ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On July 13, 2021 (the “Signing Date”),
Kandi Technologies Group, Inc., a Delaware corporation (the “Company”), through its wholly-owned subsidiary, Zhejiang Kandi
Technologies Group Co., Ltd. (“Zhejiang Kandi Technologies”), a company organized under the laws of the People’s Republic
of China (the “PRC”), entered into (i) a Share Transfer Agreement (the “Share Transfer Agreement”) with Liao Zongjiang,
Liao Chunsheng, and Liao Caijin, three individual shareholders of Jiangxi Huiyi, as defined below (the “Transferors”) and
(ii) a Supplementary Agreement (the “Supplementary Agreement”) with the Transferors, pursuant to which Zhejiang Kandi Technologies
agreed to purchase all the equity interests of Jiangxi Province Huiyi New Energy Co., Ltd., a company organized under the laws of the
People’s Republic of China (“Jiangxi Huiyi”). The consummation of the transactions contemplated in the Share Transfer
Agreement is expected to take place no later than thirty business days after the Signing Date. The consummation of the transactions contemplated
in the Supplementary Agreement is expected to take place in the following three years after the Signing Date. The acquisition is for the
purpose of growing the Company’s business through vertical integration. An English translated copy of each of the Share Transfer
Agreement and the Supplementary Agreement is filed as exhibits to this report, which is incorporated by reference in its entirety to this
item.
Jiangxi Huiyi, located in GaoxinDevelopment Zone,
Xinyu City, Jiangxi Province was formed on November 16, 2016. Jiangxi Huiyi owns an intelligent production line with a daily output of
250,000 units of 18650 lithium batteries. Jiangxi Huiyi currently has 5 invention patents, 16 utility model patents, and 5 appearance
patents approved by the PRC State Intellectual Property Offices. It also filed 9 invention patent applications, 9 utility model patent
applications, and 3 appearance patent applications. Jiangxi Huiyi has more than 300 full time employees.
Pursuant to the terms of the Share Transfer Agreement,
Zhejiang Kandi Technologies will acquire all the equity interests of Jiangxi Huiyi for a purchase price of RMB 50 million (approximately
$7.7 million) in cash to the Transferors. Zhejiang Kandi Technologies is obligated to pay 50% of the cash portion of the purchase price
no later than five business days after the Signing Date. The remaining 50% of the cash portion of the purchase price will be paid upon
consummation of the transactions contemplated by the Share Transfer Agreement (the “Closing Date”). In addition, pursuant
to the Supplementary Agreement by and between the two parties, the Company may issue 858,770 shares of registered stock (the “Shares”)
to the Transferors each year for the next three years, conditioned on the fulfillment of the undertaking by the Transferors of Jiangxi
Huiyi to achieve no less than RMB 15 million (approximately $2.3 million) net income (the “Annual Profit Target”) over the
course of each of the following three years without additional investment by Zhejiang Kandi Technologies. The Shares will be registered
on proper registration statement.
The Supplementary Agreement sets forth the terms
and conditions of the issuance of the Shares for each of the next three years ended June 30, 2022, 2023 and 2024 as below -
If Jiangxi Huiyi achieves the Annual Profit Target,
858,770 shares will be issued to the Transferors. However, a reduced number of shares may be issued to Transferors if Jiangxi Huiyi fails
to achieve its Annual Profit Target: If the annual net profits of Jiangxi Huiyi fall below the Annual Profit Target by 20% or less, 687,016
shares will be issued to the Transferors; if net profits of Jiangxi Huiyi fall below the Annual Profit Target by a percentage between
20% and 40%, 515,262 shares will be issued to the Transferors; and if net profits of Jiangxi Huiyi fall below the Annual Profit Target
by 40% or more, no shares will be issued to the Transferors.
All the profit targets referenced above shall
follow the United States Generally Accepted Accounting Principles.
The Transferors have no relationship to the Company other than in connection
with this transaction.