Item
1. Financial Statements.
KANDI
TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(UNAUDITED)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
132,071,957
|
|
|
$
|
142,078,190
|
|
Restricted cash
|
|
|
16,117,526
|
|
|
|
442,445
|
|
Certificate of deposit
|
|
|
54,222,374
|
|
|
|
-
|
|
Accounts receivable (net of allowance for doubtful accounts of $111,512 and $110,269 as of June 30, 2021 and December 31, 2020, respectively)
|
|
|
48,713,854
|
|
|
|
38,547,137
|
|
Inventories
|
|
|
23,232,234
|
|
|
|
19,697,383
|
|
Notes receivable
|
|
|
8,985,422
|
|
|
|
31,404,630
|
|
Other receivables
|
|
|
40,574,115
|
|
|
|
1,875,245
|
|
Prepayments and prepaid expense
|
|
|
16,791,928
|
|
|
|
13,708,149
|
|
Advances to suppliers
|
|
|
13,274,911
|
|
|
|
36,733,182
|
|
Amount due from the Affiliate Company
|
|
|
-
|
|
|
|
21,742,226
|
|
Amount due from related party
|
|
|
-
|
|
|
|
886,989
|
|
TOTAL CURRENT ASSETS
|
|
|
353,984,321
|
|
|
|
307,115,576
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
81,579,358
|
|
|
|
65,402,680
|
|
Intangible assets, net
|
|
|
2,936,697
|
|
|
|
3,232,753
|
|
Land use rights, net
|
|
|
3,248,223
|
|
|
|
3,257,760
|
|
Construction in progress
|
|
|
6,123,956
|
|
|
|
16,317,662
|
|
Deferred taxes assets
|
|
|
7,852,209
|
|
|
|
8,964,946
|
|
Long term investment
|
|
|
154,921
|
|
|
|
45,958
|
|
Investment in the Affiliate Company
|
|
|
-
|
|
|
|
28,892,638
|
|
Goodwill
|
|
|
29,970,415
|
|
|
|
29,712,383
|
|
Other long term assets
|
|
|
18,012,160
|
|
|
|
32,307,484
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
149,877,939
|
|
|
|
188,134,264
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
503,862,260
|
|
|
$
|
495,249,840
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
31,373,506
|
|
|
$
|
34,257,935
|
|
Other payables and accrued expenses
|
|
|
8,930,573
|
|
|
|
7,218,395
|
|
Short-term loans
|
|
|
250,000
|
|
|
|
-
|
|
Notes payable
|
|
|
232,382
|
|
|
|
92,445
|
|
Income tax payable
|
|
|
11,280,164
|
|
|
|
1,313,754
|
|
Advance receipts
|
|
|
-
|
|
|
|
38,229,242
|
|
Amount due to related party
|
|
|
500,000
|
|
|
|
500,000
|
|
Other current liabilities
|
|
|
4,067,928
|
|
|
|
2,185,654
|
|
TOTAL CURRENT LIABILITIES
|
|
|
56,634,553
|
|
|
|
83,797,425
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Deferred taxes liability
|
|
|
602,435
|
|
|
|
3,483,171
|
|
Contingent consideration liability
|
|
|
-
|
|
|
|
3,743,000
|
|
Other long-term liabilities
|
|
|
464,763
|
|
|
|
459,580
|
|
TOTAL NON-CURRENT LIABILITIES
|
|
|
1,067,198
|
|
|
|
7,685,751
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
57,701,751
|
|
|
|
91,483,176
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER’S EQUITY
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000 shares authorized; 77,547,099 and 77,298,499 shares issued and 75,626,155 and 75,377,555 outstanding at June 30,2021 and December 31,2020, respectively
|
|
|
75,626
|
|
|
|
75,377
|
|
Additional paid-in capital
|
|
|
443,717,378
|
|
|
|
439,549,338
|
|
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at June 30,2021 and December 31,2020, respectively)
|
|
|
7,446,854
|
|
|
|
(27,079,900
|
)
|
Accumulated other comprehensive loss
|
|
|
(5,079,349
|
)
|
|
|
(8,778,151
|
)
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
446,160,509
|
|
|
|
403,766,664
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
503,862,260
|
|
|
$
|
495,249,840
|
|
See
accompanying notes to condensed consolidated financial statements
KANDI
TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES FROM UNRELATED PARTIES, NET
|
|
$
|
29,875,835
|
|
|
$
|
19,436,120
|
|
|
$
|
45,852,002
|
|
|
$
|
25,808,544
|
|
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET
|
|
|
-
|
|
|
|
956
|
|
|
|
1,587
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, NET
|
|
|
29,875,835
|
|
|
|
19,437,076
|
|
|
|
45,853,589
|
|
|
|
25,809,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
(23,778,053
|
)
|
|
|
(15,900,298
|
)
|
|
|
(35,401,456
|
)
|
|
|
(21,105,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
6,097,782
|
|
|
|
3,536,778
|
|
|
|
10,452,133
|
|
|
|
4,704,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
(3,564,905
|
)
|
|
|
(1,149,901
|
)
|
|
|
(25,189,502
|
)
|
|
|
(1,790,141
|
)
|
Selling and marketing
|
|
|
(1,057,517
|
)
|
|
|
(763,666
|
)
|
|
|
(2,204,383
|
)
|
|
|
(1,641,972
|
)
|
General and administrative
|
|
|
(5,359,572
|
)
|
|
|
(3,907,191
|
)
|
|
|
(9,789,695
|
)
|
|
|
(6,973,926
|
)
|
Gain on disposal of long-lived assets
|
|
|
48,253,667
|
|
|
|
13,907,574
|
|
|
|
48,253,667
|
|
|
|
13,907,574
|
|
TOTAL OPERATING INCOME
|
|
|
38,271,673
|
|
|
|
8,086,816
|
|
|
|
11,070,087
|
|
|
|
3,501,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
44,369,455
|
|
|
|
11,623,594
|
|
|
|
21,522,220
|
|
|
|
8,205,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
974,105
|
|
|
|
221,792
|
|
|
|
1,502,697
|
|
|
|
560,736
|
|
Interest expense
|
|
|
(78,069
|
)
|
|
|
(1,123,056
|
)
|
|
|
(204,417
|
)
|
|
|
(2,105,990
|
)
|
Change in fair value of contingent consideration
|
|
|
(357,000
|
)
|
|
|
(929,000
|
)
|
|
|
-
|
|
|
|
2,863,000
|
|
Government grants
|
|
|
114,402
|
|
|
|
86,799
|
|
|
|
349,195
|
|
|
|
97,898
|
|
Gain from sale of equity in the Affiliate Company
|
|
|
33,651
|
|
|
|
-
|
|
|
|
17,733,911
|
|
|
|
-
|
|
Share of loss after tax of the Affiliate Company
|
|
|
(4,904
|
)
|
|
|
(2,978,529
|
)
|
|
|
(2,584,401
|
)
|
|
|
(4,081,299
|
)
|
Other income, net
|
|
|
3,827,089
|
|
|
|
1,043,335
|
|
|
|
4,325,990
|
|
|
|
1,062,985
|
|
TOTAL OTHER INCOME (EXPENSE), NET
|
|
|
4,509,274
|
|
|
|
(3,678,659
|
)
|
|
|
21,122,975
|
|
|
|
(1,602,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
48,878,729
|
|
|
|
7,944,935
|
|
|
|
42,645,195
|
|
|
|
6,602,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
(7,949,255
|
)
|
|
|
(3,889,889
|
)
|
|
|
(8,118,441
|
)
|
|
|
(4,122,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
40,929,474
|
|
|
|
4,055,046
|
|
|
|
34,526,754
|
|
|
|
2,480,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
4,874,815
|
|
|
|
477,734
|
|
|
|
3,698,802
|
|
|
|
(3,045,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
45,804,289
|
|
|
$
|
4,532,780
|
|
|
$
|
38,225,556
|
|
|
$
|
(564,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED
|
|
|
75,510,788
|
|
|
|
53,369,602
|
|
|
|
75,447,633
|
|
|
|
52,862,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE, BASIC AND DILUTED
|
|
$
|
0.54
|
|
|
$
|
0.08
|
|
|
$
|
0.46
|
|
|
$
|
0.05
|
|
See
accompanying notes to condensed consolidated financial statements
KANDI
TECHNOLOGIES GROUP, INC.
AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
|
Number of
Outstanding
Shares
|
|
|
Common
Stock
|
|
|
Treasury
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
|
|
Balance, December 31, 2019
|
|
|
52,839,441
|
|
|
$
|
52,839
|
|
|
$
|
(2,477,965
|
)
|
|
$
|
259,691,370
|
|
|
$
|
(16,685,736
|
)
|
|
$
|
(22,723,581
|
)
|
|
$
|
217,856,927
|
|
Stock issuance and award
|
|
|
10,000
|
|
|
|
10
|
|
|
|
-
|
|
|
|
22,290
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,300
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,574,646
|
)
|
|
|
-
|
|
|
|
(1,574,646
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,523,065
|
)
|
|
|
(3,523,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
52,849,441
|
|
|
$
|
52,849
|
|
|
$
|
(2,477,965
|
)
|
|
$
|
259,713,660
|
|
|
$
|
(18,260,382
|
)
|
|
$
|
(26,246,646
|
)
|
|
$
|
212,781,516
|
|
Stock issuance and award
|
|
|
1,502,717
|
|
|
|
1,503
|
|
|
|
|
|
|
|
3,164,925
|
|
|
|
|
|
|
|
|
|
|
|
3,166,428
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,055,043
|
|
|
|
|
|
|
|
4,055,043
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477,734
|
|
|
|
477,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
54,352,158
|
|
|
$
|
54,352
|
|
|
$
|
(2,477,965
|
)
|
|
$
|
262,878,585
|
|
|
$
|
(14,205,339
|
)
|
|
$
|
(25,768,912
|
)
|
|
$
|
220,480,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Outstanding
Shares
|
|
|
|
Common
Stock
|
|
|
|
Treasury
Stock
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
Accumulated
Earning
(Deficit)
|
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
|
Total
|
|
Balance, December 31, 2020
|
|
|
75,377,555
|
|
|
$
|
75,377
|
|
|
$
|
-
|
|
|
$
|
439,549,338
|
|
|
$
|
(27,079,900
|
)
|
|
$
|
(8,778,151
|
)
|
|
$
|
403,766,664
|
|
Stock issuance and award
|
|
|
10,000
|
|
|
|
10
|
|
|
|
-
|
|
|
|
22,290
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,300
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,402,720
|
)
|
|
|
-
|
|
|
|
(6,402,720
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,176,013
|
)
|
|
|
(1,176,013
|
)
|
Reversal of reduction in the Affiliate Company’s equity (net off tax effect of $491,400)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,771,652
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,771,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
75,387,555
|
|
|
$
|
75,387
|
|
|
$
|
-
|
|
|
$
|
442,343,280
|
|
|
$
|
(33,482,620
|
)
|
|
$
|
(9,954,164
|
)
|
|
$
|
398,981,883
|
|
Stock issuance and award
|
|
|
238,600
|
|
|
|
239
|
|
|
|
|
|
|
|
1,374,098
|
|
|
|
|
|
|
|
|
|
|
|
1,374,337
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,929,474
|
|
|
|
|
|
|
|
40,929,474
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,874,815
|
|
|
|
4,874,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
|
|
75,626,155
|
|
|
$
|
75,626
|
|
|
$
|
-
|
|
|
$
|
443,717,378
|
|
|
$
|
7,446,854
|
|
|
$
|
(5,079,349
|
)
|
|
$
|
446,160,509
|
|
See
accompanying notes to condensed consolidated financial statements.
KANDI
TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,526,754
|
|
|
$
|
2,480,400
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,443,218
|
|
|
|
4,022,676
|
|
Impairments
|
|
|
-
|
|
|
|
(148,054
|
)
|
Deferred taxes
|
|
|
(11,970
|
)
|
|
|
2,089,505
|
|
Share of loss after tax of the Affiliate Company
|
|
|
2,584,401
|
|
|
|
4,081,299
|
|
Gain from equity sale in the Affiliate Company
|
|
|
(17,733,911
|
)
|
|
|
-
|
|
Gain on disposal of long-live assets
|
|
|
(48,253,667
|
)
|
|
|
(13,907,574
|
)
|
Change in fair value of contingent consideration
|
|
|
-
|
|
|
|
(2,863,000
|
)
|
Stock based compensation expense
|
|
|
1,429,456
|
|
|
|
847,546
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
2,054,930
|
|
|
|
(1,431,388
|
)
|
Inventories
|
|
|
(3,328,120
|
)
|
|
|
(743,483
|
)
|
Other receivables and other assets
|
|
|
(14,040,619
|
)
|
|
|
(11,248,701
|
)
|
Advances to supplier and prepayments and prepaid expenses
|
|
|
20,596,182
|
|
|
|
(12,586,777
|
)
|
Amount due from the Affiliate Company
|
|
|
-
|
|
|
|
4,129,516
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(1,044,040
|
)
|
|
|
(282,560
|
)
|
Other payables and accrued liabilities
|
|
|
(463,016
|
)
|
|
|
736,715
|
|
Notes payable
|
|
|
(93,273
|
)
|
|
|
(10,664,922
|
)
|
Income tax payable
|
|
|
7,671,740
|
|
|
|
1,161,312
|
|
Net cash used in operating activities
|
|
$
|
(11,661,935
|
)
|
|
$
|
(34,327,490
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, net
|
|
|
(6,565,755
|
)
|
|
|
(59,670
|
)
|
Payment for construction in progress
|
|
|
(1,869,028
|
)
|
|
|
-
|
|
Proceeds from disposal of long-lived assets
|
|
|
23,234,680
|
|
|
|
34,696,547
|
|
Repayments of loan to third party
|
|
|
31,686,168
|
|
|
|
-
|
|
Certificate of deposit
|
|
|
(54,098,335
|
)
|
|
|
-
|
|
Cash received from sales of equity in the Affiliate Company
|
|
|
23,803,268
|
|
|
|
15,641,886
|
|
Long Term Investment
|
|
|
(108,197
|
)
|
|
|
-
|
|
Net cash provided by investing activities
|
|
$
|
16,082,801
|
|
|
$
|
50,278,763
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term loans
|
|
|
250,000
|
|
|
|
24,031,625
|
|
Repayments of short-term loans
|
|
|
-
|
|
|
|
(49,769,638
|
)
|
Repayments of long-term loans
|
|
|
-
|
|
|
|
(284,398
|
)
|
Proceeds from long-term loans
|
|
|
-
|
|
|
|
394,116
|
|
Net cash provided by (used in) financing activities
|
|
$
|
250,000
|
|
|
$
|
(25,628,295
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
4,670,866
|
|
|
$
|
(9,677,022
|
)
|
Effect of exchange rate changes
|
|
$
|
997,982
|
|
|
$
|
(157,062
|
)
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR
|
|
$
|
142,520,635
|
|
|
$
|
16,512,635
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
|
|
$
|
148,189,483
|
|
|
$
|
6,678,551
|
|
-CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
|
132,071,957
|
|
|
|
3,457,498
|
|
-RESTRICTED CASH AT END OF PERIOD
|
|
|
16,117,526
|
|
|
|
3,221,053
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
373,433
|
|
|
|
870,082
|
|
Interest paid
|
|
$
|
-
|
|
|
|
641,213
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH DISCLOSURES:
|
|
|
|
|
|
|
|
|
Reversal of decrease in investment in the Affiliate Company due to change in its equity (net off tax effect of $491,400)
|
|
$
|
2,813,968
|
|
|
|
-
|
|
Increase of other receivable for equity transfer payment of the Affiliate Company
|
|
$
|
23,803,268
|
|
|
|
-
|
|
See
accompanying notes to condensed 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.
As used herein, the terms “Company” or “Kandi” refer to Kandi Technologies and its operating subsidiaries, as
described below.
Headquartered
in Jinhua City, Zhejiang Province, People’s Republic of China (“China” or “PRC”), the Company is one of
China’s leading producers and manufacturers of electric vehicle (“EV”) products (through the Affiliate Company, formerly
defined as the JV Company), EV parts, and off-road vehicles for sale in the Chinese and the global markets. The Company conducts its
primary business operations through its wholly-owned subsidiaries, Zhejiang Kandi Vehicles Co., Ltd. (“Kandi Vehicles”),
Kandi Vehicles’ wholly and partially-owned subsidiaries, and SC Autosports LLC (“SC Autosports”, d/b/a Kandi America)
and its wholly-owned subsidiary, Kandi America Investment, LLC (“Kandi Investment”). In March 2021, Zhejiang Kandi Vehicles
Co., Ltd. changed its name to Zhejiang Kandi Technologies Group Co., Ltd. (“Zhejiang Kandi Technologies”).
The
Company’s organizational chart as of the date of this report is as follows:
The
Company’s primary business operations consist of designing, developing, manufacturing and commercializing EV products, EV parts,
automatic power exchange equipment for pure electric vehicles, off-road vehicles and the dynamic power train system of intelligent transportation.
NOTE
2 - LIQUIDITY
The
Company had a working capital of $ 297,349,768 as of June 30, 2021, an increase of $74,031,617 from a working capital of $223,318,151 as
of December 31, 2020. As of June 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents were $132,071,957 and
$142,078,190, respectively, the Company’s restricted cash was $16,117,526 and $442,445, respectively. As of June 30, 2021,
the Company had multiple certificates of deposit with a total amount of $54,222,374. These certificates of deposit have an annual
interest rate from 3.7% to 3.99% which can be transferred when necessary without any penalty or any loss of interest and principal.
On
March 10, 2020, a real estate repurchase agreement (the “Repurchase Agreement”) was entered into by and between Zhejiang
Kandi Technologies and Jinhua Economic and Technological Development Zone pursuant to which the local government shall purchase the land
use right over the land of 66 acres (400 mu, 265,029 square meters) that is owned by Zhejiang Kandi Technologies for RMB 525 million
($81 million). Payments to Zhejiang Kandi Technologies shall be made in three installments as the Company disclosed in a Current
Report on Form 8-K filed with the SEC on March 9, 2020. In addition, if Zhejiang Kandi Technologies achieves certain milestones that
contribute to local economic development, the Company will be eligible for tax rebates that could total up to RMB 500 million
($77 million) over the next eight years. On May 22, 2020, the Company received the first payment of RMB 244 million (approximately
$38 million) under the Repurchase Agreement. On July 9, 2020, the Company received the second payment of RMB 119 million
(approximately $18 million) under the Repurchase Agreement. By the end of March 2021, the Company finished relocating production
and offices to the new industrial park and vacated the old factory property. In early April, the relevant Economic Zone authorities inspected
the vacated land and determined that it met all stipulated conditions. On May 20, 2021, the Company received the final portion of repurchase
payment of RMB 150 million (approximately $23 million) under the Repurchase Agreement. In addition, there was RMB 12 million
(approximately $2 million) reward for moving out of the old location has been submitted to the government for approval and will
be collected after the approval.
On
February 18, 2021, Zhejiang Kandi Technologies signed an Equity Transfer Agreement with Geely to transfer all of its remaining 22%
equity interests in the Affiliate Company to Geely for a total consideration of RMB 308 million (approximately $48 million).
On March 16, 2021, the Company received the first half of the equity transfer payment of RMB 154,000,000 (approximately $24 million), and
the rest half will be received within six months from March 9, 2021according to the Equity Transfer Agreement. If the transfer of the
remaining 22% equity interests of the Affiliate Company took place on January 1, 2020, the net income for the six months ended June
30, 2021 and 2020 would have been $19.4 million and $1.6 million, respectively.
Although
the Company expects that most of its outstanding trade receivables from customers will be collected in the next twelve months, there
are uncertainties with respect to the timing in collecting these receivables, especially the receivables due from the Affiliate Company,
because most of them are indirectly impacted by the progress of the receipt of government subsidies.
The
Company’s primary need for liquidity stems from its need to fund working capital requirements of the Company’s businesses,
its capital expenditures and its general operations, including debt repayment. The Company has historically financed its operations through
short-term commercial bank loans from Chinese banks, as well as its ongoing operating activities by using funds from operations, external
credit or financing arrangements. Currently the Company
has sufficient cash in hand to meet the existing operational needs, but the credit line is retained
which can be utilized timely when the Company has special capital needs. The PRC subsidiaries do not have any short-term bank loans and
SC Autosports only has $250,000 short-term bank loans as of June 30, 2021.
NOTE
3 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim information, and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include
all of the information and notes required by U.S. GAAP for annual financial statements. In the management’s opinion, the interim
financial statements reflect all normal adjustments that are necessary to provide a fair presentation of the financial results for the
interim periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for an
entire fiscal year. The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited consolidated
financial statements as of such date. For a more complete understanding of the Company’s business, financial position, operating
results, cash flows, risk factors and other matters, please refer to its Annual Report on Form 10-K for the fiscal year ended December 31,
2020 (the “2020 Form 10-K”).
NOTE
4 - PRINCIPLES OF CONSOLIDATION
The
Company’s consolidated financial statements reflect the accounts of the Company and its ownership interests in the following subsidiaries:
|
(1)
|
Continental
Development Limited (“Continental”), a wholly-owned subsidiary of the Company, incorporated under the laws of Hong Kong;
|
|
(2)
|
Zhejiang
Kandi Technologies, a wholly-owned subsidiary of Continental, incorporated under the laws of the PRC;
|
|
(3)
|
Kandi
New Energy Vehicle Co. Ltd. (“Kandi New Energy”), a 50%-owned subsidiary of Zhejiang Kandi Technologies (Mr. Hu Xiaoming
owns the other 50%), incorporated under the laws of the PRC. Pursuant to agreements executed in January 2011, Mr. Hu Xiaoming contracted
with Zhejiang Kandi Technologies for the operation and management of Kandi New Energy and put his shares of Kandi New Energy into escrow.
As a result, Zhejiang Kandi Technologies is entitled to 100% of the economic benefits, voting rights and residual interests of Kandi
New Energy;
|
|
(4)
|
Kandi
Electric Vehicles (Hainan) Co., Ltd. (“Kandi Hainan”), a subsidiary, 10% owned by Kandi New Energy and 90% owned
by Zhejiang Kandi Technologies, incorporated under the laws of the PRC;
|
|
(5)
|
Zhejiang
Kandi Smart Battery Swap Technology Co., Ltd (“Kandi Smart Battery Swap”), a wholly-owned subsidiary of Zhejiang Kandi Technologies,
incorporated under the laws of the PRC;
|
|
(6)
|
Yongkang
Scrou Electric Co, Ltd. (“Yongkang Scrou”), a wholly-owned subsidiary of Kandi Smart Battery Swap, incorporated under the
laws of the PRC; and
|
|
(7)
|
SC
Autosports (d/b/a Kandi America), a wholly-owned subsidiary of the Company formed under the laws of the State of Texas, USA.
|
|
(8)
|
China
Battery Exchange Technology Co., Ltd. (“China Battery Exchange”) and its subsidiaries, a wholly-owned subsidiary of Zhejiang
Kandi Technologies, incorporated under the laws of the PRC.
|
|
(9)
|
Kandi
Investment, a wholly-owned subsidiary of SC Autosports formed under the laws of the State of Texas, USA.
|
Equity
Method Investees
The
Company’s consolidated net income also includes the Company’s proportionate share of the net income or loss of its equity
method investment in the Affiliate Company, in which the Company owned 22% equity interest until March 9. 2021.
On
February 18, 2021, Zhejiang Kandi Technologies signed an Equity Transfer Agreement with Geely to transfer all of its remaining 22%
equity interests in the Affiliate Company to Geely. As the equity transfer was completed on March 9, 2021, the Company recorded 22%
of the Affiliate Company’s loss for the period from January 1, 2021 to March 9, 2021 and recognized the gain from equity sale
of $17.7 million during the first quarter of 2021. As of June 30, 2021, the amount due from the Affiliate Company has been
reclassed to accounts receivable of $17.6 million and other receivables of $2.2 million.
All
intra-entity profits and losses with regard to the Company’s equity method investees have been eliminated.
NOTE
5 - USE OF ESTIMATES
The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and related disclosures of contingent assets and liabilities at the balance
sheet date, and the reported revenues and expenses during the reported period in the consolidated financial statements and accompanying
notes. Significant accounting estimates reflected in the Company’s consolidated financial statements primarily include, but are
not limited to, allowances for doubtful accounts, lower of cost and net realizable value of inventory, assessment for impairment of long-lived
assets and intangible assets, valuation of deferred tax assets, change in fair value of contingent consideration, determination of share-based
compensation expenses as well as fair value of stock warrants.
Management
bases the estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which
form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
NOTE
6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our
significant accounting policies are detailed in “Note 6 - Summary of Significant Accounting Policies” of the Company 2020
Form 10-K.
NOTE
7 - NEW ACCOUNTING PRONOUNCEMENTS
Accounting
Pronouncements Not Yet Adopted
In
June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU
2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such
losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning
after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments –
Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of
ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter
of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated
financial statements, particularly its recognition of allowances for accounts receivable.
NOTE
8 - CONCENTRATIONS
(a) Customers
For
the three-month period ended June 30, 2021, the Company’s major customers, each of whom accounted for more than 10% of the
Company’s consolidated revenue, were as follows:
|
|
Sales
|
|
|
Trade Receivable
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
Major Customers
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Customer A
|
|
|
24
|
%
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
7
|
%
|
Customer B
|
|
|
22
|
%
|
|
|
-
|
|
|
|
13
|
%
|
|
|
13
|
%
|
Customer C
|
|
|
12
|
%
|
|
|
-
|
|
|
|
5
|
%
|
|
|
3
|
%
|
Customer D
|
|
|
10
|
%
|
|
|
-
|
|
|
|
5
|
%
|
|
|
-
|
|
For
the six-month period ended June 30, 2021, the Company’s major customers, each of whom accounted for more than 10% of the Company’s
consolidated revenue, were as follows:
|
|
Sales
|
|
|
Trade Receivable
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
Major Customers
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Customer A
|
|
|
18
|
%
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
7
|
%
|
Customer B
|
|
|
16
|
%
|
|
|
-
|
|
|
|
13
|
%
|
|
|
13
|
%
|
(b) Suppliers
For
the three-month period ended June 30, 2021, the Company’s material suppliers, each of whom accounted for more than 10% of
the Company’s total purchases, were as follows:
|
|
Purchases
|
|
|
Accounts Payable
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
Major Suppliers
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Zhejiang Kandi Supply Chain Management Co., Ltd.
|
|
|
60
|
%
|
|
|
59
|
%
|
|
|
9
|
%
|
|
|
9
|
%
|
For
the six-month period ended June 31, 2020, the Company’s material suppliers, each of whom accounted for more than 10% of the
Company’s total purchases, were as follows:
|
|
Purchases
|
|
|
Accounts Payable
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
Major Suppliers
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Zhejiang Kandi Supply Chain Management Co., Ltd.
|
|
|
57
|
%
|
|
|
59
|
%
|
|
|
9
|
%
|
|
|
9
|
%
|
Supplier E
|
|
|
12
|
%
|
|
|
25
|
%
|
|
|
16
|
%
|
|
|
5
|
%
|
NOTE
9 - EARNINGS 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 and warrants (using treasury stock method). Due to the average market price of the common stock during the
period below the exercise price of the options, approximately 900,000 options and 8,131,332 warrants were excluded
from the calculation of diluted net earnings per share, for the three-month and
six-month period ended June 30, 2021.
NOTE
10 - ACCOUNTS RECEIVABLE
Accounts
receivable are summarized as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Accounts receivable
|
|
$
|
48,825,366
|
|
|
$
|
38,657,406
|
|
Less: allowance for doubtful accounts
|
|
|
(111,512
|
)
|
|
|
(110,269
|
)
|
Accounts receivable, net
|
|
$
|
48,713,854
|
|
|
$
|
38,547,137
|
|
NOTE
11 - INVENTORIES
Inventories
are summarized as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Raw material
|
|
$
|
10,202,043
|
|
|
$
|
7,512,259
|
|
Work-in-progress
|
|
|
5,638,319
|
|
|
|
5,488,532
|
|
Finished goods *
|
|
|
7,391,872
|
|
|
|
6,696,592
|
|
Inventories
|
|
$
|
23,232,234
|
|
|
$
|
19,697,383
|
|
|
*
|
approximately
$1.1 million of inventory of off-roads and EVs held by SC Autosports were pledged as collateral for the $250,000 short-term loan.
|
NOTE
12 - NOTES RECEIVABLE
As
of June 30, 2021,
there was $8,985,422 notes receivable from unrelated parties, among which $4.6 million will be matured on August 20, 2021 and
$4.3 million will be matured on September 20, 2021. As of December 31, 2020, there was $31,404,630 notes receivable from unrelated
parties with a 6% annual interest rate, among which $6.1 million was collected on January 15, 2021, $6.9 million
was collected on January 27, 2021, $9.2 million was collected on April 20, 2021 and $9.2 million was collected
on June 22, 2021.
NOTE
13 - Other receivables
As
of June 30, 2021, the Company had $40,574,115 other receivables, among which $23.9 million were receivables of Affiliate Equity
Transfer, $11.1 million were lease deposits and $2.9 million were interest receivables. As of December 31, 2020, the Company had
$ 1,875,245 other receivables.
NOTE
14 - ADVANCES TO SUPPLIERS
Advances
to suppliers are summarized as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Advance payment for inventory purchase (1)
|
|
$
|
11,164,073
|
|
|
$
|
13,107,630
|
|
Advance payment for R & D (2)
|
|
|
-
|
|
|
|
19,365,947
|
|
Others
|
|
|
2,110,838
|
|
|
|
4,259,605
|
|
Total
|
|
$
|
13,274,911
|
|
|
$
|
36,733,182
|
|
|
(1)
|
This
amount represents the advance payment in order to lock up the purchase price of the inventory.
|
|
(2)
|
This
amount presents the advance payment to a third party for designing a new EV model, as well as related research and development and consulting
works. The Company entered into a research and development contract with a third party on December 1, 2020 with total contract amount
of $38.3 million, and advance payment of $23.0 million as per the contract. This advance payment will be expensed progressively
according to the progress of the R & D project. In the first half of 2021, $18.2 million expense was incurred accordingly.
|
NOTE
15 - PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plants and equipment as of June 30, 2021 and December 31, 2020, consisted of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
At cost:
|
|
|
|
|
|
|
|
|
Buildings *
|
|
$
|
37,389,860
|
|
|
$
|
18,924,734
|
|
Machinery and equipment
|
|
|
65,449,228
|
|
|
|
67,893,378
|
|
Office equipment
|
|
|
1,226,586
|
|
|
|
1,138,870
|
|
Motor vehicles and other transport equipment
|
|
|
584,420
|
|
|
|
587,785
|
|
Molds and others
|
|
|
12,945,460
|
|
|
|
12,752,789
|
|
|
|
|
117,595,554
|
|
|
|
101,297,556
|
|
Less : Accumulated depreciation
|
|
|
(36,016,196
|
)
|
|
|
(35,894,876
|
)
|
Property, plant and equipment, net
|
|
$
|
81,579,358
|
|
|
$
|
65,402,680
|
|
*
|
approximately $10.9 million of production line building structures were recognized as fixed assets during the second quarter of 2021 due to completion of relocation process and readiness in working condition for their intended use.
|
Depreciation
expenses for the three months ended June 30, 2021 and 2020 were $1,942,294 and $1,750,013, respectively. Depreciation expenses for
the six months ended June 30, 2021 and 2020 were $3,766,555 and $3,530,165, respectively.
NOTE
16 - INTANGIBLE ASSETS
Intangible
assets include acquired other intangibles of trade name, customer relations and patent recorded at estimated fair values in accordance
with purchase accounting guidelines for acquisitions.
The
following table provides the gross carrying value and accumulated amortization for each major class of our intangible assets, other than
goodwill:
|
|
Remaining
|
|
June 30,
|
|
|
December 31,
|
|
|
|
useful life
|
|
2021
|
|
|
2020
|
|
Gross carrying amount:
|
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
0.5 years
|
|
$
|
492,235
|
|
|
$
|
492,235
|
|
Customer relations
|
|
0.5 years
|
|
|
304,086
|
|
|
|
304,086
|
|
Patent
|
|
4.00-5.67 years
|
|
|
4,926,490
|
|
|
|
4,871,547
|
|
|
|
|
|
|
5,722,811
|
|
|
|
5,667,868
|
|
Less : Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
|
|
$
|
(465,170
|
)
|
|
$
|
(439,798
|
)
|
Customer relations
|
|
|
|
|
(287,366
|
)
|
|
|
(271,691
|
)
|
Patent
|
|
|
|
|
(2,033,578
|
)
|
|
|
(1,723,626
|
)
|
|
|
|
|
|
(2,786,114
|
)
|
|
|
(2,435,115
|
)
|
Intangible assets, net
|
|
|
|
$
|
2,936,697
|
|
|
$
|
3,232,753
|
|
The
aggregate amortization expenses for those intangible assets were $165,722 and $152,846 for the three months ended June 30,
2021 and 2020, respectively. The aggregate amortization expenses for those intangible assets were $330,894 and $307,702 for
the six months ended June 30, 2021 and 2020, respectively.
Amortization
expenses for the next five years and thereafter are as follows:
Six months ended December 31, 2021
|
|
$
|
330,894
|
|
Years ended December 31,
|
|
|
|
|
2022
|
|
|
582,429
|
|
2023
|
|
|
579,692
|
|
2024
|
|
|
579,692
|
|
2025
|
|
|
513,271
|
|
Thereafter
|
|
|
350,719
|
|
Total
|
|
$
|
2,936,697
|
|
NOTE
17 - LAND USE RIGHTS, NET
The
Company’s land use rights consist of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cost of land use rights
|
|
$
|
4,070,283
|
|
|
$
|
4,024,889
|
|
Less: Accumulated amortization
|
|
|
(822,060
|
)
|
|
|
(767,129
|
)
|
Land use rights, net
|
|
$
|
3,248,223
|
|
|
$
|
3,257,760
|
|
The
amortization expenses for the three months ended June 30, 2021 and 2020, were $23,130 and $79,751, respectively. The amortization
expenses for the six months ended June 30, 2021 and 2020, were $46,172 and $160,712, respectively. Amortization expenses for the
next five years and thereafter is as follows:
Six months ended December 31, 2021
|
|
$
|
46,172
|
|
Years ended December 31,
|
|
|
|
|
2022
|
|
|
92,344
|
|
2023
|
|
|
92,344
|
|
2024
|
|
|
92,344
|
|
2025
|
|
|
92,344
|
|
Thereafter
|
|
|
2,832,675
|
|
Total
|
|
$
|
3,248,223
|
|
NOTE
18 - OTHER LONG TERM ASSETS
Other
long term assets as of June 30, 2021 and December 31, 2020, consisted of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Long term deferred assets
|
|
$
|
3,308,514
|
|
|
$
|
3,706,560
|
|
Prepayments for land use right (i)
|
|
|
4,322,440
|
|
|
|
4,319,305
|
|
Land and properties with certificates cancelled (ii)
|
|
|
-
|
|
|
|
13,728,557
|
|
Other receivables- Long term
|
|
|
154,921
|
|
|
|
153,193
|
|
Prepayments for new product molds
|
|
|
6,739,066
|
|
|
|
6,663,909
|
|
Right - of - use asset (iii)
|
|
|
3,454,805
|
|
|
|
3,496,993
|
|
Others
|
|
|
32,414
|
|
|
|
238,967
|
|
Total other long term asset
|
|
$
|
18,012,160
|
|
|
$
|
32,307,484
|
|
|
(i)
|
As
of June 30, 2021 and December 31, 2020, the Company’s other long term asset included
net value of prepayments for land use right of Hainan facility of $4,322,440 and $4,319,305, respectively. As of June
30, 2021, the land us right of Hainan was not recognized since the land certificate is still in process. The amortization expense
for the three months ended June 30, 2021 and 2020 were $22,781 and $20,760, respectively. The amortization expense for the six months
ended June 30, 2021 and 2020 were $45,475 and $41,836, respectively.
|
|
(ii)
|
As
of December 31, 2020, the Company’s other long term asset included net value of land of Jinhua facility’s old location with
certificates cancelled of $6,095,310 and net value of properties (or buildings/housing) of Jinhua facility’s old location with
certificates cancelled of $7,633,247, respectively. As of June 30, 2021, the land and property
of Jinhua facility’s old location has been written off. The land amortization expense of Jinhua
facility’s old location for the three months ended June 30, 2021 were $21,508.
The land amortization expense of Jinhua facility’s old location for the six months
ended June 30, 2021 were $67,898. The property depreciation expense of Jinhua
facility’s old location for the three months ended June 30, 2021 were $37,288.
The property depreciation expense of Jinhua facility’s old location for the six months
ended June 30, 2021 were $151,230. The Company’s
Jinhua facility moved out of the old location and completed the relocation process in April 2021. The relevant Economic Zone authorities
inspected the vacated land and determined that the relocation was formally completed by meeting all stipulated conditions. As of June
30, 2021, the property of Jinhua facility’s old location has been fully disposed, and the related $48 million gain on disposal
of long-live asset was recognized.
|
|
(iii)
|
As
of June 30, 2021 and December 31, 2020, the Company’s operating lease right-of-use
assets in other long term asset included net value of newly acquired land use right of Jinhua facility of $3,454,805 and $3,450,958,
respectively. The amortization expense for the three months ended June 30, 2021 were $17,530.
The amortization expense for the six months ended June 30, 2021 were $34,994.
|
NOTE
19 - TAXES
(a)
Corporation Income Tax
Pursuant
to the tax laws and regulations of the PRC, the Company’s applicable corporate income tax (“CIT”) rate is 25%.
High and New Technology Enterprise (“HNTE”) company’s applicable CIT rate is 15%. Zhejiang Kandi Technologies, Jinhua
Ankao and Kandi Hainan qualify as HNTE companies in the PRC, and are entitled to pay a reduced income tax rate of 15% for the years
presented within the validity period. A HNTE Certificate is valid for three years. An entity may re-apply for an HNTE certificate when
the prior certificate expires. Zhejiang Kandi Technologies has successfully re-applied for such certificates in December 2020. Jinhua
Ankao has been qualified as HNTE since 2018. Kandi Hainan has been qualified as HNTE since 2020. Therefore no records for renewal are
available. The applicable CIT rate of each of the Company’s other subsidiaries, Kandi New Energy and Yongkang Scrou is 25%.
The
Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective
tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its
estimate of the annual effective tax rate, and if its estimated tax rate changes, the management makes a cumulative adjustment. For 2020,
the Company’s effective tax rate is favorably affected by a super-deduction for qualified research and development costs and adversely
affected by non-deductible expenses such as stock rewards for non-US employees, and part of entertainment expenses. The Company records
valuation allowances against the deferred tax assets associated with losses and other timing differences for which we may not realize
a related tax benefit. After combining research and development tax credits of 25% on certain qualified research and development
expenses, the Company’s effective tax rate for the
six months ended June 30, 2021 and 2020 were a tax expense of 19.04% on a reported income before
taxes of approximately $42.6 million, a tax expense of 62.43% on a reported income before taxes of approximately $6.6 million,
respectively.
The
quarterly tax provision, and the quarterly estimate of the Company’s annual effective tax rate, is subject to significant variation
due to several factors, including variability in accurately predicting the Company’s pre-tax and taxable income and loss, acquisitions
(including integrations) and investments, changes in its stock price, changes in its deferred tax assets and liabilities and their valuation,
return to provision true-up, foreign currency gains (losses), changes in regulations and interpretations related to tax, accounting,
and other areas. Additionally, the Company’s effective tax rate can be more or less volatile based on the amount of pre-tax income
or loss. The income tax provision for the three months ended June
30, 2021 and 2020 was tax expense of $8,118,441 and tax expense of $4,122,502,
respectively.
Under
ASC 740 guidance relating to uncertain tax positions, which addresses the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the financial statements, the Company may recognize the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based
on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also
provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires
increased disclosures. As of June 30, 2021, the Company did not have any liability for unrecognized tax benefits. The Company files
income tax returns with the U.S. Internal Revenue Services (“IRS”) and those states where the Company has operations. The
Company is subject to U.S. federal or state income tax examinations by the IRS and relevant state tax authorities 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 the PRC. As of June
30, 2021, the Company was not aware of any pending income tax examinations by U.S. or PRC tax authorities. The Company records interest
and penalties on uncertain tax provisions as income tax expense. As of June 30, 2021,
the Company has no accrued interest or penalties related to uncertain tax positions.
The
aggregate NOLs in tax year 2020 was $21.3 million deriving from entities in the PRC, Hong Kong and U.S. The aggregate NOLs
in tax year 2019 was $9.6 million deriving from entities in the PRC and Hong Kong. The NOLs will start to expire from 2026
if they are not used. The cumulative net operating loss in the PRC can be carried forward for five years in general, and ten
years for entities qualify HNTE treatment, to offset future net profits for income tax purposes. The Company has $0.8 million
cumulative net operating loss in U.S. to carry forward as of June
30, 2021 with indefinite carryforward period. The cumulative net operating loss in Hong Kong
of $0.1 million can be carried forward without an expiration date as well.
(b)
Tax Holiday Effect
For
the six months ended June 30, 2021 and 2020, the PRC CIT rate was 25%. Certain subsidiaries of the Company are entitled to tax exemptions
(tax holidays) for the six months ended June 30, 2021 and 2020.
The
combined effects of income tax expense exemptions and reductions available to the Company for the six months ended June 30, 2021 and
2020 are as follows:
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Tax benefit (holiday) credit
|
|
$
|
5,543,010
|
|
|
$
|
164,163
|
|
Basic net income per share effect
|
|
$
|
0.000
|
|
|
$
|
0.000
|
|
NOTE
20 - LEASES
The
Company has renewed its corporate office leases for SC Autosports, with a term of 15 months from January 31, 2020 to April
30, 2021. The monthly lease payment is $11,000 from February 2020 to April 2020 and $12,000 from May 2020 to April 2021. The
Company recorded operating lease assets and operating lease liabilities at January 31, 2020, with a remaining lease term of 15 months
and discount rate of 4.25%.
During
October 2020, land use right of gross value of $3.5 million was acquired from the government as the new site of Jinhua Facility’s
relocation as per the Repurchase Agreement. This lease was wholly prepaid when the land use right was acquired. See NOTE 18
for more details.
As
of June 30, 2021, the Company’s operating lease right-of-use assets (grouped in other long term assets on the balance sheet)
was $3,454,805. For the three months ended June 30,
2021, the Company’s operating lease cost was $29,530. For the six months ended June 30, 2021, the Company’s operating lease
cost was $82,994.
Supplemental
information related to operating leases was as follows:
|
|
Six months
ended
June 30,
2021
|
|
Cash payments
for operating leases
|
|
$
|
82,994
|
|
NOTE
21 - CONTINGENT CONSIDERATION LIABILITY
On
January 3, 2018, the Company completed the acquisition of 100% of the equity of Jinhua An Kao, currently known as Kandi Smart Battery
Swap Co., Ltd. (“Kandi Smart Battery Swap”). The Company paid approximately RMB 25.93 million (approximately $4 million)
at the closing of the transaction using cash on hand and issued a total of 2,959,837 shares of restrictive stock or 6.2% of
the Company’s total outstanding shares of the common stock immediately prior to the closing of the acquisition valued at approximately
$20.7 million to the former shareholders of Kandi Smart Battery Swap and his designees (the “KSBS Shareholders”), and
may be required to pay future consideration of up to an additional 2,959,837 shares of common stock, which are being held in
escrow and to be released contingent upon the achievement of certain net income-based milestones in the next three years. Any escrowed
shares that are not released from escrow to the KSBS Shareholders as a result of the failure to achieve the milestones will be forfeited
and returned to the Company for cancellation. While the escrowed shares are held in escrow, the Company will retain all voting rights
with respect to such shares. For the year ended December 31, 2018, Kandi Smart Battery Swap achieved its first year net profit
target. Accordingly, the KSBS Shareholders received 739,959 shares of Kandi’s restrictive common stock or 12.5%
of the total equity consideration (i.e., 5,919,674 total shares) as part of the purchase price. For the year ended December 31,
2019, Kandi Smart Battery Swap achieved its second year net profit target. Accordingly, the KSBS Shareholders received 986,810 shares
of Kandi’s restrictive common stock or 16.67% of the total equity consideration (i.e., 5,919,674 total shares) as part of the purchase
price. All the escrowed shares have been included in the Company’s registration statement on Form S-3 declared effective by
the SEC on April 5, 2019.
As
the outbreak of COVID-19 in 2020 affected Kandi Smart Battery Swap’s operation and business, on July 7, 2020, the Company and the
KSBS Shareholders made the following supplements to Condition III of the original Supplementary Agreement: The KSBC Shareholders have
the right to receive an aggregate of 20.83% of the total equity consideration (i.e., 5,919,674 total shares), provided
that Kandi Smart Battery Swap realizes a net profit of RMB50,000,000 or more for the period from January 1, 2020 to June 30, 2021
(as opposed to be the originally stated “December 31, 2020”), and such profit is audited or reviewed and Kandi Smart Battery
Swap gets annual or quarterly financial report issued under US GAAP. For the period from January 1, 2020 to June 30, 2021, Kandi Smart
Battery Swap achieved its net profit target. Accordingly, the KSBS Shareholders will receive 1,233,068 shares of Kandi’s restrictive
common stock or 20.83% of the total equity consideration (i.e., 5,919,674 total shares) as part of the purchase price. All the escrowed
shares have been included in the Company’s registration statement on Form S-3 declared effective by the SEC on April 5, 2019.
On
July 1, 2018, the Company completed the acquisition of 100% of the equity of SC Autosports (d/b/a Kandi America). The
Company issued a total of 171,969 shares of restrictive stock or approximately 0.3% of the Company’s total outstanding
shares of the common stock immediately prior to the closing of the acquisition valued at approximately $0.8 million at the closing
of transaction to the former members of SC Autosports within 30 days from the signing date of the Transfer Agreement, and may be required
to pay future consideration of up to an additional 1,547,721 shares of common stock of the Company, which are being held in
escrow and to be released contingent upon the achievement of certain pre-tax profit based milestones in the next three years. Any
escrowed shares that are not released from escrow to the SC Autosports former members due to the failure to achieve the milestones will
be forfeited and returned to the Company for cancellation. While the escrowed shares are held in escrow, the Company will retain all
voting rights with respect to the shares. For the year ended December 31, 2018, SC Autosports achieved its first year pre-tax
profit target. Accordingly, the former members of SC Autosports received 343,938 shares of Kandi’s restrictive common
stock or 20% of the total equity consideration in the purchase price. For the year ended December 31, 2019, SC Autosports achieved
its second year pre-tax profit target. Accordingly, the former members of SC Autosports received 515,907 shares of Kandi’s restrictive
common stock or 30% of the total equity consideration in the purchase price. For the year ended December 31, 2020, SC Autosports
partially achieved its third year pre-tax profit target. As the gap between third year’s pretax profit and pre-tax profit target
is less than 20%, the former members of SC Autosports will receive 515,907 shares of Kandi’s restrictive common stock or 30% of
the total equity consideration in the purchase price. All the escrowed shares have been included in the Company’s registration
statement on Form S-3 declared effective by the SEC on April 5, 2019.
The
Company recorded contingent consideration liability of the estimated fair value of the contingent consideration the Company currently
expects to pay to the KSBS Shareholders and SC Autosports’ former members upon the achievement of certain milestones. The fair
value of the contingent consideration liability associated with remaining shares of restrictive common stock was estimated by using the
Monte Carlo simulation method, which took into account all possible scenarios. This fair value measurement is classified as Level 3 within
the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurement and Disclosures. In accordance with ASC Topic 805, Business
Combinations, the Company will re-measure this liability each reporting period and record changes in the fair value through a separate
line item within the Company’s consolidated statements of income.
As
of June 30, 2021 and December 31, 2020, the Company’s contingent consideration liability was $0 and $3,743,000, respectively.
NOTE
22 - STOCK AWARD
In
connection with the appointment of Mr. Henry Yu as a member of the Board of Directors (the “Board”), the Board authorized
the Company to compensate Mr. Henry Yu with 5,000 shares of Company’s restricted common stock every six months as compensation,
beginning in July 2011.
As
compensation for Mr. Jerry Lewin’s services as a member of the Board, the Board authorized the Company to compensate Mr. Jerry
Lewin with 5,000 shares of Company’s restricted common stock every six months, beginning in August 2011.
As
compensation for Ms. Kewa Luo’s services as the Company’s investor relation officer, the Board authorized the Company to
compensate Ms. Kewa Luo with 5,000 shares of the Company’s common stock every six months, beginning in September 2013.
On
January 29, 2019, the Board appointed Ms. Zhu Xiaoying as interim Chief Financial Officer. Ms. Zhu was entitled to receive 10,000 shares
of the common stock annually under the Company’s 2008 Omnibus Long-Term Incentive Plan (the “2008 Plan”) as a year-end
equity bonus. Effective May 15, 2020, Ms. Zhu resigned from her position as interim Chief Financial Officer of the Company.
On
May 15, 2020, the Board appointed Mr. Jehn Ming Lim as the Chief Financial Officer. Mr. Lim was entitled to receive 6,000 shares
of the common stock annually, which shall be issuable evenly on each six-month anniversary hereof.
The
fair value of stock awards with service condition is determined based on the closing price of the common stock on the date the shares
are granted. The compensation costs for awards of common stock are recognized over the requisite service period.
On
December 30, 2013, the Board approved a proposal (as submitted by the Compensation Committee) of an award (the “Board’s Pre-Approved
Award Grant Sub-Plan under the 2008 Plan”) for certain executives and other key employees. The fair value of each award granted
under the 2008 Plan is determined based on the closing price of the Company’s stock on the date of grant of such award. On September
26, 2016, the Board approved to terminate the previous Board’s Pre-Approved Award Grant Sub-Plan under the 2008 Plan and adopted
a new plan to grant the total number of shares of common stock of the stock award for selected executives and key employees 250,000 shares
of common stock for each fiscal year. On April 18, 2018, the Company granted 238,600 shares of common stock to certain management
members and employees as compensation for their past services under the 2008 Plan. On April 30, 2019, the Company granted 238,600 shares
of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On May 9, 2020,
the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past
services under the 2008 Plan. On April 30, 2021, the Company granted 238,600 shares of common stock to certain management members
and employees as compensation for their past services under the 2008 Plan.
For
the three months ended June 30, 2021 and 2020, the Company recognized $1,406,531 and $824,621 of employee stock award expenses
for stock compensation and annual incentive award under the 2008 Plan paid to Board members, management and consultants under General
and Administrative Expenses, respectively. For the six months ended June 30, 2021 and 2020, the Company recognized $1,429,456 and
$847,546 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members,
management and consultants under General and Administrative Expenses, respectively.
NOTE
23 - SUMMARIZED INFORMATION OF EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY
The
Company’s condensed consolidated net income (loss) includes the Company’s proportionate share of the net income or loss of
the Company’s equity method investees. When the Company records its proportionate share of net income (loss) in such investees,
it increases equity income (loss) – net in the Company’s consolidated statements of income and the Company’s 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 Company’s consolidated statements of income (loss) and the Company’s carrying value
in that investment. All intra-entity profits and losses with the Company’s equity method investees have been eliminated.
On
February 18, 2021, Zhejiang Kandi Technologies signed an Equity Transfer Agreement with Geely to transfer all of its remaining 22%
equity interests in the Affiliate Company to Geely for a total consideration of RMB 308 million (approximately $47.0 million).
Zhejiang Provincial Administration for Market Regulation recorded the update of the ownership of Fengsheng on March 9, 2021. On March
16, 2021, the Company received the first half of the equity transfer payment of RMB 154,000,000 (approximately $23.5 million),
and the rest will be paid within 6 months from March 9, 2021.
The
Company accounted for its investments in the Affiliate Company under the equity method of accounting. As the equity transfer was completed
at March 9, 2021, the Company recorded 22% of the Affiliate Company’s loss for the period until completion of equity
transfer during the first quarter of 2021.
The
Company’s equity method investments in the Affiliate Company for the six months ended June 30, 2021 and 2020 are as follows:
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
Investment in the Affiliate Company,
beginning of the period,
|
|
$
|
28,892,638
|
|
|
$
|
47,228,614
|
|
Investment decreased in 2021
|
|
|
(47,715,689
|
)
|
|
|
-
|
|
Gain from equity sale
|
|
|
17,733,911
|
|
|
|
-
|
|
Reversal of prior year reduction in the equity
of the Affiliate Company
|
|
|
3,312,946
|
|
|
|
-
|
|
Company’s
share in net (loss) income of Affiliate based on 22% ownership for period from January 1, 2021 to March 9, 2021 and six months ended
June 30, 2020
|
|
|
(2,683,986
|
)
|
|
|
(4,086,848
|
)
|
Non-controlling interest
|
|
|
99,585
|
|
|
|
-
|
|
Prior
year unrealized profit realized
|
|
|
-
|
|
|
|
5,549
|
|
Subtotal
|
|
|
(2,584,401
|
)
|
|
|
(4,081,299
|
)
|
Exchange difference
|
|
|
360,595
|
|
|
|
(656,867
|
)
|
Investment in Affiliate
Company, end of the period
|
|
$
|
-
|
|
|
$
|
42,490,448
|
|
NOTE
24 - COMMITMENTS AND CONTINGENCIES
Guarantees
and pledged collateral for bank loans to other parties
(1)
Guarantees for bank loans
On
March 15, 2013, the Company entered into a guarantee contract to serve as the guarantor of Nanlong Group Co., Ltd. (“NGCL”)
for NGCL’s $3,098,421 (RMB 20 million) loan from Shanghai Pudong Development Bank Jinhua Branch, with a 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 assume joint liability as the loan guarantor. In April 2017, Shanghai Pudong Development Bank filed a lawsuit against
NGCL, the Company and ten other parties in Zhejiang Province People’s Court in Yongkang City, alleging NGCL defaulted on a bank
loan borrowed from Shanghai Pudong Development Bank for a principal amount of approximately $2.9 million and demanded that the guarantor
bear the liability for compensation. On May 27, 2017, a judicial mediation took place in Yongkang City and parties reached a settlement
in mediation, in which the plaintiff agreed NGCL would repay the loan principal and interest in installments until December 2021. If
there were an event of default that NGCL could not repay the loan, the Company may be obligated to bear the liability of defaulted amount. The
Company expects the likelihood of incurring losses in connection with this matter to be remote.
(2)
Pledged collateral for bank loans for which the parties other than the Company are the borrowers.
As
of June 30, 2021 and December 31, 2020, none of the Company’s land use rights or plants and equipment were pledged as collateral
securing bank loans for which the parties other than the Company are the borrowers.
Litigation
Beginning
in March 2017, putative shareholder class actions were filed against Kandi Technologies Group, Inc. (“Kandi”) and certain
of its current and former directors and officers in the United States District Court for the Central District of California and the United
States District Court for the Southern District of New York. The complaints generally alleged violations of the federal securities laws
based on Kandi’s disclosure in March 2017 that its financial statements for the years 2014, 2015 and the first three quarters of
2016 would need to be restated, and seek damages on behalf of putative classes of shareholders who purchased or acquired Kandi’s
securities prior to March 13, 2017. Kandi moved to dismiss the remaining cases, all of which were pending in the New York federal court,
and that motion was granted by an order entered on September 30, 2019, and the time to appeal has run. In June 2020, a similar but
separate putative securities class action was filed against Kandi and certain of its current and former directors and officers in California
federal court. In September 2020, this action was transferred to the New York federal court and Kandi moved to dismiss in March 2021.
Beginning
in May 2017, purported shareholder derivative actions based on the same underlying events described above were filed against certain
current and former directors of Kandi in the United States District Court for the Southern District of New York. The New York federal
court confirmed the voluntary dismissal of these actions in April 2019.
In
October 2017, a shareholder filed a books and records action against the Company in the Delaware Court of Chancery pursuant to 8 Del.
C. Section 220 seeking the production of certain documents generally relating to the same underlying items described above as well as
attorney’s fees (the “Section 220 Litigation”). On September 28, 2018, the parties, through their respective counsel,
agreed to dismiss the Section 220 Litigation with prejudice and with each party bearing its own attorney’s fees, costs, and expenses,
thereby concluding the action. In February 2019, this same shareholder commenced a derivative action against certain current and former
directors of Kandi in the Delaware Court of Chancery. A motion to dismiss this derivative action was filed in May 2019 and that motion
was denied on April 27, 2020.
Separately,
in connection with allegations of misconduct identified in pre-suit demands made by putative shareholders of Kandi, Kandi formed a Special
Litigation Committee (“SLC”) and retained a Delaware law firm as independent counsel to the SLC to aid in the SLC’s
investigation of, and to ultimately report on, the allegations of misconduct set forth in the pre-suit demands. The SLC recommended to
Kandi’s board of directors in June 2020 that the SLC be dissolved in light of the ongoing derivative action pending in the Delaware
Court of Chancery, and this recommendation was adopted by the board in August 2020.
In
December 2020, a putative securities class action was filed against Kandi and certain of its current officers in the United States District
Court for the Eastern District of New York. The complaint generally alleges violations of the federal securities laws based on claims
made in a report issued by Hindenburg Research in November 2020, and seeks damages on behalf of a putative class of shareholders who
purchased or acquired Kandi’s securities prior to March 15, 2019. This action remains pending.
While
the Company believes that the claims in these litigations are without merit and will defend itself vigorously, the Company is unable
to estimate the possible loss, if any, associated with these litigations. The ultimate outcome of any litigation is uncertain and the
outcome of these matters, whether favorable or unfavorable, could have a negative impact on the Company’s financial condition or
results of operations due to defense costs, diversion of management resources and other factors. Defending litigation can be costly,
and adverse results in the litigations could result in substantial monetary judgments. No assurance can be made that litigation will
not have a material adverse effect on the Company’s future financial position.
NOTE
25 - SEGMENT REPORTING
The
Company has one operating segment. The Company’s revenue and long-lived assets are primarily derived from and located
in China and US. The Company does not have manufacturing operations outside of China.
The
following table sets forth disaggregation of revenue:
|
|
Three
Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales Revenue
|
|
|
Sales Revenue
|
|
Primary geographical markets
|
|
|
|
|
|
|
Overseas
|
|
$
|
6,180,582
|
|
|
$
|
8,571,281
|
|
China
|
|
|
23,695,253
|
|
|
|
10,865,795
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
|
|
|
|
|
|
|
|
|
Major products
|
|
|
|
|
|
|
|
|
EV parts
|
|
$
|
6,680,515
|
|
|
$
|
12,514,548
|
|
EV products
|
|
|
610,812
|
|
|
|
(1,913
|
)
|
Off-road vehicles
|
|
|
5,473,195
|
|
|
|
6,564,415
|
|
Electric Scooters, Electric Self-Balancing
Scooters and associated parts
|
|
|
16,526,436
|
|
|
|
360,026
|
|
Battery exchange equipment
and Battery exchange service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
Products transferred
at a point in time
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
The
negative amount is due to exchange rate difference.
|
|
Six
Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales
Revenue
|
|
|
Sales
Revenue
|
|
Primary geographical markets
|
|
|
|
|
|
|
Overseas
|
|
$
|
14,048,008
|
|
|
$
|
10,702,105
|
|
China
|
|
|
31,805,581
|
|
|
|
15,107,395
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
|
|
|
|
|
|
|
|
|
Major products
|
|
|
|
|
|
|
|
|
EV parts
|
|
$
|
13,048,846
|
|
|
$
|
14,595,883
|
|
EV products
|
|
|
732,306
|
|
|
|
253,906
|
|
Off-road vehicles
|
|
|
11,092,199
|
|
|
|
10,599,685
|
|
Electric Scooters, Electric Self-Balancing
Scooters and associated parts
|
|
|
20,395,361
|
|
|
|
360,026
|
|
Battery exchange equipment and Battery exchange
service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
Products transferred at a point in time
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
NOTE
26 - SUBSEQUENT EVENTS
On
July 13, 2021 (the “Signing Date”), Zhejiang Kandi Technologies entered into (i) a Share Transfer Agreement (the “Share
Transfer Agreement”) with 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.
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. 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.
By
the end of July 2021, the Company has paid RMB 25 million (approximately $3.4 million) in cash to the Transferors according to the Share
Transfer Agreement.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
report contains forward-looking statements within the meaning of the federal securities laws that relate to future events or our future
financial performance. In some cases, you can identify forward-looking statements by terminologies, such as “may,” “will,”
“should,” “could,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “project,” “predict,” “intend,” “potential” or “continue”
or the negative of such terms or other comparable terminologies, although not all forward-looking statements contain such terms.
In
addition, these forward-looking statements include, but are not limited to, statements regarding implementing our business strategy;
development and marketing of our products; our estimates of future revenue and profitability; our expectations regarding future expenses,
including research and development, sales and marketing, manufacturing and general and administrative expenses; difficulty or inability
to raise additional financing, if needed, on terms acceptable to us; our estimates regarding our capital requirements and our needs for
additional financing; attracting and retaining customers and employees; sources of revenue and anticipated revenue; and competition in
our market.
Forward-looking
statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance or achievements. All of our forward-looking information is subject
to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible
to identify all factors, these risks and uncertainties include the risk factors and the timing of any of those risk factors described
in the 2020 Form 10-K and those set forth from time to time in our other filings with the SEC. These documents are available on the SEC’s
Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov.
Critical
Accounting Policies and Estimates
The
preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the
financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly
from actual results, the impact to the condensed consolidated financial statements may be material. There have been no material changes
in our critical accounting policies and estimates from those disclosed in on the 2020 Form 10-K. Please refer to Part II, Item 7 of such
a report for a discussion of our critical accounting policies and estimates.
Overview
The
Company’s primary business operations consist of designing, developing, manufacturing and commercializing EV products, EV parts,
automatic power exchange equipment for pure electric vehicles, off-road vehicles and the dynamic power train system of intelligent transportation.
For the six months ended June 30, 2021, we recognized
total revenue of $45,853,589 as compared to $25,809,500 for the same period of 2020, an increase of $20,044,089 or 77.7%. For the six
months ended June 30, 2021, we recorded $10,452,133 of gross profit, an increase of 122.2% from the same period of 2020. Gross margin
for the six months ended June 30, 2021 was 22.8%, compared to 18.2% for the same period of 2020. We recorded a net income of $34,526,754
for the six months ended June 30, 2021, compared to a net income of $2,480,400 in the same period of 2020, an increase of $32,046,354
or 1,292.0% from the same period of 2020
The
spread of COVID-19 around China and other parts of the world has caused significant volatility in the markets of China, U.S., and the
rest of the world. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities
in China and elsewhere. Although the Company’s operations in China have fully resumed in early March 2020, the COVID-19 has affected
the Company’s business performance in 2020, and the impact continued during 2021 though it appears to be on the wane. Though the
situation became more stable in China at the end of 2020, the impact of the COVID-19 on the Company's operations is still uncertain.
Despite
the challenges posed by COVID-19 around the world, overall, we were still productive during the year ended December 31, 2020 and first
half of fiscal year 2021. Most importantly, after a lengthy process of preparation, the “300,000 government-accredited pure EV
within 5 years rideshare” program - of which Kandi was a co-founder - has begun its trial with the plan of gradual delivery of
1,000 EVs to the city of Haikou in Hainan province and 2,500 EVs to the city of Shaoxing in Zhejiang province. All the EVs delivered
for the program include our battery swap feature. At present, Zhejiang Ruiheng Technology Co., Ltd (“Zhejiang Ruiheng”),
a company jointly established by Zhejiang Kandi Technologies, has negotiated with more than ten third-tier cities about the cooperation
of launching the program of online car hailing based on the battery swap mode, which is expected to gradually start launching in these
cities during second half of 2021. We believe that this program can drive the production and sales of our EV parts and battery swap equipment,
and we can thus restore growth in our pure EV business.
The
COVID-19 outbreak has seriously impacted the EV market in 2020, and the impact continued during 2021 though it appears to be on the wane,
leading us to explore how to augment our business. As we looked at other market opportunities that leverage our expertise, the management
of the Company found potential in a number of ancillary products aimed at intelligent transportation. For example, Electric Scooters
and Electric Self-Balancing Vehicles have distinct potential, with tens of millions of units sold each year around the world. The Company
is pursuing these opportunities by expanding production of intelligent transportation products that exploit our advantages in the Yongkang
Scrou’s power electric motor and Kandi Smart Battery Swap’s power battery pack. Our products aimed at this market combine
our motors and battery packs into a dynamic power train system. As this business is developing quickly and progressing, the Company transferred
all of its equity interest in Yongkang Scrou to Jinhua An Kao in September 2020 (changed name to Kandi Smart Battery Swap), and the work
of separate listing Kandi Smart Battery Swap on domestic A-share is moving forward as planned.
In
November 2020, the Company has received the required clearance from the United States Environmental Protection Agency (EPA) for its two
electric vehicle (EV) models, the K23 and K27 via Certificates of Conformity. We are performing self-inspection comparing to the safety
standards published by the United States Department of Transportation. We are also in the process of modifying features, upgrading the
software and technology for the EVs to cater for our potential U.S. consumers.
Results
of Operations
Comparison
of the Three Months Ended June 30, 2021 and 2020
The
following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of operations
and comprehensive income (loss) for the three months ended June 30, 2021 and 2020.
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
2021
|
|
|
%
of
Revenue
|
|
|
June
30,
2020
|
|
|
%
of
Revenue
|
|
|
Change
in
Amount
|
|
|
Change
in
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
FROM UNRELATED PARTIES, NET
|
|
$
|
29,875,835
|
|
|
|
100.0
|
%
|
|
$
|
19,436,120
|
|
|
|
100.0
|
%
|
|
|
10,439,715
|
|
|
|
53.7
|
%
|
REVENUES
FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
956
|
|
|
|
0.0
|
%
|
|
|
(956
|
)
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, NET
|
|
|
29,875,835
|
|
|
|
|
|
|
|
19,437,076
|
|
|
|
|
|
|
|
10,438,759
|
|
|
|
53.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
(23,778,053
|
)
|
|
|
(79.6
|
)%
|
|
|
(15,900,298
|
)
|
|
|
(81.8
|
)%
|
|
|
(7,877,755
|
)
|
|
|
49.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
6,097,782
|
|
|
|
20.4
|
%
|
|
|
3,536,778
|
|
|
|
18.2
|
%
|
|
|
2,561,004
|
|
|
|
72.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
(3,564,905
|
)
|
|
|
(11.9
|
)%
|
|
|
(1,149,901
|
)
|
|
|
(5.9
|
)%
|
|
|
(2,415,004
|
)
|
|
|
210.0
|
%
|
Selling and marketing
|
|
|
(1,057,517
|
)
|
|
|
(3.5
|
)%
|
|
|
(763,666
|
)
|
|
|
(3.9
|
)%
|
|
|
(293,851
|
)
|
|
|
38.5
|
%
|
General and administrative
|
|
|
(5,359,572
|
)
|
|
|
(17.9
|
)%
|
|
|
(3,907,191
|
)
|
|
|
(20.1
|
)%
|
|
|
(1,452,381
|
)
|
|
|
37.2
|
%
|
Gain
on disposal of long-lived assets
|
|
|
48,253,667
|
|
|
|
161.5
|
%
|
|
|
13,907,574
|
|
|
|
71.6
|
%
|
|
|
34,346,093
|
|
|
|
247.0
|
%
|
TOTAL
OPERATING INCOME
|
|
|
38,271,673
|
|
|
|
128.1
|
%
|
|
|
8,086,816
|
|
|
|
41.6
|
%
|
|
|
30,184,857
|
|
|
|
373.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
44,369,455
|
|
|
|
148.5
|
%
|
|
|
11,623,594
|
|
|
|
59.8
|
%
|
|
|
32,745,861
|
|
|
|
281.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
974,105
|
|
|
|
3.3
|
%
|
|
|
221,792
|
|
|
|
1.1
|
%
|
|
|
752,313
|
|
|
|
339.2
|
%
|
Interest expense
|
|
|
(78,069
|
)
|
|
|
(0.3
|
)%
|
|
|
(1,123,056
|
)
|
|
|
(5.8
|
)%
|
|
|
1,044,987
|
|
|
|
(93.0
|
)%
|
Change
in fair value of contingent consideration
|
|
|
(357,000
|
)
|
|
|
(1.2
|
)%
|
|
|
(929,000
|
)
|
|
|
(4.8
|
)%
|
|
|
572,000
|
|
|
|
(61.6
|
)%
|
Government grants
|
|
|
114,402
|
|
|
|
0.4
|
%
|
|
|
86,799
|
|
|
|
0.4
|
%
|
|
|
27,603
|
|
|
|
31.8
|
%
|
Gain
from sale of equity in the Affiliate Company
|
|
|
33,651
|
|
|
|
0.1
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
33,651
|
|
|
|
-
|
|
Share
of loss after tax of the Affiliate Company
|
|
|
(4,904
|
)
|
|
|
(0.0
|
)%
|
|
|
(2,978,529
|
)
|
|
|
(15.3
|
)%
|
|
|
2,973,625
|
|
|
|
(99.8
|
)%
|
Other income, net
|
|
|
3,827,089
|
|
|
|
12.8
|
%
|
|
|
1,043,335
|
|
|
|
5.4
|
%
|
|
|
2,783,754
|
|
|
|
266.8
|
%
|
TOTAL
OTHER INCOME (EXPENSE), NET
|
|
|
4,509,274
|
|
|
|
15.1
|
%
|
|
|
(3,678,659
|
)
|
|
|
(18.9
|
)%
|
|
|
8,187,933
|
|
|
|
(222.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
48,878,729
|
|
|
|
163.6
|
%
|
|
|
7,944,935
|
|
|
|
40.9
|
%
|
|
|
40,933,794
|
|
|
|
515.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
(7,949,255
|
)
|
|
|
(26.6
|
)%
|
|
|
(3,889,889
|
)
|
|
|
(20.0
|
)%
|
|
|
(4,059,366
|
)
|
|
|
104.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
|
40,929,474
|
|
|
|
137.0
|
%
|
|
|
4,055,046
|
|
|
|
20.9
|
%
|
|
|
36,874,428
|
|
|
|
909.3
|
%
|
(a)
Revenue
For
the three months ended June 30, 2021, our revenue was $29,875,835 compared to $19,437,076 for the same period of 2020, representing an
increase of $10,438,759 or 53.7%. The increase in revenue was mainly due to the increase in Electric Scooters, Electric Self-Balancing
Scooters and associated parts sales, which was resulted from our successful expansion of intelligent
transportation products after the COVID-19 outbreak seriously impacted the EV market in 2020.
The
following table summarizes our revenues by product types for the three months ended June 30, 2021 and 2020:
|
|
Three
Months Ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales
|
|
|
Sales
|
|
EV parts
|
|
$
|
6,680,515
|
|
|
$
|
12,514,548
|
|
EV products
|
|
|
610,812
|
|
|
|
(1,913
|
)
|
Off-road vehicles
|
|
|
5,473,195
|
|
|
|
6,564,415
|
|
Electric Scooters, Electric Self-Balancing
Scooters and associated parts
|
|
|
16,526,436
|
|
|
|
360,026
|
|
Battery exchange equipment
and Battery exchange service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
The
negative amount is due to exchange rate difference.
EV
Parts
During
the three months ended June 30, 2021, our revenues from the sales of EV parts were $6,680,515, representing a decrease of $5,834,033
or 46.6% from $12,514,548 for the same quarter of 2020, which was mainly due to the decreased battery packs sales compared to the same
period of last year; however, the sales of EV parts was stable during 2021. The revenue of $6,680,515 during the three months ended June
30, 2021 was comparable to the revenue of $6,368,331 the three months ended March 31, 2021.
Our
revenue for the three months ended June 30, 2021 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers,
air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for 22.4% of total sales.
EV
Products
During
the three months ended June 30, 2021, our revenue from the sale of EV Products was $610,812, representing
an increase of $612,725 from negative $1,913 (Which was due to exchange rate difference. For the three months ended June 30, 2020,
there were no EV product sales in local currency.) for the same period of 2020. These sales
accounted for 2.0% of total sales for the three months ended June 30, 2021.
Off-Road
Vehicles
During
the three months ended June 30, 2021, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”)
and others, were $5,473,195, representing a decrease of $1,091,220 or 16.6% from $6,564,415 for the same quarter of 2020. The decrease
was mainly due to shortage of inventory to fulfill all sales orders received from the customers in the United States. The global shortage
of shipping containers, primarily caused by the Covid-19 pandemic, has led to increased delay times and hence shortage of inventory.
Our
off-road vehicles business line accounted for approximately 18.3% of our total net revenue for the three months ended June 30, 2021.
Electric
Scooters, Electric Self-Balancing Scooters and associated parts
During
the three months ended June 30, 2021, our revenue from the sale of Electric Scooters and Electric Self-Balancing Scooters and
associated parts was $16,526,436, representing an increase of $16,166,410 or 4,490.3% from
$360,026 for the same period of 2020. The sales during the same quarter of 2020 was
immaterial. The increase was mainly due to our successful expansion of intelligent transportation
products after the COVID-19 outbreak seriously impacted the EV market in 2020, and we are now having sufficient capacity to fulfill the
sales orders of Electric Scooters and Electric Self-Balancing Scooters and associated parts.
Battery
exchange equipment and Battery exchange service
During
the three months ended June 30, 2021, our revenue from the sale of Battery exchange equipment and Battery exchange service was $584,877,
there was no such sales for the same period of 2020.
The
following table shows the breakdown of our net revenues:
|
|
Three
Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales
Revenue
|
|
|
Sales
Revenue
|
|
Primary geographical
markets
|
|
|
|
|
|
|
Overseas
|
|
$
|
6,180,582
|
|
|
$
|
8,571,281
|
|
China
|
|
|
23,695,253
|
|
|
|
10,865,795
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
|
|
|
|
|
|
|
|
|
Major products
|
|
|
|
|
|
|
|
|
EV parts
|
|
$
|
6,680,515
|
|
|
$
|
12,514,548
|
|
EV products
|
|
|
610,812
|
|
|
|
(1,913
|
)
|
Off-road vehicles
|
|
|
5,473,195
|
|
|
|
6,564,415
|
|
Electric Scooters, Electric Self-Balancing
Scooters and associated parts
|
|
|
16,526,436
|
|
|
|
360,026
|
|
Battery exchange equipment
and Battery exchange service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
Products transferred
at a point in time
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
Total
|
|
$
|
29,875,835
|
|
|
$
|
19,437,076
|
|
The
negative amount is due to exchange rate difference.
(b)
Cost of goods sold
Cost
of goods sold was $23,778,053 during the three months ended June 30, 2021, representing an increase of $7,877,755, or 49.5%, compared
to $15,900,298 for the same period of 2020. The increase was primarily due to the corresponding increase in sales. Please refer to the
Gross Profit section below for product margin analysis.
(c)
Gross profit
Our
margins by product for the three months ended June 30, 2021 and 2020 are as set forth below:
|
|
2021
|
|
|
2020
|
|
|
|
Sales
|
|
|
Cost
|
|
|
Gross
Profit
|
|
|
Margin
%
|
|
|
Sales
|
|
|
Cost
|
|
|
Gross
Profit
|
|
|
Margin
%
|
|
EV parts
|
|
$
|
6,680,515
|
|
|
|
5,608,759
|
|
|
|
1,071,756
|
|
|
|
16.0
|
%
|
|
$
|
12,514,548
|
|
|
|
10,745,020
|
|
|
|
1,769,528
|
|
|
|
14.1
|
%
|
EV products
|
|
|
610,812
|
|
|
|
542,121
|
|
|
|
68,691
|
|
|
|
11.2
|
%
|
|
|
(1,913
|
)
|
|
|
(4,793
|
)
|
|
|
2,880
|
|
|
|
-
|
|
Off-road vehicles
|
|
|
5,473,195
|
|
|
|
4,098,401
|
|
|
|
1,374,794
|
|
|
|
25.1
|
%
|
|
|
6,564,415
|
|
|
|
4,827,659
|
|
|
|
1,736,756
|
|
|
|
26.5
|
%
|
Electric
Scooters, Electric Self-Balancing Scooters and associated parts
|
|
|
16,526,436
|
|
|
|
12,999,612
|
|
|
|
3,526,824
|
|
|
|
21.3
|
%
|
|
|
360,026
|
|
|
|
332,412
|
|
|
|
27,614
|
|
|
|
7.7
|
%
|
Battery
exchange equipment and Battery exchange service
|
|
|
584,877
|
|
|
|
529,160
|
|
|
|
55,717
|
|
|
|
9.5
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
29,875,835
|
|
|
|
23,778,053
|
|
|
|
6,097,782
|
|
|
|
20.4
|
%
|
|
$
|
19,437,076
|
|
|
|
15,900,298
|
|
|
|
3,536,778
|
|
|
|
18.2
|
%
|
The
negative amount is due to exchange rate difference.
Gross
profit for the second quarter of 2021 increased 72.4% to $6,097,782, compared to $3,536,778 for the same period last year. This
was primarily attributable to the sales increase of Electric Scooters, Electric Self-Balancing Scooters and associated parts. Our gross
margin increased to 20.4% compared to 18.2% for the same period of 2020. The increase in our gross margin was mainly due to a higher
concentration of sales generated from the product line of Electric Scooters, Electric Self-Balancing Scooters and associated parts which
has a higher gross margin compared to other product lines. The sales generated from the product line of Electric Scooters, Electric Self-Balancing
Scooters and associated parts was immaterial in the same period of 2020.
(d)
Research and development
Research
and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses,
totaled $3,564,905 for the second quarter of 2021, an increase of $2,415,004 or 210.0% compared to $1,149,901 for the same period of
last year. The increase was mainly due to the Company’s R & D expenditure in the
second quarter of 2021 for new products.
(e)
Sales and marketing
Selling
and distribution expenses were $1,057,517 for the second quarter of 2021, compared to $763,666 for the same period last year, representing
an increase of $293,851 or 38.5%. The increase was primarily attributable to the increasing product insurance expense, freight
expense and advertising expense.
(f)
General and administrative expenses
General
and administrative expenses were $5,359,572 for the second quarter of 2021, compared to $3,907,191 for the same period last year, representing
an increase of $1,452,381 or 37.2%. For the three months ended June 30, 2021, general and administrative expenses included $1,406,531
as expenses for common stock awards and stock options to employees and Board members, compared to $824,621 of common stock awards and
stock options expenses for the same period in 2020. Besides stock compensation expense, our net general and administrative expenses for
the three months ended June 30, 2021 were $3,953,041, representing an increase of $870,471, or 28.2% from $3,082,570 for the same period
of 2020, which was largely due to the increase of salary expenses and depreciation expenses.
(g)
Gain on disposal of long-live asset
Gain
on disposal of long-live asset was $48,253,667 for the second quarter of 2021, compared to $13,907,574 for the same period last year,
representing an increase of $34,346,093 or 247.0%. The increase was related to the real estate repurchase agreement of our Jinhua Facility’s
relocation. In June 2020, 73,333 square meters of land use right was transferred to the local government, and the related gain was recognized
in the second quarter of 2020. The Company’s Jinhua facility moved out of the old location and completed the relocation process
in April 2021. The relevant Economic Zone authorities inspected the vacated land and determined that it met all stipulated conditions.
The remaining related gain on disposal of long-live asset was recognized in the second quarter of 2021.
(h)
Interest income
Interest
income was $974,105 for the second quarter of 2021, representing an increase of $752,313 or 339.2% compared to $221,792 for the same
period of last year. The increase was primarily attributable to the increased interest earned on
bank deposit.
(i)
Interest expenses
Interest
expenses were $78,069 in the second quarter of 2021, representing a decrease of $1,044,987 or 93.0% compared to $1,123,056 for the same
period of last year. The decrease was primarily due to the interest expenses related to short-term
and long-term debt of the Company in the same period of last year, which has been paid off as of the end of 2020.
(j)
Change in fair value of contingent consideration
For
the second quarter of 2021, the loss related to changes in the fair value of contingent consideration was $357,000, a decrease loss of
$572,000 or 61.6% compared to loss related to changes in the fair value of contingent consideration of $929,000 for the same period of
last year, which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with the remaining
shares of restrictive common stock (Please refer to NOTE 21 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent
consideration liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all
possible scenarios.
(k)
Government grants
Government
grants were $114,402 for the second quarter of 2021, compared to $86,799 for the same quarter last year, representing an increase of
$27,603, or 31.8%, which was largely attributable to the financial support from Jinhua local government in the second quarter of 2021.
(l)
Gain from equity sale in the Affiliate Company
Gain
from equity sale was $33,651 (Due to exchange rate difference.
For the three months ended June 30, 2021, there were no gain from equity sale in the Affiliate Company in local currency.) for
the second quarter of 2021, which was due to the Affiliate Equity Transfer. On February 18, 2021, Zhejiang Kandi Technologies signed
an Equity Transfer Agreement with Geely to transfer all of its remaining 22% equity interests in the Affiliate Company to Geely
for a total consideration of RMB 308 million (approximately $47.7 million). Zhejiang Provincial Administration for Market
Regulation recorded the update of the ownership of Fengsheng on March 9, 2021. On March 16, 2021, the Company received the first half
of the equity transfer payment of RMB 154,000,000 (approximately $23.8 million), and the rest half will be received within
six months from March 9, 2021 according to the Equity Transfer Agreement. As of March 9, 2021, the equity transfer had been completed.
Therefore, in the first quarter of 2021, the Company has recognized the gain from equity sale.
(m)
Share of loss after tax of the Affiliate Company
For
the second quarter of 2021, our share of loss of the Affiliate Company was $4,904 (Due to exchange rate difference. For the three months
ended June 30, 2021, there were no share of loss after tax of the Affiliate Company in local currency.) as compared to share of loss
of $2,978,529 for the same period of last year.
(n)
Other income (expenses), net
Net
other income was $3,827,089 for the second quarter of 2021, compared to net other income of $1,043,335 for the same period of last year,
which was largely due the discount of accounts payable after negotiation with supplier.
(o)
Income Taxes
In
accordance with the relevant Chinese tax laws and regulations, our applicable corporate income tax rate is 25%. However, Zhejiang Kandi
Technologies, Kandi Smart Battery Swap and Kandi Hainan are qualified as high technology companies in China and are therefore entitled
to a reduced corporate income tax rate of 15%.
Each
of our wholly-owned subsidiaries, Kandi New Energy and Yongkang Scrou, has an applicable corporate income tax rate of 25%.
Our
actual effective income tax rate for the second quarter of 2021 was a tax expense of 16.26% on a reported income before taxes of
approximately $48.9 million, compared to a tax expense of 48.96% on a reported income before taxes of approximately $7.9 million
for the same period of last year. The effective tax rate was decreased largely due to the decrease of the non-deductible losses in equity
investment compared to the same period of last year.
(p)
Net income
Net
income was $40,929,474 for the second quarter of 2021, representing an increase of $36,874,428 or 909.3% compared to net income of $4,055,046
for the same period of last year. The increase was primarily attributable to $48 million gain on disposal of long-live asset recognized
in the second quarter of 2021, compared to $14 million gain on disposal of long-live asset in the same period of last year, which was
related to the real estate repurchase agreement of our Jinhua Facility’s relocation.
Comparison
of the Six Months Ended June 30, 2021 and 2020
The
following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of operations
and comprehensive income (loss) for the six months ended June 30, 2021 and 2020.
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
% of Revenue
|
|
|
June 30,
2020
|
|
|
% of Revenue
|
|
|
Change in Amount
|
|
|
Change in %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES FROM UNRELATED PARTIES, NET
|
|
$
|
45,852,002
|
|
|
|
100.0
|
%
|
|
$
|
25,808,544
|
|
|
|
100.0
|
%
|
|
$
|
20,043,458
|
|
|
|
77.7
|
%
|
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET
|
|
|
1,587
|
|
|
|
0.0
|
%
|
|
|
956
|
|
|
|
0.0
|
%
|
|
|
631
|
|
|
|
66.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, NET
|
|
|
45,853,589
|
|
|
|
100.0
|
%
|
|
|
25,809,500
|
|
|
|
100.0
|
%
|
|
|
20,044,089
|
|
|
|
77.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
(35,401,456
|
)
|
|
|
(77.2
|
)%
|
|
|
(21,105,463
|
)
|
|
|
(81.8
|
)%
|
|
|
(14,295,993
|
)
|
|
|
67.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
10,452,133
|
|
|
|
22.8
|
%
|
|
|
4,704,037
|
|
|
|
18.2
|
%
|
|
|
5,748,096
|
|
|
|
122.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
(25,189,502
|
)
|
|
|
(54.9
|
)%
|
|
|
(1,790,141
|
)
|
|
|
(6.9
|
)%
|
|
|
(23,399,361
|
)
|
|
|
1307.1
|
%
|
Selling and marketing
|
|
|
(2,204,383
|
)
|
|
|
(4.8
|
)%
|
|
|
(1,641,972
|
)
|
|
|
(6.4
|
)%
|
|
|
(562,411
|
)
|
|
|
34.3
|
%
|
General and administrative
|
|
|
(9,789,695
|
)
|
|
|
(21.3
|
)%
|
|
|
(6,973,926
|
)
|
|
|
(27.0
|
)%
|
|
|
(2,815,769
|
)
|
|
|
40.4
|
%
|
Gain on disposal of long-lived assets
|
|
|
48,253,667
|
|
|
|
105.2
|
%
|
|
|
13,907,574
|
|
|
|
53.9
|
%
|
|
|
34,346,093
|
|
|
|
247.0
|
%
|
TOTAL OPERATING INCOME
|
|
|
11,070,087
|
|
|
|
24.1
|
%
|
|
|
3,501,535
|
|
|
|
13.6
|
%
|
|
|
7,568,552
|
|
|
|
216.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
21,522,220
|
|
|
|
46.9
|
%
|
|
|
8,205,572
|
|
|
|
31.8
|
%
|
|
|
13,316,648
|
|
|
|
162.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,502,697
|
|
|
|
3.3
|
%
|
|
|
560,736
|
|
|
|
2.2
|
%
|
|
|
941,961
|
|
|
|
168.0
|
%
|
Interest expense
|
|
|
(204,417
|
)
|
|
|
(0.4
|
)%
|
|
|
(2,105,990
|
)
|
|
|
(8.2
|
)%
|
|
|
1,901,573
|
|
|
|
(90.3
|
)%
|
Change in fair value of contingent consideration
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
2,863,000
|
|
|
|
11.1
|
%
|
|
|
(2,863,000
|
)
|
|
|
(100.0
|
)%
|
Government grants
|
|
|
349,195
|
|
|
|
0.8
|
%
|
|
|
97,898
|
|
|
|
0.4
|
%
|
|
|
251,297
|
|
|
|
256.7
|
%
|
Gain from sale of equity in the Affiliate Company
|
|
|
17,733,911
|
|
|
|
38.7
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
17,733,911
|
|
|
|
-
|
|
Share of loss after tax of the Affiliate Company
|
|
|
(2,584,401
|
)
|
|
|
(5.6
|
)%
|
|
|
(4,081,299
|
)
|
|
|
(15.8
|
)%
|
|
|
1,496,898
|
|
|
|
(36.7
|
)%
|
Other income, net
|
|
|
4,325,990
|
|
|
|
9.4
|
%
|
|
|
1,062,985
|
|
|
|
4.1
|
%
|
|
|
3,263,005
|
|
|
|
307.0
|
%
|
TOTAL OTHER INCOME (EXPENSE), NET
|
|
|
21,122,975
|
|
|
|
46.1
|
%
|
|
|
(1,602,670
|
)
|
|
|
(6.2
|
)%
|
|
|
22,725,645
|
|
|
|
(1418.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
42,645,195
|
|
|
|
93.0
|
%
|
|
|
6,602,902
|
|
|
|
25.6
|
%
|
|
|
36,042,293
|
|
|
|
545.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
(8,118,441
|
)
|
|
|
(17.7
|
)%
|
|
|
(4,122,502
|
)
|
|
|
(16.0
|
)%
|
|
|
(3,995,939
|
)
|
|
|
96.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
34,526,754
|
|
|
|
75.3
|
%
|
|
|
2,480,400
|
|
|
|
9.6
|
%
|
|
|
32,046,354
|
|
|
|
1292.0
|
%
|
(a)
Revenue
For
the six months ended June 30, 2021, our revenue was $45,853,589 compared to $25,809,500 for the same period of 2020, representing an
increase of $20,044,089 or 77.7%. The increase in revenue was mainly due to the increase in Electric Scooters, Electric Self-Balancing
Scooters and associated parts sales, which was resulted from our successful expansion of intelligent
transportation products after the COVID-19 outbreak seriously impacted the EV market in 2020.
The
following table summarizes our revenues by product types for the six months ended June 30, 2021 and 2020:
|
|
Six Months Ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales
|
|
|
Sales
|
|
EV parts
|
|
$
|
13,048,846
|
|
|
$
|
14,595,883
|
|
EV products
|
|
|
732,306
|
|
|
|
253,906
|
|
Off-road vehicles
|
|
|
11,092,199
|
|
|
|
10,599,685
|
|
Electric Scooters, Electric Self-Balancing Scooters and associated parts
|
|
|
20,395,361
|
|
|
|
360,026
|
|
Battery exchange equipment and Battery exchange service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
EV
Parts
During
the six months ended June 30, 2021, our revenues from the sales of EV parts were $13,048,846, representing a decrease of $1,547,037 or
10.6% from $14,595,883 for the same period of 2020 due to less demand in the current period.
Our
revenue for the six months ended June 30, 2021 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers,
air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for 28.5% of total sales.
EV
Products
During
the six months ended June 30, 2021, our revenue from the sale of EV Products was $ 732,306, representing
an increase of $478,400 or 188.4% from $253,906 for the same period of 2020 due to the sales
of EVs to the ride-hailing platform in China market during 2021.
Off-Road
Vehicles
During
the six months ended June 30, 2021, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”)
and others, were $11,092,199, representing an increase of $492,514 or 4.6% from $10,599,685, for the same period of 2020 despite the
decrease of sales during April to June 2021 caused by a shortage of inventory to fulfill all sales orders received from the customers
in the United States.
Our
off-road vehicles business line accounted for approximately 24.2% of our total net revenue for the six months ended June 30, 2021.
Electric
Scooters, Electric Self-Balancing Scooters and associated parts
During
the six months ended June 30, 2021, our revenue from the sale of Electric Scooters and Electric Self-Balancing Scooters and
associated parts was $20,395,361, representing an increase of $20,035,335 or 5,565.0% from
$360,026 for the same period of 2020. The increase was mainly due to our
successful expansion of intelligent transportation products after the COVID-19 outbreak seriously impacted the EV market in 2020, and
we are now having sufficient capacity to fulfill the sales orders of Electric Scooters and Electric Self-Balancing Scooters and
associated parts.
Battery
exchange equipment and Battery exchange service
During
the six months ended June 30, 2021, our revenue from the sale of Battery exchange equipment and Battery exchange service was $584,877,
there was no such sales for the same period of 2020.
The
following table shows the breakdown of our net revenues:
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales Revenue
|
|
|
Sales Revenue
|
|
Primary geographical markets
|
|
|
|
|
|
|
|
|
Overseas
|
|
$
|
14,048,008
|
|
|
$
|
10,702,105
|
|
China
|
|
|
31,805,581
|
|
|
|
15,107,395
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
|
|
|
|
|
|
|
|
|
Major products
|
|
|
|
|
|
|
|
|
EV parts
|
|
$
|
13,048,846
|
|
|
$
|
14,595,883
|
|
EV products
|
|
|
732,306
|
|
|
|
253,906
|
|
Off-road vehicles
|
|
|
11,092,199
|
|
|
|
10,599,685
|
|
Electric Scooters, Electric Self-Balancing Scooters and associated parts
|
|
|
20,395,361
|
|
|
|
360,026
|
|
Battery exchange equipment and Battery exchange service
|
|
|
584,877
|
|
|
|
-
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
Products transferred at a point in time
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
Total
|
|
$
|
45,853,589
|
|
|
$
|
25,809,500
|
|
(b)
Cost of goods sold
Cost
of goods sold was $35,401,456 during the six months ended June 30, 2021, representing an increase of $14,295,993, or 67.7%, compared
to $21,105,463 for the same period of 2020. The increase was primarily due to the corresponding increase in sales. Please refer to the
Gross Profit section below for product margin analysis.
(c)
Gross profit
Our
margins by product for the six months ended June 30, 2021 and 2020 are as set forth below:
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Sales
|
|
|
Cost
|
|
|
Gross Profit
|
|
|
Margin %
|
|
|
Sales
|
|
|
Cost
|
|
|
Gross Profit
|
|
|
Margin %
|
|
EV parts
|
|
$
|
13,048,846
|
|
|
|
9,895,628
|
|
|
|
3,153,218
|
|
|
|
24.2
|
%
|
|
$
|
14,595,883
|
|
|
|
12,603,150
|
|
|
|
1,992,733
|
|
|
|
13.7
|
%
|
EV products
|
|
|
732,306
|
|
|
|
651,878
|
|
|
|
80,428
|
|
|
|
11.0
|
%
|
|
|
253,906
|
|
|
|
236,594
|
|
|
|
17,312
|
|
|
|
6.8
|
%
|
Off-road vehicles
|
|
|
11,092,199
|
|
|
|
8,211,150
|
|
|
|
2,881,049
|
|
|
|
26.0
|
%
|
|
|
10,599,685
|
|
|
|
7,933,307
|
|
|
|
2,666,378
|
|
|
|
25.2
|
%
|
Electric Scooters, Electric Self-Balancing Scooters and associated parts
|
|
|
20,395,361
|
|
|
|
16,113,640
|
|
|
|
4,281,721
|
|
|
|
21.0
|
%
|
|
|
360,026.00
|
|
|
|
332,412.00
|
|
|
|
27,614
|
|
|
|
7.7
|
%
|
Battery exchange equipment and Battery exchange service
|
|
|
584,877
|
|
|
|
529,160
|
|
|
|
55,717
|
|
|
|
9.5
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
45,853,589
|
|
|
|
35,401,456
|
|
|
|
10,452,133
|
|
|
|
22.8
|
%
|
|
$
|
25,809,500
|
|
|
|
21,105,463
|
|
|
|
4,704,037
|
|
|
|
18.2
|
%
|
Gross
profit for the first half of 2021 increased 122.2% to $10,452,133, compared to $4,704,037 for the same period last year. This was
primarily attributable to the sales increase of Electric Scooters, Electric Self-Balancing Scooters and associated parts. Our gross margin
increased to 22.8% compared to 18.2% for the same period of 2020. The increase in our gross margin was mainly due to a higher concentration
of sales generated from the product line of Electric Scooters, Electric Self-Balancing Scooters and associated parts which has a higher
gross margin compared to other product lines. The sales generated from the product line of Electric Scooters, Electric Self-Balancing
Scooters and associated parts was immaterial in the same period of 2020.
(d)
Research and development
Research
and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses,
totaled $25,189,502 for the first half of 2021, an increase of $23,399,361 or 1,307.1% compared to $1,790,141 for the same period of
last year. The increase was mainly due to the Company’s R & D expenditure in the
first half of 2021 for new products.
(e)
Sales and marketing
Selling
and distribution expenses were $2,204,383 for the first half of 2021, compared to $$1,641,972 for the same period last year, representing
an increase of $562,411 or 34.3%. The increase was primarily attributable to the increasing product insurance expense, freight
expense and advertising expense.
(f)
General and administrative expenses
General
and administrative expenses were $9,789,695 for the first half of 2021, compared to $6,973,926 for the same period last year, representing
an increase of $2,815,769 or 40.4%. For the six months ended June 30, 2021, general and administrative expenses included $1,429,456 as
expenses for common stock awards and stock options to employees and Board members, compared to $847,546 of common stock awards and stock
options expenses for the same period in 2020. Besides stock compensation expense, our net general and administrative expenses for the
six months ended June 30, 2021 were $8,360,239, representing an increase of $2,233,859 or 36.5% from $6,126,380 for the same period of
2020, which was largely due to the increase of depreciation expenses and the increase in need for professional services.
(g)
Gain on disposal of long-live asset
Gain
on disposal of long-live asset was $48,253,667 for the first half of 2021, compared to $13,907,574 for the same period last year, representing
an increase of $34,346,093 or 247.0%. which was related to the real estate repurchase agreement of our Jinhua Facility’s relocation.
In June 2020, 73,333 square meters of land use right was transferred to the local government, and the related gain was recognized in
the second quarter of 2020. The Company’s Jinhua facility moved out of the old location and completed the relocation process
in April 2021. The relevant Economic Zone authorities inspected the vacated land and determined that it met all stipulated conditions.
The remaining related gain on disposal of long-live asset was recognized in the second quarter of 2021.
(h)
Interest income
Interest
income was $1,502,697 for the first half of 2021, representing an increase of $941,961 or 168.0% compared to $560,736 for the same period
of last year. The increase was primarily attributable to the increased interest earned on bank
deposit.
(i)
Interest expenses
Interest
expenses were $204,417 in the first half of 2021, representing a decrease of $1,901,573 or 90.3% compared to $2,105,990 for the same
period of last year. The decrease was primarily due to the interest expenses related to short-term
and long-term debt of the Company in the same period of last year, which has been paid off as of the end of 2020.
(j)
Change in fair value of contingent consideration
For
the first half of 2021, the gain related to changes in the fair value of contingent consideration was $0, a decrease of $2,863,000 or
100.0% compared to gain related to changes in the fair value of contingent consideration of $2,863,000 for the same period of last year,
which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with the remaining shares
of restrictive common stock (Please refer to NOTE 21 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration
liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all possible scenarios.
(k)
Government grants
Government
grants were $349,195 for the first half of 2021, compared to $97,898 for the same quarter last year, representing an increase of $251,297,
or 256.7%, which was largely attributable to the financial support from Jinhua local government in the second quarter of 2021.
(l)
Gain from equity sale in the Affiliate Company
Gain
from equity sale was $17,733,911 for the first half of 2021, which was due to the Affiliate Equity Transfer. On February 18, 2021,
Zhejiang Kandi Technologies signed an Equity Transfer Agreement with Geely to transfer all of its remaining 22% equity interests
in the Affiliate Company to Geely for a total consideration of RMB 308 million (approximately $47.7 million). Zhejiang
Provincial Administration for Market Regulation recorded the update of the ownership of Fengsheng on March 9, 2021. On March 16, 2021,
the Company received the first half of the equity transfer payment of RMB 154,000,000 (approximately $23.8 million), and
the rest half will be received within six months from March 9, 2021according to the Equity Transfer Agreement. As of March 9, 2021,
the equity transfer had been completed. Therefore, in the first quarter of 2021, the Company has recognized the gain from equity sale.
(m)
Share of loss after tax of the Affiliate Company
For
the first half of 2021, our share of loss of the Affiliate Company was $2,584,401 as compared to share of loss of $4,081,299 for the
same period of last year. On February 18, 2021, Zhejiang Kandi Technologies signed an Equity Transfer
Agreement with Geely to transfer all of its remaining 22% equity interests in the Affiliate Company to Geely for a total consideration
of RMB 308 million (approximately $47.7 million). Zhejiang Provincial Administration for Market Regulation recorded the
update of the ownership of Fengsheng on March 9, 2021. On March 16, 2021, the Company received the first half of the equity transfer
payment of RMB 154,000,000 (approximately $23.8 million), and the rest is expected to receive within six months from March
9, 2021. As of March 9, 2021, the equity transfer had been completed.
(n)
Other income, net
Net
other income was $4,325,990 for the first half of 2021, representing an increase of $3,263,005 or 307.0% compared to net other income
of $1,062,985 for the same period of last year, which was largely due to the discount of accounts payable after negotiation with supplier.
(o)
Income Taxes
In
accordance with the relevant Chinese tax laws and regulations, our applicable corporate income tax rate is 25%. However, Zhejiang Kandi
Technologies, Kandi Smart Battery Swap and Kandi Hainan are qualified as high technology companies in China and are therefore entitled
to a reduced corporate income tax rate of 15%.
Each
of our wholly-owned subsidiaries, Kandi New Energy and Yongkang Scrou, has an applicable corporate income tax rate of 25%.
Our
actual effective income tax rate for the first half of 2021 was a tax expense of 19.04% on a reported income before taxes of approximately
$42.6 million, compared to a tax expense of 62.43% on a reported income before taxes of approximately $6.6 million for the same
period of last year. The effective tax rate was decreased largely due to the decrease of the non-deductible losses in equity investment
compared to the same period of last year.
(p)
Net income
Net
income was $34,526,754 for the first half of 2021, representing an of $32,046,354 or 1,292.0% compared to net income $2,480,400 for the
same period of last year. The increase was primarily attributable to $48 million gain on disposal of long-live asset recognized in the
second quarter of 2021, compared to $14 million gain on disposal of long-live asset in the same period of last year, which was related
to the real estate repurchase agreement of our Jinhua Facility’s relocation.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
Flow
|
|
Six Months
Ended
|
|
|
|
June
30,
2021
|
|
|
June
30,
2020
|
|
Net
cash used in operating activities
|
|
$
|
(11,661,935
|
)
|
|
$
|
(34,327,490
|
)
|
Net
cash provided by investing activities
|
|
$
|
16,082,801
|
|
|
$
|
50,278,763
|
|
Net cash provided by (used in) financing activities
|
|
$
|
250,000
|
|
|
$
|
(25,628,295
|
)
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
4,670,866
|
|
|
$
|
(9,677,022
|
)
|
Effect of exchange rate
changes
|
|
$
|
997,982
|
|
|
$
|
(157,062
|
)
|
CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR
|
|
$
|
142,520,635
|
|
|
$
|
16,512,635
|
|
CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
|
|
$
|
148,189,483
|
|
|
$
|
6,678,551
|
|
For
the first half of 2021, cash used in operating activities was $11,661,935, as compared to cash used in operating activities of $34,327,490
for the same period last year. Our operating cash inflows include cash received primarily from sales of our EV parts and off-road vehicles.
These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing
process, operation expenses, employee compensation, and interest expenses of our financings. The major operating activities that provided
cash for the first half of 2021 were a decrease of advances to supplier and prepayments and prepaid expenses of $20,596,182. The major
operating activity that used cash for first half of 2021 was an increase of other receivables and other assets of $14,040,619.
For
the first half of 2021, cash derived from investing activities was $16,082,801, as compared to cash derived from investing activities
of $50,278,763 for the same period of last year. The major investing activities that provided cash for the first half of 2021 were an
increase of repayments of loan to third party of $31,686,168. The major investing activities that used cash for first half of 2021 were
an increase of certificate of deposit of $54,098,335 .
For
the first half of 2021, cash derived from financing activities was $250,000, as compared to cash used from financing activities of $25,628,295
for the same period of last year. The major financing activities that provided cash for the first half of 2021 were proceeds from short-term
bank loans of $250,000.
Working
Capital
We
had a working capital of $ 297,349,768 on June 30, 2021, which reflects an increase of $74,031,617 from a working capital of $223,318,151
as of December 31, 2020.
On
March 10, 2020, a real estate repurchase agreement (the “Repurchase Agreement”) was entered into by and between Zhejiang
Kandi Technologies and Jinhua Economic and Technological Development Zone pursuant to which the local government shall purchase the land
use right over the land of 66 acres (400 mu, 265,029 square meters) that is owned by Zhejiang Kandi Technologies for RMB 525 million
($81 million). Payments to Zhejiang Kandi Technologies shall be made in three installments as the Company disclosed in a Current
Report on Form 8-K filed with the SEC on March 9, 2020. In addition, if Zhejiang Kandi Technologies achieves certain milestones that
contribute to local economic development, the Company will be eligible for tax rebates that could total up to RMB 500 million
($77 million) over the next eight years. On May 22, 2020, the Company received the first payment of RMB 244 million (approximately
$38 million) under the Repurchase Agreement. On July 9, 2020, the Company received the second payment of RMB 119 million
(approximately $18 million) under the Repurchase Agreement. By the end of March 2021, the Company finished relocating production
and offices to the new industrial park and vacated the old factory property. In early April, the relevant Economic Zone authorities inspected
the vacated land and determined that it met all stipulated conditions. On May 20, 2021, the Company received the final portion of repurchase
payment of RMB 150 million (approximately $23 million) under the Repurchase Agreement. In addition, there was RMB 12 million
(approximately $2 million) reward for moving out of the old location has been submitted to the government for approval and will
be collected after the approval.
On
February 18, 2021, Zhejiang Kandi Technologies signed an Equity Transfer Agreement with Geely to transfer all of its remaining 22%
equity interests in the Affiliate Company to Geely for a total consideration of RMB 308 million (approximately $48 million).
On March 16, 2021, the Company received the first half of the equity transfer payment of RMB 154,000,000 (approximately $24 million), and
the rest half will be received within six months from March 9, 2021 according to the Equity Transfer Agreement.
Contractual
Obligations and Off-balance Sheet Arrangements
Guarantees
and pledged collateral for third party bank loans
For
the discussion of guarantees and pledged collateral for third party bank loans, please refer to Note 24 – Commitments and Contingencies
under Notes to Condensed Consolidated Financial Statements.
Recent
Development Activities
On
May 24, 2021, the Company announced that we unveiled five prototypes of its new K32 UTV, produced at its factory in Hainan, China. The
K32 is a premium UTV, featuring pure electric four-wheel-drive propulsion and a fully enclosed cockpit with air conditioning. The Company
intends to begin sales of the K32 in the U.S. in the second half of 2021.
On
July 19, 2021, the Company announced the expansion of its battery cell business with the acquisition of Jiangxi Province Huiyi New Energy
Co., Ltd. (“Jiangxi Huiyi”), a leading cell producer in Jiangxi Province, China. The Company is a leader in electric vehicles
and associated parts, including the cell business of subsidiary Ankao and the intelligent battery exchange system, so this acquisition
is a natural fit to its vertical integration strategy. Jiangxi Huiyi, currently produces approximately 250,000 units of 18650 lithium
batteries daily. The cells have a variety of applications, especially in consumer products. Kandi intends to further grow its cell business
by using the newly acquired technology to address many new applications, eventually including EV battery packs.