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Kandi Technologies Reports Third Quarter 2015 Financial Results

- Q3 EV parts sales increased 35.7% year-over-year to $49.0 million
- Q3 operating cash flow reached $11.6 million
- Q3 the JV Company sold 6,004 EV products, a 208% increase year-over-year
-Q3 EV products direct sales increased 367.2% quarter-over-quarter

JINHUA, China, Nov. 9, 2015 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (NASDAQ GS:KNDI) (the "Company," "we" or "Kandi"), today announced its financial results for the quarter ended September 30, 2015.

Third Quarter 2015 Highlights

  • Total revenues grew 14.3% to $50.5 million for the third quarter of 2015 from $44.2 million for the same period of 2014;
  • Electric Vehicle ("EV") parts sales increased 35.7% to $49.0 million for the third quarter of 2015, compared with $36.1 million in the same period of 2014;
  • Kandi Electric Vehicles Group Co., Ltd. (the "JV Company"), sold 6,004 EV products, a 208% increase compared with the same period last year. Total EV product sales comprised 3,000 EV products to the Micro Public Transportation (MPT) program and 3,004 EV products through the distribution channel under its direct sales program, with the latter being a significant sequential increase of 367.2% over the 643 EV products sold through the distribution channel under the direct sales program in the second quarter.
  • GAAP net income for the third quarter of 2015 was $2.3 million, or approximately $0.05 per fully diluted share, compared with $13.5 million, or approximately $0.31 per fully diluted share in the same period of 2014. The decrease was mainly due to changes in stock-based compensation expenses and the fair value of the financial derivatives during the period;
  • Non-GAAP adjusted net income1, which excludes stock award expenses and changes in the fair value of financial derivatives, was $6.3 million, a 17.7% increase from $5.4 million in the same quarter of 2014. Non-GAAP adjusted earnings per share1 was approximately $0.13 per fully diluted share for the third quarter of 2015 compared with $0.12 per fully diluted share for the same quarter of 2014;
  • Working capital surplus was $54.2 million as of September 30, 2015;
  • Cash, cash equivalents and restricted cash totaled $27.4 million as of September 30, 2015.

"The third quarter performance underscores our tremendous growth in EV parts and EV sales as we became China's top seller for EV products in September," commented Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, "During the third quarter, we obtained the approval for a vehicle purchase tax exemption for Kandi Cyclone ("K17"), while launching a successful promotion in Beijing and Shanghai. The initial market response has been extremely positive, and we believe K17 will become the Company's key driver for growth over the next year. Meanwhile, China's central government has extended its continuous support and confidence in developing the new energy vehicle (NEV) industry by releasing additional policies, including reducing traffic controls and purchase quotas on NEVs, encouraging government purchases, and promoting EV car-share programs. With the government's dedication, we see unprecedented opportunities ahead of us, and we are well-positioned to benefit from the EV adoption in China by leveraging our unique growth engines: the rapid expansion of our Micro Public Transportation program and the burgeoning direct sales program through the distribution channel."

"We are very pleased to achieve strong financial results in the third quarter of 2015," added Mr. Wang Cheng, Chief Financial Officer of Kandi, "Both sales and gross margin were in line with our expectations. With positive operating cash flow of $11.6 million, we are fully prepared for the significant growth potential around the corner."

Third Quarter 2015 Financial Results:

Net Revenues and Gross Profit

3Q15 2Q15 2Q14 Q-o-Q% Y-o-Y%
Net Revenues
(US$mln)
$50.53 $47.96 $44.21 5.3% 14.3%
Gross Profit
(US$mln)
$7.12 $6.49 $5.51 9.6% 29.2%
Gross Margin 14.1% 13.5% 12.5% -- --

Net revenues increased 5.3% sequentially from the second quarter of 2015 due to the sales growth of EV products from the JV Company. Gross margin increased 0.6% sequentially as a result of the cost control from battery packing production. Gross margin increased 1.6% year-over-year due to the margin improvement from EV parts, which was mainly contributed by effective cost control and the scaled production. Gross margin growth was partially offset by the sales decrease in off-road vehicles and EV products sales, with the latter being completely transferred to the JV Company this year per the Joint Venture Agreement.

Operating Income (Loss)

3Q15 2Q15 3Q14 Q-o-Q% Y-o-Y%
Operating Expenses
(US$mln)
$9.56 $4.49 $2.90 112.8% 229.6%
Operating Income
(Loss) (US$mln)
($2.44 ) $ 2.00 $ 2.61 -222.1% -193.6%
Operating Margin -4.8% 4.2% 5.9% -- --

Total operating expenses were $9.6 million, compared with $4.5 million in the second quarter of 2015, and $2.9 million in the third quarter of 2014. The significant increase in total operating expenses was mainly due to the $7.0 million expenses for stock award compensation and $0.5 million in legal expenses in the third quarter of 2015.

GAAP Net Income

3Q15 2Q15 3Q14 Q-o-Q% Y-o-Y%
Net Income
(US$mln)
$2.34 $5.43 $13.53 -56.8% -82.7%
Earnings per Weighted Average Common Share $0.05 $0.12 $0.31 -- --
Earnings per Weighted Average Diluted Share $ 0.05 $ 0.12 $ 0.31 -- --

Non-GAAP Net Income

3Q15 2Q15 3Q14 Q-o-Q% Y-o-Y%
GAAP net income from continuing operations $2.34 $5.43 $13.53 -56.8% -82.7%
Stock award expenses $7.03 $3.48 $2.02 101.9% 247.1%
Change of the fair value of financial derivatives $ 3.05 $ 4.00 $ 10.19 -23.8% -70.1%
Non-GAAP net income (loss) from continuing operations $6.32 $4.90 $5.37 28.9% 17.7%

Net income was $2.3 million, compared with $5.4 million in the second quarter of 2015, and $13.5 million in the third quarter of 2014. The decrease in net income was mainly due to the $7.0 million expenses for the stock award compensation in the third quarter of 2015. Non-GAAP net income was $6.3 million, a 28.6% increase from $4.9 million in the second quarter of 2015 and 16.7% increase from $5.4 million in the third quarter of 2014. The increase in non-GAAP net income was in line with the revenue growth and the margin improvements.

JV Company Financial Results

In the third quarter, the JV Company sold 6,004 EV products, a 208% increase compared with the same period last year. Total EV product sales comprised 3,000 EV products to the Micro Public Transportation program and 3,004 EV products through the distribution channel under the direct sales program, with the latter being a significant sequential increase over the 643 EV products sold through the distribution channel under the direct sales program in the second quarter.

The condensed financial income statement is as below:

3Q15 2Q15 3Q14 Q-o-Q% Y-o-Y%
Net Revenues (US$mln) $98.45 $68.95 $46.85 42.8% 110.1%
Gross Profit (US$mln) $13.33 $10.65 $7.03 25.1% 89.7%
Gross Margin 13.5% 15.4% 15.0% -- --
Net Income $1.61 $1.59 $4.40 1.6% -63.4%
% of Net revenue 1.6% 2.3% 9.4% -- --

Gross margin in the third quarter of 2015 was 13.5%, compared with gross margin of 15.4% in the second quarter of 2015 and 15.0% in the same period of 2014. The sequential decrease was the result of the lower selling price to a strategic partner in the third quarter of 2015.

We accounted for our investments in the JV Company under the equity method of accounting as we have a 50% ownership interest in the JV Company. As a result, we recorded 50% of the JV Company's profit for $0.8 million for the third quarter of 2015. After eliminating intra-entity profits and losses, our share of the after tax profit of the JV Company was $1.2 million for the three months ended September 30, 2015.

Outlook

For the fourth quarter 2015, Kandi expects net revenues to be in the range of $54.0 million to $56.0 million with gross margin in the range of 13.5% to 14.5% .

The Company also expects the JV Company to deliver 8,000 to 10,000 EV products in the fourth quarter and a total of 20,000-22,000 EV products in the full year of 2015.

This outlook reflects Kandi's current view, which is subject to change.

Third Quarter 2015 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss the financial results at 8:00 AM (U.S. EST) on November 9, 2015 (9:00 PM Beijing time on November 9, 2015). Mr. Hu Xiaoming, Chief Executive Officer and Mr. Wang Cheng (Henry), Chief Financial Officer, will deliver prepared remarks, followed by a question and answer session.

The dial-in details for the conference call are as follows:

The live audio webcast of the call can also be accessed by visiting Kandi's Investor Relations website at http://ir.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. 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.

Follow us on Twitter: @ Kandi_Group

1 Non-GAAP measures, including the Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change of the fair value of financial derivatives and the effects of the stock award expense. We supply non-GAAP information because we believe it allows our investors to obtain a clearer understanding of our operations. Any non-GAAP measures 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.

- Tables Below -

KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2015 2014
Current assets
Cash and cash equivalents $ 11,691,023 $ 26,379,460
Restricted cash 15,689,228 13,000,731
Accounts receivable 33,912,043 15,736,805
Inventories (net of provision for slow moving inventory of 304,677 and 315,584 as of September 30, 2015 and December 31, 2014, respectively) 31,652,659 15,403,840
Notes receivable 18,785,582 9,060,441
Other receivables 488,621 238,567
Prepayments and prepaid expense 240,609 120,761
Due from employees 41,128 34,475
Advances to suppliers 457,782 6,901,505
Amount due from JV Company, net 76,814,162 51,450,612
TOTAL CURRENT ASSETS 189,772,837 138,327,197
LONG-TERM ASSETS
Plant and equipment, net 21,788,066 26,215,356
Land use rights, net 14,826,253 15,649,152
Construction in progress 56,525,652 58,510,051
Long Term Investment 1,490,477 --
Investment in JV Company 82,273,884 83,309,095
Goodwill 322,591 322,591
Intangible assets 515,830 577,401
Other long term assets 156,892 162,509
TOTAL Long-Term Assets 177,899,645 184,746,155
TOTAL ASSETS $ 367,672,482 $ 323,073,352
CURRENT LIABILITIES
Accounts payables $ 87,854,246 $ 45,772,481
Other payables and accrued expenses 3,362,729 5,101,740
Short-term loans 37,340,362 35,589,502
Customer deposits 111,314 2,630,723
Notes payable 3,137,846 5,702,121
Income tax payable 2,803,621 1,835,685
Due to employees 12,862 15,787
Deferred taxes liabilities 256,049 230,864
Financial derivate - liability 540,299 2,245,610
Deferred income 34,954 --
Total Current Liabilities 135,454,282 99,124,513
LONG-TERM LIABILITIES
Deferred taxes liabilities 402,934 2,266,725
Financial derivate - liability -- 10,097,275
Total Long-Term Liabilities 402,934 12,364,000
TOTAL LIABILITIES 135,857,216 111,488,513
STOCKHOLDER'S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 46,964,855 and 46,274,855 shares issued and outstanding at September 30,2015 and December 31,2014, respectively 46,965 46,275
Additional paid-in capital 202,744,428 190,258,037
Retained earnings (the restricted portion is $4,172,324 and $4,172,324 at September 30,2015 and December 31,2014, respectively) 30,290,776 16,390,424
Accumulated other comprehensive income(loss) (1,266,903) 4,890,103
TOTAL STOCKHOLDERS' EQUITY 231,815,266 211,584,839
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 367,672,482 $ 323,073,352
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2015 2014 2015 2014
REVENUES, NET $ 50,528,545 $ 44,206,992 $ 142,273,091 $ 117,338,351
COST OF GOODS SOLD 43,411,839 38,698,452 122,294,189 99,748,314
GROSS PROFIT 7,116,706 5,508,540 19,978,902 17,590,037
OPERATING EXPENSES:
Research and development 785,450 391,097 1,928,091 2,535,0 27
Selling and marketing 122,873 432,365 312,284 939,516
General and administrative 8,649,541 2,076,749 16,275,202 11,720,693
Total Operating Expenses 9,557,864 2,900,211 18,515,577 15,195,236
INCOME (LOSS) FROM OPERATIONS (2,441,158) 2,608,329 1,463,325 2,394,801
OTHER INCOME(EXPENSE):
Interest income 1,140,756 220,911 2,454,0 79 1,453,0 47
Interest (expense) (534,987) (932,030) (1,730,898) (2,850,341)
Change in fair value of financial instruments 3,049,242 10,187,277 11,802,586 6,814,675
Government grants (724) 63,584 92,139 217,284
Share of profit (loss) in associated companies -- 38,702 -- (54,290)
Share of profit after tax of JV 1,179,605 2,038,388 1,900,128 3,757,218
Other income, net 988,224 21,814 1,094,278 141,641
Total other income (expense), net 5,822,116 11,638,646 15,612,312 9,479,234
INCOME(LOSS) BEFORE INCOME TAXES 3,380,958 14,246,975 17,075,637 11,874,035
INCOME TAX EXPENSE (1,037,763) (713,273) (3,175,287) (1,269,408)
NET INCOME 2,343,195 13,533,702 13,900,350 10,604,627
OTHER COMPREHENSIVE INCOME
Foreign currency translation (7,098,249) (109,112) (6,157,006) (2,037,704)
COMPREHENSIVE INCOME(LOSS) $ (4,755,054) $ 13,424,590 $ 7,743,344 $ 8,566,923
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 46,959,638 43,214,455 46,670,533 41,327,666
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED 46,959,638 43,530,185 46,945,277 41,462,490
NET INCOME PER SHARE, BASIC $ 0.05 $ 0.31 $ 0.30 $ 0.26
NET INCOME PER SHARE, DILUTED $ 0.05 $ 0.31 $ 0.30 $ 0.26
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30, September 30,
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,900,350 $ 10,604,627
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 4,388,902 4,157,606
Assets Impairments --
Deferred taxes (1,854,863) 808,725
Change in fair value of financial instruments (11,802,586) (6,814,675)
Loss (income) in investment in associated companies -- 54,290
Share of loss after tax of JV Company (1,900,128) (3,757,218)
Stock Compensation cost 12,486,881 --
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) Decrease In:
Accounts receivable (19,286,512) 17,190,113
Inventories (17,289,849) (5,480,008)
Other receivables (298,976) 105,092
Due from employee (10,535) 413,441
Prepayments and prepaid expenses 6,265,899 (49,927,475)
Amount due from JV Company (27,964,497) (49,177,160)
Increase (Decrease) In:
Accounts payable 44,980,746 32,911,627
Other payables and accrued liabilities (1,302,135) 2,441,464
Customer deposits (2,502,087) 108,031
Income Tax payable 1,062,643 (36,060)
Net cash (used in ) provided by operating activities $ (1,126,747) $ (46,397,580)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases)/Disposal of plant and equipment, net (408,850) (813,246)
Purchases of land use rights -- (1,667,986)
Purchases of construction in progress (39,054) (39,283)
Disposal of associated company -- (96,268)
Issuance of notes receivable (72,040,444) (21,698,986)
Repayment of notes receivable 61,697,894 29,344,951
Long Term Investment (1,535,651) --
Net cash provided by (used in) investing activities $ (12,326,105) $ 5,029,182
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash (3,232,950) (13,006,018)
Proceeds from short-term bank loans 30,583,709 28,616,816
Repayments of short-term bank loans (27,512,406) (39,998,504)
Proceeds from notes payable 9,860,498 13,007,644
Repayment of notes payable (12,299,436) (16,584,746)
Option exercise, stock awards & other financing -- 6,429,622
Warrant exercise -- 22,447,914
Common stock issued for acquisition, net of cost of capital -- 78,155,627
Net cash (used in) provided by financing activities $ (2,600,585) $ 79,068,355
NET INCREASE IN CASH AND CASH EQUIVALENTS (16,053,437) 37,699,957
Effect of exchange rate changes on cash 1,365,000 (961,614)
Cash and cash equivalents at beginning of year 26,379,460 12,762,369
CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,691,023 49,500,712
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid 1,794,115 1,305,468
Interest paid 1,718,257 1,748,140

CONTACT: Company Contact: Ms. Kewa Luo Kandi Technologies Group, Inc. Phone: 1-212-551-3610 Email: IR@kandigroup.com IR Contact: The Piacente Group Phone: 1-212-481-2050 Email: kandi@tpg-ir.comSource:Kandi Technologies Group, Inc.