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Kandi Technologies Reports Third Quarter 2019 Financial Results

JINHUA, China, Nov. 12, 2019 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), today announced its financial results for the third quarter of 2019.

Third Quarter Financial Highlights

  • Total revenues were $31.7 million for the third quarter of 2019, a decrease of 16.6% from total revenues of $38.0 million for the same period in 2018.
     
  • Electric Vehicle (“EV”) parts sales decreased by 19.4%, to $25.8 million for the third quarter of 2019, compared with EV parts sales of $32.1 million for the same period in 2018.
     
  • Revenues from sales of off-road vehicles decreased by 1.5%, to $5.8 million for the third quarter of 2019, compared with revenues from sales of off-road vehicles of $5.9 million for the same period in 2018.
     
  • Gross profit decreased 15.5% to $5.3 million, compared to $6.2 million for the same period last year. Gross margin increased to 16.7% compared to 16.4% for the same period of 2018.
  • GAAP net income for the third quarter of 2019 was $12.1 million, or earnings of $0.23 per fully diluted share compared with GAAP net loss of $6.5 million, or loss of $0.13 per fully diluted share for the same period in 2018.
  • Non-GAAP adjusted net income1, which excludes stock award expenses and the change of the fair value of contingent consideration, was $12.1 million in the third quarter of 2019, compared with non-GAAP net loss of $4.9 million for the same period in 2018. Non-GAAP adjusted income per share1 was approximately $0.23 per fully diluted share for the third quarter of 2019, compared with Non-GAAP adjusted loss per share1 of $0.10 per fully diluted share for the same period in 2018.
  • Working capital was $80.4 million as of September 30, 2019. Cash, cash equivalents and restricted cash totaled $26.1 million as of September 30, 2019.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, “Kandi’s financial performance in the first three quarters of 2019 were unsatisfying due to the negative impact stemming from the Affiliate Company’s2 equity adjustment and the corresponding changes to its business operations. However, over the past six months, the Company’s efforts have led to new opportunities for its future development. These efforts include reorganizing and working with other business partners to facilitate the online ride-sharing service alliance project, which offers 300,000 government-accredited vehicles within five years. The Company’s efforts also include improving the operation and production capacity of the Hainan facility, enhancing the Company’s ability to supply the EV-part products, strengthening its relationship with DGL Group Inc. (USA) while simultaneously developing the business of the all-terrain vehicles. We are confident in the Company's ability to grow and prosper in 2020. In addition, Geely Technologies Group Co., Ltd. has conducted substantial work in connection with the improvement of the Affiliate Company and achieved significant results, details of which will be released by the Affiliate Company in December.”

Revenues and Gross Profit

3Q19   3Q18   Y-o-Y%  
Revenues (US$million) $31.7   $38.0   -16.6%  
Gross Profit (US$million) $5.3   $6.2   -15.5%  
Gross Margin   16.7%     16.4%   -  

Revenues for the third quarter of 2019 decreased by 16.6% compared to the same period of last year. The decrease in revenues was mainly due to the decrease in EV parts sales during this quarter. The decrease in EV parts sales was primarily due to the Affiliate Company’s temporary declining sales, which was caused by its product adjustments. The increase in the gross margin was mainly due to the increased selling price of the charging and exchanging equipment and the increased proportion of the high-margin battery processing business this year.                      

Operating Income (Loss)

3Q19   3Q18   Y-o-Y%  
Operating Expenses (US$million) $5.0   $8.7   42.7%  
Operating Income (Loss) (US$million) $0.3   ($2.4)   -113.1%  
Operating Margin   1.0%     -6.4%   -  

Total operating expenses in the third quarter of 2019 were $5.0 million, compared with $8.7 million in the same quarter of 2018. The decrease in total operating expenses was due to the decreased R&D expenses, which were $0.6 million in this quarter compared with $5.7 million in the same quarter last year.

The following table summarizes our non-GAAP net income for the three months ended September 30, 2019 and 2018:

3Q19   3Q18   Y-o-Y%  
Net Income (Loss) (US$million) $12.1   ($6.5)   -285.4%  
Earnings (Loss) per Weighted Average Common Share $0.23   ($0.13)   -  
Earnings (Loss) per Weighted Average Diluted Share $0.23   ($0.13)   -  
Stock Award Expenses (US$million) $0.02   $0.03   -27.6%  
Change in the Fair Value of Contingent Consideration (US$million) ($0.06)   $1.6   -103.7%  
Non-GAAP Net Income (Loss) (US$million) $12.1   ($5.0)   -344.2%  

Net income was $12.1 million in the third quarter of 2019, compared with net loss of $6.5 million in the same quarter of 2018. The increase of net income for this quarter was primarily attributable to the gain from equity sale in the Affiliate Company and the decreased research and development expense.

Non-GAAP net income was $12.1 million in the third quarter of 2019, compared to Non-GAAP net loss of $5.0 million in the same quarter of 2018. The increase of net income (non-GAAP) was primarily attributable to the gain from equity sale in the Affiliate Company and the decreased research and development expense.

Third Quarter 2019 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss its third quarter 2019 financial results at 8:00 A.M. Eastern Time (9:00 P.M. Beijing Time) on November 12, 2019. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Mr. Zhu Xiaoying, interim Chief Financial Officer of the Company, will deliver prepared remarks to be followed by a question and answer session.  

Dial-in details for the conference call are as follows:

A live audio webcast of the call can also be accessed by visiting Kandi's Investor Relations page on the Company’s website at http://www.kandivehicle.com. An archive of the webcast will be available on the Company’s website following the live call.

About Kandi Technologies Group, Inc.

Kandi Technologies Group, Inc. (KNDI), headquartered in Jinhua Economic Development Zone, Zhejiang Province, is engaged in the research, development, manufacturing, and sales of various vehicular products. Kandi conducts its primary business operations through its wholly-owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. ("Kandi Vehicles") and its subsidiaries, SC Autosports, LLC, a wholly-owned subsidiary of Kandi in the United States and Kandi Electric Vehicles Group Co., Ltd. (the “Affiliate Company”). Kandi Vehicles has established itself as one of China's leading manufacturers of pure electric vehicle (“EV”) parts and off-road vehicles.

In 2013, Kandi Vehicles and Geely Group, China's leading automaker, jointly invested in the establishment of the Affiliate Company in order to develop, manufacture and sell pure EV products. As of September 30, 2019, Geely Technologies Group Co., Ltd. (including its affiliate) and Kandi Vehicles respectively hold 78% and 22% of the equity interest in the Affiliate Company.  The Affiliate Company has established itself as one of the driving forces in the development and the manufacturing of pure EV products in China.

More information about KNDI is available on the Company's corporate website at http://www.kandivehicle.com. The Company routinely posts important information on its website.

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.

Follow us on Twitter: @ Kandi_Group
Company Contact:

Ms. Kewa Luo
Kandi Technologies Group, Inc.
Phone: 1-212-551-3610
Email: IR@kandigroup.com

________________________________

1Non-GAAP measures, including Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change of fair value of contingent consideration and the effects of stock award expenses. We supply non-GAAP information because we believe it allows our investors to obtain a clearer understanding of our operations. Any non-GAAP measure should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance prepared in accordance with GAAP.

2 Refers to Kandi Electric Vehicles Group Co., Ltd., formerly known as the “JV Company”.


- Tables Below -


KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
   

    September 30,
2019
    December 31,
2018
 
    (UNAUDITED)        
Current assets            
Cash and cash equivalents   $ 14,338,637     $ 15,662,201  
Restricted cash     11,713,004       6,690,870  
Accounts receivable (net of allowance for doubtful accounts of $130,420 and $120,010 as of September 30, 2019 and December 31, 2018, respectively)     54,859,801       34,274,728  
Inventories     35,447,383       21,997,868  
Notes receivable     41,549,888       72,712  
Notes receivable from the Affiliate Company and related party     -       3,861,032  
Other receivables     12,859,304       1,264,323  
Prepayments and prepaid expense     9,497,459       11,136,408  
Due from employees     5,499       1,001  
Advances to suppliers     4,474,104       4,705,183  
Amount due from the Affiliate Company, net     25,335,894       67,683,462  
Right - of - use asset     42,974       -  
TOTAL CURRENT ASSETS     210,123,947       167,349,788  
                 
LONG-TERM ASSETS                
Property, plant and equipment, net     74,491,204       82,045,923  
Land use rights, net     11,084,717       11,749,728  
Construction in progress     17,781       -  
Deferred taxes assets     -       8,204  
Investment in the Affiliate Company     53,837,011       128,929,893  
Goodwill     27,762,120       28,552,215  
Intangible assets     3,723,988       4,328,127  
Other long term assets     4,803,349       5,865,386  
TOTAL Long-Term Assets     175,720,170       261,479,476  
                 
TOTAL ASSETS   $ 385,844,117     $ 428,829,264  
                 
CURRENT LIABILITIES                
Accounts payable   $ 79,632,036     $ 112,309,683  
Other payables and accrued expenses     4,843,001       4,251,487  
Short-term loans     30,969,731       30,539,236  
Customer deposits     33,535       94,408  
Notes payable     11,463,004       12,787,619  
Income tax payable     1,519,699       3,471,366  
Due to employees     7,105       28,473  
Deferred income     1,237,556       1,340,605  
Lease liability     44,121       -  
Total Current Liabilities     129,749,788       164,822,877  
                 
LONG-TERM LIABILITIES                
Long term bank loans     27,606,502       28,794,136  
Deferred taxes liability     1,758,643       1,711,343  
Contingent consideration liability     6,562,000       7,256,000  
Other long-term liability     -       622,034  
Total Long-Term Liabilities     35,927,145       38,383,513  
                 
TOTAL LIABILITIES     165,676,933       203,206,390  
                 
STOCKHOLDER’S EQUITY                
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,263,102 and 55,992,002 shares issued and 52,839,441 and 51,484,444 outstanding at September 30, 2019 and December 31, 2018, respectively     52,839       51,484  
Less: Treasury stock (487,155 shares with average price of $5.09 and 0 shares at September 30, 2019 and December 31, 2018, respectively )     (2,477,965 )     -  
Additional paid-in capital     259,691,370       254,989,657  
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at September 30, 2019 and December 31, 2018, respectively)     (9,135,198 )     (9,497,009 )
Accumulated other comprehensive loss     (27,963,862 )     (19,921,258 )
TOTAL STOCKHOLDERS’ EQUITY     220,167,184       225,622,874  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 385,844,117     $ 428,829,264  

  
KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
  

    Three Months Ended     Nine Months Ended  
    September 30,
2019
    September 30,
2018
    September 30,
2019
    September 30,
2018
 
                         
REVENUES FROM UNRELATED PARTY, NET   $ 26,968,385     $ 14,860,034     $ 63,360,044     $ 32,211,352  
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET     4,720,159       23,135,326       10,543,190       30,479,521  
                                 
REVENUES, NET     31,688,544       37,995,360       73,903,234       62,690,873  
                                 
COST OF GOODS SOLD     (26,412,129 )     (31,753,311 )     (61,288,228 )     (53,044,861 )
                                 
GROSS PROFIT     5,276,415       6,242,049       12,615,006       9,646,012  
                                 
OPERATING EXPENSES:                                
Research and development     (596,187 )     (5,691,649 )     (1,766,210 )     (7,091,836 )
Selling and marketing     (930,810 )     (898,896 )     (2,448,291 )     (1,875,294 )
General and administrative     (3,432,920 )     (2,070,947 )     (11,096,246 )     (5,534,039 )
Total Operating Expenses     (4,959,917 )     (8,661,492 )     (15,310,747 )     (14,501,169 )
                                 
INCOME (LOSS) FROM OPERATIONS     316,498       (2,419,443 )     (2,695,741 )     (4,855,157 )
                                 
OTHER INCOME (EXPENSE):                                
Interest income     209,736       52,745       559,954       1,452,522  
Interest expense     (435,524 )     (483,376 )     (1,304,062 )     (1,505,409 )
Change in fair value of contingent consideration     57,000       (1,552,686 )     694,000       1,814,326  
Government grants     502,146       607,008       725,189       717,821  
Gain from equity dilution in the Affiliate Company     (49,285 )     -       4,291,974       -  
Gain from equity sale in the Affiliate Company     20,574,217       -       20,574,217       -  
Share of loss after tax of the Affiliate Company     (8,433,767 )     (3,247,343 )     (22,883,126 )     (79,592 )
Other income , net     57,833       15,735       357,626       666,294  
Total other income (expense), net     12,482,356       (4,607,917 )     3,015,772       3,065,962  
                                 
INCOME (LOSS) BEFORE INCOME TAXES     12,798,854       (7,027,360 )     320,031       (1,789,195 )
                                 
INCOME TAX (EXPENSE) BENEFIT     (709,413 )     505,961       41,780       370,316  
                                 
NET INCOME (LOSS)     12,089,441       (6,521,399 )     361,811       (1,418,879 )
                                 
OTHER COMPREHENSIVE INCOME (LOSS)                                
Foreign currency translation     (8,531,043 )     (8,108,270 )     (8,042,604 )     (13,230,652 )
                                 
COMPREHENSIVE INCOME (LOSS)   $ 3,558,398     $ (14,629,669 )   $ (7,680,793 )   $ (14,649,531 )
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED     52,613,642       51,474,048       52,332,260       51,089,047  
                                 
NET INCOME (LOSS) PER SHARE, BASIC AND DILUTED   $ 0.23     $ (0.13 )   $ 0.01     $ (0.03 )


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
Income
    Total  
Balance, December 31, 2018     51,484,444       51,484       -       254,989,657       (9,497,009 )     (19,921,258 )     225,622,874  
Stock issuance and award     1,096,397       1,097       -       3,387,379       -       -       3,388,476  
Net income (loss)     -       -       -       -       (4,409,472 )     -       (4,409,472 )
Foreign currency translation     -       -       -       -       -       5,404,028       5,404,028  
                                                         
Balance, March 31, 2019     52,580,841       52,581       -       258,377,036       (13,906,481 )     (14,517,230 )     230,005,906  
Stock issuance and award     238,600       238       -       1,259,569       -       -       1,259,807  
Net income (loss)     -       -       -       -       (7,318,158 )     -       (7,318,158 )
Foreign currency translation     -       -       -       -       -       (4,915,589 )     (4,915,589 )
                                                         
Balance, June 30, 2019     52,819,441       52,819       -       259,636,605       (21,224,639 )     (19,432,819 )     219,031,966  
Stock issuance and award     20,000       20       -       69,380       -       -       69,400  
Stock buyback     -       -       (2,477,965 )     -       -       -       (2,477,965 )
Commission in stock buyback     -       -       -       (14,615 )     -       -       (14,615 )
Net income (loss)     -       -       -       -       12,089,441       -       12,089,441  
Foreign currency translation     -       -       -       -       -       (8,531,043 )     (8,531,043 )
                                                         
Balance, September 30, 2019     52,839,441       52,839       (2,477,965 )     259,691,370       (9,135,198 )     (27,963,862 )     220,167,184  
                                                         
    Number of
Outstanding
Shares
    Common
Stock
    Treasury
Stock
    Additional
Paid-in
Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income
    Total  
Balance, December 31, 2017     48,036,538       48,037       -       233,055,348       (3,802,310 )     (6,310,763 )     222,990,312  
Stock issuance and award     2,972,337       2,972       -       19,099,556       -       -       19,102,528  
Net income (loss)     -       -       -       -       3,727,995       -       3,727,995  
Foreign currency translation     -       -       -       -       -       7,465,240       7,465,240  
                                                         
Balance, March 31, 2018     51,008,875       51,009       -       252,154,904       (74,315 )     1,154,477       253,286,075  
Stock issuance and award     288,600       289       -       2,038,476       -       -       2,038,765  
Net income (loss)     -       -       -       -       1,374,525       -       1,374,525  
Foreign currency translation     -       -       -       -       -       (12,587,622 )     (12,587,622 )
                                                         
Balance, June 30, 2018     51,297,475       51,298       -       254,193,380       1,300,210       (11,433,145 )     244,111,743  
Stock issuance and award     184,469       184       -       787,529       -       -       787,713  
Net income (loss)     -       -       -       -       (6,521,399 )     -       (6,521,399 )
Foreign currency translation     -       -       -       -       -       (8,108,271 )     (8,108,271 )
                                                         
Balance, September 30, 2018     51,481,944       51,482       -       254,980,909       (5,221,189 )     (19,541,416 )     230,269,786  


KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

     Nine Months Ended  
    September 30,
2019
    September 30,
2018
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income (loss)   $ 361,811     $ (1,418,879 )
Adjustments to reconcile net income to net cash provided by operating activities                
Depreciation and amortization     6,443,422       2,271,599  
Impairments     44,544       24,854  
Allowance for doubtful accounts     15,366       (7,093 )
Deferred taxes     50,693       -  
Share of loss after tax of the Affiliate Company     22,883,126       79,592  
Gain from equity dilution in the Affiliate Company     (4,291,974 )     -  
Gain from equity sale in the Affiliate Company     (20,574,217 )     -  
Change in fair value of contingent consideration     (694,000 )     (1,814,326 )
Stock compensation cost     1,337,333       253,934  
                 
Changes in operating assets and liabilities:                
(Increase) Decrease In:                
Accounts receivable     (36,822,184 )     (52,845,923 )
Deferred taxes assets     -       (52,126 )
Notes receivable     174,881       491,272.00  
Notes receivable from the Affiliate Company and related party     437,203       3,196,340  
Inventories     (14,813,147 )     1,555,993  
Other receivables and other assets     (17,275,954 )     1,497,230  
Due from employee     (25,861 )     945  
Advances to supplier and prepayments and prepaid expenses     1,357,001       (4,590,404 )
Amount due from the Affiliate Company     30,549,072       (81,549,214 )
Amount due from Affiliate Company-Long term     -       15,907,183  
Due from related party     -       161,874  
                 
Increase (Decrease) In:                
Accounts payable     11,383,411       101,684,965  
Other payables and accrued liabilities     7,791,028       29,845,307  
Notes payable     (11,836,950 )     (12,434,813 )
Customer deposits     (59,734 )     20,350  
Income tax payable     (1,803,574 )     (2,353,826 )
Deferred income     (56,448 )     (761,643 )
Net cash used in operating activities   $ (25,425,152 )   $ (836,809 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property, plant and equipment, net     (955,670 )     (304,745 )
Purchases of land use rights and other intangible assets     -       (105,480 )
Acquisition of Jinhua An Kao (net of cash received)     -       (3,610,846 )
Acquisition of SC Autosports     -       486,954  
Purchases of construction in progress     (18,491 )     (425,241 )
Reimbursement of capitalize interests for construction in progress     -       1,818,390  
Cash received from equity sale in the Affiliate Company     32,061,558       -  
Long Term Investment     -       1,458,464  
Net cash provided by (used in) investing activities   $ 31,087,397     $ (682,504 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from short-term bank loans     27,864,409       25,515,452  
Repayments of short-term bank loans     (26,261,331 )     (26,283,065 )
Repayments of long-term bank loans     (145,734 )     (153,523 )
Proceeds from notes payable     -       40,313,800  
Repayment of notes payable     -       (43,024,633 )
Cash used for stock buyback     (2,492,579 )     -  
Net cash used in financing activities   $ (1,035,235 )   $ (3,631,969 )
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH     4,627,010       (5,151,282 )
Effect of exchange rate changes on cash     (928,440 )     (512,545 )
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR     22,353,071       16,110,496  
                 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD     26,051,641       10,446,669  
-CASH AND CASH EQUIVALENTS AT END OF PERIOD     14,338,637       1,342,085  
-RESTRICTED CASH AT END OF PERIOD     11,713,004       9,104,584  
                 
SUPPLEMENTARY CASH FLOW INFORMATION                
Income taxes paid     1,711,101       1,981,072  
Interest paid     1,304,062       1,274,399  
                 
SUPPLEMENTAL NON-CASH DISCLOSURES:                
Acquisition of Jinhua An Kao by stock     -       20,718,859  
Acquisition of SC Autosports by stock     -       756,664  
Amount due from the Affiliate Company converted to investment in the Affiliate Company     -       83,669,804  
Notes receivable from unrelated parties for equity transfer payment     43,137,369       -