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Kandi Technologies Reports Strong Sales and Earnings Increase in Third Quarter 2012

Third Quarter Revenue Increased 23.8% YoY to $12.77 Million, Income From Operation Jumped by 164.5% to $1.49 Million; Third Quarter GAAP Net Income Increased 54.5% YoY to $0.59 Million; Company Gained Significant Increase in ATV, Go-Kart and EV Sales Before the Official Launch of Hangzhou's 20,000 Pure EV Project

JINHUA, CHINA--(Marketwire - Nov 14, 2012) - Kandi Technologies, Corp. (the 'Company' or 'Kandi') (NASDAQ: KNDI), a leading Chinese manufacturer and developer of pure electric vehicles (EVs) and off-road vehicles, today announced its unaudited financial results for the third quarter ended September 30, 2012.

Q3 2012 Financial Highlights:

  • Revenue for the third quarter grew 23.8% year-over-year to $12.77 million from $10.31 million last year. ATV sales grew 66.0% to $1.73 million and EV sales grew 83.8% to $2.78 million as compared to the same period of 2011

  • Income from operations jumped by 164.5% in the quarter to $1.49 million as compared to $0.57 million in the same period of 2011

  • Gross margins reached to 25.3% in the 2012 third quarter, up from 22.6% in the prior year

  • GAAP net income in the third quarter jumped to $0.59 million, or $0.02 per diluted share, a 54.5% increase compared to a GAAP net income of $0.38 million, or $0.01 per diluted share, in the same period last year

  • Non-GAAP adjusted net income in the third quarter of 2012, excluding effects from convertible notes' interest expense, amortization of discount on convertible notes, stock awards expense and the change of the fair value of derivatives was $1.51 million, an increase of 111.5% compared with $0.72 million in the same period of 2011

  • The Company sold 471 electronic vehicles in Q3, all related to the previously announced 3,000 EV order from Jinhua City

  • A working capital surplus of $25.90 million was achieved at quarter-end, improved from a reported working capital surplus of $18.94 million as of September 30, 2011

  • Cash, cash equivalents and restricted cash totaled $21.44 million at quarter-end, a 140% increase from $8.93 million at the end of 2011

Mr. Xiaoming Hu, Chairman and Chief Executive Officer of Kandi Technologies, commented, "We are very pleased to report another successful quarter just before the initial launch of our largest EV project in China, Hangzhou's 20,000 EV leasing program. The third quarter demonstrated the balanced growth of both Kandi's legacy businesses, particularly the ATV and Go-cart segment, and the continued strength of our EV business offerings. During the quarter, we achieved robust year-over-year revenue and net income growth. We also have very strong EV sales in Jinhua City and sold 471 EVs in Q3. In coming months, by collaborating closely with State Grid Corporation of China (SGCC), China Aviation Lithium Battery Co., Ltd (CALB), and Hangzhou municipal government, we expect to launch the initial shipment of the first 5000 EVs to CALB for the currently largest pure EV commercialization launch in China -- the 20,000 pure EV leasing program in Hangzhou."

"There is a growing demand in China for clean energy products and solutions at both the national as well as municipal level. Our company is uniquely positioned to capitalize on this trend with our practical EV products and innovative business model which shall strengthen Kandi's market leadership in China."

Outlook
"The recent Letter of Intent we have entered with the government of Weifang Binhai Economic Development Zone of Shandong Province and Wanning city government of Hainan Province will help us effectively expand into new markets and build order backlog for the years to come. We are confident that our business model will be soon replicated in many other markets throughout China given our successful track record, favorable central government policy, support from regional government and our strong alliance with industry partners," concluded Mr. Hu.

*EXPLANATION OF NON-GAAP RESULTS

In addition to disclosing financial results in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this earnings release contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our future results. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in our budget, planning and evaluation processes, and to show the reader how our performance compares to other periods. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects: Non-GAAP net income and losses, and related per share amounts as reported for Q1 2012 exclude the effects of all option related expenses, stock award expense, Convertible Note interest expense, effects caused by amortization of discounts, on Convertible Notes, and the change of the fair value of financial derivatives.

KANDI TECHNOLOGIES, CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

September 30,

December 31,

2012

2011

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents

$

1,546,006

$

2,294,352

Restricted cash

19,895,444

6,634,989

Accounts receivable

26,921,141

12,932,776

Inventories (net of reserve for slow moving inventory of $0 and $72,487 as of September 30, 2012 and December 31, 2011 respectively)

14,385,086

6,674,467

Notes receivable

15,980,324

37,879,243

Other receivables

1,056,257

2,438,917

Prepayments and prepaid expenses

92,349

185,037

Due from employees

57,624

79,857

Advances to suppliers

4,105,847

852,638

Total Current Assets

84,040,078

69,972,276

LONG-TERM ASSETS

Plant and equipment, net

18,124,202

20,981,893

Land use rights, net

14,383,669

10,992,769

Intangible assets

723,003

-

Construction in progress

12,214,227

10,007,601

Deferred taxes

35,025

89,998

Investment in associated companies

184,701

229,213

Goodwill

437,525

-

Total Long-Term Assets

46,102,352

42,301,474

TOTAL ASSETS

$

130,142,430

$

112,273,750

KANDI TECHNOLOGIES, CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

September 30,

December 31,

2012

2011

(Unaudited)

CURRENT LIABILITIES

Accounts payable

$

10,968,071

$

5,061,069

Other payables and accrued expenses

1,182,349

3,137,983

Short-term bank loans

34,970,003

36,372,492

Customer deposits

131,557

1,025,357

Notes payable, net of discount of $0 and $71 as of September 30, 2012 and December 31, 2011 respectively

9,630,565

5,847,552

Income tax payable

181,766

153,730

Due to employees

160,547

9,455

Due to related party

841,251

841,251

Deferred taxes

70,522

56,362

Financial derivate - liability

-

213

Total Current Liabilities

58,136,631

52,505,464

LONG-TERM LIABILITIES

Financial derivatives - liability

2,621,557

3,919,411

Total Long-Term Liabilities

2,621,557

3,919,411

TOTAL LIABILITIES

60,758,188

56,424,875

STOCKHOLDERS' EQUITY

Common stock, $0.001 par value; 100,000,000 shares authorized; 29,941,134and 27,445,600 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

29,941

27,446

Additional paid-in capital

38,614,210

31,533,378

Retained earnings (the restricted portion is $1,940,832 at September 30, 2012 and December 31, 2011)

23,093,029

19,210,330

Accumulated other comprehensive income

7,647,062

5,077,721

TOTAL STOCKHOLDERS' EQUITY

69,384,242

55,848,875

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

130,142,430

$

112,273,750

KANDI TECHNOLOGIES, CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

Three Months Ended

Nine Months Ended

30-Sep-12

30-Sep-11

30-Sep-12

30-Sep-11

REVENUES, NET

$

12,765,694

$

10,310,558

$

38,182,211

$

28,789,766

COST OF GOODS SOLD

-9,541,687

-7,984,828

-29,829,097

-22,060,888

GROSS PROFIT

3,224,007

2,325,730

8,353,114

6,728,878

Research and development

-630,083

-608,463

-2,006,269

-1,695,003

Selling and marketing

-158,714

-85,239

-331,750

-234,854

General and administrative

-940,930

-1,067,021

-2,520,600

-2,568,417

INCOME FROM CONTINUING OPERATIONS

1,494,280

565,007

3,494,495

2,230,604

Interest income (expense), net

-76,866

117,353

-133,806

95,549

Change in fair value of financial instruments

-882,731

-271,780

1,078,795

7,480,992

Government grants

20,634

9,235

45,942

289,962

Investment (loss) income

-18,259

-12,905

-45,670

-20,181

Other income, net

239,203

95,067

285,805

262,299

INCOME (LOSS) BEFORE INCOME TAXES

776,261

501,977

4,725,561

10,339,225

INCOME TAX EXPENSE

-181,743

-117,119

-842,863

-394,624

NET INCOME

594,518

384,858

3,882,698

9,944,601

OTHER COMPREHENSIVE INCOME

Foreign currency translation

-260,114

377,991

2,569,341

1,524,411

COMPREHENSIVE INCOME (LOSS)

$

334,404

$

762,849

$

6,452,039

11,469,012

WEIGHTED AVERAGE SHARES OUTSTANDING BASIC

29,909,130

27,445,600

29,068,208

27,436,434

WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED

31,464,257

28,617,870

30,413,267

28,740,204

NET INCOME PER SHARE, BASIC

$

0.02

$

0.01

$

0.13

0.36

NET INCOME PER SHARE, DILUTED

$

0.02

$

0.01

$

0.13

0.35

KANDI TECHNOLOGIES, CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended September 30

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

3,882,698

$

9,944,601

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization

3,694,917

3,501,765

Deferred taxes

72,004

236,939

Option and warrant expense

19,053

195,474

Change of derivative instrument's fair value

-1,297,854

-7,480,992

Loss in investment in associated company

45,670

29,786

Changes in operating assets and liabilities:

(Increase) Decrease In:

Accounts receivable

-13,939,987

8,118,796

Inventories

-7,686,157

-2,554,537

Other receivables and prepaid expenses

1,395,899

-880,750

Due from employees

173,844

10,376

Prepayments and prepaid expenses

-3,158,733

-3,290,026

Marketable equity securities (trading)

-

305,564

Increase (Decrease) In:

Accounts payable

5,888,514

-1,431,210

Other payables and accrued liabilities

-1,957,184

-156,970

Customer deposits

-899,693

-24,783

Income tax payable

27,318

-14,090

Net cash (used in) provided by operating activities

$

-13,739,691

$

6,509,943

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash Acquired in Acquisition

112,551

-

Purchases of plant and equipment

-472,696

-240,954

Purchase of construction in progress

-2,160,338

-6,019,101

Issuance of notes receivable

-1,010,596

-2,751,302

Repayments of notes receivable

23,115,794

7,810,463

Net cash provided by (used in) investing activities

$

19,584,715

$

-1,200,894

CASH FLOWS FROM FINANCING ACTIVITIES:

Restricted cash

$

-13,241,885

$

-8,255,977

Proceeds from short-term bank loans

31,023,311

25,607,093

Repayments of short-term bank loans

-32,603,714

-22,748,197

Proceeds from notes payable

18,316,871

33,309,509

Repayments of notes payable

-14,558,408

-39,023,610

Option exercise & other financing

116,903

65,544

Common Stock Issued, net of Cost of Capital

3,741,790

-

Warrant exercise

219,059

Net cash provided by financing activities

-6,986,073

-11,045,638

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

-1,141,049

-5,736,589

Effect of exchange rate changes on cash

392,703

-136,100

Cash and cash equivalents at beginning of period

2,294,352

7,754,166

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

1,546,006

$

1,881,477

SUPPLEMENTARY CASH FLOW INFORMATION

Income taxes paid

$

688,668

$

408,714

Interest paid

$

2,062,306

$

1,776,835

Issuance of Common Stock for Acquisition

$

8,616,416

-

About Kandi Technologies, Corp.

Kandi Technologies, Corp. (KNDI) is a manufacturer and exporter of a variety of vehicles in China, making it a world leader in the production of popular off-road vehicles (ORVs). It also ranks among the leading manufacturers in China of all-terrain vehicles (ATVs), specialized utility vehicles (UTVs), and a recently introduced second-generation high mileage, two-seat three-wheeled motorcycle. Another major company focus has been on the manufacture and sale of the COCO electric vehicle (EV), a highly economical, beautifully designed, all-electric super mini-car for neighborhood driving and commuting. The convertible and hardtop models of the COCO EV are available in the United States and other countries, while the Chinese government has approved the sale of Kandi EVs in China since 2010. More information can be viewed at its corporate website is http://www.kandivehicle.com.

Safe Harbor Statement

This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

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