated into
United States dollars from RMB at their historical exchange rates when the
capital transactions occurred.
F-18
Assets and liabilities are translated at the exchange rates as
of balance sheet date. Income and expenditures are translated at the average
exchange rate of the reporting period, which rates are obtained from the
website: http://www. oanda.com
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December 31,
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December 31,
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December 31,
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|
|
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2016
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|
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2015
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|
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2014
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|
Period end RMB : USD exchange rate
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6.94585
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|
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6.49270
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|
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6.15350
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Average RMB : USD exchange rate
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6.64520
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|
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6.24010
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6.14821
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(q) Comprehensive Income
Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, all items that are required to be recognized
under current accounting standards as components of comprehensive income are
required to be reported in a financial statement that is presented with the same
prominence as other financial statements. Comprehensive income includes net
income and the foreign currency translation changes.
(r) Segments
In accordance with ASC 280-10, Segment Reporting, the Companys
chief operating decision makers rely upon the consolidated results of operations
when making decisions about allocating resources and assessing performance of
the Company. As a result of the assessment made by the chief operating decision
makers, the Company has only one single operating segment. The Company does not
distinguish between markets or segments for the purpose of internal reporting.
(s) Stock Option Expenses
The Companys stock option expenses are recorded in accordance
with ASC 718 and ASC 505.
The fair value of stock options is estimated using the
Black-Scholes -Merton model. The Companys expected volatility assumption is
based on the historical volatility of the Companys common stock. The expected
life assumption is primarily based on the expiration date of the option. The
risk-free interest rate for the expected term of the option is based on the U.S.
Treasury yield curve in effect at the time of grant.
F-19
The recognition of the stock option expenses is based on awards
expected to vest, and there were no estimated forfeitures. ASC standards require
forfeitures to be estimated at the time of grants and revised in subsequent
periods, if necessary, if actual forfeitures differ from those estimates.
The stock-based option expenses for the years ended December
31, 2016, 2015 and 2014 were $14,867,987, $14,255,887 and $0, respectively. See
Note 19.
(t) Warrant Cost
The Companys warrant costs are recorded in liabilities in
accordance with ASC 480, ASC 505 and ASC 815.
We adopted the binomial tree valuation approach to estimate the
fair value of the warrants. In binomial tree valuation approach, it is assumed
that the life of the warrant (from Valuation Date to Expiration Date) is
typically divided into many steps (or nodes). In each step there is a binomial
stock price movement. With more steps, possible stock price paths are implicitly
considered. Valuation of warrant is performed iteratively, starting at each of
the final nodes (those that may be reached at the time of expiration), and then
working backwards through the tree towards the first node (valuation date). The
value computed at each stage is the value of the warrant at that point in time.
(u) Goodwill
The Company allocates goodwill from business combinations to
reporting units based on the expectation that the reporting unit is to benefit
from the business combination. The Company evaluates its reporting units on an
annual basis and, if necessary, reassigns goodwill using a relative fair value
allocation approach. Goodwill is tested for impairment at the reporting unit
level on an annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying value. These events or circumstances could
include a significant change in the business climate, legal factors, operating
performance indicators, competition, or sale or disposition of a significant
portion of a reporting unit.
Application of the goodwill impairment test requires judgments,
including the identification of reporting units, assignment of assets and
liabilities to reporting units, assignment of goodwill to reporting units, and
the determination of the fair value of each reporting unit. The Company first
assesses qualitative factors to determine whether it is more likely than not
that goodwill is impaired. If the more likely than not threshold is met, the
Company performs a quantitative impairment test.
As of December 31, 2016 and 2015, the Company determined that
its goodwill was not impaired.
F-20
(v) Intangible assets
Intangible assets consist of trade names and customer relations
associated with the purchase price from the allocation of Yongkang Scrou. Such
assets are being amortized over their estimated useful lives of 9.7 years.
Intangible assets were amortized as of December 31, 2016. The amortization
expenses for intangible assets were $82,095 and $82,095 for the years ended
December 31, 2016 and 2015, respectively.
(w) Accounting for Sale of Common Stock and Warrants
Gross proceeds are firstly allocated according to the initial
fair value of the freestanding derivative instruments (i.e. the warrants issued
to the Companys investors in its previous offerings, or the Investor
Warrants) . The remaining proceeds are allocated to common stock. The related
issuance expenses, including the placement agent cash fees, legal fees, the
initial fair value of the warrants issued to the placement agent and others were
allocated between the common stock and the Investor Warrants based on how the
proceeds are allocated to these instruments. Expenses related to the issuance of
common stock were charged to paid-in capital. Expenses related to the issuance
of derivative instruments were expensed upon issuance.
(x) Consolidation of variable interest entities
In accordance with accounting standards regarding consolidation
of variable interest entities, or VIEs, VIEs are generally entities that lack
sufficient equity to finance their activities without additional financial
support from other parties or whose equity holders lack adequate decision making
ability. All VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIE for financial reporting
purposes.
The Company has concluded, based on the contractual
arrangements, that Kandi New Energy is a VIE and that the Companys wholly-owned
subsidiary, Kandi Vehicles, absorbs a majority of the risk of loss from the
activities of these companies, thereby enabling the Company, through Kandi
Vehicles, to receive a majority of their respective expected residual returns.
Additionally, as Kandi New Energy is under common control with
other entities, the consolidated financial statements have been prepared as if
the transactions had occurred retroactively as to the beginning of the reporting
period of these consolidated financial statements.
Control and common control are defined under the accounting
standards as an individual, enterprise, or immediate family members who hold
more than 50 percent of the voting ownership interest of each entity. Because
the owners collectively own 100% of Kandi New Energy, and have agreed to vote
their interests in concert since the establishment of each of these three
companies as memorialized the Voting Rights Proxy Agreement, the Company
believes that the owners collectively have control and common control of the
company. Accordingly, the Company believes that Kandi New Energy was
constructively held under common control by Kandi Vehicles as of the time the
Contractual Agreements were entered into, establishing Kandi Vehicles as their
primary beneficiary. Kandi Vehicles, in turn, is owned by Continental, which is
owned by the Company.
F-21
NOTE 7 NEW ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements that the Company has adopted
or may be required to adopt in the future are summarized below.
In May 2014, the FASB has issued ASU No. 2014-09 Topic 606,
Revenue from Contracts with Customers. The core principle of the guidance is
that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. To
achieve that core principle, an entity should apply the following steps: Step 1:
Identify the contract(s) with a customer. Step 2: Identify the performance
obligations in the contract. Step 3: Determine the transaction price. Step 4:
Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance
obligation. The guidance in this Update affects any entity that either enters
into contracts with customers to transfer goods or services or enters into
contracts for the transfer of nonfinancial assets unless those contracts are
within the scope of other standards (for example, insurance contracts or lease
contracts). For a public entity, the amendments in this Update are effective for
annual reporting periods beginning after December 15, 2016, including interim
periods within that reporting period. Early application is not permitted. For
all other entities (nonpublic entities), the amendments in this Update are
effective for annual reporting periods beginning after December 15, 2017, and
interim periods within annual periods beginning after December 15, 2018. We do
not expect the adoption of ASU 2014-09 to have a material impact on our
consolidated financial statements.
In February 2016, the FASB has issued ASU No. 2016-02 Topic
842, Leases. The amendments in this Update increase transparency and
comparability among organizations by recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information about leasing
arrangements. The main difference between previous GAAP and Topic 842 is the
recognition of lease assets and lease liabilities by lessees for those leases
classified as operating leases under previous GAAP. Topic 842 affects any entity
that enters into a lease (as that term is defined in this Update), with some
specified scope exemptions. The amendments in this Update are effective for
fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years, for any of the following: 1. A public business entity 2. A
not-for-profit entity that has issued, or is a conduit bond obligor for,
securities that are traded, listed, or quoted on an exchange or an
over-the-counter market 3. An employee benefit plan that files financial
statements with the U.S. Securities and Exchange Commission (SEC). For all other
entities, the amendments in this Update are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020. We do not expect the adoption of ASU 2016-16 to have a
material impact on our consolidated financial statements.
In October 2016, the FASB has issued ASU No. 2016-16 Topic
740, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory . The
amendments in this Update do not include new disclosure requirements; however,
existing disclosure requirements might be applicable when accounting for the
current and deferred income taxes for an intra-entity transfer of an asset other
than inventory. The amendments in this Update align the recognition of income
tax consequences for intra-entity transfers of assets other than inventory with
International Financial Reporting Standards (IFRS). Specifically, IAS 12, Income
Taxes, requires recognition of current and deferred income taxes resulting from
an intra-entity transfer of any asset (including inventory) when the transfer
occurs. For public business entities, the amendments in this Update are
effective for annual reporting periods beginning after December 15, 2017,
including interim reporting periods within those annual reporting periods. For
all other entities, the amendments are effective for annual reporting periods
beginning after December 15, 2018, and interim reporting periods within annual
periods beginning after December 15, 2019. We do not expect the adoption of ASU
2016-16 to have a material impact on our consolidated financial statements.
In October 2016, the FASB has issued ASU No. 2016-17 Topic
810, Consolidation: Interests Held through Related Parties That Are under Common
Control . The amendments in this Update amend the consolidation guidance on how
a reporting entity that is the single decision maker of a VIE should treat
indirect interests in the entity held through related parties that are under
common control with the reporting entity when determining whether it is the
primary beneficiary of that VIE. The amendments in this Update affect reporting
entities that are required to evaluate whether they should consolidate a VIE
within the Variable Interest Entities Subsections of Subtopic 810-10,
Consolidation Overall, in certain situations involving entities under common
control. The amendments in this Update do not change the characteristics of a
primary beneficiary in current generally accepted accounting principles (GAAP) .
The amendments in this Update are effective for public business entities for
fiscal years beginning after December 15, 2016, including interim periods within
those fiscal years. For all other entities, the amendments in this Update are
effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal 3 years beginning after December 15, 2017. We do not
expect the adoption of ASU 2016-17 to have a material impact on our consolidated
financial statements.
In November 2016, the FASB has issued ASU No. 2016-18 Topic
230, Statement of Cash Flows: Restricted Cash a consensus of the FASB Emerging
Issues Task Force. The amendments in this Update require that a statement of
cash flows explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or restricted
cash equivalents. Therefore, amounts generally described as restricted cash and
restricted cash equivalents should be included with cash and cash equivalents
when reconciling the beginning -of-period and end-of-period total amounts shown
on the statement of cash flows. The amendments in this Update do not provide a
definition of restricted cash or restricted cash equivalents. The amendments in
this Update apply to all entities that have restricted cash or restricted cash
equivalents and are required to present a statement of cash flows under Topic
230. The amendments in this Update are effective for public business entities
for fiscal years beginning after December 15, 2017, and interim periods within
those fiscal years. For all other entities, the amendments are effective for
fiscal years beginning after December 15, 2018, and interim periods within
fiscal years beginning after December 15, 2019. We do not expect the adoption of
ASU 2016-18 to have a material impact on our consolidated financial statements.
F-22
In January 2017, the FASB has issued ASU No. 2017-1 Topic 805,
Business Combinations: Clarifying the Definition of a Business . The amendments
in this Update provide a screen to determine when a set is not a business. The
screen requires that when substantially all of the fair value of the gross
assets acquired (or disposed of) is concentrated in a single identifiable asset
or a group of similar identifiable assets, the set is not a business. This
screen reduces the number of transactions that need to be further evaluated. The
amendments in this Update affect all reporting entities that must determine
whether they have acquired or sold a business. Public business entities should
apply the amendments in this Update to annual periods beginning after December
15, 2017, including interim periods within those periods. All other entities
should apply the amendments to annual periods beginning after December 15, 2018,
and interim periods within annual periods beginning after December 15, 2019. We
do not expect the adoption of ASU 2017-1 to have a material impact on our
consolidated financial statements.
NOTE 8 CONCENTRATIONS
(a) Customers
The Company's major customers, each of whom accounted for more
than 10% of the Companys consolidated revenue, were as follows:
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Sales
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Accounts Receivable
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Year ended
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Year ended
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Year ended
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Ended
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Ended
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Ended
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December 31
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December 31
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December 31
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December 31
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December 31
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December 31
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Major
Customers
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2016
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2015
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2014
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2016
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2015
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2014
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Kandi Electric Vehicles Group Co., Ltd.
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59%
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34%
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53%
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55%
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Jinhua Chaoneng Automobile Sales Co. Ltd.
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30%
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19%
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(b) Suppliers
The Company's material suppliers, each of whom accounted for
more than 10% of the Companys total purchases, were as follows:
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Purchases
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Accounts Payable
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Year
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Year
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Year
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Ended
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Ended
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Ended
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December 31
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December 31
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December 31
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December 31
|
|
|
December 31
|
|
|
December 31
|
|
|
|
|
|
|
|
|
|
|
Major
Suppliers
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Dongguan Chuangming Battery Technology Co.,
Ltd.
|
|
42%
|
|
|
26%
|
|
|
|
|
|
22%
|
|
|
15%
|
|
|
|
|
Zhejiang Tianneng Energy Technology Co.,
Ltd.
|
|
23%
|
|
|
20%
|
|
|
|
|
|
15%
|
|
|
24%
|
|
|
|
|
F-23
NOTE 9 INCOME PER SHARE
The Company calculates earnings per share in accordance with
ASC 260, Earnings Per Share, which requires a dual presentation of basic and
diluted earnings per share. Basic earnings per share are computed using the
weighted average number of shares outstanding during the reporting period.
Diluted earnings per share represents basic earnings per share adjusted to
include the potentially dilutive effect of outstanding stock options, warrants
and convertible notes (using the if-converted method) . For the years ended
December 31, 2016, 2015 and 2014, the number of potentially dilutive common
shares were 0, 180,836 and 132,323, respectively. The potential dilutive common
shares as of December 31, 2016, 2015 and 2014 were 4,900,000, 0 and 2,506,072,
respectively.
The following table sets forth the computation of basic and
diluted net income per common share:
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net income
|
$
|
(6,510,757
|
)
|
$
|
14,665,495
|
|
$
|
12,271,338
|
|
Weighted average shares used in basic computation
|
|
47,447,665
|
|
|
46,744,718
|
|
|
42,583,495
|
|
Dilutive shares
|
|
-
|
|
|
180,836
|
|
|
132,323
|
|
Weighted average shares used in diluted
computation
|
|
47,447,665
|
|
|
46,925,554
|
|
|
42,715,818
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.14
|
)
|
$
|
0.31
|
|
$
|
0.29
|
|
Diluted
|
$
|
(0.14
|
)
|
$
|
0.31
|
|
$
|
0.29
|
|
NOTE 10 - ACCOUNTS RECEIVABLE
Accounts receivable for the years ended December 31, 2016 and
2015 were summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Accounts receivable
|
$
|
32,394,613
|
|
$
|
8,136,421
|
|
Less: Provision for doubtful debts
|
|
-
|
|
|
-
|
|
Accounts receivable, net
|
$
|
32,394,613
|
|
$
|
8,136,421
|
|
F-24
NOTE 11 - INVENTORIES
Inventories for the years ended December 31, 2016 and 2015 were
summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Raw material
|
$
|
2,529,149
|
|
$
|
8,509,421
|
|
Work-in-progress
|
|
1,786,087
|
|
|
1,648,498
|
|
Finished goods
|
|
8,014,671
|
|
|
8,101,661
|
|
Total inventories
|
|
12,329,907
|
|
|
18,259,580
|
|
Less: provision for slowing moving
inventories
|
|
(415,797
|
)
|
|
(485,901
|
)
|
Inventories, net
|
$
|
11,914,110
|
|
$
|
17,773,679
|
|
NOTE 12 - NOTES RECEIVABLE
Notes Receivable from unrelated party for the years ended
December 31, 2016 and 2015 were summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(As Restated)
|
|
Notes receivable as below:
|
|
|
|
|
|
|
Due September 30, 2016, interest at 7.2%
per annum
|
|
-
|
|
|
10,578,574
|
|
Bank acceptance
notes
|
|
-
|
|
|
523,665
|
|
Notes receivable
|
$
|
-
|
|
$
|
11,102,239
|
|
Details of Notes Receivable from unrelated party as of December
31, 2015 were as follows:
Index
|
Amount ($)
|
Counter party
|
Relationship
|
Nature
|
Manner of settlement
|
1
|
10,578,574
|
Yongkang HuiFeng
Guarantee Co., Ltd
|
No relationship beyond loan
|
Receive interest income
|
Not due
|
2
|
523,665
|
Zhuhai Enpower electrical Limited
|
No relationship beyond loan
|
Payments for sales
|
Not due
|
F-25
Notes Receivable from JV Company and related party for the
years ended December 31, 2016 and 2015 were summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(As Restated)
|
|
Notes receivable as below:
|
|
|
|
|
|
|
Bank acceptance notes
|
|
400,239
|
|
|
1,931,076
|
|
Notes receivable
|
$
|
400,239
|
|
$
|
1,931,076
|
|
Details of Notes Receivable from JV Company and related party
as of December 31, 2016 were as follows:
Index
|
Amount ($)
|
Counter party
|
Relationship
|
Nature
|
Manner of settlement
|
1
|
400,239
|
Kandi Shanghai
|
Subsidiary of the JV Company
|
Payments for sales
|
Not due
|
Details of Notes Receivable from JV Company and related party
as of December 31, 2015 were as follows:
Index
|
Amount ($)
|
Counter party
|
Relationship
|
Nature
|
Manner of settlement
|
1
|
1,871,332
|
Kandi Electric
Vehicles Group Co., Ltd.
|
Joint venture of the Company
|
Payments for sales
|
Not due
|
2
|
59,744
|
Kandi Shanghai
|
Subsidiary of the JV Company
|
Payments for sales
|
Not due
|
As a common business practice in China, the Company accepts the
notes receivable as the settlement for the trade receivables. The majority of
notes receivable was received for the settlement of trade receivables with the
JV Company, related parties and other unrelated customers.
Notes receivable are unsecured.
NOTE 13 PROPERTY, PLANT AND EQUIPMENT
Plant and equipment for the years ended December 31, 2016 and
2015 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
At cost:
|
|
|
|
|
|
|
Buildings
|
$
|
12,977,465
|
|
$
|
13,883,211
|
|
Machinery and equipment
|
|
8,585,666
|
|
|
7,804,097
|
|
Office equipment
|
|
475,162
|
|
|
395,328
|
|
Motor vehicles
|
|
321,207
|
|
|
335,227
|
|
Moulds
|
|
26,463,472
|
|
|
32,931,740
|
|
|
|
48,822,972
|
|
|
55,349,603
|
|
Less : Accumulated depreciation
|
|
|
|
|
|
|
Buildings
|
$
|
(3,948,909
|
)
|
$
|
(3,755,582
|
)
|
Machinery and equipment
|
|
(8,107,884
|
)
|
|
(7,108,925
|
)
|
Office equipment
|
|
(216,226
|
)
|
|
(249,378
|
)
|
Motor vehicles
|
|
(274,197
|
)
|
|
(271,495
|
)
|
Moulds
|
|
(21,031,086
|
)
|
|
(23,385,363
|
)
|
|
|
(33,578,302
|
)
|
|
(34,770,743
|
)
|
Less: provision for impairment for fixed assets
|
|
(50,228
|
)
|
|
(53,734
|
)
|
Plant and equipment, net
|
$
|
15,194,442
|
|
$
|
20,525,126
|
|
As of December 31, 2016 and 2015, the net book value of plant
and equipment pledged as collateral for the Company's bank loans were $8,875,111
and $9,949,661, respectively.
F-26
Depreciation expenses for the years ended December 31, 2016,
2015 and 2014 were $4,448,010, $5,322,613 and $5,110,681, respectively.
NOTE 14 LAND USE RIGHTS
The Companys land use rights consist of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cost of land use rights
|
$
|
14,280,282
|
|
$
|
15,276,957
|
|
Less: Accumulated amortization
|
|
(2,504,562
|
)
|
|
(2,341,836
|
)
|
Land use rights, net
|
$
|
11,775,720
|
|
$
|
12,935,121
|
|
As of December 31, 2016 and 2015, the net book value of the
land use rights pledged as collateral for the Company's bank loans were
$8,660,097 and $9,512,598 respectively. Also see Note 17.
The amortization expense for the years ended December 31, 2016,
2015 and 2014 were $333,171, $384,072 and $378,689, respectively.
Amortization expense for the next five years and thereafter is
as follows:
2017
|
$
|
333,171
|
|
2018
|
|
333,171
|
|
2019
|
|
333,171
|
|
2020
|
|
333,171
|
|
2021
|
|
333,171
|
|
Thereafter
|
|
10,109,865
|
|
Total
|
$
|
11,775,720
|
|
F-27
NOTE 15 - CONSTRUCTION -IN-PROGRESS
Hainan Facility
In April 2013, the Company signed an agreement with Wanning
city government in Hainan Province to invest a total of RMB 1 billion to develop
a factory in Wanning with an annual production of 100,000 EVs. Also in 2013, the
Company contracted with an unrelated third party supplier, Nanjing Shangtong
Auto Technologies Co., Ltd. (Nanjing Shangtong), to purchase the production
line to build the manufacturing facility and develop a new EV model. In January
2016, the government of Hainan Province implemented a new development plan to
centralize the manufacturing in certain designated industry park. Therefore, the
Wanning facility was relocated from Wanning City to Haikou City high-tech zone.
Based on the agreement with the government, all related expenses and assets
disposal caused by the relocation were compensated by the local government. As a
result of this relocation, the contracts to build the manufacturing facility had
to be revised in terms of total contract amount, technical requirements,
completion milestones, etc. for the new construction site in Haikou. Because of
this change, part of the construction -in-progress previously recorded was
transferred back to the advances to supplier according to the revised contract
terms and technical requirements. Hainan facility is currently under
construction and is expected to be completed for trial production in the middle
of 2017.
No depreciation is provided for CIP until such time as the
facility is completed and placed into operation.
The contractual obligation under CIP of the Company as of
December 31, 2016 is as follow:
|
|
|
Total in CIP as of
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
Project
|
|
|
2016
|
|
|
Estimate to complete
|
|
|
Total contract amount
|
|
|
|
|
|
|
|
|
|
|
|
|
Kandi Hainan facility
|
|
$
|
27,054,181
|
|
$
|
42,285,595
|
|
$
|
69,339,776
|
|
Total
|
|
$
|
27,054,181
|
|
$
|
42,285,595
|
|
$
|
69,339,776
|
|
As of December 31, 2016 and 2015, the Company had CIP amounting
to $27,054,181 and $46,821,816, respectively.
No interest expense has been capitalized for CIP for the years
ended December 31, 2016, 2015 and 2014, respectively.
NOTE 16 SHORT -TERM AND LONG-TERM BANK LOANS
Short-term loans are summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Loans from China
Ever-bright Bank
|
|
|
|
|
|
|
Interest rate 4.698% per annum, due on April 21, 2017, secured by the
assets of the Company, guaranteed by Mr. Hu Xiaoming and his wife. Also see Note 13 and Note 14.
|
$
|
11,229,727
|
|
$
|
12,013,492
|
|
Loans from Hangzhou
Bank
|
|
|
|
|
|
|
Interest rate 4.35% per
annum, due on October 12, 2017, secured by the assets of the Company. Also
see Note 13 and Note 14.
|
|
7,025,778
|
|
|
7,516,134
|
|
Interest rate 4.82% per annum, paid off on
July 1, 2016, secured by the assets of the Company. Also see Note 13 and
Note 14.
|
|
|
|
|
7,700,956
|
|
Interest rate 4.85% per
annum, paid off on July 1, 2016, secured by the assets of the Company.
Also see Note 13 and Note 14.
|
|
|
|
|
3,419,225
|
|
Interest rate 4.35% per
annum, due July 3, 2017, secured by the assets of the Company. Also see
Note 13 and Note 14.
|
|
10,394,696
|
|
|
-
|
|
Interest rate 4.35% per
annum, due March 23, 2017, secured by the assets of the Company. Also see
Note 13 and Note 14.
|
|
5,614,864
|
|
|
-
|
|
Interest rate 5.35% per annum, paid off on
March 22, 2016, secured by the assets of the Company. Also see Note 13 and
Note 14.
|
|
-
|
|
|
6,006,746
|
|
|
$
|
34,265,065
|
|
$
|
36,656,553
|
|
F-28
Long-term loan is summarized as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Loans from Haikou Rural Credit
Cooperative
|
|
|
|
|
|
|
Interest rate 7% per annum, due on December
12, 2021, guaranteed by Kandi Vehicle and Kandi New Energy.
|
$
|
28,794,172
|
|
$
|
0
|
|
|
$
|
28,794,172
|
|
$
|
0
|
|
The interest expense of the short-term and long-term bank loans
for the years ended December 31, 2016, 2015 and 2014 were $1,831,667, $2,176,092
and $3,480,646, respectively.
As of December 31, 2016, the aggregate amount of short-term
loans that was guaranteed by various third parties was $0.
NOTE 17 NOTES PAYABLE
By issuing bank notes payables rather than paying cash to
suppliers, the Company can defer the payments until the date the bank notes
payable is due. Simultaneously, depending on the requirements of the banks, the
Company may need to deposit restricted cash in banks to back up the bank notes
payable, while the restricted cash deposited in the banks will generate interest
income.
Notes payable for December 31, 2016 and 2015 were summarized as
follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Bank acceptance notes:
|
|
|
|
|
|
|
Due May 12, 2016
|
$
|
-
|
|
$
|
2,310,287
|
|
Due June 17, 2016
|
|
-
|
|
|
1,540,191
|
|
Due March 22, 2017
|
|
400,239
|
|
|
|
|
Due March 29, 2017
|
|
1,439,709
|
|
|
|
|
Due June 21, 2017
|
|
1,439,709
|
|
|
|
|
Other Notes Payable:
|
|
|
|
|
|
|
Due May 6, 2017
|
|
11,517,668
|
|
|
|
|
Total
|
$
|
14,797,325
|
|
$
|
3,850,478
|
|
A bank acceptance note is a promised future payment, or time
draft, which is accepted and guaranteed by a bank and drawn on a deposit at the
bank. The banker's acceptance specifies the amount of the funds, the date, and
the person to which the payment is due.
After acceptance, the draft becomes an unconditional liability
of the bank, but the holder of the draft can sell (exchange) it for cash at a
discount to a buyer who is willing to wait until the maturity date for the funds
in the deposit. $3,279,656 and $3,850,478 were held as collateral for the notes
payable as of December 31, 2016 and December 31, 2015, respectively.
As a common business practice in China, the Company issues the
notes payable to its suppliers as a settlement for the accounts payable.
F-29
NOTE 18 TAXES
(a) Corporation Income Tax
In accordance with the relevant tax laws and regulations of the
PRC, applicable corporate income tax (CIT) rate is 25%. However, Kandi
Vehicle, qualified as a High and New Technology Enterprises (HNTEs) company in
China, is entitled to pay a reduced income tax rate of 15% for the years
presented, which will expire in 2017. An entity could re-apply for the HNTE
certificate when the prior certificate expires. Historically, Kandi Vehicle
successfully re-applied for the certificates when the prior ones expired. The
applicable corporate income tax rate of each of the Companys three other
subsidiaries, Kandi New Energy, Yongkang Scrou and Kandi Hainan, the JV Company
and its subsidiaries and the Service Company is 25%.
After combining with the research and development tax credit of
25% on certain qualified research and development expenses, the final effective
tax rate for 2016, 2015 and 2014 was -11.69%,29.47%,and 16.44%, respectively.
The effective tax rates for each of the years mentioned above are disclosed in
the summary table of income tax expenses for the years ended December 31, 2016,
2015 and 2014.
According to the PRC CIT reporting system, the CIT sales
cut-off base is concurrent with the value-added tax (VAT), which should be
reported to the State Administration of Taxation (SAT) on a quarterly basis.
Since the VAT and CIT are accounted for on a VAT tax basis that records all
sales on astate provided official invoices reporting system, the Company
reports the CIT according to the SAT prescribed tax reporting rules. Under the
VAT tax reporting system, sales cut-off is not done on an accrual basis but
rather on a VAT taxable reporting basis. Therefore, when the Company adopts U.S.
GAAP using an accrual basis, the sales cut-off CIT timing (due to the VAT
reporting system) creates a temporary sales cut-off timing difference. This
difference is reflected in the deferred tax assets or liabilities calculations
on the income tax estimate reported elsewhere on the report.
Effective January 1, 2007, the Company adopted the guidance in
ASC 740 related to uncertain tax positions. The guidance addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements.
Under ASC 740, 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 December
31, 2016, the Company did not have a liability for unrecognized tax benefits.
The Company files income tax returns to the U.S. Internal Revenue Services
(IRS) and 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 for years after 2006. 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 China. As of December 31, 2016, the
Company was not aware of any pending income tax examinations by U.S. and China
tax authorities. The Company's policy is to record interest and penalties on
uncertain tax provisions as income tax expense. As of December 31, 2016, the
Company has no accrued interest or penalties related to uncertain tax positions.
The Company has not recorded a provision for U.S. federal income tax for the
year ended December 31, 2016 due to the net operating loss in 2016 and an
accumulated net operating loss carry forward from prior years in the United
States.
F-30
Income tax expenses for the years ended December 31, 2016, 2015
and 2014 are summarized as follows:
The brackets with a number below after Re: key to the
explanatory item under Note 26 regarding the Restatements.
Re: (9)
|
|
For the Year Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
Restated
|
|
|
Restated
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Provision for CIT
|
$
|
601,212
|
|
$
|
4,656,311
|
|
$
|
831,518
|
|
Provision for Federal Income Tax
|
|
-
|
|
|
-
|
|
|
-
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Provision for CIT
|
|
80,334
|
|
|
1,470,917
|
|
|
1,582,894
|
|
Income tax expense (benefit)
|
$
|
681,546
|
|
$
|
6,127,228
|
|
$
|
2,414,412
|
|
The Company's income tax expense differs from the expected
tax expense for the years ended December 31, 2016, 2015 and 2014 (computed by
applying the U.S. Federal Income Tax rate of 34% and PRC Corporation Income Tax
rate of 25%, respectively to income before income taxes) as follows:
|
|
December 31,
|
|
|
December 31
,
|
|
|
December 31
,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Re: (7) (10)
|
|
|
|
|
Restated
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
Expected taxation at PRC
statutory tax rate
|
$
|
(1,457,303
|
)
|
$
|
5,198,181
|
|
$
|
3,671,438
|
|
Effect of differing tax rates in different
jurisdictions
|
|
(1,403,077
|
)
|
|
(1,256,718
|
)
|
|
(381,829
|
)
|
Non-taxable income
|
|
-
|
|
|
(4,482,892
|
)
|
|
(3,320,310
|
)
|
Non-deductible expenses
|
|
1,103,158
|
|
|
39,081
|
|
|
30,369
|
|
Research and development
super-deduction
|
|
(43,826
|
)
|
|
(438,845
|
)
|
|
(344,078
|
)
|
Under-accrued EIT for previous years
|
|
(2,727,454
|
)
|
|
1,519
|
|
|
419
|
|
Effect of PRC preferential
tax rates
|
|
-
|
|
|
(578,484
|
)
|
|
(267,594
|
)
|
Addition to valuation allowance
|
|
5,301,677
|
|
|
7,645,386
|
|
|
3,025,997
|
|
Other
|
|
(91,629
|
)
|
|
-
|
|
|
-
|
|
Income tax expense (benefit)
|
$
|
681,546
|
|
$
|
6,127,228
|
|
$
|
2,414,412
|
|
Effective tax rate
|
|
-11.69%
|
|
|
29.47%
|
|
|
29.47%
|
|
The tax effects of temporary differences that give rise to the
Company's net deferred tax assets and liabilities as of December 31, 2016, 2015
and 2014 are summarized as follows:
F-31
|
|
December 31,
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Re: (8) (10)
|
|
|
|
|
Restated
|
|
|
Restated
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Sales cut-off difference derived from Value
Added Tax reporting system to calculate PRC Corporation Income Tax in
accordance with the PRC State Administration of Taxation
|
$
|
-
|
|
$
|
290,850
|
|
$
|
-
|
|
Expense
|
|
72,742
|
|
|
-
|
|
|
-
|
|
Depreciation
|
|
230,156
|
|
|
-
|
|
|
-
|
|
Loss carried forward
|
|
27,218,934
|
|
|
22,870,649
|
|
|
18,749,408
|
|
less: valuation allowance
|
|
-26,820,811
|
|
|
-22,870,649
|
|
|
-18,749,408
|
|
Total deferred tax assets, net
of valuation allowance
|
|
701,021
|
|
|
290,850
|
|
|
-
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Sales cut-off difference
derived from Value Added Tax reporting system to calculate PRC
Corporation Income Tax in accordance with the PRC State Administration of
Taxation
|
|
-
|
|
|
-
|
|
|
26,226
|
|
Expense
|
|
1,698,303
|
|
|
272,953
|
|
|
80,016
|
|
Depreciation
|
|
-
|
|
|
353,115
|
|
|
551,697
|
|
Other
|
|
-
|
|
|
2,392,821
|
|
|
124,622
|
|
Accumulated other
comprehensive gain
|
|
-
|
|
|
1,240,467
|
|
|
1,715,028
|
|
Total deferred tax liability
|
|
1,698,303
|
|
|
4,259,356
|
|
|
2,497,589
|
|
Net deferred tax liabilities
|
$
|
-997,282
|
|
$
|
-3,968,506
|
|
$
|
-2,497,589
|
|
As of December 31, 2016 the Company had net losses of
approximately US$78.88million, US$4.75thousand, US$2.12 million deriving from
entities in the US, Hong Kong and PRC respectively. The net loss in the PRC and
US can be carried forward for five years, to offset future net profit for income
tax purposes. The net loss of entities in the PRC and US will begin to expire in
2021, if not utilized. The net loss in Hong Kong can be carried forward without
an expiration date.
(b) Tax Holiday Effect
For the years ended December 31, 2016, 2015 and 2014, the PRC
corporate income tax rate was 25%. Certain subsidiaries of the Company are
entitled to tax exemptions (tax holidays) for the years ended December 31, 2016,
2015 and 2014.
The combined effects of the income tax expense exemptions and
reductions available to the Company for the years ended December 31, 2016, 2015
and 2014 are as follows:
Re: (10)
|
|
For the Year Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
Restated
|
|
|
Restated
|
|
Tax benefit (holiday) credit
|
$
|
36,522
|
|
$
|
912,548
|
|
$
|
611,672
|
|
Basic net income per share
effect
|
$
|
0.001
|
|
$
|
0.020
|
|
$
|
0.010
|
|
NOTE 19 - STOCK OPTIONS AND WARRANTS
(a) Stock Options
On May 29, 2015, the Compensation Committee of the Board of
Directors of the Company approved the grant of stock options to purchase
4,900,000 shares of common stock at an exercise price of $9.72 per share to the
Companys directors, officers and senior employees. The stock options will vest
ratably over three years and expire on the tenth anniversary of the grant date.
The Company valued the stock options at $39,990,540 and will amortize the stock
compensation expense using the straight-line method over the service period from
May 29, 2015 through May 29, 2018. The value of the options was estimated using
the Black Scholes Model with an expected volatility of 90%, expected life of 10
years, risk-free interest rate of 2.23% and expected dividend yield of 0.00% .
There was $14,867,987 stock compensation expense booked as of December 31, 2016.
F-32
The following is a summary of the stock option activities of
the Company:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
Outstanding as of January 1,
2015
|
|
4,900,000
|
|
$
|
9.72
|
|
Granted
|
|
-
|
|
|
-
|
|
Exercised
|
|
-
|
|
|
-
|
|
Cancelled
|
|
-
|
|
|
-
|
|
Forfeited
|
|
-
|
|
|
-
|
|
Outstanding as of January 1, 2016
|
|
4,900,000
|
|
|
9.72
|
|
Granted
|
|
-
|
|
|
-
|
|
Exercised
|
|
-
|
|
|
-
|
|
Cancelled
|
|
-
|
|
|
-
|
|
Forfeited
|
|
(333,333
|
)
|
|
9.72
|
|
Outstanding as of December
31, 2016
|
|
4,566,667
|
|
$
|
9.72
|
|
The fair value per share of the 4,900,000 options issued to the
employees and directors on May 29, 2015 is $8.1613 per share.
(b) Warrants
We adopted the binomial tree valuation approach to estimate the
fair value of the warrant. In binomial tree valuation approach, it is assumed
that the life of the warrant(from Valuation Date to Expiration Date) is
typically divided into many steps(or nodes). In each step there is a binomial
stock price movement. With more steps, possible stock price paths are implicitly
considered. Valuation of warrant is performed iteratively, starting at each of the final nodes (those that may be reached
at the time of expiration), and then working backwards through the tree towards
the first node (valuation date). The value computed at each stage is the value
of the warrant at that point in time.
F-33
On June 26, 2013, the Company entered into a securities
purchase agreement (the 2013 Securities Purchase Agreement) with certain
institutional investors (the Third Round Investors) that closed on July 1,
2013, pursuant to which the Company sold to the Third Round Investors, in a
registered direct offering, an aggregate of 4,376,036 shares of the Companys
common stock at a negotiated purchase price of $6.03 per share. Under the 2013
Securities Purchase Agreement, the Third Round Investors also received Series A
warrants for the purchase of up to 1,750,415 shares of the Companys common
stock at an exercise price of $7.24 per share and an option to make an
additional investment in the form of Series B warrants and Series C warrants,
Series B warrants to purchase a maximum aggregate of 728,936 shares of the
Companys common stock at an exercise price of $7.24 per share and Series C
warrants to purchase a maximum aggregate of 291,574 shares of the Companys
common stock at an exercise price of $8.69 (the Third Round Warrants) . As of
June 30, 2014, all the Third Round Warrants had been exercised on a cash basis.
In addition, the placement agent for this transaction also received warrants for
the purchase of up to 262,562 shares of the Companys common stock with an
exercise price of $7.24 per share (the Third Round Placement Agent Warrants) .
Based on the terms of the warrants, they contain the downward ratchet protection
and anti-dilution terms, so the Company classified these warrants as liabilities
on the balance sheet. On July 1, 2016, the Third Round Placement Agent Warrants
expired without any exercise.
On January 15, 2014, the Company sold to certain institutional
investors warrants to purchase an aggregate of 1,429,393 shares of the Companys
common stock at an exercise price of $15 per share (the January 2014 Warrants)
for a total purchase price of approximately $14,294. According to the warrant
subscription agreement by and among the Company and the holders, the exercise
price was reduced by a credit of $0.01, which reflected the price per warrant
share paid in connection with the issuance of the January 2014 Warrants.
Consequently, the effective exercise price per warrant share is $14.99. Based on
the terms of the warrants, they contain the downward ratchet protection and
anti-dilution terms, so the Company classified these warrants as liabilities on
the balance sheet. The January 2014 Warrants expired on January 30, 2015 and no
investors exercised their warrants.
On March 19, 2014, the Company entered into a securities
purchase agreement with certain purchasers (the Fourth Round Investors),
pursuant to which the Company sold to the Fourth Round Investors, in a
registered direct offering, an aggregate of 606,000 shares of common stock, at a
negotiated purchase price of $18.24 per share, for aggregate gross proceeds to
the Company of approximately $11,053,440, before deducting fees to the placement
agent and other estimated offering expenses payable by the Company. As part of
the transaction, the Fourth Round Investors also received warrants for the
purchase of up to 90,900 shares of the Companys common stock at an exercise
price of $22.80 per share (the Fourth Round Warrants) . In addition, the
placement agent for this transaction also received warrants for the purchase of
up to 36,360 shares of the Companys common stock at an exercise price of $22.80
per share, which was adjusted to $9.72 on July 27, 2015. The Fourth Round
Warrants have a term of eighteen months and are exercisable by the holders at
any time after the date of issuance. On August 8, 2015, the Company extended the
expiration date of these warrants from September 21, 2015 to January 20, 2016,
among these warrants, 44,783 shares were exercised in January 2016 and the rest
warrant shares were expired without exercise. Based on the terms of the
warrants, they contain the downward ratchet protection and anti-dilution terms,
so the Company classified these warrants as liabilities on the balance sheet.
F-34
On September 4, 2014, the Company entered in a securities
purchase agreement with certain purchasers (the Fifth Round Investors),
pursuant to which the Company sold to the Fifth Round Investors, in a registered
direct offering, an aggregate of 4,127,908 shares of its common stock at a price
of $17.20 per share, for aggregate gross proceeds to the Company of
approximately $71 million, before deducting fees to the placement agent and
other estimated offering expenses payable by the Company (the Fifth Round
Financing) . As part of the transaction, the Fifth Round Investors also
received warrants for the purchase of up to 743,024 shares of the Companys
common stock at an exercise price of $21.50 per share (the Fifth Round
Warrants), which was adjusted to $9.72 on July 27, 2015. The Fifth Round
Warrants have a term of seventeen months and are exercisable by the holders at
any time after the date of issuance. On August 8, 2015, the Company extended the
expiration date of these warrants from February 4, 2016 to June 3, 2016, and as
of now these warrants were expired without any exercise. In addition, the
placement agent for this transaction also received warrants for the purchase of
up to 206,395 shares of the Companys common stock at an exercise price of
$20.64 per share, which was adjusted to $9.72 per share as the exercise price in
December 2015 due to its financial consulting service. The placement agents
warrants are exercisable for a term of seventeen months after six months from
the issuance. Based on the terms of the warrants, they contain the downward
ratchet protection and anti-dilution terms, so the Company classified these
warrants as liabilities on the balance sheet. On August 3, 2016, all the
placement agent warrants were expired without any exercise.
As of December 31, 2016 and December 31, 2015, the derivative
liability relating to the warrants issued to the investors and a placement agent
was $0 and $3,823,590, respectively.
NOTE 20 STOCK AWARD
In connection with the appointment of Mr. Henry Yu as a member
of the Board of Directors (the Board), and as compensation, the Board
authorized the Company to provide Mr. Henry Yu with 5,000 shares of Company's
restricted common stock every six months, beginning in July 2011.
As compensation for having Mr. Jerry Lewin to serve as a member
of the Board, the Board authorized the Company to provide Mr. Jerry Lewin with
5,000 shares of Company's restricted common stock every six months, beginning in
August 2011.
As compensation for having Ms. Kewa Luo to serve as the
Companys investor relation officer, the Board authorized the Company to provide
Ms. Kewa Luo with 5,000 shares of Company's common stock every six months,
beginning in September 2013.
In November 2016, the Company entered into a three-year
employment agreement with Mr. Mei Bing to hire him as the Companys Chief
Financial Officer. Under the agreement, he is entitled to receive an aggregate
10,000 shares of common stock each year, vested in four equal quarterly
installments of 2,500 shares which shall be issuable on each three-month
anniversary thereof.
F-35
The fair value of stock awards based on service is determined
based on the closing price of the common stock on the date the shares are
approved by the board for grant. The compensation costs for awards of common
stock are recognized over the requisite service period of three or six months.
On December 30, 2013, the Board approved a proposal (as
submitted by the Compensation Committee) of an award (Boards Pre-Approved
Award Grant Sub-Plan under the 2008 Plan) for selected executives and other key
employees comprising a total of 335,000 shares of common stock for each fiscal
year, beginning with the 2013 fiscal year, under the Companys 2008 Omnibus
Long-Term Incentive Plan (the 2008 Plan), if the Companys Non-GAAP Net
Income for the current fiscal year increased by 10% comparing to that of the
prior year. The specific number of shares of common stock to be issued in
respect of such award could proportionally increase or decrease if the actual
Non-GAAP Net Income increase is more or less than 10%. Non-GAAP Net Income
means the Companys net income for a particular year calculated in accordance
with GAAP, excluding option-related expenses, stock award expenses, and the
effects caused by the change of fair value of financial derivatives. For
example, if Non-GAAP Net Income for the 2014 fiscal year increased by 10%
compared to the Non-GAAP Net Income for the 2013 fiscal year, the selected
executives and other key employees each would be granted his or her target
amount of common stock of the Company. If Non-GAAP Net Income in 2014 is less
than Non-GAAP Net Income in 2013, then no common stock would be granted. If
Non-GAAP Net Income in 2014 increased compared to Non-GAAP Net Income in 2013
but the increase is less than 10%, then the target amount of the common stock
grant would be proportionately decreased. If Non-GAAP Net Income in 2014
increased compared to Non- GAAP Net Income in 2013 but the increase is more than
10%, then the target amount of the common stock grant would be proportionately
increased up to 200% of the target amount. Any such increase in the grant would
be subject to the total number of shares available under the 2008 Plan, and the
Companys Board and shareholders will need to approve an increase in the number
of shares reserved under the 2008 Plan if the number of shares originally
reserved is used up. On May 20, 2015, the shareholders of the Company approved
an increase of 9,000,000 shares under the 2008 Plan at its annual meeting. The
fair value of each award granted under the 2008 Plan is determined based on the
closing price of the Companys stock on the date of grant of the award.
Stock-based compensation expense is calculated based on grant date fair value
and number of awards expected to be earned at the end of each quarter and
recognized in the quarter. In subsequent periods, stock-based compensation
expense is adjusted based on grant date fair value and the change of number of
awards expected to be earned. Final stock-based compensation expense for the
year is calculated based on grant date fair value and number of awards earned
for the year and recognized at the end of year. On September 26, 2016, the Board
approved to terminate the previous Boards Pre-Approved Award Grant Sub-Plan
under the 2008 Plan and adopted a new plan to reduce the total number of shares
of common stock of the stock award for selected executives and key employees
from 335,000 shares of common stock to 250,000 shares of common stock for each
fiscal year and the other term was as same as before. As of December 31, 2016
and 2015, there were $0 and $8,006,500 of employee stock award expense
recognized under General and Administrative Expenses, respectively.
The stock award was below starting from 2013 based on the award
plan above:
Issue Date
|
For Year
|
Shares
|
May 22, 2014
|
2013
|
801,163
|
April 15, 2015 / June 12, 2015
|
2014
|
670,000
|
April 13, 2016
|
2015
|
670,000
|
F-36
NOTE 21 INTANGIBLE ASSETS
The following table provides the gross carrying value and
accumulated amortization for each major class of intangible assets other than
goodwill:
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Remaining useful life
|
|
|
2016
|
|
|
2015
|
|
Gross carrying amount:
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
5 years
|
|
$
|
492,235
|
|
$
|
492,235
|
|
Customer relations
|
|
5 years
|
|
|
304,086
|
|
|
304,086
|
|
|
|
|
|
|
796,321
|
|
|
796,321
|
|
Less : Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
|
|
$
|
(236,815
|
)
|
$
|
(186,069
|
)
|
Customer relations
|
|
|
|
|
(146,295
|
)
|
|
(114,946
|
)
|
|
|
|
|
|
(383,110
|
)
|
|
(301,015
|
)
|
Intangible assets, net
|
|
|
|
$
|
413,211
|
|
$
|
495,306
|
|
The aggregate amortization expenses for those intangible assets
that continue to be amortized is reflected in amortization of intangible assets
in the Consolidated Statements of Income and Comprehensive Income and were
$82,095, $82,095 and $82,095 for the years ended December 31, 2016, 2015 and
2014, respectively.
Amortization expenses for the next five years and thereafter is
as follows:
2017
|
$
|
82,095
|
|
2018
|
|
82,095
|
|
2019
|
|
82,095
|
|
2020
|
|
82,095
|
|
2021
|
|
82,095
|
|
Thereafter
|
|
2,736
|
|
Total
|
$
|
413,211
|
|
NOTE 22 SUMMARIZED INFORMATION OF INVESTMENT IN THE JV
COMPANY
The Companys consolidated net income includes the Companys
proportionate share of the net income or loss of the Companys equity method
investees. When the Company records its proportionate share of net income in
such investees, it increases equity income (loss) net in the Companys
consolidated statements of income and the Companys carrying value in that
investment. Conversely, when the Company records its proportionate share of a
net loss in such investees, it decreases equity income (loss) net in the
Companys consolidated statements of income and the Companys carrying value in
that investment. All intra-entity profits and losses with the Companys equity
method investees have been eliminated.
F-37
Kandi Electric Vehicles Group Co., Ltd. (the JV Company)
In March 2013, pursuant to a joint venture agreement (the JV
Agreement) entered into between Kandi Vehicles and Shanghai Maple Guorun
Automobile Co., Ltd. (Shanghai Guorun), a 99%-owned subsidiary of Geely
Automobile Holdings Ltd. (Geely), the parties established Zhejiang Kandi
Electric Vehicles Co., Ltd. (the JV Company) to develop, manufacture and sell
electric vehicles (EVs) and related auto parts. Each of Kandi Vehicles and
Shanghai Guorun has 50% ownership interest in the JV Company. For JV Companys
better development, Zhejiang Geely Holding Group, the parent company of Geely,
became the direct holding company of the JV Company on October 26, 2016 by
completing the purchase of the 50% equity of the JV Company held by Shanghai
Guorun with a premium price, or a purchase price exceeding the cash amount of
the aggregate of the original investment and the shared profits over the years.
In the fourth quarter of 2013, Kandi Vehicles entered into an ownership transfer
agreement with the JV Company pursuant to which Kandi Vehicles transferred 100%
of its ownership in Kandi Changxing to the JV Company. As a result, the Company
indirectly has 50% economic interest in Kandi Changxing through its 50%
ownership interest in the JV Company after this transfer. In November 2013,
Kandi Electric Vehicles Jinhua Co., Ltd. (Kandi Jinhua) was formed by the JV
Company. The JV Company has 100% ownership interest in Kandi Jinhua, and the
Company, indirectly through its 50% ownership interest in the JV Company, has
50% economic interest in Kandi Jinhua. In November 2013, Zhejiang JiHeKang
Electric Vehicle Sales Co., Ltd. (JiHeKang) was formed by the JV Company. The
JV Company has 100% ownership interest in JiHeKang, and the Company, indirectly
through its 50% ownership interest in the JV Company, has 50% economic interest
in JiHeKang. In December 2013, the JV Company entered into an ownership transfer
agreement with Shanghai Guorun pursuant to which the JV Company acquired 100%
ownership of Kandi Electric Vehicles (Shanghai) Co., Ltd. (Kandi Shanghai) . As a result, Kandi
Shanghai is a wholly-owned subsidiary of the JV Company, and the Company,
indirectly through its 50% ownership interest in the JV Company, has 50%
economic interest in Kandi Shanghai. In January 2014, Kandi Electric Vehicles
Jiangsu Co., Ltd. (Kandi Jiangsu) was formed by the JV Company. The JV Company
has 100% ownership interest in Kandi Jiangsu, and the Company, indirectly
through its 50% ownership interest in the JV Company, has 50% economic interest
in Kandi Jiangsu. In addition, In July 2013, Zhejiang ZuoZhongYou Electric
Vehicle Service Co., Ltd. (the Service Company) was formed. The JV Company had
a 19% ownership interest in the Service Company. In March 2014, the JV Company
changed its name to Kandi Electric Vehicles Group Co., Ltd. In August 2015, the
JV Company transferred its shares of the Service Company to Shanghai Guorun and
Kandi Vehicles for 9.5% respectively. As the result, the JV Company no longer
has any ownership of the Service Company since the transfer. In November 2015,
Hangzhou Puma Investment Management Co., Ltd. (Puma Investment) was formed by
the JV Company. The JV Company has 50% ownership interest in Puma Investment and
the Company, indirectly through its 50% ownership interest in the JV Company,
has 25% economic interest in Puma Investment. In November 2015,Hangzhou JiHeKang
Electric Vehicle Service Co., Ltd. (JiHeKang Service Company) was formed by
the JV Company. The JV Company has 100% ownership interest in JiHeKang Service
Company and the Company, indirectly through its 50% ownership interest in the JV
Company, has 50% economic interest in JiHeKang Service Company. In August 2016,
Jiangsu JiDian Electric Vehicle Sales Co., Ltd. (Jiangsu JiDian) was formed by
JiHeKang and is engaged in the car sales business. Since JiHeKang is 100% owned
by the JV Company, the JV Company has a 100% ownership interest in Jiangsu
JiDian, and the Company, indirectly through its 50% ownership interest in the JV
Company, has a 50% economic interest in Jiangsu JiDian. In October 2016,
JiHeKang acquired Tianjin BoHaiWan Vehicle Sales Co., Ltd. (Tianjin BoHaiWan),
which is engaged in the car sales business. Since JiHeKang is 100% owned by the
JV Company, the JV Company has a 100% ownership interest in Tianjin BoHaiWan,
and the Company, indirectly through its 50% ownership interest in the JV
Company, has a 50% economic interest in Tianjin BoHaiWan. In November 2016,
Changxing Kandi Vehicle Maintenance Co., Ltd. (Changxing Maintenance) was
formed by Kandi Changxing and is engaged in the car repair and maintenance
business. Since Kandi Changxing is 100% owned by the JV Company, the JV Company
has a 100% ownership interest in Changxing Maintenance, and the Company,
indirectly through its 50% ownership interest in the JV Company, has a 50%
economic interest in Changxing Maintenance
As of December 31, 2016, the JV Company consolidated the
following entities on its financial statements: (1) 100% interest in Kandi
Changxing; (2) 100% interest in Kandi Jinhua; (3) 100% interest in JiHeKang; (4)
100% interest in Kandi Shanghai; (5) 100% interest in Kandi Jiangsu; (6) 100%
interest in JiHeKang Service; (7) 100% interest in Jiangsu JiDian; (8) 100%
interest inTianjin BoHaiWan;and (9) 100% interest in Changxing Maintenance. The
Company accounted for its investments in the JV Company under the equity method
of accounting as the Company has 50% ownership interest in the JV Company.
Therefore, the Companys consolidated net income for the three months and year
ended December 31, 2016, included equity income from the JV Company during such
periods.
F-38
The combined results of operations and financial position of
the JV Company are summarized below:
|
|
Year
ended
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Condensed income statement
information:
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
179,328,669
|
|
$
|
362,715,996
|
|
$
|
215,537,203
|
|
Gross income
|
|
19,278,511
|
|
|
59,635,845
|
|
|
41,889,144
|
|
% of net sales
|
|
10.8%
|
|
|
16.4%
|
|
|
19.4%
|
|
Net income
|
|
(14,155,578
|
)
|
|
23,323,128
|
|
|
7,526,164
|
|
% of net sales
|
|
-7.9%
|
|
|
6.4%
|
|
|
3.5%
|
|
Companys equity in net
income of JV
|
$
|
(7,077,789
|
)
|
$
|
11,661,564
|
|
$
|
3,763,082
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Condensed balance sheet
information:
|
|
|
|
|
|
|
Current assets
|
$
|
514,958,008
|
|
$
|
455,368,595
|
|
Noncurrent assets
|
|
177,563,801
|
|
|
191,145,583
|
|
Total assets
|
$
|
692,521,809
|
|
$
|
646,514,178
|
|
Current liabilities
|
|
505,356,626
|
|
|
429,487,685
|
|
Noncurrent liabilities
|
|
31,817,560
|
|
|
36,348,514
|
|
Equity
|
|
155,347,623
|
|
|
180,677,979
|
|
Total liabilities and equity
|
$
|
692,521,809
|
|
$
|
646,514,178
|
|
During the year of 2016, 100% of the JV Companys revenues were
derived from the sales of EV products in the PRC with a total of 10,148 units
sold, 5,382 units of which were direct sales through the distribution company,
JiHeKang, and 4,766 units were sold to the Micro Public Transportation Program
(MPT or the EV-Share Program) through JiHeKang as well. As the Company only
has a 50% ownership interest in the JV Company and accounted for its investments in the JV Company
under the equity method of accounting, the Company didnt consolidate the JV
Companys financial results but included the equity income from the JV Company
during such periods.
F-39
Note: The following table illustrates the captions used in the
Companys Income Statements for its equity basis investments in the JV Company.
Changes in the Companys equity method investment in JV Company
for the year ended December 31, 2016 and 2015 are as follows:
|
|
Year
ended
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Investment in JV Company,
beginning of the period,
|
$
|
90,337,899
|
|
$
|
83,309,095
|
|
Share of profit (loss)
|
|
(7,077,789
|
)
|
|
11,661,564
|
|
Intercompany transaction
elimination
|
|
(230,787
|
)
|
|
(1,135
|
)
|
Year 2015 unrealized profit realized
|
|
1,066
|
|
|
181,426
|
|
Exchange difference
|
|
(5,577,376
|
)
|
|
(4,813,051
|
)
|
Investment in JV Company, end of the period
|
$
|
77,453,014
|
|
$
|
90,337,899
|
|
Sales to the Companys customers, the JV Company and its
subsidiaries, for the year ended December 31, 2016 were $77,708,394 or 60% of
the Companys total revenue for the year, a decrease of 49.0% of the sales to
the JV Company from the previous year. The sales to the JV Company and its
subsidiaries were primarily the sales of battery packs, body parts, EV drive
motors, EV controllers, air conditioning units and other auto parts, the
breakdown of the sales to the JV Company and its subsidiaries as follows:
|
|
Year
ended
|
|
|
|
December31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
JV Company
|
$
|
76,331,493
|
|
$
|
67,729,570
|
|
$
|
-
|
|
Kandi Changxing
|
|
349,721
|
|
|
44,019,899
|
|
|
65,342,342
|
|
Kandi Shanghai
|
|
647,950
|
|
|
39,708,548
|
|
|
39,412,740
|
|
Kandi Jinhua
|
|
46,303
|
|
|
789,065
|
|
|
12,952,070
|
|
Kandi Jiangsu
|
|
332,926
|
|
|
-
|
|
|
|
|
Total sales to JV
|
$
|
77,708,394
|
|
$
|
152,247,081
|
|
$
|
117,707,152
|
|
The following tables summarize the effects of transactions
including sales and purchases with JV:
|
|
Year
ended
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Sales to JV
|
$
|
77,708,394
|
|
$
|
152,247,082
|
|
$
|
117,707,152
|
|
Purchase from JV
|
$
|
-
|
|
$
|
55,179
|
|
$
|
356,609
|
|
As of the years ended 2016 and 2015, the amount due from (to)
the JV Company and its subsidiaries, net was $136,536,159 and $76,172,471,
respectively, of which the majority was the balances with the JV Company, Kandi
Jinhua, Kandi Changxing and Kandi Shanghai. The breakdown was as below:
F-40
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Kandi Shanghai
|
$
|
281,657
|
|
$
|
(4,488,379
|
)
|
Kandi Changxing
|
|
16,359,155
|
|
|
3,249,445
|
|
Kandi Jinhua
|
|
5,050,525
|
|
|
6,218,177
|
|
Kandi Jiangsu
|
|
352,587
|
|
|
11,453
|
|
JV Company
|
|
114,492,235
|
|
|
71,181,775
|
|
Consolidated JV
|
$
|
136,536,159
|
|
$
|
76,172,471
|
|
The amount due from the JV Company included four short-term
loans in the total amount of $33,113,298 that Kandi Vehicle lent to the JV
Company during the year and each of them carries an annual interest rate 4.35%.
NOTE 23 - COMMITMENTS AND CONTINGENCIES
Guarantees and pledged collateral for third party bank loans
As of December 31, 2016 and 2015, the Company provided
guarantees for the following third parties:
(1) Guarantees for bank loans
|
|
December 31,
|
|
|
December 31,
|
|
Guarantee provided to
|
|
2016
|
|
|
2015
|
|
Zhejiang Shuguang industrial
Co., Ltd.
|
|
4,175,155
|
|
|
4,466,555
|
|
Nanlong Group Co., Ltd.
|
|
2,879,417
|
|
|
3,080,383
|
|
Kandi Electric Vehicles Group
Co., Ltd.
|
|
46,790,530
|
|
|
50,056,216
|
|
Total
|
$
|
53,845,102
|
|
$
|
57,603,154
|
|
On March 15, 2013, the Company entered into a guarantee
contract to serve as the guarantor for NGCL's loan amount of $2,879,417 from
Shanghai Pudong Development Bank Jinhua Branch with related loan period from
March 15, 2013 to March 15, 2016. NGCL is not related to the Company. Under this
guarantee contract, the Company agreed to perform all obligations of NGCL under
the loan contract if NGCL fails to perform its obligations as set forth therein.
On July 20,2015,the Company entered into a guarantee contract
to serve as the guarantor for the JV Company for the bank loans of $10,797,815
from Bank of China with related loan period from July 20,2015 to July 19, 2016.
Under this guarantee contract, the Company agreed to perform all obligations of
the JV Company under the loan contract if the JV Company fails to perform its
obligations as set forth therein.
On September 29, 2015, the Company entered into a guarantee
contract to serve as the guarantor of Zhejiang Shuguang Industrial Co., Ltd.
(ZSICL) for the bank loan amount of $4,175,155 from Ping An Bank with related
loan period from September 29, 2015 to September 28, 2016. ZSICL is not related
to the Company. Under these guarantee contracts, the Company agreed to perform
all obligations of ZSICL under the loan contracts if ZSICL fails to perform its
obligations as set forth therein. ZSICL defaulted on the loan interest as of
December 31, 2016. Ping An Bank brought a lawsuit to the court against ZSICL,
the Company and three other parties for this default and a court ruling was
issued in December 2016 to order ZSICL to repay the principal and interest of
the bank loan to Ping An Bank with the Company and three other parties assuming
joint liabilities on this default. Currently, an appeal to the ruling is
pending. The Company is unable to estimate the amount of any potential loss at
this point.
On December 14, 2015,the Company entered into a guarantee
contract to serve as the guarantor for the JV Company for the bank loans of
$35,992,715 from China Import & Export Bank with related loan period from
December 14,2015 to December 13,2016, which was expanded to September 14, 2017.
Under this guarantee contract, the Company agreed to perform all obligations of
the JV Company under the loan contract if the JV Company fails to perform its
obligations as set forth therein.
F-41
All guarantee periods are two years from the date of expiry of
the debt performance under the principal loan contract.
(2) Pledged collateral for a third party's bank loans
As of December 31, 2016 and 2015, none of the Company's land
use rights or plant and equipment were pledged as collateral securing bank loans
to third parties.
NOTE 24 SEGMENT REPORTING
The Company has only one single operating segment. The
Company's revenue and long-lived assets are primarily derived from and located
in the PRC. The Company only operates in China.
The following table sets forth revenues by geographic area:
|
|
Year Ended
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Sales Revenue
|
|
|
Percentage
|
|
|
Sales Revenue
|
|
|
Percentage
|
|
|
Sales Revenue
|
|
|
Percentage
|
|
Overseas
|
$
|
4,919,054
|
|
|
4%
|
|
$
|
4,713,441
|
|
|
2%
|
|
$
|
8,629,824
|
|
|
5%
|
|
China
|
|
124,572,959
|
|
|
96%
|
|
|
196,355,732
|
|
|
98%
|
|
|
161,599,182
|
|
|
95%
|
|
Total
|
$
|
129,492,013
|
|
|
100%
|
|
$
|
201,069,173
|
|
|
100%
|
|
$
|
170,229,006
|
|
|
100%
|
|
NOTE 25 Related Party Transactions
The Board of Directors must approve all related party
transactions. All material related party transactions will be made or entered
into on terms that are no less favorable to the Company than can be obtained
from unaffiliated third parties.
The following table lists the sales to related parties during
the years of 2016, 2015 and 2014:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Service Company
|
|
3,913,031
|
|
|
42,032,060
|
|
|
-
|
|
Total
|
$
|
3,913,031
|
|
|
42,032,060
|
|
|
-
|
|
The details for amount due from related parties (other than the
JV Company) as of the December 31, 2016 and 2015 were as below:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Service Company
|
|
10,484,816
|
|
|
40,606,162
|
|
Total due from related party
|
$
|
10,484,816
|
|
|
40,606,162
|
|
The Company has 9.5% ownership of the Service Company and
Mr.Hu, Chairman and CEO of the Company, has 13% ownership of the Service
Company. The main transactions between the Company and the Service Company is
that the Service Company needs to buy battery for the speed upgrade and also EV
parts for the repairing and maintenance for its operating electric vehicles.
For any transactions with JV Company, please refer to Note 22
for the details.
F-42
NOTE 26 - Restatements of Certain Accounts in Previously Issued
Financial Statements
The Company restates its consolidated financial statements as
of and for the year ended December 31, 2015 and 2014. The Restatements reflect
separate audited financial statements for the fiscal years ended December 31,
2016, 2015 and 2014 of the JV Company, the adjustments to correct errors
identified by management during the Companys normal closing process, in the
course of the Companys regularly scheduled audit, and during preparation of the
responses to the comments from the staff of the SEC Division of Corporate
Finance. The Restatements primarily reflect adjustments to correct errors in the
classification of notes receivables and notes payables in the statements of cash
flows in previous relevant years, the revision in our financial statement
presentation to separately identify certain accounts on the face of Balance
Sheets and the Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss) in previous relevant years, the amendments to certain previously
disclosed amounts and disclosures in Note 18 Taxes of the Notes to our
Consolidated Financial Statements, and the corrected amount of previously
disclosed construction -in-progress in Note 16 - Construction -in-Progress of
the Notes to our Consolidated Financial Statements. The Restatements had no
effect on net income as reported in the previously issued financial statements.
The effect of the Restatements on the Companys Balance Sheets and the Statement
of Cash Flows is not material. The nature and impact of these adjustments are
described below and detailed in the tables below.
The Company placed a number in brackets in front of each
narrative explanation for the revisions below and keyed the corresponding
adjustments in the tabular presentation in the note to these items using the
same number, for clarity.
Revision in Consolidated Statements of Cash Flows:
(1). For the years ended December 31,
2015 and 2014, $122,440,599 and $15,254,847, respectively, were previously
reported as an issuance of notes receivables in cash flow from investing
activities in the statement of cash flows, which represent the settlement of the
trade receivables with notes receivables. This classification as issuance of
notes receivables in cash flow from investing activities was not correct. In
this Form 10-K, the receipts of notes receivable for the settlement of trade
receivables are reported as a noncash activity in the schedule of noncash
transactions in the statement of cash flows.
(2). For the years ended December 31,
2015 and 2014, $120,815,961and $14,311,483, respectively, were previously
reported as repayments of notes receivable in the investing section of the
statement of cash flows, which represent the collections of the notes
receivables or the assignment of the notes receivable to our suppliers to settle
the accounts payables. This classification as repayments of notes receivables in
cash flow from investing activities was not correct. In this Form 10-K, for the
years ended December 31, 2015 and 2014, $1,708,224 and $0, respectively, of the
cash receipts from the collection of notes receivables are reported as an
activity in the cash flow from operating activities in the statement of cash
flows and $119,107,737and $14,311,483 of the assignment of the notes receivable
to our suppliers to settle the accounts payables as noncash activity in the
schedule of noncash transactions.
(3). For the years ended December 31,
2015and 2014, $13,781,830 and $5,707,027, respectively, were previously reported
as the proceeds from notes payables in the financing section of the statement of
cash flows, which represent the settlement of accounts payable with notes
payables. This classification as proceeds from notes payables in cash flow from
financing activities was not correct. In this Form 10-K, the settlement of
accounts payables with notes payable are reported as a noncash activity in the
schedule of noncash transactions in the statement of cash flows.
These misstatements in our Consolidated Statements of Cash
Flows for the years December 31, 2015 and 2014 are corrected as follows:
F-43
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Consolidated
Statements
of Cash Flows
For the Year Ended
December
31, 2015
|
|
As Previously Reported
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
$
|
14,665,495
|
|
$
|
|
|
$
|
14,665,495
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
5,788,780
|
|
|
|
|
|
5,788,780
|
|
Assets Impairments
|
|
194,366
|
|
|
|
|
|
194,366
|
|
Deferred taxes
|
|
1,446,345
|
|
|
|
|
|
1,446,345
|
|
Change in fair value of
financial instruments
|
|
(8,519,295
|
)
|
|
|
|
|
(8,519,295
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss (income) in investment
in associated companies
|
|
0
|
|
|
|
|
|
0
|
|
Share of profit after tax of JV Company
|
|
(11,841,855
|
)
|
|
|
|
|
(11,841,855
|
)
|
Decrease in reserve for fixed
assets
|
|
0
|
|
|
|
|
|
0
|
|
Stock Compensation cost
|
|
22,306,987
|
|
|
|
|
|
22,306,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
7,052,626
|
|
|
(23,292,896)
|
(1)
|
|
(16,240,270
|
)
|
Notes receivable
|
|
|
|
|
1,708,223
|
(2)
|
|
1,708,223
|
|
Inventories
|
|
(3,497,460
|
)
|
|
|
|
|
(3,497,460
|
)
|
Other receivables
|
|
(193,954
|
)
|
|
|
|
|
(193,954
|
)
|
Due from employee
|
|
(7,596
|
)
|
|
|
|
|
(7,596
|
)
|
Prepayments and prepaid expenses
|
|
6,664,779
|
|
|
|
|
|
6,664,779
|
|
Amount due from the JV
Company
|
|
(28,519,360
|
)
|
|
(99,147,703)
|
(1)
|
|
(127,667,063
|
)
|
Amount due from related parties
|
|
(42,249,905
|
)
|
|
|
|
|
(42,249,905
|
)
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
31,814,545
|
|
|
132,889,567
|
(2)(3)
|
|
164,704,112
|
|
Other payables and accrued liabilities
|
|
5,300,095
|
|
|
|
|
|
5,300,095
|
|
Notes payable
|
|
0
|
|
|
(15,398,471
|
)
|
|
(15,398,471
|
)
|
Customer deposits
|
|
(2,496,382
|
)
|
|
|
|
|
(2,496,382
|
)
|
Income Tax payable
|
|
(1,039,187
|
)
|
|
|
|
|
(1,039,187
|
)
|
Net cash (used in ) provided by operating
activities
|
$
|
(3,130,976
|
)
|
$
|
(3,241,279
|
)
|
$
|
(6,372,255
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
(Purchases)/Disposal of plant
and equipment, net
|
|
(827,059
|
)
|
|
|
|
|
(827,059
|
)
|
|
|
|
|
|
|
|
|
|
|
(Purchases)/Disposal of land
use rights and other intangible assets
|
|
1,589,165
|
|
|
|
|
|
1,589,165
|
|
(Purchases)/Disposal of construction in
progress
|
|
1,128,443
|
|
|
|
|
|
1,128,443
|
|
Issuance of notes receivable
|
|
(131,852,319
|
)
|
|
122,440,599
|
(1)
|
|
(9,411,720
|
)
|
Repayment of notes receivable
|
|
127,226,115
|
|
|
(120,815,961)
|
(2)
|
|
6,410,154
|
|
Long Term Investment
|
|
(1,522,411
|
)
|
|
|
|
|
(1,522,411
|
)
|
Short Term Investment
|
|
(1,679,051
|
)
|
|
|
|
|
(1,679,051
|
)
|
Net cash provided by (used
in) investing activities
|
$
|
(5,937,117
|
)
|
$
|
1,624,638
|
|
$
|
(4,312,479
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
(4,006,346
|
)
|
|
|
|
|
(4,006,346
|
)
|
Proceeds from
short-term bank loans
|
|
50,640,214
|
|
|
|
|
|
50,640,214
|
|
Repayments of short-term bank
loans
|
|
(47,595,391
|
)
|
|
|
|
|
(47,595,391
|
)
|
Proceeds from notes
payable
|
|
13,781,830
|
|
|
(13,781,830)
|
(3)
|
|
0
|
|
Repayment of notes payable
|
|
(15,398,471
|
)
|
|
15,398,471
|
|
|
0
|
|
Net cash (used in)
provided by financing activities
|
$
|
(2,578,164
|
)
|
$
|
1,616,641
|
|
$
|
(961,523
|
)
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH
EQUIVALENTS
|
|
(11,646,257
|
)
|
|
|
|
|
(11,646,257
|
)
|
Effect of exchange rate changes on cash
|
|
2,005,356
|
|
|
|
|
|
2,005,356
|
|
Cash and cash equivalents at
beginning of year
|
|
26,379,460
|
|
|
|
|
|
26,379,460
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
16,738,559
|
|
|
|
|
$
|
16,738,559
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
2,496,654
|
|
|
|
|
|
2,496,654
|
|
Interest paid
|
|
2,188,223
|
|
|
|
|
|
2,188,223
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress
transferred back to prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV Company and related
parties with notes receivable
|
|
|
|
|
99,147,703
|
(1)
|
|
99,147,703
|
|
Settlement of accounts
receivables with notes receivable from unrelated parties
|
|
|
|
|
23,292,896
|
(1)
|
|
23,292,896
|
|
Assignment of notes receivable to supplier to
settle accounts payable
|
|
|
|
|
119,107,737
|
(2)
|
|
119,107,737
|
|
Settlement of accounts
payable with notes payables
|
|
|
|
|
13,781,830
|
(3)
|
|
13,781,830
|
|
F-44
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Consolidated
Statements
of Cash Flows
For the Year Ended
December
31, 2014
|
|
As Previously Reported
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
$
|
12,271,338
|
|
$
|
|
|
$
|
12,271,338
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
5,571,465
|
|
|
|
|
|
5,571,465
|
|
Deferred taxes
|
|
1,579,855
|
|
|
|
|
|
1,579,855
|
|
Change in fair value of financial instruments
|
|
(6,531,308
|
)
|
|
|
|
|
(6,531,308
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss (income) in investment in associated
companies
|
|
54,308
|
|
|
|
|
|
54,308
|
|
Share of profit after tax of
JV Company
|
|
(4,490,266
|
)
|
|
|
|
|
(4,490,266
|
)
|
Decrease in reserve for fixed assets
|
|
(302,023
|
)
|
|
|
|
|
(302,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
15,445,962
|
|
|
(1,706,188
|
) (1)
|
|
13,739,774
|
|
Notes receivable
|
|
0
|
|
|
0
|
(2)
|
|
0
|
|
Inventories
|
|
(6,280,502
|
)
|
|
|
|
|
(6,280,502
|
)
|
Other receivables
|
|
315,071
|
|
|
|
|
|
315,071
|
|
Due from employee
|
|
5,139
|
|
|
|
|
|
5,139
|
|
Prepayments and prepaid expenses
|
|
(5,360,637
|
)
|
|
7,969,799
|
(6)
|
|
2,609,162
|
|
Amount due from the JV
Company
|
|
(48,593,522
|
)
|
|
(13,548,659
|
) (1)
|
|
(62,142,181
|
)
|
Amount due from related parties
|
|
0
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
23,095,825
|
|
|
20,018,509
|
(2)(3)
|
|
43,114,334
|
|
Other payables and accrued liabilities
|
|
2,694,689
|
|
|
|
|
|
2,694,689
|
|
Notes payable
|
|
0
|
|
|
(1,951,788
|
)
|
|
(1,951,788
|
)
|
Customer deposits
|
|
2,588,830
|
|
|
|
|
|
2,588,830
|
|
Income Tax payable
|
|
482,020
|
|
|
|
|
|
482,020
|
|
Net cash (used in ) provided by operating
activities
|
$
|
(7,453,756
|
)
|
$
|
10,781,674
|
|
$
|
3,327,918
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
(Purchases)/Disposal of plant
and equipment, net
|
|
(2,101,355
|
)
|
|
|
|
|
(2,101,355
|
)
|
|
|
|
|
|
|
|
|
|
|
(Purchases)/Disposal of land
use rights and other intangible assets
|
|
(1,668,534
|
)
|
|
|
|
|
(1,668,534
|
)
|
(Purchases)/Disposal of construction in
progress
|
|
(50,891,170
|
)
|
|
(7,969,799
|
) (6)
|
|
(58,860,969
|
)
|
Deposit for acquisition
|
|
0
|
|
|
|
|
|
0
|
|
Disposal of associated company
|
|
(96,299
|
)
|
|
|
|
|
(96,299
|
)
|
Issuance of notes receivable
|
|
(24,705,489
|
)
|
|
15,254,847
|
(1)
|
|
(9,450,642
|
)
|
Repayment of notes receivable
|
|
29,354,592
|
|
|
(14,311,483
|
) (2)
|
|
15,043,109
|
|
Short Term Investment
|
|
0
|
|
|
|
|
|
0
|
|
Net cash provided by (used in) investing
activities
|
$
|
(50,108,255
|
)
|
$
|
(7,026,435
|
)
|
$
|
(57,134,690
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
(13,010,291
|
)
|
|
|
|
|
(13,010,291
|
)
|
Proceeds from short-term bank loans
|
|
48,306,743
|
|
|
|
|
|
48,306,743
|
|
Repayments of
short-term bank loans
|
|
(46,517,604
|
)
|
|
|
|
|
(46,517,604
|
)
|
Proceeds from notes payable
|
|
18,718,944
|
|
|
(5,707,027
|
) (3)
|
|
13,011,917
|
|
Repayment of notes
payable
|
|
(29,602,112
|
)
|
|
1,951,788
|
|
|
(27,650,324
|
)
|
Repayment of bond payable
|
|
(13,011,917
|
)
|
|
|
|
|
(13,011,917
|
)
|
Fund raising through
issuing common stock and warrants
|
|
78,358,991
|
|
|
|
|
|
78,358,991
|
|
Option exercisestock awards &
other financing
|
|
8,431,247
|
|
|
|
|
|
8,431,247
|
|
Warrant exercise
|
|
21,101,039
|
|
|
|
|
|
21,101,039
|
|
Net cash (used in) provided by
financing activities
|
$
|
72,775,040
|
|
$
|
(3,755,239
|
)
|
$
|
69,019,801
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
15,213,029
|
|
|
|
|
|
15,213,029
|
|
Effect of exchange rate changes on cash
|
|
(1,595,938
|
)
|
|
|
|
|
(1,595,938
|
)
|
Cash and cash equivalents at
beginning of year
|
|
12,762,369
|
|
|
|
|
|
12,762,369
|
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
$
|
26,379,460
|
|
$
|
|
|
$
|
26,379,460
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
1,932,392
|
|
|
|
|
|
1,932,392
|
|
Interest paid
|
|
3,475,893
|
|
|
|
|
|
3,475,893
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress
transferred back to prepayments
|
|
|
|
|
7,969,799
|
(6)
|
|
7,969,799
|
|
Settlement of due from JV Company and related
parties with notes receivable
|
|
|
|
|
13,548,659
|
(1)
|
|
13,548,659
|
|
Settlement of accounts
receivables with notes receivable from unrelated parties
|
|
|
|
|
1,706,188
|
(1)
|
|
1,706,188
|
|
Assignment of notes receivable to supplier to
settle accounts payable
|
|
|
|
|
14,311,483
|
(2)
|
|
14,311,483
|
|
Settlement of accounts
payable with notes payables
|
|
|
|
|
5,707,027
|
(3)
|
|
5,707,027
|
|
Revision in Financial Statement Presentation and Note 12
Notes Receivables
(4) We
previously reported the notes receivable as one line item on the Balance Sheet
at December 31, 2015. Pursue to the requirements of Rule 4-08(k) of Regulation
S-X, we separately identify notes receivable with the JV Company and related
parties on the face of the balance sheet in this Form 10-K. Accordingly, Note 12
Notes Receivables of the Notes to our Consolidated Financial Statements has
been revised to reflect this change.
These misstatements in our Consolidated Balance Sheets at
December 31, 2015 are corrected as follows:
F-45
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
December
31, 2015
|
|
As Previously
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
Reported
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
16,738,559
|
|
$
|
|
|
$
|
16,738,559
|
|
Restricted cash
|
|
16,172,009
|
|
|
|
|
|
16,172,009
|
|
Short term investment
|
|
1,613,727
|
|
|
|
|
|
1,613,727
|
|
Accounts receivable
|
|
8,136,421
|
|
|
|
|
|
8,136,421
|
|
Inventories (net of provision
for slow moving inventory of 485,901 as of December 31, 2015)
|
|
17,773,679
|
|
|
|
|
|
17,773,679
|
|
Notes receivable
|
|
13,033,315
|
|
|
-1,931,076
|
(4)
|
|
11,102,239
|
|
Notes receivable from the JV
Company and related parties
|
|
|
|
|
1,931,076
|
(4)
|
|
1,931,076
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
332,922
|
|
|
|
|
|
332,922
|
|
Prepayments and
prepaid expense
|
|
181,534
|
|
|
|
|
|
181,534
|
|
|
|
|
|
|
|
|
|
|
|
Due from employees
|
|
34,434
|
|
|
|
|
|
34,434
|
|
|
|
|
|
|
|
|
|
|
|
Advances to suppliers
|
|
71,794
|
|
|
7,546,937
|
(6)
|
|
7,618,731
|
|
Amount due from JV Company, net
|
|
76,172,471
|
|
|
|
|
|
76,172,471
|
|
Amount due from related party
|
|
40,606,162
|
|
|
|
|
|
40,606,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,867,027
|
|
|
|
|
|
198,413,964
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
7,546,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
20,525,126
|
|
|
|
|
|
20,525,126
|
|
Land use rights, net
|
|
12,935,121
|
|
|
|
|
|
12,935,121
|
|
Construction in progress
|
|
54,368,753
|
|
|
-7,546,937
|
(6)
|
|
46,821,816
|
|
Deferred taxes assets
|
|
-
|
|
|
|
|
|
-
|
|
Investment in associated
company
|
|
|
|
|
|
|
|
-
|
|
Long Term Investment
|
|
1,463,182
|
|
|
|
|
|
1,463,182
|
|
Investment in JV Company
|
|
90,337,899
|
|
|
|
|
|
90,337,899
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
495,306
|
|
|
|
|
|
495,306
|
|
|
|
|
|
|
|
|
|
|
|
Other long term assets
|
|
154,019
|
|
|
|
|
|
154,019
|
|
TOTAL Long-Term Assets
|
|
180,601,997
|
|
|
-7,546,937
|
|
|
173,055,060
|
|
TOTAL ASSETS
|
$
|
371,469,024
|
|
$
|
|
|
$
|
-371,469,024
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
73,957,969
|
|
$
|
|
|
$
|
73,957,969
|
|
Other payables and accrued expenses
|
|
9,544,909
|
|
|
|
|
|
9,544,909
|
|
Short-term loans
|
|
36,656,553
|
|
|
|
|
|
36,656,553
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
94,026
|
|
|
|
|
|
94,026
|
|
Notes payable
|
|
3,850,478
|
|
|
|
|
|
3,850,478
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payable
|
|
624,276
|
|
|
|
|
|
624,276
|
|
|
|
|
|
|
|
|
|
|
|
Due to employees
|
|
9,423
|
|
|
|
|
|
9,423
|
|
Deferred taxes liabilities
|
|
2,374,924
|
|
|
|
|
|
2,374,924
|
|
Financial derivate - liability
|
|
3,823,590
|
|
|
|
|
|
3,823,590
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income
|
|
13,726
|
|
|
|
|
|
13,726
|
|
Total Current
Liabilities
|
|
130,949,874
|
|
|
-
|
|
|
130,949,874
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
1,593,582
|
|
|
|
|
|
1,593,582
|
|
Bond payable
|
|
-
|
|
|
|
|
|
-
|
|
Financial derivate - liability
|
|
-
|
|
|
|
|
|
-
|
|
Total Long-Term
Liabilities
|
|
1,593,582
|
|
|
-
|
|
|
1,593,582
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
132,543,456
|
|
|
-
|
|
|
132,543,456
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000
shares authorized; 46,964,855 shares issued and outstanding at December
31,2015
|
|
46,965
|
|
|
|
|
|
46,965
|
|
Additional paid-in capital
|
|
212,564,334
|
|
|
|
|
|
212,564,334
|
|
Retained earnings (the restricted portion is
$4,172,324 at December 31,2015)
|
|
31,055,919
|
|
|
|
|
|
31,055,919
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other
|
|
-4,741,650
|
|
|
|
|
|
-4,741,650
|
|
comprehensive income(loss)
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY
|
|
238,925,568
|
|
|
-
|
|
|
238,925,568
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
371,469,024
|
|
$
|
|
|
$
|
-
371,469,024
|
|
(5) We
previously reported the revenue as one line item on the Consolidated Statements
of Income (Loss) and Comprehensive Income (Loss) for the years ended December
31, 2015 and 2014. Pursue to the requirements of Rule 4-08(k) of Regulation S-X,
we separately identify revenue from the JV Company and related parties and
revenue from unrelated parties on the face of the Consolidated Statements of
Income (Loss) and Comprehensive Income (Loss) in this Form 10-K.
These misstatements in our Consolidated Statements of Income
(Loss) and Comprehensive Income (Loss) for the year ended December 31, 2015 and
2014 are corrected as follows:
F-46
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
FOR THE
YEARS
ENDED
DECEMBER
31, 2015
|
|
As Previously
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
6,790,032
|
(5)
|
$
|
6,790,032
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
194,279,141
|
(5)
|
|
194,279,141
|
|
REVENUES, NET
|
|
201,069,173
|
|
|
|
|
|
201,069,173
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
172,649,955
|
|
|
|
|
|
172,649,955
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
28,419,218
|
|
|
|
|
|
28,419,218
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
3,482,511
|
|
|
|
|
|
3,482,511
|
|
Selling and marketing
|
|
633,863
|
|
|
|
|
|
633,863
|
|
General and administrative
|
|
28,255,267
|
|
|
|
|
|
28,255,267
|
|
Total Operating
Expenses
|
|
32,371,641
|
|
|
|
|
|
32,371,641
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
(3,952,423
|
)
|
|
|
|
|
(3,952,423
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
3,138,717
|
|
|
|
|
|
3,138,717
|
|
Interest (expense)
|
|
(2,214,635
|
)
|
|
|
|
|
(2,214,635
|
)
|
Change in fair value
of financial instruments
|
|
8,519,295
|
|
|
|
|
|
8,519,295
|
|
Government grants
|
|
1,645,032
|
|
|
|
|
|
1,645,032
|
|
Share of (loss) in associated
companies
|
|
-
|
|
|
|
|
|
-
|
|
Share of profit after tax of JV
|
|
11,841,855
|
|
|
|
|
|
11,841,855
|
|
Other income, net
|
|
1,814,882
|
|
|
|
|
|
1,814,882
|
|
Total other income(expense), net
|
|
24,745,146
|
|
|
|
|
|
24,745,146
|
|
|
|
|
|
|
|
|
|
|
|
INCOME(LOSS) BEFORE INCOME TAXES
|
|
20,792,723
|
|
|
|
|
|
20,792,723
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
(6,127,228
|
)
|
|
|
|
|
(6,127,228
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
14,665,495
|
|
|
|
|
|
14,665,495
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
(9,631,753
|
)
|
|
|
|
|
(9,631,753
|
)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
5,033,742
|
|
$
|
|
|
$
|
5,033,742
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING BASIC
|
|
46,744,718
|
|
|
|
|
|
46,744,718
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED
|
|
46,925,554
|
|
|
|
|
|
46,925,554
|
|
NET INCOME(LOSS) PER SHARE,
BASIC
|
$
|
0.31
|
|
$
|
|
|
$
|
0.31
|
|
NET INCOME(LOSS) PER SHARE, DILUTED
|
$
|
0.31
|
|
$
|
|
|
$
|
0.31
|
|
F-47
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
FOR THE
YEARS
ENDED
DECEMBER
31, 2014
|
|
As Previously Reported
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
49,539,910
|
(5)
|
$
|
49,539,910
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
120,689,096
|
(5)
|
|
120,689,096
|
|
REVENUES, NET
|
|
170,229,006
|
|
|
|
|
|
170,229,006
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
146,825,073
|
|
|
|
|
|
146,825,073
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
23,403,933
|
|
|
|
|
|
23,403,933
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
2,755,637
|
|
|
|
|
|
2,755,637
|
|
Selling and marketing
|
|
1,345,588
|
|
|
|
|
|
1,345,588
|
|
General and administrative
|
|
14,058,548
|
|
|
|
|
|
14,058,548
|
|
Total Operating
Expenses
|
|
18,159,773
|
|
|
|
|
|
18,159,773
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
5,244,160
|
|
|
|
|
|
5,244,160
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,701,121
|
|
|
|
|
|
1,701,121
|
|
Interest (expense)
|
|
(3,480,646
|
)
|
|
|
|
|
(3,480,646
|
)
|
Change in fair value of financial instruments
|
|
6,531,308
|
|
|
|
|
|
6,531,308
|
|
Government grants
|
|
288,498
|
|
|
|
|
|
288,498
|
|
Share of (loss) in associated companies
|
|
(54,308
|
)
|
|
|
|
|
(54,308
|
)
|
Share of profit after tax of
JV
|
|
4,490,266
|
|
|
|
|
|
4,490,266
|
|
Other income, net
|
|
(34,649
|
)
|
|
|
|
|
(34,649
|
)
|
Total other
income(expense), net
|
|
9,441,590
|
|
|
|
|
|
9,441,590
|
|
|
|
|
|
|
|
|
|
|
|
INCOME(LOSS) BEFORE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
14,685,750
|
|
|
|
|
|
14,685,750
|
|
TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
(2,414,412
|
)
|
|
|
|
|
(2,414,412
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
12,271,338
|
|
|
|
|
|
12,271,338
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
(2,725,143
|
)
|
|
|
|
|
(2,725,143
|
)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
9,546,195
|
|
$
|
|
|
$
|
9,546,195
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC
|
|
42,583,495
|
|
|
|
|
|
42,583,495
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
42,715,818
|
|
|
|
|
|
42,715,818
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME(LOSS) PER SHARE,
BASIC
|
$
|
0.29
|
|
$
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME(LOSS) PER SHARE,
DILUTED
|
$
|
0.29
|
|
$
|
|
|
$
|
0.29
|
|
F-48
Construction -in-progress Adjustments:
(6) A
RMB 49 million or approximately $7.5 million of previously recorded construction
-in-progress on the Balance Sheet at December 31, 2014 was reclassified to the
prepayment at December 31, 2014 due to the revised completion status at December
31, 2014 as a result of the revision of contract terms and technical
requirements. Accordingly, this adjustment was made on the balance sheets at
December 31, 2015,
Revision in Note 18 - Taxes:
(7) Our previously
reported the tax reconciliation schedule in Note 20 Taxes in the Form 10-K
filed with the SEC on March 14, 2016 was prepared incorrectly. Pursuant to ASC
740-10-50-12, the starting point in reconciling reported income tax expense
(benefit) attributable to continuing operations for the year is the amount of
income tax expense that would result from applying domestic statutory tax rates
to reported pretax income from continuing operations for that year. A revised
tax rate reconciliation schedule for the years ended December 31, 2015 are
included in this Form 10-K, which we have used the PRC statutory rate of 25% as
the starting point for our rate reconciliation. The revised tax rate
reconciliation schedule for the years ended December 31, 2015 reflect the
reduced rate applicable to high technology companies as a reconciling item to
arrive at the effective rate.
(7) We
previously reported the expected tax expense was computed through a combination
of applying the U.S. Federal rate of 34%, the PRC rate of 25%, and the Hong Kong
rate of 16.5% in Note 20 Taxes in the Form 10-K filed with the SEC on March 14,
2016.This error is corrected in this Form 10-K. Pursue to Rule 4-08(h)(2) of
Regulation S-X, we have used the PRC statutory rate of 25% to reconcile to the
effective tax rate.
(8) Our
previously reported loss carried forward and valuation allowance for the years
ended December 31, 2015 was not prepared correctly. In this Form 10-K, we have
revised our note and tabular disclosure to include the total of all deferred tax
assets and total valuation allowance recognized for deferred tax assets at each
respective balance sheet date presented, the net change in the total valuation
allowance during each year presented, and the amount(s) and expiration date(s)
of total net operating loss carryforwards available to us at the most recent
balance sheet date presented. Pursue to the guidance in FASB ASC 740-10-50-2 and
3, our tabular disclosure in Note 18 - Taxes includes the tax effect of the
total cumulative net operating loss carryforward(s) existing at each balance
sheet date and the associated total valuation allowance.
(9) Our
previously reported taxes were not properly broken out between current and
deferred taxes in the Form 10-K filed with the SEC on March 14, 2016. In this
Form 10-K, the table has been modified in Note 18 - Taxes, and deferred tax
expense agrees with amount reflected in the statement of cash flows.
(7) The amount
and nature of each item within permanent differences in the reconciliation
between the expected and reported tax expense were not disclosed properly in the
Form 10-K filed with the SEC on March 14, 2016.In this Form 10-K, pursue to Rule
4-08(h)(2) of Regulation S-X for guidance, the amount and nature of each item
for the years ended December 31, 2015 is revised and disclosed in the table.
F-49
(10) We
previously included unaudited headings on the tables of the statutory to
actual tax provision reconciliation, the 2015 presentation of net deferred tax
liabilities, and the table presenting tax benefit (holiday) credit and net per
share effect in Note 20 Taxes in the Form 10-K filed with the SEC on March 14,
2016. These unintentional typographical errors are corrected in this Form 10-K
with the unaudited label removed from the noted tables for the relevant years.
NOTE 27 Quarterly Financial Statements (Unaudited)
The information for the first three quarters of the year ended
December 31, 2016 and for all corresponding 2015 quarters have been restated to
correct the errors described in Overview of Restatement.
The restatement had no effect on net income.
The restated financial statements correct the following errors:
The Company placed a number in brackets in front of each
narrative explanation for the revisions below and keyed the corresponding
adjustments in the tabular presentation in the note to these items using the
same number, for clarity.
Restatement of Unaudited Condensed Consolidated Statement of
Cash Flows and Related Unaudited Footnotes:
(1)
For the three months ended March 31, 2016, the six months ended June 30, 2016
and nine months ended September 30, 2016, $31,350,559, $34,866,384 and
$46,791,213, respectively, were previously reported as an issuance of notes
receivables in cash flow from investing activities in the statement of cash
flows, which represent the settlement of due from the JV Company and related
parties with notes receivables. This classification as issuance of notes
receivables in cash flow from investing activities was not correct. In this Form
10-K, the receipts of notes receivable for the settlement of Due from the JV
Company and related parties are reported as a noncash activity in the schedule
of noncash transactions in the statement of cash flows.
(2)
For the three months ended March 31, 2016, the six months ended June 30, 2016
and nine months ended September 30, 2016, $10,413,273, $12,714,237 and
$15,198,694, respectively, were previously reported as an issuance of notes
receivables in cash flow from investing activities in the statement of cash
flows, which represent the settlement of accounts receivable with notes
receivables. This classification as issuance of notes receivables in cash flow
from investing activities was not correct. In this Form 10-K, the receipts of
notes receivable for the settlement of accounts receivable are reported as a
noncash activity in the schedule of noncash transactions in the statement of
cash flows.
F-50
(3) For
the three months ended March 31, 2016, the six months ended June 30, 2016 and
the nine months ended September 30, 2016, $40,855,454, $49,046,178 _and
$61,497,480, respectively, were previously reported as repayments of notes
receivable in the investing section of the statement of cash flows, which
represent the assignment of the notes receivable to our suppliers to settle the
accounts payables. This classification as repayments of notes receivables in
cash flow from investing activities was not correct. In this Form 10-K, the
assignment of the notes receivable to our suppliers to settle the accounts
payables are reported as a noncash activity in the schedule of noncash
transactions in the statement of cash flows.
(4)
For the three months ended March 31, 2016, the six months ended June 30, 2016
and the nine months ended September 30, 2016, $0, $229,450 and $918,018,
respectively, were previously reported as repayments of notes receivable in the
investing section of the statement of cash flows, which represent the cash
receipts from the collection of notes receivables. This classification as
repayments of notes receivables in cash flow from investing activities was not
correct. In this Form 10-K, the cash receipts from the collection of notes
receivables are reported as an activity in the cash flow from operating
activities in the statement of cash flows.
(5)
For the three months ended March 31, 2016, the six months ended June 30, 2016
and the nine months ended September 30, 2016, $2,063,766, $4,796,570 and
$5,187,040, respectively, were previously reported as the proceeds from notes
payables in the financing section of the statement of cash flows, which
represent the settlement of accounts payable with notes payables. This
classification as proceeds from notes payables in cash flow from financing
activities was not correct. In this Form 10-K, the settlement of accounts
payables with notes payable are reported as an noncash activity in the schedule
of noncash transactions rather than an proceeds from notes payable in cash flow
from financing activities in the statement of cash flows
Restatement of Unaudited Condensed Consolidated Balance Sheet
and Condensed Consolidated Income Statement:
(6)
We previously reported the notes receivable as one line item on the Balance
Sheet at March 31, 2016, June 30, 2016 and September 30, 2016. Pursue to the
requirements of Rule 4-08(k) of Regulation S-X, we separately identify notes
receivable with the JV Company and related parties on the face of the balance
sheet in this Form 10-K.
(7)
We previously reported the revenue as one line item on the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss) for the three months
ended March 31, 2016, the six months ended June 30, and the nine months ended
2016 and September 30, 2016. Pursue to the requirements of Rule 4-08(k) of
Regulation S-X, we separately identify revenue from the JV Company and related
parties and revenue from unrelated parties on the face of the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss) in this Form 10-K.
Construction -in-progress Adjustments:
F-51
(8)
A RMB 49 million or approximately $7.5 million of previously recorded
construction -in-progress on the Balance Sheet at December 31, 2014 was
reclassified to the prepayment at December 31, 2014 due to the revised
completion status at December 31, 2014 as a result of the revision of contract
terms and technical requirements. Accordingly, this adjustment was made on the
balance sheets at March 31, 2016, June 30, 2016 and September 30, 2016 as well.
Restatement of Unaudited Income Tax Footnote:
(9) Our
previously reported tax reconciliation schedule in Note 20 Taxes in the Form
10-Q filed with the SEC on May 10, 2016, August 9, 2016 and November 9, 2016 was
prepared incorrectly. Pursuant to ASC 740-10-50-12, the starting point in
reconciling reported income tax expense (benefit) attributable to continuing
operations for the period is the amount of income tax expense that would result
from applying domestic statutory tax rates to reported pretax income from
continuing operations for that period. A revised tax rate reconciliation
schedule for the three months ended March 31, 2016, the six months ended June
30, 2016 and the nine months ended September 30, 2016 are included in this Form
10-K, which we have used the PRC statutory rte of 25% as the starting point for
our rate reconciliation. The revised tax rate reconciliation schedule for the
three months ended March 31, 2016, the six months ended June 30, 2016 and the
nine months ended September 30, 2016, reflect the reduced rate applicable to
high technology companies as a reconciling item to arrive at the effective rate.
(9) We
previously reported the expected tax expense was computed through a combination
of applying the U.S. Federal rate of 34%, the PRC rate of 25%, and the Hong Kong
rate of 16.5% in Note 20 Taxes in the Form 10-Q filed with the SEC on May 10,
2016, August 9, 2016 and November 9, 2016.This error is corrected in this Form
10-K. Pursue to Rule 4-08(h)(2) of Regulation S-X, we have used the PRC
statutory rate of 25% to reconcile to the effective tax rate.
(10) Our
previously reported loss carried forward and valuation allowance for the three
months ended March 31, 2016, the six months ended June 30, 2016 and the nine
months ended September 30, 2016 was not prepared correctly. In this Form 10-K,
we have revised our note and tabular disclosure to include the total of all
deferred tax assets and total valuation allowance recognized for deferred tax
assets at each respective balance sheet date presented, the net change in the
total valuation allowance during each period presented, and the amount(s) and
expiration date(s) of total net operating loss carryforwards available to us at
the most recent balance sheet date presented. Pursue to the guidance in FASB ASC
740-10-50-2 and 3, our revised tabular disclosure includes the tax effect of the
total cumulative net operating loss carryforward(s) existing at each balance
sheet date and the associated total valuation allowance.
F-52
(11) Our
previously reported taxes were not properly broken out between current and
deferred taxes in the Form 10-Q filed with the SEC on May 10, 2016, August 9,
2016 and November 9, 2016. In this Form 10-K, the table has been modified and
deferred tax expense agrees with amount reflected in the statement of cash
flows.
(9) The
amount and nature of each item within permanent differences in the
reconciliation between the expected and reported tax expense were not disclosed
properly in the Form 10-Q filed with the SEC on May 10, 2016, August 9, 2016 and
November 9, 2016.In this Form 10-K, pursue to Rule 4-08(h)(2) of Regulation S-X
for guidance, the amount and nature of each item for the three months ended
March 31, 2016, the six months ended June 30, 2016 and the nine months ended
September 30, 2016 is revised and disclosed in the table.
The unaudited restated note - taxes for the first three
quarters of the year ended December 31, 2016 is presented below:
(a) Corporation Income Tax
In accordance with the relevant tax laws and regulations of
the PRC, applicable corporate income tax (CIT) rate is 25%. However, the Kandi
Vehicle, qualified as a High and New Technology Enterprises (HNTEs) company in
China, is entitled to pay a reduced income tax rate of 15% for the periods
presented, which will expire in 2017. An entity could re-apply for the HNTE
certificate when the prior certificate expires. Historically, Kandi Vehicle
successfully re-applied for the certificates when the prior ones expired. The
applicable corporate income tax rate of each of the Companys three
subsidiaries, Kandi New Energy, Yongkang Scrou and Kandi Hainan, the JV Company
and its subsidiaries and the Service Company is 25%.
After combining with the research and development tax credit
of 25% on certain qualified research and development expenses, the effective tax
rates for each of the periods mentioned above are disclosed in the summary table
of income tax expenses for the three months ended March 31, 2016, the six months
ended June 30, 2016 and the nine months ended September 30, 2016.
According to the PRC CIT reporting system, the CIT sales
cut-off base is concurrent with the value-added tax (VAT), which should be
reported to the State Administration of Taxation (SAT) on a quarterly basis.
Since the VAT and CIT are accounted for on a VAT tax basis that records all
sales on astate provided official invoices reporting system, the Company
reports the CIT according to the SAT prescribed tax reporting rules. Under the
VAT tax reporting system, sales cut-off is not done on an accrual basis but
rather on a VAT taxable reporting basis. Therefore, when the Company adopts U.S.
GAAP using an accrual basis, the sales cut-off CIT timing (due to the VAT
reporting system) creates a temporary sales cut-off timing difference. This
difference is reflected in the deferred tax assets or liabilities calculations
on the income tax estimate reported elsewhere on the report.
Effective January 1, 2007, the Company adopted the guidance
in ASC 740 related to uncertain tax positions. The guidance addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements.
Under ASC 740, 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 December
31, 2016, the Company did not have a liability for unrecognized tax benefits.
The Company files income tax returns to the U.S. Internal Revenue Services
(IRS) and 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 for years after 2006. 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 China. As of March 31, 2016, June 30,
2016 and September 30, 2016, the Company was not aware of any pending income tax
examinations by U.S. and China tax authorities. The Company's policy is to
record interest and penalties on uncertain tax provisions as income tax expense.
As of March 31, 2016, June 30, 2016 and September 30, 2016, the Company has no
accrued interest or penalties related to uncertain tax positions. The Company
has not recorded a provision for U.S. federal income tax for the three months
ended March 31, 2016, the six months ended June 30, 2016 and the nine months
ended September 30, 2016 due to the net operating loss in 2016 and an
accumulated net operating loss carry forward from prior years in the United
States.
F-53
Income tax expenses for the three months ended March 31,
2016, the six months ended June 30, 2016 and the nine months ended September 30,
2016 are summarized as follows:
|
|
For Three
Months Ended
|
|
|
|
March 31,
|
|
(11)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Current:
|
$
|
|
|
$
|
|
|
Provision for CIT
|
|
1,761,153
|
|
|
(1,008,909
|
)
|
Provision for Federal Income Tax
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
Provision for CIT
|
|
(4,397,828
|
)
|
|
-
|
|
Income tax expense (benefit)
|
$
|
(2,636,675
|
)
|
$
|
(1,008,909
|
)
|
Effective tax rate
|
|
103.47%
|
|
|
-14.13%
|
|
|
|
For Six
Months Ended
|
|
|
|
June 30,
|
|
(11)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Current:
|
$
|
|
|
$
|
|
|
Provision for CIT
|
|
4,408,966
|
|
|
2,291,440
|
|
Provision for Federal Income Tax
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
Provision for CIT
|
|
(4,645,415
|
)
|
|
(153,916
|
)
|
Income tax expense (benefit)
|
$
|
(236,449
|
)
|
$
|
2,137,524
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
-8.94%
|
|
|
15.61%
|
|
F-54
|
|
For Nine
Months Ended
|
|
|
|
September
30,
|
|
(11)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Current:
|
$
|
|
|
$
|
|
|
Provision for CIT
|
|
2,925,100
|
|
|
5,030,150
|
|
Provision for Federal Income Tax
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
Provision for CIT
|
|
(2,608,701
|
)
|
|
(1,854,863
|
)
|
Income tax expense (benefit)
|
$
|
316,399
|
|
$
|
3,175,287
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
12.02%
|
|
|
18.60%
|
|
The Company's income tax expense differs from the expected
tax expense for the three months ended March 31, 2016, the six months ended June
30, 2016 and the nine months ended September 30, 2016 as follows:
|
|
For Three
Months Ended
|
|
|
|
March
31,
|
|
(9)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Expected taxation at PRC statutory tax rate
|
$
|
(637,064
|
)
|
$
|
1,785,141
|
|
Effect of differing tax rates
in different jurisdictions
|
|
(703,686
|
)
|
|
(88,867
|
)
|
Non-taxable income
|
|
-
|
|
|
(20,796
|
)
|
Non-deductible expenses
|
|
763,369
|
|
|
23,185
|
|
Research and development super-deduction
|
|
(21,993
|
)
|
|
(59,474
|
)
|
Under-accrued EIT for
previous years
|
|
-
|
|
|
-
|
|
Effect of PRC preferential tax rates
|
|
(91,215
|
)
|
|
(28,905
|
)
|
addition to valuation
allowance
|
|
(1,946,086
|
)
|
|
(2,619,192
|
)
|
Income tax expense (benefit)
|
$
|
(2,636,675
|
)
|
$
|
(1,008,909
|
)
|
F-55
|
|
For Six
Months Ended
|
|
|
|
June 30,
|
|
(9)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Expected taxation at PRC statutory tax rate
|
$
|
661,288
|
|
$
|
3,423,670
|
|
Effect of differing tax rates
in different jurisdictions
|
|
(1,207,759
|
)
|
|
(422,851
|
)
|
Non-taxable income
|
|
(24,041
|
)
|
|
(198,400
|
)
|
Non-deductible expenses
|
|
2,068
|
|
|
14,518
|
|
Research and development super-deduction
|
|
(74,248
|
)
|
|
59,618
|
|
Under-accrued EIT for
previous years
|
|
(2,727,454
|
)
|
|
(2,345,342
|
)
|
Effect of PRC preferential tax rates
|
|
(135,630
|
)
|
|
8,693
|
|
addition to valuation
allowance
|
|
3,269,327
|
|
|
1,597,618
|
|
Income tax expense (benefit)
|
$
|
(236,449
|
)
|
$
|
2,137,524
|
|
|
|
For Nine
Months Ended
|
|
|
|
September
30,
|
|
(9)
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Expected taxation at PRC statutory tax rate
|
$
|
658,015
|
|
$
|
4,268,909
|
|
Effect of differing tax rates
in different jurisdictions
|
|
(611,065
|
)
|
|
(1,079,743
|
)
|
Non-taxable income
|
|
-
|
|
|
(477,133
|
)
|
Non-deductible expenses
|
|
32,122
|
|
|
192,069
|
|
Research and development super-deduction
|
|
(128,865
|
)
|
|
(140,994
|
)
|
Under-accrued EIT for
previous years
|
|
(2,727,454
|
)
|
|
(2,345,342
|
)
|
Effect of PRC preferential tax rates
|
|
(100,974
|
)
|
|
(739,022
|
)
|
addition to valuation
allowance
|
|
3,194,621
|
|
|
3,496,544
|
|
Income tax expense (benefit)
|
$
|
316,399
|
|
$
|
3,175,287
|
|
The tax effects of temporary differences that give rise to the
Company's net deferred tax assets and liabilities as of March 31, 2016, June 30,
2016 and September 30, 2016 are summarized as follows:
F-56
|
|
March 31
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
(10)
|
|
(Unaudited)
|
|
|
(Restated)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Sales cut-off difference
derived from Value Added Tax reporting system to calculate
PRC Corporation
Income Tax in accordance with the PRC State Administration of Taxation
|
$
|
-
|
|
$
|
290,850
|
|
Other
|
|
915,772
|
|
|
-
|
|
Loss carried forward
|
|
24,177,630
|
|
|
22,870,649
|
|
less valuation allowance
|
|
(24,177,630
|
)
|
|
(22,870,649
|
)
|
Total deferred tax assets,net
of valuation allowance
|
|
915,772
|
|
|
290,850
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Expense
|
|
170,862
|
|
|
272,953
|
|
Depreciation
|
|
312,693
|
|
|
353,115
|
|
Other
|
|
-
|
|
|
2,392,821
|
|
Accumulated other comprehensive gain
|
|
-
|
|
|
1,240,467
|
|
Total deferred tax liability
|
|
483,555
|
|
|
4,259,356
|
|
Net deferred tax liabilities
|
$
|
432,217
|
|
$
|
(3,968,506
|
)
|
|
|
June 30
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
(10)
|
|
(Unaudited)
|
|
|
(Restated)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Sales cut-off difference
derived from Value Added Tax reporting system to calculate
PRC Corporation
Income Tax in accordance with the PRC State Administration of Taxation
|
$
|
-
|
|
$
|
290,850
|
|
Other
|
|
1,094,501
|
|
|
-
|
|
Loss carried forward
|
|
26,081,921
|
|
|
22,870,649
|
|
less valuation allowance
|
|
(26,081,921
|
)
|
|
(22,870,649
|
)
|
Total deferred tax assets,net
of valuation allowance
|
|
1,094,501
|
|
|
290,850
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Expense
|
|
165,841
|
|
|
272,953
|
|
Depreciation
|
|
262,042
|
|
|
353,115
|
|
Other
|
|
-
|
|
|
2,392,821
|
|
Accumulated other comprehensive gain
|
|
-
|
|
|
1,240,467
|
|
Total deferred tax liability
|
|
427,883
|
|
|
4,259,356
|
|
Net deferred tax liabilities
|
$
|
666,618
|
|
$
|
(3,968,506
|
)
|
F-57
|
|
September 30
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
(10)
|
|
(Unaudited)
|
|
|
(Restated)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Sales cut-off difference
derived from Value Added Tax reporting system to calculate
PRC Corporation
Income Tax in accordance with the PRC State Administration of Taxation
|
$
|
-
|
|
$
|
290,850
|
|
Expense
|
|
239,930
|
|
|
-
|
|
Depreciation
|
|
219,758
|
|
|
-
|
|
Loss carried forward
|
|
23,827,743
|
|
|
22,870,649
|
|
less valuation allowance
|
|
(23,827,743
|
)
|
|
(22,870,649
|
)
|
Total deferred tax assets,net of valuation
allowance
|
|
459,688
|
|
|
290,850
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Expense
|
|
1,578,802
|
|
|
272,953
|
|
Depreciation
|
|
-
|
|
|
353,115
|
|
Other
|
|
252,608
|
|
|
2,392,821
|
|
Accumulated other
comprehensive gain
|
|
-
|
|
|
1,240,467
|
|
Total deferred tax liability
|
|
1,831,410
|
|
|
4,259,356
|
|
Net deferred tax liabilities
|
$
|
(1,371,722
|
)
|
$
|
(3,968,506
|
)
|
As of March 31, 2016 the Company had net losses of
approximately US$71.11million, US$2.61thousand deriving from entities in the US
and Hong Kong respectively. As of June 30, 2016 the Company had net losses of
approximately US$76.71million, US$2.64thousand deriving from entities in the US
and Hong Kong respectively. As of September 30, 2016 the Company had net losses
of approximately US$70.08million, US$2.64thousand deriving from entities in the
US and Hong Kong respectively. The net loss in the PRC and US can be carried
forward for five years, to offset future net profit for income tax purposes. The
net loss of entities in the PRC and US will begin to expire in 2021, if not
utilized. The net loss in Hong Kong can be carried forward without an expiration
date.
(b) Tax Holiday Effect
For the three months ended March 31, 2016, the six months ended
June 30, 2016 and the nine months ended September 30, 2016, the PRC corporate
income tax rate was 25%. Certain subsidiaries of the Company are entitled to tax
exemptions (tax holidays) for the three months ended March 31, 2016, the six
months ended June 30, 2016 and the nine months ended September 30, 2016.
The combined effects of the income tax expense exemptions and
reductions available to the Company for the three months ended March 31, 2016,
the six months ended June 30, 2016 and the nine months ended September 30, 2016
are as follows:
F-58
|
|
For the
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Tax benefit (holiday) credit
|
$
|
(113,208
|
)
|
$
|
2,416,981
|
|
Basic net income per share effect
|
$
|
(0.002
|
)
|
$
|
0.052
|
|
|
|
For the Six
Months Ended
|
|
|
|
June 30,
|
|
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Tax benefit (holiday) credit
|
$
|
209,878
|
|
$
|
1,660,950
|
|
Basic net income per share effect
|
$
|
0.004
|
|
$
|
0.036
|
|
|
|
For the
Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
(Unaudited)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
Tax benefit (holiday) credit
|
$
|
229,839
|
|
$
|
880,016
|
|
Basic net income per share
effect
|
$
|
0.005
|
|
$
|
0.019
|
|
The restated unaudited quarterly Balance Sheets for the first
three quarters of the years ended December 31, 2016 and 2015 are presented
below:
F-59
CONSOLIDATED
BALANCE
SHEETS
March 31, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
15,635,658
|
|
$
|
|
|
$
|
15,635,658
|
|
Restricted cash
|
|
25,454,249
|
|
|
|
|
|
25,454,249
|
|
Short term investment
|
|
-
|
|
|
|
|
|
-
|
|
Accounts receivable
|
|
28,679,895
|
|
|
|
|
|
28,679,895
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision for slow moving
inventory of $316,686 and $315,584 as of March 31, 2015 and December 31,
2014, respectively
|
|
26,742,009
|
|
|
|
|
|
26,742,009
|
|
Notes receivable
|
|
10,739,366
|
|
|
-1,125,226
|
(6)
|
|
9,614,140
|
|
Notes receivable from the JV Company and
related parties
|
|
-
|
|
|
1,125,226
|
(6)
|
|
1,125,226
|
|
Other receivables
|
|
323,925
|
|
|
|
|
|
323,925
|
|
Prepayments and prepaid expense
|
|
462,058
|
|
|
|
|
|
462,058
|
|
Due from employees
|
|
40,084
|
|
|
|
|
|
40,084
|
|
Advances to suppliers
|
|
7,112,895
|
|
|
7,990,737
|
(8)
|
|
15,103,632
|
|
Amount due from JV Company,
net
|
|
71,267,257
|
|
|
|
|
|
71,267,257
|
|
Amount due from related party
|
|
-
|
|
|
|
|
|
-
|
|
TOTAL CURRENT ASSETS
|
|
186,457,396
|
|
|
7,990,737
|
|
|
194,448,133
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and equipment, net
|
|
25,174,878
|
|
|
|
|
|
25,174,878
|
|
Land use rights, net
|
|
15,606,056
|
|
|
|
|
|
15,606,056
|
|
Construction in progress
|
|
58,753,641
|
|
|
-7,990,737
|
(8)
|
|
50,762,904
|
|
Investment in associated company
|
|
-
|
|
|
|
|
|
-
|
|
Investment in JV Company
|
|
84,070,778
|
|
|
|
|
|
84,070,778
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
556,877
|
|
|
|
|
|
556,877
|
|
Other long term assets
|
|
163,076
|
|
|
|
|
|
163,076
|
|
TOTAL Long-Term Assets
|
|
184,647,897
|
|
|
-7,990,737
|
|
|
176,657,160
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
371,105,293
|
|
$
|
-
|
|
$
|
371,105,293
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
77,954,005
|
|
$
|
|
|
$
|
77,954,005
|
|
Other payables and accrued
expenses
|
|
3,803,523
|
|
|
|
|
|
3,803,523
|
|
Short-term loans
|
|
42,073,678
|
|
|
|
|
|
42,073,678
|
|
Customer deposits
|
|
2,641,274
|
|
|
|
|
|
2,641,274
|
|
Notes payable
|
|
12,408,147
|
|
|
|
|
|
12,408,147
|
|
Income tax payable
|
|
1,711,161
|
|
|
|
|
|
1,711,161
|
|
Due to employees
|
|
11,071
|
|
|
|
|
|
11,071
|
|
Deferred taxes liabilities
|
|
132,399
|
|
|
|
|
|
132,399
|
|
Financial derivate - liability
|
|
4,800,169
|
|
|
|
|
|
4,800,169
|
|
Deferred income
|
|
-
|
|
|
|
|
|
-
|
|
Total Current Liabilities
|
|
145,535,427
|
|
|
-
|
|
|
145,535,427
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
2,543,821
|
|
|
|
|
|
2,543,821
|
|
Bond payable
|
|
-
|
|
|
-
|
|
|
-
|
|
Financial derivate -
liability
|
|
2,792,416
|
|
|
-
|
|
|
2,792,416
|
|
Total Long-Term Liabilities
|
|
5,336,237
|
|
|
-
|
|
|
5,336,237
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
150,871,664
|
|
|
-
|
|
|
150,871,664
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000
shares authorized; 46,284,855 and 46,274,855 shares issued and
outstanding at March 31,2015 and December 31,2014, respectively
|
|
46,285
|
|
|
|
|
|
46,285
|
|
Additional paid-in capital
|
|
192,281,953
|
|
|
|
|
|
192,281,953
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the
restricted portion is $4,172,324 and $4,172,324 at March 31,2015 and
December 31,2014, respectively)
|
|
22,522,078
|
|
|
|
|
|
22,522,078
|
|
Accumulated other comprehensive income(loss)
|
|
5,383,313
|
|
|
|
|
|
5,383,313
|
|
TOTAL STOCKHOLDERS'
EQUITY
|
|
220,233,629
|
|
|
-
|
|
|
220,233,629
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
371,105,293
|
|
$
|
- $
|
|
|
371,105,293
|
|
F-60
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
June 30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
9,463,991
|
|
$
|
|
|
$
|
9,463,991
|
|
Restricted cash
|
|
23,006,135
|
|
|
|
|
|
23,006,135
|
|
Accounts receivable
|
|
29,898,905
|
|
|
|
|
|
29,898,905
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision
for slow moving inventory of $316,856 and $315,584 as of June 30, 2015 and
December 31, 2014, respectively
|
|
27,607,154
|
|
|
|
|
|
27,607,154
|
|
Notes receivable
|
|
10,541,927
|
|
|
-122,373
|
(6)
|
|
10,419,554
|
|
Notes receivable from the JV
Company and related parties
|
|
-
|
|
|
122,373
|
(6)
|
|
122,373
|
|
Other receivables
|
|
311,086
|
|
|
|
|
|
311,086
|
|
Prepayments and prepaid
expense
|
|
364,284
|
|
|
|
|
|
364,284
|
|
Due from employees
|
|
38,856
|
|
|
|
|
|
38,856
|
|
Advances to suppliers
|
|
6,829,462
|
|
|
7,995,040
|
(8)
|
|
14,824,502
|
|
Amount due from JV Company, net
|
|
101,958,555
|
|
|
|
|
|
101,958,555
|
|
TOTAL CURRENT ASSETS
|
|
210,020,355
|
|
|
7,995,040
|
|
|
218,015,395
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and equipment, net
|
|
23,889,831
|
|
|
|
|
|
23,889,831
|
|
Land use rights, net
|
|
15,516,697
|
|
|
|
|
|
15,516,697
|
|
Construction in progress
|
|
58,785,276
|
|
|
-7,995,040
|
(8)
|
|
50,790,236
|
|
Investment in associated
company
|
|
-
|
|
|
|
|
|
-
|
|
Investment in JV Company
|
|
84,366,460
|
|
|
|
|
|
84,366,460
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
536,353
|
|
|
|
|
|
536,353
|
|
Other long term assets
|
|
163,164
|
|
|
|
|
|
163,164
|
|
TOTAL Long-Term Assets
|
|
183,580,372
|
|
|
-7,995,040
|
|
|
175,585,332
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
393,600,727
|
|
$
|
-
|
|
$
|
393,600,727
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
100,772,098
|
|
$
|
|
|
$
|
100,772,098
|
|
Other payables and accrued expenses
|
|
3,377,791
|
|
|
|
|
|
3,377,791
|
|
Short-term loans
|
|
38,833,051
|
|
|
|
|
|
38,833,051
|
|
Customer deposits
|
|
2,748,050
|
|
|
|
|
|
2,748,050
|
|
Notes payable
|
|
9,953,009
|
|
|
|
|
|
9,953,009
|
|
Income tax payable
|
|
2,350,173
|
|
|
|
|
|
2,350,173
|
|
Due to employees
|
|
10,829
|
|
|
|
|
|
10,829
|
|
Deferred taxes liabilities
|
|
569,499
|
|
|
|
|
|
569,499
|
|
Financial derivate -
liability
|
|
2,894,695
|
|
|
|
|
|
2,894,695
|
|
Deferred income
|
|
58,162
|
|
|
|
|
|
58,162
|
|
Total Current
Liabilities
|
|
161,567,357
|
|
|
-
|
|
|
161,567,357
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
1,772,278
|
|
|
|
|
|
1,772,278
|
|
Bond payable
|
|
-
|
|
|
-
|
|
|
-
|
|
Financial derivate - liability
|
|
694,846
|
|
|
-
|
|
|
694,846
|
|
Total Long-Term
Liabilities
|
|
2,467,124
|
|
|
-
|
|
|
2,467,124
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
164,034,481
|
|
|
-
|
|
|
164,034,481
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value; 100,000,000 shares authorized; 46,954,855 and 46,274,855 shares
issued and outstanding at June 30,2015 and December 31,2014,
respectively
|
|
46,955
|
|
|
|
|
|
46,955
|
|
Additional paid-in capital
|
|
195,740,366
|
|
|
|
|
|
195,740,366
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the restricted portion is
$4,172,324 and $4,172,324 at June 30,2015 and December 31,2014,
respectively)
|
|
27,947,579
|
|
|
|
|
|
27,947,579
|
|
Accumulated other
comprehensive income(loss)
|
|
5,831,346
|
|
|
|
|
|
5,831,346
|
|
TOTAL STOCKHOLDERS' EQUITY
|
|
229,566,246
|
|
|
-
|
|
|
229,566,246
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
$
|
393,600,727
|
|
$
|
-
|
|
$
|
393,600,727
|
|
F-61
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
September
30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
11,691,023
|
|
$
|
|
|
$
|
11,691,023
|
|
Restricted cash
|
|
15,689,228
|
|
|
|
|
|
15,689,228
|
|
Accounts receivable
|
|
33,912,043
|
|
|
|
|
|
33,912,043
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision
for slow moving inventory of $304,677 and $315,584 as of September 30,
2015 and December 31, 2014, respectively
|
|
31,652,659
|
|
|
|
|
|
31,652,659
|
|
Notes receivable
|
|
18,785,582
|
|
|
-765,634
|
(6)
|
|
18,019,948
|
|
Notes receivable from the JV
Company and related parties
|
|
-
|
|
|
765,634
|
(6)
|
|
765,634
|
|
Other receivables
|
|
488,621
|
|
|
|
|
|
488,621
|
|
Prepayments and prepaid
expense
|
|
240,609
|
|
|
|
|
|
240,609
|
|
Due from employees
|
|
41,128
|
|
|
|
|
|
41,128
|
|
Advances to suppliers
|
|
457,782
|
|
|
7,687,722
|
(8)
|
|
8,145,504
|
|
Amount due from JV Company, net
|
|
76,814,162
|
|
|
|
|
|
76,814,162
|
|
TOTAL CURRENT ASSETS
|
|
189,772,837
|
|
|
7,687,722
|
|
|
197,460,559
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and equipment, net
|
|
21,788,066
|
|
|
|
|
|
21,788,066
|
|
Land use rights, net
|
|
14,826,253
|
|
|
|
|
|
14,826,253
|
|
Construction in progress
|
|
56,525,652
|
|
|
-7,687,722
|
(8)
|
|
48,837,930
|
|
Long Term Investment
|
|
1,490,477
|
|
|
|
|
|
1,490,477
|
|
Investment in JV Company
|
|
82,273,884
|
|
|
|
|
|
82,273,884
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
515,830
|
|
|
|
|
|
515,830
|
|
Other long term assets
|
|
156,892
|
|
|
|
|
|
156,892
|
|
TOTAL Long-Term Assets
|
|
177,899,645
|
|
|
-7,687,722
|
|
|
170,211,923
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
367,672,482
|
|
$
|
-
|
|
$
|
367,672,482
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
87,854,246
|
|
$
|
|
|
$
|
87,854,246
|
|
Other payables and accrued expenses
|
|
3,362,729
|
|
|
|
|
|
3,362,729
|
|
Short-term loans
|
|
37,340,362
|
|
|
|
|
|
37,340,362
|
|
Customer deposits
|
|
111,314
|
|
|
|
|
|
111,314
|
|
Notes payable
|
|
3,137,846
|
|
|
|
|
|
3,137,846
|
|
Income tax payable
|
|
2,803,621
|
|
|
|
|
|
2,803,621
|
|
Due to employees
|
|
12,862
|
|
|
|
|
|
12,862
|
|
Deferred taxes liabilities
|
|
256,049
|
|
|
|
|
|
256,049
|
|
Financial derivate -
liability
|
|
540,299
|
|
|
|
|
|
540,299
|
|
Deferred income
|
|
34,954
|
|
|
|
|
|
34,954
|
|
Total Current
Liabilities
|
|
135,454,282
|
|
|
-
|
|
|
135,454,282
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
402,934
|
|
|
|
|
|
402,934
|
|
Total Long-Term
Liabilities
|
|
402,934
|
|
|
-
|
|
|
402,934
|
|
TOTAL LIABILITIES
|
|
135,857,216
|
|
|
-
|
|
|
135,857,216
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000
shares authorized; 46,954,855 and 46,274,855 shares issued and outstanding at September 30,2015 and December 31,2014, respectively
|
|
46,965
|
|
|
|
|
|
46,965
|
|
Additional paid-in capital
|
|
202,744,428
|
|
|
|
|
|
202,744,428
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the
restricted portion is $4,172,324 and $4,172,324 at September 30,2015 and
December 31,2014, respectively)
|
|
30,290,776
|
|
|
|
|
|
30,290,776
|
|
Accumulated other comprehensive income(loss)
|
|
(1,266,903
|
)
|
|
|
|
|
(1,266,903
|
)
|
TOTAL STOCKHOLDERS'
EQUITY
|
|
231,815,266
|
|
|
-
|
|
|
231,815,266
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
367,672,482
|
|
$
|
-
|
|
$
|
367,672,482
|
|
F-62
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
March 31, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
13,447,666
|
|
$
|
|
|
$
|
13,447,666
|
|
Restricted cash
|
|
16,277,051
|
|
|
|
|
|
16,277,051
|
|
Short term investment
|
|
3,100,391
|
|
|
|
|
|
3,100,391
|
|
Accounts receivable
|
|
40,867,698
|
|
|
|
|
|
40,867,698
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision for slow moving
inventory of $489,057 and $485,901 as of March 31, 2016 and December 31,
2015, respectively
|
|
25,814,430
|
|
|
|
|
|
25,814,430
|
|
Notes receivable
|
|
11,276,387
|
|
|
(1,841,632
|
)(6)
|
|
9,434,755
|
|
Notes receivable from the JV Company and
related parties
|
|
-
|
|
|
1,841,632
|
(6)
|
|
1,841,632
|
|
Other receivables
|
|
487,077
|
|
|
|
|
|
487,077
|
|
Prepayments and prepaid expense
|
|
353,628
|
|
|
|
|
|
353,628
|
|
Due from employees
|
|
105,868
|
|
|
|
|
|
105,868
|
|
Advances to suppliers
|
|
348,761
|
|
|
7,595,957
|
(8)
|
|
7,944,718
|
|
Amount due from JV Company,
net
|
|
92,789,649
|
|
|
|
|
|
92,789,649
|
|
Amount due from related party
|
|
5,585,613
|
|
|
|
|
|
5,585,613
|
|
Deferred taxes assets
|
|
744,910
|
|
|
|
|
|
744,910
|
|
TOTAL CURRENT ASSETS
|
|
211,199,129
|
|
|
7,595,957
|
|
|
218,795,086
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and
equipment, net
|
|
19,539,908
|
|
|
|
|
|
19,539,908
|
|
Land use rights, net
|
|
12,934,208
|
|
|
|
|
|
12,934,208
|
|
Construction in progress
|
|
54,750,430
|
|
|
(7,595,957
|
)(8)
|
|
47,154,473
|
|
Long Term Investment
|
|
1,472,686
|
|
|
|
|
|
1,472,686
|
|
Investment in JV Company
|
|
86,034,442
|
|
|
|
|
|
86,034,442
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
474,782
|
|
|
|
|
|
474,782
|
|
Other long term assets
|
|
155,020
|
|
|
|
|
|
155,020
|
|
TOTAL Long-Term Assets
|
|
175,684,067
|
|
|
(7,595,957
|
)
|
|
168,088,110
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
386,883,196
|
|
$
|
-
|
|
$
|
386,883,196
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
91,647,247
|
|
$
|
|
|
$
|
91,647,247
|
|
Other payables and accrued
expenses
|
|
1,678,011
|
|
|
|
|
|
1,678,011
|
|
Short-term loans
|
|
36,894,649
|
|
|
|
|
|
36,894,649
|
|
Customer deposits
|
|
149,688
|
|
|
|
|
|
149,688
|
|
Notes payable
|
|
5,968,252
|
|
|
|
|
|
5,968,252
|
|
Income tax payable
|
|
1,822,276
|
|
|
|
|
|
1,822,276
|
|
Due to employees
|
|
11,944
|
|
|
|
|
|
11,944
|
|
Deferred taxes liabilities
|
|
0
|
|
|
|
|
|
0
|
|
Financial derivate - liability
|
|
537,250
|
|
|
|
|
|
537,250
|
|
Total Current
Liabilities
|
|
138,709,317
|
|
|
-
|
|
|
138,709,317
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
312,693
|
|
|
|
|
|
312,693
|
|
Total Long-Term
Liabilities
|
|
312,693
|
|
|
|
|
|
- 312,693
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
139,022,010
|
|
|
|
|
|
- 139,022,010
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value; 100,000,000 shares authorized; 47,019,638 and 46,964,855 shares
issued and outstanding at March 31,2016 and December 31,2015,
respectively
|
|
47,020
|
|
|
|
|
|
47,020
|
|
Additional paid-in capital
|
|
219,886,837
|
|
|
|
|
|
219,886,837
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the restricted portion is
$4,172,324 and $4,172,324 at March 31,2016 and December 31,2015,
respectively)
|
|
31,144,340
|
|
|
|
|
|
31,144,340
|
|
Accumulated other
comprehensive income(loss)
|
|
(3,217,011
|
)
|
|
|
|
|
(3,217,011
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
247,861,186
|
|
|
|
|
|
- 247,861,186
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
$
|
386,883,196
|
|
$
|
|
|
$
|
- 386,883,196
|
|
F-63
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
June 30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
19,533,856
|
|
$
|
|
|
$
|
19,533,856
|
|
Restricted cash
|
|
14,519,706
|
|
|
|
|
|
14,519,706
|
|
Short term investment
|
|
-
|
|
|
|
|
|
-
|
|
Accounts receivable
|
|
40,422,951
|
|
|
|
|
|
40,422,951
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision for slow moving
inventory of $474,683 and $485,901 as of June 30, 2016 and December 31,
2015, respectively
|
|
8,324,176
|
|
|
|
|
|
8,324,176
|
|
Notes receivable
|
|
6,192,424
|
|
|
-300,927
|
(6)
|
|
5,891,497
|
|
Notes receivable from the JV Company and
related parties
|
|
-
|
|
|
300,927
|
(6)
|
|
300,927
|
|
Other receivables
|
|
473,667
|
|
|
|
|
|
473,667
|
|
Prepayments and prepaid expense
|
|
275,522
|
|
|
|
|
|
275,522
|
|
Due from employees
|
|
94,938
|
|
|
|
|
|
94,938
|
|
Advances to suppliers
|
|
12,715,165
|
|
|
7,372,701
|
(8)
|
|
20,087,866
|
|
Amount due from JV Company,
net
|
|
122,807,165
|
|
|
|
|
|
122,807,165
|
|
Amount due from related party
|
|
10,957,632
|
|
|
|
|
|
10,957,632
|
|
Deferred taxes assets
|
|
928,660
|
|
|
-
|
|
|
928,660
|
|
TOTAL CURRENT ASSETS
|
|
237,245,862
|
|
|
7,372,701
|
|
|
244,618,563
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and
equipment, net
|
|
17,861,960
|
|
|
|
|
|
17,861,960
|
|
Land use rights, net
|
|
12,471,618
|
|
|
|
|
|
12,471,618
|
|
Construction in progress
|
|
54,448,198
|
|
|
-7,372,701
|
(8)
|
|
47,075,497
|
|
Long Term Investment
|
|
1,429,401
|
|
|
|
|
|
1,429,401
|
|
Investment in JV Company
|
|
88,346,850
|
|
|
|
|
|
88,346,850
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
454,258
|
|
|
|
|
|
454,258
|
|
Other long term assets
|
|
9,251,729
|
|
|
|
|
|
9,251,729
|
|
TOTAL Long-Term Assets
|
|
184,586,605
|
|
|
-7,372,701
|
|
|
177,213,904
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
421,832,467
|
|
$
|
-
|
|
$
|
421,832,467
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
110,049,815
|
|
$
|
|
|
$
|
110,049,815
|
|
Other payables and accrued
expenses
|
|
15,080,603
|
|
|
|
|
|
15,080,603
|
|
Short-term loans
|
|
35,810,260
|
|
|
|
|
|
35,810,260
|
|
Customer deposits
|
|
243,500
|
|
|
|
|
|
243,500
|
|
Notes payable
|
|
4,718,077
|
|
|
|
|
|
4,718,077
|
|
Income tax payable
|
|
3,894,811
|
|
|
|
|
|
3,894,811
|
|
Due to employees
|
|
14,439
|
|
|
|
|
|
14,439
|
|
Financial derivate -
liability
|
|
10,692
|
|
|
|
|
|
10,692
|
|
Total Current Liabilities
|
|
169,822,197
|
|
|
-
|
|
|
169,822,197
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
262,042
|
|
|
|
|
|
262,042
|
|
Total Long-Term Liabilities
|
|
262,042
|
|
|
-
|
|
|
262,042
|
|
TOTAL
LIABILITIES
|
|
170,084,239
|
|
|
-
|
|
|
170,084,239
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value; 100,000,000 shares authorized; 47,689,638 and 46,964,855 shares
issued and outstanding at June 30,2016 and December 31,2015,
respectively
|
|
47,020
|
|
|
|
|
|
47,020
|
|
Additional paid-in capital
|
|
228,133,604
|
|
|
|
|
|
228,133,604
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the restricted portion is
$4,172,324 and $4,172,324 at June 30,2016 and December 31,2015,
respectively)
|
|
33,937,518
|
|
|
|
|
|
33,937,518
|
|
Accumulated other
comprehensive income(loss)
|
|
(10,369,914
|
)
|
|
|
|
|
(10,369,914
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
251,748,228
|
|
|
-
|
|
|
251,748,228
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
$
|
421,832,467
|
|
$
|
-
|
|
$
|
421,832,467
|
|
F-64
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
September
30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
3,689,850
|
|
|
|
|
|
3,689,850
|
|
Restricted cash
|
|
14,240,615
|
|
|
|
|
|
14,240,615
|
|
Accounts receivable
|
|
40,805,693
|
|
|
|
|
|
40,805,693
|
|
|
|
|
|
|
|
|
|
|
|
Inventories (net of provision
for slow moving inventory of $472,910 and $485,901 as of September 30,
2016 and December 31, 2015, respectively
|
|
15,519,976
|
|
|
|
|
|
15,519,976
|
|
Notes receivable
|
|
1,969,252
|
|
|
-1,540,984
|
(6)
|
|
428,268
|
|
Notes receivable from the JV
Company and related parties
|
|
-
|
|
|
1,540,984
|
(6)
|
|
1,540,984
|
|
Other receivables
|
|
3,243,391
|
|
|
|
|
|
3,243,391
|
|
Prepayments and prepaid
expense
|
|
746,748
|
|
|
|
|
|
746,748
|
|
Due from employees
|
|
33,817
|
|
|
|
|
|
33,817
|
|
Advances to suppliers
|
|
30,759,354
|
|
|
7,345,160
|
(8)
|
|
38,104,514
|
|
Amount due from JV Company, net
|
|
114,763,704
|
|
|
|
|
|
114,763,704
|
|
Amount due from related party
|
|
10,916,700
|
|
|
|
|
|
10,916,700
|
|
TOTAL CURRENT ASSETS
|
|
236,689,100
|
|
|
7,345,160
|
|
|
244,034,260
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Property, Plant and
equipment, net
|
|
16,690,437
|
|
|
|
|
|
16,690,437
|
|
Land use rights, net
|
|
12,342,904
|
|
|
|
|
|
12,342,904
|
|
Construction in
progress
|
|
57,094,373
|
|
|
-7,345,160
|
(8)
|
|
49,749,213
|
|
Long Term Investment
|
|
1,424,062
|
|
|
|
|
|
1,424,062
|
|
Investment in JV Company
|
|
87,721,955
|
|
|
|
|
|
87,721,955
|
|
Goodwill
|
|
322,591
|
|
|
|
|
|
322,591
|
|
Intangible assets
|
|
433,735
|
|
|
|
|
|
433,735
|
|
Other long term assets
|
|
8,914,927
|
|
|
|
|
|
8,914,927
|
|
TOTAL Long-Term Assets
|
|
184,944,984
|
|
|
-7,345,160
|
|
|
177,599,824
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
421,634,084
|
|
|
-
|
|
|
421,634,084
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payables
|
$
|
111,682,048
|
|
|
|
|
|
111,682,048
|
|
Other payables and accrued
expenses
|
|
4,399,221
|
|
|
|
|
|
4,399,221
|
|
Short-term loans
|
|
35,676,489
|
|
|
|
|
|
35,676,489
|
|
Customer deposits
|
|
78,097
|
|
|
|
|
|
78,097
|
|
Notes payable
|
|
3,093,511
|
|
|
|
|
|
3,093,511
|
|
Income tax payable
|
|
1,142,678
|
|
|
|
|
|
1,142,678
|
|
Due to employees
|
|
26,954
|
|
|
|
|
|
26,954
|
|
Deferred taxes liabilities
|
|
87,387
|
|
|
|
|
|
87,387
|
|
Financial derivate - liability
|
|
-
|
|
|
|
|
|
-
|
|
Deferred income
|
|
14,990,122
|
|
|
|
|
|
14,990,122
|
|
Total Current Liabilities
|
|
171,176,507
|
|
|
-
|
|
|
171,176,507
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred taxes liabilities
|
|
1,284,335
|
|
|
|
|
|
1,284,335
|
|
Total Long-Term Liabilities
|
|
1,284,335
|
|
|
-
|
|
|
1,284,335
|
|
TOTAL
LIABILITIES
|
|
172,460,842
|
|
|
|
|
|
- 172,460,842
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value; 100,000,000 shares authorized; 47,699,638 and 46,964,855 shares
issued and outstanding at September 30,2016 and December 31,2015,
respectively
|
|
47,030
|
|
|
|
|
|
47,030
|
|
Additional paid-in capital
|
|
226,929,764
|
|
|
|
|
|
226,929,764
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (the restricted portion is
$4,172,324 and $4,172,324 at September 30,2016 and December 31,2015,
respectively)
|
|
33,371,578
|
|
|
|
|
|
33,371,578
|
|
Accumulated other
comprehensive income(loss)
|
|
(11,175,130
|
)
|
|
|
|
|
(11,175,130
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
249,173,242
|
|
|
|
|
|
- 249,173,242
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
$
|
421,634,084
|
|
|
|
|
|
- 421,634,084
|
|
The restated unaudited quarterly statements of income (loss)
and comprehensive income (loss) for the first three quarters of the years ended
December 31, 2016 and 2015 are presented below:
F-65
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
March 30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
14,726,082
|
(7)
|
$
|
14,726,082
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
29,055,004
|
(7)
|
|
29,055,004
|
|
REVENUES, NET
|
|
43,781,086
|
|
|
|
|
|
43,781,086
|
|
COST OF GOODS SOLD
|
|
37,410,353
|
|
|
|
|
|
37,410,353
|
|
GROSS PROFIT
|
|
6,370,733
|
|
|
|
|
|
6,370,733
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
571,020
|
|
|
|
|
|
571,020
|
|
Selling and marketing
|
|
113,895
|
|
|
|
|
|
113,895
|
|
General and administrative
|
|
3,780,648
|
|
|
|
|
|
3,780,648
|
|
Total Operating Expenses
|
|
4,465,563
|
|
|
|
|
|
4,465,563
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
1,905,170
|
|
|
|
|
|
1,905,170
|
|
OTHER
INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
590,480
|
|
|
|
|
|
590,480
|
|
Interest expense
|
|
(598,591
|
)
|
|
|
|
|
(598,591
|
)
|
Change in fair value of
financial instruments
|
|
4,750,300
|
|
|
|
|
|
4,750,300
|
|
Government grants
|
|
|
|
|
|
|
|
0
|
|
Share of profit (loss) after
tax of JV
|
|
469,356
|
|
|
|
|
|
469,356
|
|
Other income (expense), net
|
|
23,847
|
|
|
|
|
|
23,847
|
|
Total other income, net
|
|
5,235,392
|
|
|
|
|
|
5,235,392
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
|
7,140,562
|
|
|
|
|
|
7,140,562
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
(1,008,909
|
)
|
|
|
|
|
(1,008,909
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
6,131,653
|
|
|
|
|
|
6,131,653
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
493,211
|
|
|
|
|
|
493,211
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
6,624,864
|
|
$
|
|
|
$
|
6,624,864
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING BASIC
|
|
46,281,299
|
|
|
|
|
|
46,281,299
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
46,397,993
|
|
|
|
|
|
46,397,993
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE,
BASIC
|
$
|
0.13
|
|
$
|
|
|
$
|
0.13
|
|
NET INCOME (LOSS) PER SHARE,
DILUTED
|
$
|
0.13
|
|
$
|
|
|
$
|
0.13
|
|
F-66
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
June 30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
2,448,106
|
(7)
|
$
|
2,448,106
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
45,515,354
|
(7)
|
|
45,515,354
|
|
REVENUES, NET
|
|
47,963,460
|
|
|
|
|
|
47,963,460
|
|
COST OF GOODS SOLD
|
|
41,471,997
|
|
|
|
|
|
41,471,997
|
|
GROSS PROFIT
|
|
6,491,463
|
|
|
|
|
|
6,491,463
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
571,621
|
|
|
|
|
|
571,621
|
|
Selling and marketing
|
|
75,516
|
|
|
|
|
|
75,516
|
|
General and administrative
|
|
3,845,013
|
|
|
|
|
|
3,845,013
|
|
Total Operating Expenses
|
|
4,492,150
|
|
|
|
|
|
4,492,150
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
1,999,313
|
|
|
|
|
|
1,999,313
|
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
722,843
|
|
|
|
|
|
722,843
|
|
Interest expense
|
|
(597,320
|
)
|
|
|
|
|
(597,320
|
)
|
Change in fair value of
financial instruments
|
|
4,003,044
|
|
|
|
|
|
4,003,044
|
|
Government grants
|
|
92,863
|
|
|
|
|
|
92,863
|
|
Share of profit (loss) after
tax of JV
|
|
251,167
|
|
|
|
|
|
251,167
|
|
Other income (expense), net
|
|
82,207
|
|
|
|
|
|
82,207
|
|
Total other income, net
|
|
4,554,804
|
|
|
|
|
|
4,554,804
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
|
6,554,117
|
|
|
|
|
|
6,554,117
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
(1,128,615
|
)
|
|
|
|
|
(1,128,615
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
5,425,502
|
|
|
|
|
|
5,425,502
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
448,032
|
|
|
|
|
|
448,032
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
5,873,534
|
|
$
|
|
|
$
|
5,873,534
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC
|
|
46,759,651
|
|
|
|
|
|
46,759,651
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
46,896,809
|
|
|
|
|
|
46,896,809
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE,
BASIC
|
$
|
0.12
|
|
$
|
|
|
$
|
0.12
|
|
NET INCOME (LOSS) PER SHARE, DILUTED
|
$
|
0.12
|
|
$
|
|
|
$
|
0.12
|
|
F-67
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
September 30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
18,639,777
|
(7)
|
$
|
18,639,777
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
31,888,768
|
(7)
|
|
31,888,768
|
|
REVENUES, NET
|
|
50,528,545
|
|
|
|
|
|
50,528,545
|
|
COST OF GOODS SOLD
|
|
43,411,839
|
|
|
|
|
|
43,411,839
|
|
GROSS PROFIT
|
|
7,116,706
|
|
|
|
|
|
7,116,706
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
785,450
|
|
|
|
|
|
785,450
|
|
Selling and marketing
|
|
122,873
|
|
|
|
|
|
122,873
|
|
General and administrative
|
|
8,649,541
|
|
|
|
|
|
8,649,541
|
|
Total Operating Expenses
|
|
9,557,864
|
|
|
|
|
|
9,557,864
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
(2,441,158
|
)
|
|
|
|
|
(2,441,158
|
)
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,140,756
|
|
|
|
|
|
1,140,756
|
|
Interest expense
|
|
(534,987
|
)
|
|
|
|
|
(534,987
|
)
|
Change in fair value of
financial instruments
|
|
3,049,242
|
|
|
|
|
|
3,049,242
|
|
Government grants
|
|
(724
|
)
|
|
|
|
|
(724
|
)
|
Share of profit (loss) after
tax of JV
|
|
1,179,605
|
|
|
|
|
|
1,179,605
|
|
Other income (expense), net
|
|
988,224
|
|
|
|
|
|
988,224
|
|
Total other income, net
|
|
5,822,116
|
|
|
|
|
|
5,822,116
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
|
3,380,958
|
|
|
|
|
|
3,380,958
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
(1,037,763
|
)
|
|
|
|
|
(1,037,763
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
2,343,195
|
|
|
|
|
|
2,343,195
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
(7,098,249
|
)
|
|
|
|
|
(7,098,249
|
)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
(4,755,054
|
)
|
$
|
|
|
$
|
(4,755,054
|
)
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC
|
|
46,959,638
|
|
|
|
|
|
46,959,638
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
46,959,638
|
|
|
|
|
|
46,959,638
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE,
BASIC
|
$
|
0.05
|
|
$
|
|
|
$
|
0.05
|
|
NET INCOME (LOSS) PER SHARE, DILUTED
|
$
|
0.05
|
|
$
|
|
|
$
|
0.05
|
|
F-68
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
March 30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
33,974,416
|
(7)
|
$
|
33,974,416
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
16,683,477
|
(7)
|
|
16,683,477
|
|
REVENUES, NET
|
|
50,657,893
|
|
|
|
|
|
50,657,893
|
|
COST OF GOODS SOLD
|
|
43,939,795
|
|
|
|
|
|
43,939,795
|
|
GROSS PROFIT
|
|
6,718,098
|
|
|
|
|
|
6,718,098
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
205,968
|
|
|
|
|
|
205,968
|
|
Selling and marketing
|
|
46,335
|
|
|
|
|
|
46,335
|
|
General and administrative
|
|
8,032,882
|
|
|
|
|
|
8,032,882
|
|
Total Operating Expenses
|
|
8,285,185
|
|
|
|
|
|
8,285,185
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
(1,567,087
|
)
|
|
|
|
|
(1,567,087
|
)
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
780,181
|
|
|
|
|
|
780,181
|
|
Interest expense
|
|
(442,079
|
)
|
|
|
|
|
(442,079
|
)
|
Change in fair value of
financial instruments
|
|
3,286,340
|
|
|
|
|
|
3,286,340
|
|
Government grants
|
|
194,473
|
|
|
|
|
|
194,473
|
|
Share of profit (loss) after
tax of JV
|
|
(4,822,470
|
)
|
|
|
|
|
(4,822,470
|
)
|
Other income (expense), net
|
|
22,387
|
|
|
|
|
|
22,387
|
|
Total other income, net
|
|
(981,168
|
)
|
|
|
|
|
(981,168
|
)
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
|
(2,548,255
|
)
|
|
|
|
|
(2,548,255
|
)
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
2,636,675
|
|
|
|
|
|
2,636,675
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
88,420
|
|
|
|
|
|
88,420
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
1,524,639
|
|
|
|
|
|
1,524,639
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
1,613,059
|
|
$
|
|
|
|
$
1,613,059
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC
|
|
47,009,834
|
|
|
|
|
|
47,009,834
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
47,027,744
|
|
|
|
|
|
47,027,744
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE,
BASIC
|
$
|
0.00
|
|
$
|
|
|
$
|
0.00
|
|
NET INCOME (LOSS) PER SHARE, DILUTED
|
$
|
0.00
|
|
$
|
|
|
$
|
0.00
|
|
F-69
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
June 30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
6,979,488
|
(7)
|
$
|
6,979,488
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
48,237,880
|
(7)
|
|
48,237,880
|
|
REVENUES, NET
|
|
55,217,368
|
|
|
|
|
|
55,217,368
|
|
COST OF GOODS SOLD
|
|
46,762,331
|
|
|
|
|
|
46,762,331
|
|
GROSS PROFIT
|
|
8,455,037
|
|
|
|
|
|
8,455,037
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
494,193
|
|
|
|
|
|
494,193
|
|
Selling and marketing
|
|
730,443
|
|
|
|
|
|
730,443
|
|
General and administrative
|
|
9,625,194
|
|
|
|
|
|
9,625,194
|
|
Total Operating Expenses
|
|
10,849,830
|
|
|
|
|
|
10,849,830
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
(2,394,793
|
)
|
|
|
|
|
(2,394,793
|
)
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
785,152
|
|
|
|
|
|
785,152
|
|
Interest expense
|
|
(432,318
|
)
|
|
|
|
|
(432,318
|
)
|
Change in fair value of
financial instruments
|
|
526,558
|
|
|
|
|
|
526,558
|
|
Government grants
|
|
1,503,384
|
|
|
|
|
|
1,503,384
|
|
Share of profit (loss) after
tax of JV
|
|
4,918,633
|
|
|
|
|
|
4,918,633
|
|
Other income (expense), net
|
|
286,790
|
|
|
|
|
|
286,790
|
|
Total other income, net
|
|
7,588,199
|
|
|
|
|
|
7,588,199
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
|
5,193,406
|
|
|
|
|
|
5,193,406
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
(2,400,226
|
)
|
|
|
|
|
(2,400,226
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
2,793,180
|
|
|
|
|
|
2,793,180
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
(7,152,903
|
)
|
|
|
|
|
(7,152,903
|
)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
(4,359,723
|
)
|
$
|
|
|
$
|
(4,359,723
|
)
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC
|
|
47,601,286
|
|
|
|
|
|
47,601,286
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING DILUTED
|
|
47,601,286
|
|
|
|
|
|
47,601,286
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE,
BASIC
|
$
|
0.06
|
|
|
|
|
$
|
$
0.06
|
|
NET INCOME (LOSS) PER SHARE, DILUTED
|
$
|
0.06
|
|
|
|
|
$
|
$
0.06
|
|
F-70
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS
OF
INCOME(LOSS)
AND
COMPREHENSIVE
INCOME(LOSS)
Three
Months
Ended
September 30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unrelated
parties, net
|
$
|
|
|
$
|
5,211,201
|
(7)
|
$
|
5,211,201
|
|
Revenues from the JV Company and related
parties, net
|
|
|
|
|
1,155,179
|
(7)
|
|
1,155,179
|
|
REVENUES, NET
|
|
6,366,380
|
|
|
|
|
|
6,366,380
|
|
COST OF GOODS SOLD
|
|
5,715,211
|
|
|
|
|
|
5,715,211
|
|
GROSS PROFIT
|
|
651,169
|
|
|
|
|
|
651,169
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
522,806
|
|
|
|
|
|
522,806
|
|
Selling and marketing
|
|
374,102
|
|
|
|
|
|
374,102
|
|
General and administrative
|
|
373,411
|
|
|
|
|
|
373,411
|
|
Total Operating Expenses
|
|
1,270,319
|
|
|
|
|
|
1,270,319
|
|
INCOME(LOSS) FROM
OPERATIONS
|
|
(619,150
|
)
|
|
|
|
|
(619,150
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME(EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
832,031
|
|
|
|
|
|
832,031
|
|
Interest expense
|
|
(425,152
|
)
|
|
|
|
|
(425,152
|
)
|
Change in fair value of financial instruments
|
|
10,692
|
|
|
|
|
|
10,692
|
|
Government grants
|
|
594,323
|
|
|
|
|
|
594,323
|
|
Share of profit (loss) after tax of JV
|
|
(299,538
|
)
|
|
|
|
|
(299,538
|
)
|
Other income (expense), net
|
|
(106,299
|
)
|
|
|
|
|
(106,299
|
)
|
Total other income, net
|
|
606,057
|
|
|
|
|
|
606,057
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
(13,093
|
)
|
|
|
|
|
(13,093
|
)
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
(552,848
|
)
|
|
|
|
|
(552,848
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
(565,941
|
)
|
|
|
|
|
(565,941
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME(LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
(805,216
|
)
|
|
|
|
|
(805,216
|
)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME(LOSS)
|
$
|
(1,371,157
|
)
|
$
|
|
|
$
|
(1,371,157
|
)
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING BASIC
|
|
47,695,290
|
|
|
|
|
|
47,695,290
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED
|
|
47,695,290
|
|
|
|
|
|
47,695,290
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE, BASIC
|
$
|
(0.01
|
)
|
$
|
|
|
$
|
(0.01
|
)
|
NET INCOME (LOSS) PER SHARE,
DILUTED
|
$
|
(0.01
|
)
|
$
|
|
|
|
$
(0.01
|
)
|
F-71
The restated unaudited quarterly statements of cash flows for
the first three quarters of the years ended December 31, 2016 and 2015 are
presented below:
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Three
Months
Ended March 31, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
6,131,653
|
|
$
|
|
|
$
|
6,131,653
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,479,384
|
|
|
|
|
|
1,479,384
|
|
Assets Impairments
|
|
0
|
|
|
|
|
|
0
|
|
Change in fair value of financial instruments
|
|
(4,750,300
|
)
|
|
|
|
|
(4,750,300
|
)
|
Share of profit after tax of
JV Company
|
|
(469,356
|
)
|
|
|
|
|
(469,356
|
)
|
Stock Compensation cost
|
|
2,049,683
|
|
|
|
|
|
2,049,683
|
|
Changes in
operating assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(12,844,602
|
)
|
|
0
|
|
|
(12,844,602
|
)
|
Notes receivable
|
|
-
|
|
|
11,297
|
(1)(3)(4)
|
|
11,297
|
|
Inventories
|
|
(11,246,265
|
)
|
|
|
|
|
(11,246,265
|
)
|
Other receivables and other assets
|
|
(65,602
|
)
|
|
|
|
|
(65,602
|
)
|
Due from employee
|
|
(10,225
|
)
|
|
|
|
|
(10,225
|
)
|
Prepayments and prepaid expenses
|
|
(527,687
|
)
|
|
|
|
|
(527,687
|
)
|
Amount due from JV Company
|
|
(19,570,708
|
)
|
|
(2,762,925
|
)(1)
|
|
(22,333,633
|
)
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
31,915,168
|
|
|
9,236,375
|
(3)(5)
|
|
41,151,543
|
|
Other payables and accrued
liabilities
|
|
(1,438,571
|
)
|
|
|
|
|
(1,438,571
|
)
|
Customer deposits
|
|
1,365
|
|
|
|
|
|
1,365
|
|
Income Tax payable
|
|
(130,488
|
)
|
|
|
|
|
(130,488
|
)
|
Notes payable
|
|
0
|
|
|
0
|
|
|
0
|
|
Net cash used in operating
activities
|
$
|
(9,476,551
|
)
|
$
|
6,484,747
|
|
$
|
(2,991,804
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment, net
|
|
(233,343
|
)
|
|
|
|
|
(233,343
|
)
|
Purchases of construction in
progress
|
|
(39,266
|
)
|
|
|
|
|
(39,266
|
)
|
Deposit for acquisition
|
|
-
|
|
|
|
|
|
-
|
|
Issuance of notes receivable
|
|
(4,225,884
|
)
|
|
2,762,925
|
(1)
|
|
(1,462,959
|
)
|
Repayment of notes receivable
|
|
2,584,147
|
|
|
(2,584,147
|
)(3)
|
|
-
|
|
Net cash provided by (used
in) investing activities
|
$
|
(1,914,346
|
)
|
$
|
178,778
|
|
$
|
(1,735,568
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
(12,366,201
|
)
|
|
|
|
|
(12,366,201
|
)
|
Proceeds from short-term bank loans
|
|
6,338,475
|
|
|
|
|
|
6,338,475
|
|
Repayments of
short-term bank loans
|
|
-
|
|
|
|
|
|
-
|
|
Proceeds from notes payable
|
|
6,663,525
|
|
|
(6,663,525
|
)(5)
|
|
-
|
|
Net cash (used in)
provided by financing activities
|
$
|
635,799
|
|
$
|
(6,663,525
|
)
|
$
|
(6,027,726
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
(10,755,098
|
)
|
|
-
|
|
|
(10,755,098
|
)
|
Effect of exchange rate changes on cash
|
|
11,296
|
|
|
|
|
|
11,296
|
|
Cash and cash equivalents at
beginning of year
|
|
26,379,460
|
|
|
|
|
|
26,379,460
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
|
$
|
15,635,658
|
|
$
|
-
|
|
$
|
15,635,658
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
1,139,397
|
|
|
|
|
|
1,139,397
|
|
Interest paid
|
|
577,874
|
|
|
|
|
|
577,874
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress transferred back to
prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
|
|
|
|
2,762,925
|
(1)
|
|
2,762,925
|
|
Assignment of notes receivable to supplier to
settle accounts payable
|
|
|
|
|
2,572,850
|
(3)
|
|
2,572,850
|
|
Settlement of accounts
payable with notes payables
|
|
|
|
|
6,663,525
|
(5)
|
|
6,663,525
|
|
F-72
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Six
Months
Ended June 30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
11,557,155
|
|
$
|
|
|
$
|
11,557,155
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
2,955,663
|
|
|
|
|
|
2,955,663
|
|
Deferred taxes
|
|
(153,916
|
)
|
|
|
|
|
(153,916
|
)
|
Change in fair value of financial instruments
|
|
(8,753,344
|
)
|
|
|
|
|
(8,753,344
|
)
|
Share of profit after tax of
JV Company
|
|
(720,523
|
)
|
|
|
|
|
(720,523
|
)
|
Decrease in reserve for fixed assets
|
|
-
|
|
|
|
|
|
-
|
|
Stock Compensation cost
|
|
5,482,808
|
|
|
|
|
|
5,482,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease
In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(14,077,317
|
)
|
|
0
|
|
|
(14,077,317
|
)
|
Notes receivable
|
|
-
|
|
|
0
|
|
|
0
|
|
Inventories
|
|
(12,122,839
|
)
|
|
|
|
|
(12,122,839
|
)
|
Other receivables and other
assets
|
|
(58,055
|
)
|
|
|
|
|
(58,055
|
)
|
Due from employee
|
|
(9,250
|
)
|
|
|
|
|
(9,250
|
)
|
Prepayments and prepaid
expenses
|
|
(143,163
|
)
|
|
|
|
|
(143,163
|
)
|
Amount due from JV Company
|
|
(50,224,378
|
)
|
|
(4,121,797
|
)(1)
|
|
(54,346,175
|
)
|
Due from related party
|
|
0
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
54,732,723
|
|
|
14,882,456
|
(3)(5)
|
|
69,615,179
|
|
Other payables and accrued
liabilities
|
|
(1,716,848
|
)
|
|
|
|
|
(1,716,848
|
)
|
Customer deposits
|
|
106,563
|
|
|
|
|
|
106,563
|
|
Income Tax payable
|
|
506,321
|
|
|
|
|
|
506,321
|
|
Notes payable
|
|
0
|
|
|
(5,716,427
|
)
|
|
(5,716,427
|
)
|
Net cash used in operating
activities
|
$
|
(12,638,400
|
)
|
$
|
5,044,232
|
|
$
|
(7,594,168
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment, net
|
|
(291,895
|
)
|
|
|
|
|
(291,895
|
)
|
Disposal of land use rights
and other intangible assets
|
|
-
|
|
|
|
|
|
-
|
|
Purchases of construction in progress
|
|
(39,361
|
)
|
|
|
|
|
(39,361
|
)
|
Deposit for acquisition
|
|
-
|
|
|
|
|
|
-
|
|
Issuance of notes receivable
|
|
(5,588,283
|
)
|
|
3,322,772
|
(1)
|
|
(2,265,511
|
)
|
Repayment of notes receivable
|
|
4,145,502
|
|
|
(4,145,502
|
)(3)
|
|
0
|
|
Net cash provided by (used in) investing
activities
|
$
|
(1,774,037
|
)
|
$
|
(822,730
|
)
|
$
|
(2,596,767
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
(9,937,929
|
)
|
|
|
|
|
(9,937,929
|
)
|
Proceeds from
short-term bank loans
|
|
19,061,273
|
|
|
|
|
|
19,061,273
|
|
Repayments of short-term bank loans
|
|
(15,965,853
|
)
|
|
|
|
|
(15,965,853
|
)
|
Proceeds from notes
payable
|
|
9,937,929
|
|
|
(9,937,929
|
)(5)
|
|
-
|
|
Repayment of notes payable
|
|
(5,716,427
|
)
|
|
5,716,427
|
|
|
0
|
|
Net cash (used in)
provided by financing activities
|
$
|
(2,621,007
|
)
|
$
|
(4,221,502
|
)
|
$
|
(6,842,509
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
(17,033,444
|
)
|
|
-
|
|
|
(17,033,444
|
)
|
Effect of exchange rate changes on cash
|
|
117,975
|
|
|
|
|
|
117,975
|
|
Cash and cash equivalents at
beginning of year
|
|
42,015,118
|
|
|
|
|
|
42,015,118
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
|
$
|
25,099,649
|
|
$
|
-
|
|
$
|
25,099,649
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
1,310,173
|
|
|
|
|
|
1,310,173
|
|
Interest paid
|
|
1,192,526
|
|
|
|
|
|
1,192,526
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress transferred back to
prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
|
|
|
|
4,121,797
|
(1)
|
|
4,121,797
|
|
Assignment of notes receivable to supplier to
settle accounts payable
|
|
|
|
|
4,944,527
|
(3)
|
|
4,944,527
|
|
Settlement of accounts
payable with notes payables
|
|
|
|
|
9,937,929
|
(5)
|
|
9,937,929
|
|
F-73
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Nine
Months
Ended September
30, 2015
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
13,900,350
|
|
$
|
|
|
$
|
13,900,350
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
4,388,902
|
|
|
|
|
|
4,388,902
|
|
Assets Impairments
|
|
0
|
|
|
|
|
|
0
|
|
Deferred taxes
|
|
(1,854,863
|
)
|
|
|
|
|
(1,854,863
|
)
|
Change in fair value of
financial instruments
|
|
(11,802,586
|
)
|
|
|
|
|
(11,802,586
|
)
|
Share of profit after tax of JV Company
|
|
(1,900,128
|
)
|
|
|
|
|
(1,900,128
|
)
|
Decrease in reserve for fixed
assets
|
|
-
|
|
|
|
|
|
-
|
|
Stock Compensation cost
|
|
12,486,881
|
|
|
|
|
|
12,486,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(19,286,512
|
)
|
|
(8,163,199
|
)(2)
|
|
(27,449,711
|
)
|
Notes receivable
|
|
-
|
|
|
18,026
|
(1)(2)(3)(4)
|
|
18,026
|
|
Inventories
|
|
(17,289,849
|
)
|
|
|
|
|
(17,289,849
|
)
|
Other receivables and other assets
|
|
(298,976
|
)
|
|
|
|
|
(298,976
|
)
|
Due from employee
|
|
(10,535
|
)
|
|
|
|
|
(10,535
|
)
|
Prepayments and prepaid expenses
|
|
6,265,899
|
|
|
|
|
|
6,265,899
|
|
Amount due from JV Company
|
|
(27,964,497
|
)
|
|
(54,355,864
|
)(1)
|
|
(82,320,361
|
)
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
44,980,746
|
|
|
65,074,466
|
(3)(5)
|
|
110,055,212
|
|
Other payables and accrued
liabilities
|
|
(1,302,135
|
)
|
|
|
|
|
(1,302,135
|
)
|
Customer deposits
|
|
(2,502,087
|
)
|
|
|
|
|
(2,502,087
|
)
|
Income Tax payable
|
|
1,062,643
|
|
|
|
|
|
1,062,643
|
|
Notes payable
|
|
0
|
|
|
(12,299,436
|
)
|
|
(12,299,436
|
)
|
Net cash used in operating
activities
|
$
|
(1,126,747
|
)
|
$
|
(9,726,007
|
)
|
$
|
(10,852,754
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment, net
|
|
(408,850
|
)
|
|
|
|
|
(408,850
|
)
|
Purchases of construction in
progress
|
|
(39,054
|
)
|
|
|
|
|
(39,054
|
)
|
Deposit for acquisition
|
|
-
|
|
|
|
|
|
-
|
|
Issuance of notes receivable
|
|
(72,040,444
|
)
|
|
62,519,063
|
(1)(2)
|
|
(9,521,381
|
)
|
Repayment of notes receivable
|
|
61,697,894
|
|
|
(55,231,994
|
)(3)
|
|
6,465,900
|
|
Long Term Investment
|
|
(1,535,651
|
)
|
|
|
|
|
(1,535,651
|
)
|
Net cash provided by (used in) investing
activities
|
$
|
(12,326,105
|
)
|
$
|
7,287,069
|
|
$
|
(5,039,036
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
(3,232,950
|
)
|
|
|
|
|
(3,232,950
|
)
|
Proceeds from short-term bank loans
|
|
30,583,709
|
|
|
|
|
|
30,583,709
|
|
Repayments of
short-term bank loans
|
|
(27,512,406
|
)
|
|
|
|
|
(27,512,406
|
)
|
Proceeds from notes payable
|
|
9,860,498
|
|
|
(9,860,498
|
)(5)
|
|
-
|
|
Repayment of notes
payable
|
|
(12,299,436
|
)
|
|
12,299,436
|
|
|
0
|
|
Proceeds from bond payable
|
|
-
|
|
|
|
|
|
-
|
|
Net cash (used in)
provided by financing activities
|
$
|
(2,600,585
|
)
|
$
|
2,438,938
|
|
$
|
(161,647
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
(16,053,437
|
)
|
|
-
|
|
|
(16,053,437
|
)
|
Effect of exchange rate changes on cash
|
|
1,365,000
|
|
|
|
|
|
1,365,000
|
|
Cash and cash equivalents at
beginning of year
|
|
51,479,109
|
|
|
|
|
|
51,479,109
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
|
$
|
36,790,672
|
|
$
|
-
|
|
$
|
36,790,672
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
1,794,115
|
|
|
|
|
|
1,794,115
|
|
Interest paid
|
|
1,718,257
|
|
|
|
|
|
1,718,257
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress transferred back to
prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
|
|
|
|
54,355,864
|
(1)
|
|
54,355,864
|
|
Settlement of accounts receivables with notes
receivable from unrelated parties
|
|
|
|
|
8,163,199
|
(2)
|
|
8,163,199
|
|
Assignment of notes
receivable to suppllier to settle accounts payable
|
|
|
|
|
55,213,968
|
(3)
|
|
55,213,968
|
|
Settlement of accounts payable with notes
payables
|
|
|
|
|
9,860,498
|
(5)
|
|
9,860,498
|
|
F-74
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Three
Months
Ended March 31, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on Form
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
88,420
|
|
$
|
|
|
$
|
88,420
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,223,243
|
|
|
|
|
|
1,223,243
|
|
Deferred taxes
|
|
(4,397,828
|
)
|
|
|
|
|
(4,397,828
|
)
|
Change in fair value of financial instruments
|
|
(3,286,340
|
)
|
|
|
|
|
(3,286,340
|
)
|
Share of profit after tax of
JV Company
|
|
4,822,470
|
|
|
|
|
|
4,822,470
|
|
Stock Compensation cost
|
|
6,887,892
|
|
|
|
|
|
6,887,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(32,225,627
|
)
|
|
(10,413,273
|
)(2)
|
|
(42,638,900
|
)
|
Notes receivable
|
|
-
|
|
|
0
|
|
|
0
|
|
Inventories
|
|
(7,815,491
|
)
|
|
|
|
|
(7,815,491
|
)
|
Other receivables and other assets
|
|
(144,118
|
)
|
|
|
|
|
(144,118
|
)
|
Due from employee
|
|
(67,798
|
)
|
|
|
|
|
(67,798
|
)
|
Prepayments and prepaid expenses
|
|
(441,602
|
)
|
|
|
|
|
(441,602
|
)
|
Amount due from JV Company
|
|
(15,899,018
|
)
|
|
(31,350,559
|
)(1)
|
|
(47,249,577
|
)
|
Due from related party
|
|
34,781,767
|
|
|
|
|
|
34,781,767
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
16,975,799
|
|
|
42,919,220
|
(3)(5)
|
|
59,895,019
|
|
Other payables and accrued liabilities
|
|
(7,875,311
|
)
|
|
|
|
|
(7,875,311
|
)
|
Customer deposits
|
|
54,289
|
|
|
|
|
|
54,289
|
|
Income Tax payable
|
|
1,165,635
|
|
|
|
|
|
1,165,635
|
|
Notes payable
|
|
0
|
|
|
0
|
|
|
0
|
|
Net cash used in operating activities
|
$
|
(6,153,618
|
)
|
$
|
1,155,388
|
|
$
|
(4,998,230
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and
equipment, net
|
|
(29,696
|
)
|
|
|
|
|
(29,696
|
)
|
Disposal of land use rights and other
intangible assets
|
|
13,767
|
|
|
|
|
|
13,767
|
|
Purchases of construction in
progress
|
|
(28,140
|
)
|
|
|
|
|
(28,140
|
)
|
Deposit for acquisition
|
|
-
|
|
|
|
|
|
-
|
|
Issuance of notes receivable
|
|
(614,592
|
)
|
|
614,592
|
(1)(2)
|
|
-
|
|
Repayment of notes receivable
|
|
2,430,657
|
|
|
293,786
|
(3)
|
|
2,724,443
|
|
Long Term Investment
|
|
-
|
|
|
|
|
|
-
|
|
Short Term Investment
|
|
(1,455,727
|
)
|
|
|
|
|
(1,455,727
|
)
|
Net cash provided by (used
in) investing activities
|
$
|
316,269
|
|
$
|
908,378
|
|
$
|
1,224,647
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
-
|
|
|
|
|
|
-
|
|
Proceeds from notes payable
|
|
2,063,766
|
|
|
(2,063,766
|
)(5)
|
|
-
|
|
Repayment of notes
payable
|
|
0
|
|
|
|
|
|
0
|
|
Warrant exercise
|
|
434,666
|
|
|
|
|
|
434,666
|
|
Common stock issued for
acquisition, net of cost of capital
|
|
-
|
|
|
|
|
|
-
|
|
Net cash (used in) provided by financing
activities
|
$
|
2,498,432
|
|
$
|
(2,063,766
|
)
|
$
|
434,666
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
(3,338,917
|
)
|
|
-
|
|
|
(3,338,917
|
)
|
Effect of exchange rate
changes on cash
|
|
48,024
|
|
|
|
|
|
48,024
|
|
Cash and cash equivalents at beginning of
year
|
|
16,738,559
|
|
|
|
|
|
16,738,559
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
$
|
13,447,666
|
|
$
|
-
|
|
$
|
13,447,666
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
595,518
|
|
|
|
|
|
595,518
|
|
Interest paid
|
|
445,176
|
|
|
|
|
|
445,176
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress
transferred back to prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV Company and related
parties with notes receivable
|
|
|
|
|
31,350,559
|
(1)
|
|
31,350,559
|
|
Settlement of accounts
receivables with notes receivable from unrelated parties
|
|
|
|
|
10,413,273
|
(2)
|
|
10,413,273
|
|
Assignment of notes receivable to supplier to
settle accounts payable
|
|
|
|
|
40,855,454
|
(3)
|
|
40,855,454
|
|
Settlement of accounts
payable with notes payables
|
|
|
|
|
2,063,766
|
(5)
|
|
2,063,766
|
|
F-75
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Six
Months
Ended
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
2,881,600
|
|
$
|
|
|
$
|
2,881,600
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
2,458,160
|
|
|
|
|
|
2,458,160
|
|
Deferred taxes
|
|
(4,645,415
|
)
|
|
|
|
|
(4,645,415
|
)
|
Change in fair value of financial instruments
|
|
(3,812,898
|
)
|
|
|
|
|
(3,812,898
|
)
|
Loss (income) in investment
in associated companies
|
|
-
|
|
|
|
|
|
-
|
|
Share of profit after tax of JV Company
|
|
(96,163
|
)
|
|
|
|
|
(96,163
|
)
|
Decrease in reserve for fixed
assets
|
|
-
|
|
|
|
|
|
-
|
|
Stock Compensation cost
|
|
15,134,658
|
|
|
|
|
|
15,134,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(33,014,640
|
)
|
|
(12,714,237
|
)(2)
|
|
(45,728,877
|
)
|
Notes receivable
|
|
-
|
|
|
229,449
|
(1)(2)(3)(4)
|
|
229,449
|
|
Inventories
|
|
9,189,542
|
|
|
|
|
|
9,189,542
|
|
Other receivables and other assets
|
|
(9,424,711
|
)
|
|
|
|
|
(9,424,711
|
)
|
Due from employee
|
|
(56,998
|
)
|
|
|
|
|
(56,998
|
)
|
Prepayments and prepaid expenses
|
|
(12,953,797
|
)
|
|
|
|
|
(12,953,797
|
)
|
Amount due from JV Company
|
|
(49,198,396
|
)
|
|
(34,866,384
|
)(1)
|
|
(84,064,780
|
)
|
Due from related party
|
|
29,188,707
|
|
|
|
|
|
29,188,707
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
38,423,919
|
|
|
53,842,748
|
(3)(5)
|
|
92,266,667
|
|
Other payables and accrued liabilities
|
|
6,009,203
|
|
|
|
|
|
6,009,203
|
|
Customer deposits
|
|
154,168
|
|
|
|
|
|
154,168
|
|
Income Tax payable
|
|
3,363,489
|
|
|
|
|
|
3,363,489
|
|
Notes payable
|
|
-
|
|
|
(3,824,162
|
)
|
|
(3,824,162
|
)
|
Net cash used in operating activities
|
$
|
(6,399,572
|
)
|
$
|
2,667,414
|
|
$
|
(3,732,158
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and
equipment, net
|
|
(37,554
|
)
|
|
|
|
|
(37,554
|
)
|
Disposal of land use rights and other
intangible assets
|
|
13,775
|
|
|
|
|
|
13,775
|
|
Purchases of construction in
progress
|
|
(1,356,866
|
)
|
|
|
|
|
(1,356,866
|
)
|
Deposit for acquisition
|
|
-
|
|
|
|
|
|
-
|
|
Issuance of notes receivable
|
|
(42,626,834
|
)
|
|
42,626,834
|
(1)(2)
|
|
0
|
|
Repayment of notes receivable
|
|
49,275,627
|
|
|
(44,321,840
|
)(3)
|
|
4,953,787
|
|
Long Term Investment
|
|
-
|
|
|
|
|
|
-
|
|
Short Term Investment
|
|
1,602,698
|
|
|
|
|
|
1,602,698
|
|
Net cash provided by (used
in) investing activities
|
$
|
6,870,846
|
|
$
|
(1,695,006
|
)
|
$
|
5,175,840
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
1,300,215
|
|
|
|
|
|
1,300,215
|
|
Proceeds from notes payable
|
|
4,796,570
|
|
|
(4,796,570
|
)(5)
|
|
-
|
|
Repayment of notes
payable
|
|
(3,824,162
|
)
|
|
3,824,162
|
|
|
0
|
|
Warrant exercise
|
|
434,666
|
|
|
|
|
|
434,666
|
|
Net cash (used in)
provided by financing activities
|
$
|
2,707,289
|
|
$
|
(972,408
|
)
|
$
|
1,734,881
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
3,178,563
|
|
|
-
|
|
|
3,178,563
|
|
Effect of exchange rate changes on cash
|
|
(383,266
|
)
|
|
|
|
|
(383,266
|
)
|
Cash and cash equivalents at
beginning of year
|
|
16,738,559
|
|
|
|
|
|
16,738,559
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
|
|
19,533,856
|
|
|
-
|
|
|
19,533,856
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
1,051,032
|
|
|
|
|
|
1,051,032
|
|
Interest paid
|
|
877,496
|
|
|
|
|
|
877,496
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Construction in progress transferred back to
prepayments
|
|
|
|
|
|
|
|
-
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
|
|
|
|
34,866,384
|
(1)
|
|
34,866,384
|
|
Settlement of accounts receivables with notes
receivable from unrelated parties
|
|
|
|
|
12,714,237
|
(2)
|
|
12,714,237
|
|
Assignment of notes
receivable to supplier to settle accounts payable
|
|
|
|
|
49,046,178
|
(3)
|
|
49,046,178
|
|
Settlement of accounts payable with notes
payables
|
|
|
|
|
4,796,570
|
(5)
|
|
4,796,570
|
|
F-76
KANDI
TECHNOLOGIES
GROUP,
INC. AND
SUBSIDIARIES
Condensed
Consolidated
Statements
of Cash Flows
Nine
Months
Ended
September
30, 2016
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported on
|
|
|
|
|
|
|
|
|
|
Form 10-Q
|
|
|
Reclassification
|
|
|
As Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
2,315,659
|
|
$
|
|
|
$
|
2,315,659
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
3,681,345
|
|
|
|
|
|
3,681,345
|
|
Assets Impairments
|
|
0
|
|
|
|
|
|
0
|
|
Deferred taxes
|
|
(2,608,702
|
)
|
|
|
|
|
(2,608,702
|
)
|
Change in fair value of
financial instruments
|
|
(3,823,590
|
)
|
|
|
|
|
(3,823,590
|
)
|
Share of profit after tax of JV Company
|
|
203,375
|
|
|
|
|
|
203,375
|
|
Stock Compensation cost
|
|
13,930,829
|
|
|
|
|
|
13,930,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities, net of effects of acquisition:
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease
In:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(33,335,798
|
)
|
|
(15,198,694
|
)(2)
|
|
(48,534,492
|
)
|
Notes receivable
|
|
|
|
|
918,018
|
(1)(2)(3)(4)
|
|
918,018
|
|
Inventories
|
|
1,802,780
|
|
|
|
|
|
1,802,780
|
|
Other receivables and
other assets
|
|
(11,868,318
|
)
|
|
|
|
|
(11,868,318
|
)
|
Due from employee
|
|
17,718
|
|
|
|
|
|
17,718
|
|
Prepayments and prepaid
expenses
|
|
(31,684,685
|
)
|
|
|
|
|
(31,684,685
|
)
|
Amount due from JV Company
|
|
(41,182,480
|
)
|
|
(46,791,213
|
)(1)
|
|
(87,973,693
|
)
|
Due from related party
|
|
28,994,314
|
|
|
|
|
|
28,994,314
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
In:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
40,240,135
|
|
|
66,684,520
|
(3)(5)
|
|
106,924,655
|
|
Other payables and accrued
liabilities
|
|
10,415,706
|
|
|
|
|
|
10,415,706
|
|
Customer deposits
|
|
(13,598
|
)
|
|
|
|
|
(13,598
|
)
|
Income Tax payable
|
|
607,422
|
|
|
|
|
|
607,422
|
|
Notes payable
|
|
0
|
|
|
(5,849,988
|
)
|
|
(5,849,988
|
)
|
Net cash used in operating
activities
|
$
|
(22,307,888
|
)
|
$
|
(237,357
|
)
|
$
|
(22,545,245
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment, net
|
|
(39,250
|
)
|
|
|
|
|
(39,250
|
)
|
Purchases of construction in
progress
|
|
(4,236,301
|
)
|
|
|
|
|
(4,236,301
|
)
|
Issuance of notes receivable
|
|
(51,553,604
|
)
|
|
51,553,604
|
(1)(2)
|
|
-
|
|
Repayment of notes receivable
|
|
62,415,498
|
|
|
(51,979,195
|
)(3)
|
|
10,436,303
|
|
Short Term Investment
|
|
1,592,024
|
|
|
|
|
|
1,592,024
|
|
Net cash provided by (used
in) investing activities
|
$
|
8,178,367
|
|
$
|
(425,591
|
)
|
$
|
7,752,776
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
1,519,477
|
|
|
|
|
|
1,519,477
|
|
Proceeds from notes
payable
|
|
5,187,040
|
|
|
(5,187,040
|
)(5)
|
|
-
|
|
Repayment of notes payable
|
|
(5,849,988
|
)
|
|
5,849,988
|
|
|
-
|
|
Warrant exercise
|
|
434,666
|
|
|
|
|
|
434,666
|
|
Net cash (used in) provided by
financing activities
|
$
|
1,291,195
|
|
$
|
662,948
|
|
$
|
1,954,143
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
(12,838,326
|
)
|
|
-
|
|
|
(12,838,326
|
)
|
Effect of exchange rate
changes on cash
|
|
(210,383
|
)
|
|
|
|
|
(210,383
|
)
|
Cash and cash equivalents at beginning of
year
|
|
16,738,559
|
|
|
|
|
|
16,738,559
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
$
|
3,689,850
|
|
$
|
-
|
|
$
|
3,689,850
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
2,322,747
|
|
|
|
|
|
2,322,747
|
|
Interest paid
|
|
1,283,843
|
|
|
|
|
|
1,283,843
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Settlement of due from JV
Company and related parties with notes receivable
|
|
|
|
|
46,791,213
|
(1)
|
|
46,791,213
|
|
Settlement of accounts receivables with notes
receivable from unrelated parties
|
|
|
|
|
15,198,694
|
(2)
|
|
15,198,694
|
|
Assignment of notes
receivable to suppllier to settle accounts payable
|
|
|
|
|
61,497,480
|
(3)
|
|
61,497,480
|
|
Settlement of accounts payable with notes
payables
|
|
|
|
|
5,187,040
|
(5)
|
|
5,187,040
|
|
Note 28 - SUBSEQUENT EVENTS
On February 1, 2017, the Company entered a consulting agreement
with FirsTrust China Ltd.(FirsTrust) to engage FirsTrust as a consultant to
advise the Company on financial markets and restructuring, business acquisitions
and other aspects of or concerning the Companys business about which FirsTrust
has knowledge or experience. Pursuant to the consulting agreement, the Company
shall pay FirsTrust an aggregate of 60,000 shares of the Companys common stock,
with a par value of $0.001, for its services from February 1, 2017 to January
31, 2018. Pursuant to the consulting agreement, the Company may, at its sole
discretion, elect to pay FirsTrust an additional 60,000 shares of the Companys
common stock based on its performance. The shares and the additional shares (if
issued) shall be restrictive under the Securities Act of 1933, as amended. The
Board of Directors ratified and approved the consulting agreement with FirsTrust
in February 2017.
In February, 2017, The Board of Directors authorized the
Company to issue an aggregate of 246,900 shares of the unrestricted stock to a
list of management members designated by the CEO as compensation for their past
services pursuant to Section 11 of the Companys 2008 Omnibus Long-Term
Incentive Plan, as amended.
F-77
Item 9.
Changes
in and
Disagreements
with
Accountants
on
Accounting
and
Financial
Disclosure.
None.
Item 9A.
Controls
and
Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
The Company has evaluated, under the supervision of the Company's Chief Executive Officer and the Chief Financial Officer, the effectiveness of disclosure controls and procedures as of December 31, 2016. This is done in order to ensure that information the Company is required to disclose in reports that are filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2016.
(b)
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under Exchange Act. The Company's ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
The Company's ICFR includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements.
All internal control systems, no matter how well designed, have inherent limitations, so that no evaluation of controls can provide absolute assurance that all control issues are detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, any current evaluation of controls cannot and should not be projected to future periods.
Management conducted an assessment of the effectiveness of our system of ICFR as of December 31, 2016, the last day of our fiscal year of 2016. This assessment was based on criteria established in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 (the“2013 COSO Framework”) and included an evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
44
According to the SEC rules and guidance on internal control over financial reporting, a material weakness is a deficiency, or a combination of deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement to the annual or interim financial statements will not be prevented or detected on a timely basis.
Based on management's evaluation under the 2013 COSO Framework, management identified the following material weaknesses as of December 31, 2016 in the Company’s ICFR, principally related to the Company’s period-end financial reporting.
i.
|
Accounting and finance personnel. The company lacks sufficient expertise relating to technical knowledge of certain US GAAP accounting and SEC disclosures to ensure accuracy and completeness of accounting treatment and financial reporting. The weakness was largely due to the lack of requisite U.S. GAAP and SEC compliance experience with our finance personnel responsible for the preparation of U.S. GAAP based financial statements and disclosures pursuant to the SEC rules and regulations.
|
|
|
ii.
|
Disclosure requirements for equity investments. The Company did not have sufficient expertise to ensure the completeness of the disclosure of financial statements for equity investments. The procedures in the control framework designed by the Company’s internal department in its accounting manual (the “Accounting Manual”) used to identify the requirements to file separate audited financial statements for equity investments was not adequately performed during each reporting period. The weakness resulted in the addition of separate audited financial statements of the JV Company to this Form 10-K.
|
|
|
iii.
|
Disclosure of related party transactions. The Company did not have sufficient expertise to ensure that proper disclosure of related party transactions. The procedures in the Accounting Manual for the preparation of the financial statements were not adequately performed during each reporting period. The weakness resulted in the restatement of consolidated balance sheet and consolidated income statement to separately identify certain accounts with the JV Company and related parties on the face of consolidated balance sheet and consolidated income statement in this Form 10-K.
|
|
|
iv.
|
Presentation of the statement of cash flows. The Company did not have effective controls to ensure the proper classification and reporting of certain cash and non-cash activities related to accounts receivable, accounts payable, notes receivable and notes payable on the statement of cash flows. The procedures in the Accounting Manual for the preparation of the statement of cash flows were not adequately performed during each reporting period. The weakness resulted in the reclassification of the statement of cash flows line items and related financial disclosures in this Form 10-K.
|
|
|
v.
|
Accounting for income taxes. The Company did not have sufficient expertise to ensure the accuracy of the accounting and reporting of income taxes and related disclosures. The procedures in the Accounting Manual for the identification of the tax rates and calculation of the income taxes were not adequately performed during each reporting period. The weakness resulted in the correction in accounting for income taxes in this Form 10-K.
|
45
Based on the material weaknesses as laid out above, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2016 based on the 2013 COSO Framework.
(c) Plan for Remediation of the Material Weakness in Internal Control Over Financial Reporting
Management has been actively engaged in the planning for, and implementation of, remediation efforts to address the material weaknesses, as well as other identified areas of risk. These remediation efforts, outlined below, are intended both to address the material weaknesses and to enhance the Company’s overall financial control environment. Management believes that the material weaknesses arose due to the Company’s rapid growth outpacing the development of the Company’s accounting infrastructure.
Management’s planned actions to further address these issues including:
i.
|
The addition of more experienced accounting and finance personnel to manage the Company’s U.S. GAAP practice and SEC reporting compliance; In November 2016, we added an industry veteran to oversee U.S. GAAP-based reporting and SEC compliance works.
|
|
|
ii.
|
Necessary training for related accounting and finance personnel, so that they are well versed in the rules in the Accounting Manual such as the selection of accounting principles, the application of accounting policies and the procedures of accounting treatment; and remain current with accounting rules, regulations and trends; We increased on-job trainings and mentorship to the accounting and finance personnel responsible for consolidation and financial reporting during the course of the preparation of our annual report for the year ended December 31, 2016 and will continue to provide necessary training to our staff as needed.
|
|
|
iii.
|
A thorough review of the finance and accounting departments to ensure that the areas of responsibilities are properly matched to the staff competencies and the planning is properly matched to the procedures; and that the lines of communication and processes are as effective as possible; We will carry out this thorough review of the finance and accounting departments in the second quarter of 2017.
|
|
|
iv.
|
A thorough review of the processes and procedures used in the Company’s period closing and financial reporting, including but not limited to presentation of the statement of cash flows, disclosure of related party transactions, disclosure requirements for equity investment and accounting for income taxes, to ensure the related processes and procedures in our current accounting manual is complete and updated. We streamlined and strengthened the process and controls of the conversion and development of U.S. GAAP based financial statements by adding another layer of internal review to ensure the completeness and accuracy of financial data and regulatory compliance during preparation of our annual report for the year ended December 31, 2016. More thorough review of the processes and procedures used in the Company’s period closing and financial reporting will be carried out during the second quarter of 2017.
|
46
The audit committee has directed management to develop a detailed plan and timetable for the implementation of the foregoing remedial measures (to the extent not already completed) and will monitor their implementation. In addition, under the direction of the audit committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.
Management believes the measures described above and others that will be implemented will remediate the material weaknesses the Company has identified and strengthen its ICFR.
Management is committed to continuous improvement of the Company’s internal control processes and will continue to diligently review the Company’s financial reporting controls and procedures. As management continues to evaluate and work to improve ICFR, the Company may determine to take additional measures to address material weaknesses or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.
We reviewed the results of management's assessment with the Audit Committee of our Board of Directors.
Our independent registered public accounting firm, BDO China Shu Lun Pan Certified Public Accountants LLP, has audited the effectiveness of our ICFR as of December 31, 2016 as stated in their report which is attached to the auditors’ report included under item 8 of this report.
(e) Changes in Internal Control Over Financial Reporting
There had been no changes in the Company's ICFR identified in connection with the above evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's ICFR, other than the Company hired a CFO who is familiar with U.S. GAAP to oversee U.S. GAAP-based reporting and SEC compliance works.
47
Item 9B. Other
Information.
None