Kandi Technologies Reports Second Quarter 2017 Financial Results

JINHUA, China, Aug. 09, 2017 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ:KNDI), today announced its financial results for the second quarter of 2017.

Second Quarter Highlights

• Total revenues were $27.3 million for the second quarter of 2017, a decrease of 50.5% from total revenues of $55.2 million for the same period in 2016.
  
  
• Electric Vehicle (“EV”) parts sales decreased by 51.3%, to $26.2 million for the second quarter of 2017, compared with EV parts sales of $53.8 million for the same period in 2016.
  
  
• Revenues from sales of off-road vehicles decreased by 19.5%, to $1.1 million for the second quarter of 2017, compared with revenues from sales of off-road vehicles of $1.4 million for the same period in 2016.
  
  
• GAAP net loss for the second quarter of 2017 was $11.6 million, or a loss of $0.24 per fully diluted share, compared with GAAP net income of $2.8 million, or income of $0.06 per fully diluted share for the same period in 2016. This decrease is largely due to JV Company losses and significantly increased research and development expenses of $5.1 million for this quarter.
  
  
• Non-GAAP adjusted net loss¹, which excludes stock award expenses, was $9.5 million in the second quarter of 2017, compared with non-GAAP net income of $10.5 million for the same period in 2016. Non-GAAP adjusted loss per share¹ was approximately $0.20 per fully diluted share for the second quarter of 2017, compared with Non-GAAP adjusted earnings per share¹ of $0.22 per fully diluted share for the same period in 2016.
  
  
• Working capital surplus was $56.8 million as of June 30, 2017. Cash, cash equivalents and restricted cash totaled $30.1 million as of June 30, 2017.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, “2017 has been a challenging year for Kandi. The confusion surrounding the subsidy heavily impacted the Company’s business last year and we have been trying to regain the momentum this year. The management team is working hard to explore better growth opportunities. Despite second-quarter losses, Kandi Vehicles' estimated value has exceeded RMB four billion, the management team will actively seek strategic investors based upon the estimated value to increase its competitive advantages. The efforts the Company has made will lay a solid foundation to achieve strong business results."

Net Revenues and Gross Profit

	2Q17			2Q16			Y-o-Y%
Net Revenues (US$million)	$	27.3		$	55.2		-50.5	%
Gross Profit (US$million)	$	3.8		$	8.5		-55.6	%
Gross Margin		13.7	%		15.3	%	-

Net revenues for the second quarter of 2017 decreased by 50.5% compared to the same period last year. The decrease in net revenues was mainly due to a decrease in EV parts sales during this quarter. Selling prices of our products for the three months ended June 30, 2017, decreased on average from the same period last year. The decrease in revenues was primarily due to this decrease in sales volume.

Operating Income (Loss)

	2Q17			2Q16			Y-o-Y%
Operating Expenses (US$million)	$	7.1		$	10.8		-34.5	%
Operating Loss (US$million)	($	3.3	)	($	2.4	)	-39.7	%
Operating Margin		-12.2	%		-4.3	%	-
Operating (Loss) Income (US$million) (Non-GAAP)	($	1.3	)	$	5.9		-122.0	%

Total operating expenses in the second quarter of 2017 were $7.1 million, compared with $10.8 million in the same quarter of 2016. The decrease in total operating expenses was due to decreased SG&A expenses, which were $2.0 million in this quarter compared with $10.4 million in the same quarter last year.

GAAP Net (Loss) Income

	2Q17			2Q16			Y-o-Y%
Net (Loss) Income (US$million)	($	11.6	)	$	2.8		-513.8	%
(Loss) Earnings per Weighted Average Common Share	($	0.24	)	$	0.06		-
(Loss) Earnings per Weighted Average Diluted Share	($	0.24	)	$	0.06		-
Stock Award Expenses	$	2.0		$	8.3		-75.6	%
Change in the Fair Value of Financial Derivatives		-		($	0.5	)	-
Non-GAAP Net (Loss) Income from Continuing Operations	($	9.5	)	$	10.5		-190.6	%

Net loss was $11.6 million in the second quarter, compared with net income of $2.8 million in the same quarter of 2016. The negative change was primarily attributable to JV Company losses and significantly increased research and development expenses of approximately $5.1 million.

Non-GAAP net loss was $9.5 million in the second quarter of 2017, a 190.6% decrease compared to Non-GAAP net income of $10.5 million in the same quarter of 2016. The decrease was primarily attributable to the JV Company’s net losses, and significantly increased research and development expenses made in an effort to prepare the Company for future business growth.

Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”) Financial Results

In the second quarter of 2017, the JV Company sold 365 units of EV products.

The condensed financial income statements of the JV Company in the first quarter are as set forth below:

	2Q17			2Q16			Y-o-Y%
Net Revenues (US$million)	$	18.7		$	111.8		-83.3	%
Gross (Loss) Income (US$million)	($	1.5	)	$	14.7		-110.2	%
Gross Margin		-			13.1	%	-
Net (Loss) Income	($	14.6	)	$	8.6		-269.8	%
% of Net revenue		-			7.7	%	-

Revenue for the JV Company was $18.7 million in the second quarter of 2017, a decrease of 83.3% compared to the same quarter of 2016. Net loss was $14.6 million, a 269.8% decrease compared to net income of $8.6 million in the same quarter of 2016.

Kandi’s investments in the JV Company are accounted for using the equity method of accounting because Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company’s losses of $7.3 million for this quarter. After eliminating intra-entity profits and losses, Kandi’s share of the after-tax loss of the JV Company was $8.7 million for the second quarter of 2017.

Second Quarter 2017 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss its second quarter 2017 financial results at 8:00 A.M. Eastern Time (8:00 P.M. Beijing Time) on August 9, 2017. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Mr. Mei Bing, 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:

• Toll-free dial-in number: +1-877-407-3982
• International dial-in number: + 1-201-493-6780
• Webcast and replay: http://public.viavid.com/index.php?id=125842

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, Zhejiang Province, is engaged in the research and development, manufacturing and sales of various vehicle products. Kandi has established itself as one of China's leading manufacturers of pure electric vehicle ("EV") products (through its joint venture), EV parts and off-road vehicles.  Kandi conducts its primary business operations through its wholly-owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. (“Kandi Vehicles”), and the partially and wholly-owned subsidiaries of Kandi Vehicles. More information can be viewed at 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.

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- Tables Below -

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
		June 30, 2017				December 31, 2016
Current assets
Cash and cash equivalents		$	7,407,032			$	12,235,921
Restricted cash			22,708,654				12,957,377
Short term investment			-				4,463,097
Accounts receivable			34,964,666				32,394,613
Inventories (net of provision for slow moving inventory of $465,096 and $415,797 as of June 30, 2017 and December 31, 2016, respectively			13,427,455				11,914,110
Notes receivable from JV Company and related party			-				400,239
Other receivables			1,185,804				66,064
Prepayments and prepaid expense			4,319,890				4,317,855
Due from employees			33,076				4,863
Advances to suppliers			15,009,973				38,250,818
Amount due from JV Company, net			138,908,557				136,536,159
Amount due from related party			10,742,243				10,484,816
TOTAL CURRENT ASSETS			248,707,350				264,025,932
LONG-TERM ASSETS
Property, Plant and equipment, net			13,533,421				15,194,442
Land use rights, net			11,903,213				11,775,720
Construction in progress			43,655,614				27,054,181
Deferred taxes assets			4,394,192				-
Long Term Investment			1,401,304				1,367,723
Investment in JV Company			65,258,976				77,453,014
Goodwill			322,591				322,591
Intangible assets			372,163				413,211
Advances to suppliers			29,972,701				33,819,419
Other long term assets			7,880,223				8,271,952
TOTAL Long-Term Assets			178,694,398				175,672,253
TOTAL ASSETS		$	427,401,748			$	439,698,185
CURRENT LIABILITIES
Accounts payables		$	111,356,483			$	115,870,051
Other payables and accrued expenses			5,269,999				4,835,952
Short-term loans			32,008,732				34,265,065
Customer deposits			177,328				41,671
Notes payable			37,289,011				14,797,325
Income tax payable			1,435,646				1,364,235
Due to employees			26,156				21,214
Deferred taxes liabilities			-				118,643
Deferred income			1,371,213				6,363,751
Loss contingency-litigation			2,950,114				-
Total Current Liabilities			191,884,682				177,677,907
LONG-TERM LIABILITIES
Long term bank loans			29,501,136				28,794,172
Deferred taxes liabilities			-				878,639
Total Long-Term Liabilities			29,501,136				29,672,811
TOTAL LIABILITIES			221,385,818				207,350,718
STOCKHOLDER'S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 48,021,538 and 47,699,638 shares issued and outstanding at June 30,2017 and December 31,2016, respectively			48,022				47,700
Additional paid-in capital			232,380,792				227,911,477
Retained earnings (the restricted portion is $4,217,753 and $4,219,808 at June 30,2017 and December 31, 2016, respectively)			(11,166,290	)			24,545,163
Accumulated other comprehensive income (loss)			(15,246,594	)			(20,156,873	)
TOTAL STOCKHOLDERS' EQUITY			206,015,930				232,347,467
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	427,401,748			$	439,698,185

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
		Three Months Ended								Six Months Ended
		June 30,  2017				June 30, 2016				June 30, 2017				June 30,  2016
REVENUES FROM UNRELATED PARTY, NET		$	1,153,555			$	6,979,488			$	4,116,486			$	40,953,904
REVENUES FROM JV COMPANY AND RELATED PARTY, NET			26,171,724				48,237,880				27,483,366				64,921,357
REVENUES, NET			27,325,279				55,217,368				31,599,852				105,875,261
COST OF GOODS SOLD			23,568,343				46,762,331				27,175,584				90,702,126
GROSS PROFIT			3,756,936				8,455,037				4,424,268				15,173,135
OPERATING EXPENSES:
Research and development			5,142,041				494,193				25,911,773				700,161
Selling and marketing			402,253				730,443				760,562				776,778
General and administrative			1,558,652				9,625,194				9,877,946				17,658,076
Total Operating Expenses			7,102,946				10,849,830				36,550,281				19,135,015
LOSS FROM OPERATIONS			(3,346,010	)			(2,394,793	)			(32,126,013	)			(3,961,880	)
OTHER INCOME (EXPENSE):
Interest income			559,425				785,152				1,090,067				1,565,333
Interest expense			(548,810	)			(432,318	)			(1,163,263	)			(874,397	)
Change in fair value of financial instruments			0				526,558				0				3,812,898
Government grants			262,137				1,503,384				5,329,611				1,697,857
Share of (loss) profit after tax of JV			(8,738,254	)			4,918,633				(13,899,967	)			96,163
Other income, net			121,556				286,790				150,177				309,177
Total other (expense) income, net			(8,343,946	)			7,588,199				(8,493,375	)			6,607,031
(LOSS) INCOME BEFORE INCOME TAXES			(11,689,956	)			5,193,406				(40,619,388	)			2,645,151
INCOME TAX BENEFIT (EXPENSE)			131,939				(2,400,226	)			4,907,936				236,449
NET (LOSS) INCOME			(11,558,017	)			2,793,180				(35,711,452	)			2,881,600
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Foreign currency translation			3,118,462				(7,152,903	)			4,910,278				(5,628,264	)
COMPREHENSIVE LOSS		$	(8,439,555	)		$	(4,359,723	)		$	(30,801,174	)		$	(2,746,664	)
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC			47,974,974				47,601,286				47,854,351				47,305,560
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED			47,974,974				47,601,286				47,854,351				47,311,584
NET (LOSS) INCOME PER SHARE, BASIC		$	(0.24	)		$	0.06			$	(0.75	)		$	0.06
NET (LOSS) INCOME PER SHARE, DILUTED		$	(0.24	)		$	0.06			$	(0.75	)		$	0.06

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Six months Ended
		June 30, 2017				June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(35,711,452	)		$	2,881,600
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			2,334,776				2,458,160
Assets Impairments			38,548				-
Deferred taxes			(5,415,959	)			(4,645,415	)
Change in fair value of financial instruments			-				(3,812,898	)
Share of loss after tax of JV Company			13,899,967				(96,163	)
Stock Compensation cost			4,493,187				15,134,658
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) Decrease In:
Accounts receivable			(2,826,433	)			(45,728,877	)
Notes receivable			-				229,449
Notes receivable from JV Company and related party			4,875,795				-
Inventories			(1,242,422	)			9,189,542
Other receivables and other assets			(498,376	)			(9,424,711	)
Due from employee			(23,344	)			(56,998	)
Advances to supplier and Prepayments and prepaid expenses			23,946,781				(12,953,797	)
Advances to suppliers-Long term			(4,099,879	)			-
Amount due from JV Company			(21,853,571	)			(84,064,780	)
Due from related party			-				29,188,707
Increase (Decrease) In:
Accounts payable			25,017,146				92,266,667
Other payables and accrued liabilities			127,252				6,009,203
Notes payable			(2,731,692	)			(3,824,162	)
Customer deposits			132,765				154,168
Income Tax payable			(31,314	)			3,363,489
Deferred income			(5,077,291	)			-
Loss contingency-litigation			2,909,151				-
Net cash used in operating activities		$	(1,736,365	)		$	(3,732,158	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment, net			(128,509	)			(37,554	)
Disposal of land use rights and other intangible assets			-				13,775
Purchases of construction in progress			(1,029,516	)			(1,356,866	)
Repayment of notes receivable			-				4,953,787
Short Term Investment			4,509,183				1,602,698
Net cash provided by investing activities		$	3,351,158			$	5,175,840
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash			(9,302,161	)			1,300,215
Proceeds from short-term bank loans			13,963,923				-
Repayments of short-term bank loans			(17,018,531	)			-
Proceeds from notes payable			5,713,368				-
Warrant exercise			-				434,666
Net cash (used in) provided by financing activities		$	(6,643,401	)		$	1,734,881
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(5,028,608	)			3,178,563
Effect of exchange rate changes on cash			199,530				(383,266	)
Cash and cash equivalents at beginning of year			12,235,921				16,738,559
CASH AND CASH EQUIVALENTS AT END OF PERIOD			7,406,843				19,533,856
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid			1,001,501				1,051,032
Interest paid			742,958				877,496
SUPPLEMENTAL NON-CASH DISCLOSURES:
Prepayment transferred to Construction in progress			8,712,000				-
Acquisition of Construction in progress by Accounts Payable			5,974,383				-
Settlement of due from JV Company and related parties with notes receivable			22,819,847				34,866,384
Settlement of accounts receivables with notes receivable from unrelated parties			1,076,386				12,714,237
Assignment of notes receivable to supplier to settle accounts payable			19,424,810				49,046,178
Settlement of accounts payable with notes payables			18,839,444				4,796,570
Deferred tax change to other comprehensive income			24,486				-

¹ Non-GAAP measures, including Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change of fair value of financial derivatives 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.

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