Kandi Technologies Reports Third Quarter 2016 Financial Results

JINHUA, China, Nov. 09, 2016 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (NASDAQ:KNDI) (the "Company," "we" or "Kandi") today announced its financial results for the third quarter of 2016.

Third Quarter Highlights
  • Total revenues decreased 87.4% to $6.4 million for the third quarter of 2016, compared with $50.5 million for the same period of 2015;
  • Electric vehicle ("EV") parts sales decreased 90.4% to $4.7 million for the third quarter of 2016, compared with $49.0 million in the same period of 2015;
  • Kandi Electric Vehicles Group Co., Ltd. (the "JV Company") sold 184 units of EV products, including 159 EV products via the Micro Public Transportation (MPT) program and 25 EV products via its direct sales program, a 96.9% decrease compared to the same period last year;
  • GAAP net loss for the third quarter of 2016 was $0.6 million, or $0.01 per fully-diluted share, compared with GAAP net income of $2.3 million, or $0.05 per fully-diluted share in the same period of 2015;
  • Non-GAAP adjusted net loss 1, which excludes stock award expenses and changes in the fair value of financial derivatives, was $1.8 million in the third quarter of 2016, compared with non-GAAP adjusted net income of $6.3 million of the same period of 2015. Non-GAAP adjusted loss per share 1 was approximately $0.04 per fully-diluted share for the third quarter of 2016 compared with Non-GAAP adjusted earnings per share of $0.13 per fully-diluted share for the same quarter of 2015; and
  • Working capital surplus was $65.5 million as of September 30, 2016. Cash, cash equivalents and restricted cash totaled $17.9 million as of September 30, 2016.

"China's central government preceded a review on the subsidies paid to all the EV manufacturers, which caused the 2015 subsidy payments remain unpaid industry-wide. The delay in subsidy payment heavily impacted the JV Company's production and sales, which resulted in a significant decrease in our EV parts sales." commented Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi. "Although our financial performance this year has not matched up to our past success, we have accomplished lots of fundamental work for the business growth in year 2017. First, with the subsidy review in year 2016, after our positive communication with the government, we believe there will be a good outcome soon. There is some misunderstanding with the EV battery exchange model adopted by our end customers to repeatedly and efficiently utilize batteries for the EVs that we manufactured during 2013 and 2014, which was also a challenge to the Company's further development. Taking the opportunity for clarification with government during the subsidy review, we can clear up this barrier and create a good base for future smooth development. Second, the process of preparing the JV Company to enter into capital markets at the appropriate time and with a strong valuation is on the track as planned; At the same time, we have done lots of work for the JV Company to obtain the vehicles manufacturing license approval in 2017. Finally, we will introduce two new EV models in 2017. Our new models, carefully designed to best serve market needs, will provide a solid foundation for the fast growth in 2017. In addition, in this quarter, we made a significant progress into developing the country-wide EVs distribution network for direct sales. We have also signed the strategic agreement with Qingdao TELD New Energy Co. Ltd. for the Shandong market, and a strategic cooperation agreement with Shanxi Coal Asset Management Group for the Shanxi market, both of which paid us the initial payments in connection with both agreements."

"Although the central government will begin reducing the amount of renewable energy subsidies to all EV manufacturers in 2017, the subsidy program itself will continue through 2020. Under the government's current subsidy policy, we believes the EVs produced and sold by the JV Company meet national renewable energy subsidy requirements and are eligible to receive subsidy payments. Kandi is currently developing the EV products after year 2020, which do not rely solely on subsidy payments and is identifying key areas of focus in which to ensure Kandi's sustained growth and improve Kandi's earnings capabilities," Mr. Hu concluded.

"Due to the delayed government subsidy payments, we have experienced decreased cash flow in the third quarter of 2016, which inevitably impacted the Company's financial performance in this quarter," added Mr. Wang Cheng (Henry), Chief Financial Officer of Kandi. "We expect our cash flow and financial position will be improved in the coming quarters once the central government concludes its review and resumes its subsidy payments."

Net Revenues and Gross Profit
      3Q16 2Q16 3Q15 Q-o-Q% Y-o-Y%
Net Revenues (US$mln) $ 6.4   $ 55.2   $ 50.5     -88.5 %   -87.4 %
Gross Profit (US$mln) $ 0.7   $ 8.5   $ 7.1     -92.3 %   -90.9 %
Gross Margin   10.2 %   15.3 %   14.1 %   -     -  
 

Net revenues for the third quarter of 2016 decreased 87.4% compared to the same quarter last year. This decrease in net revenues was mainly due to a decrease in EV parts sales. Gross margin was 10.2%, 3.9% lower compared to 14.1% for the same quarter of 2015, which was the result of significant volume drops.

Operating Income (Loss)

      3Q16 2Q16 3Q15 Q-o-Q% Y-o-Y%
Operating Expenses (US$mln) $ 1.3   $ 10.8   $ 9.6     -88.3 %   -86.7 %
Operating Income (Loss) (US$mln) ($ 0.6 ) ($ 2.4 ) ($ 2.4 )   -     -  
Operating Margin   -9.7 %   -4.3 %   -4.8 %   -     -  
Operating Income (Loss) (US$mln) (Non-GAAP) ($ 1.8 ) $ 5.9   $ 4.6     -     -  
 

Total operating expenses in the third quarter of 2016 were $1.3 million, compared with $9.6 million in the same quarter of 2015. The decrease in total operating expenses was due to a decrease in stock compensation expenses, which were an expense reversal of $1.2 million in this quarter, compared with the stock compensation expenses of $7.0 million in the same quarter last year. Excluding stock compensation expenses, operating expenses in the third quarter of 2016 were $2.5 million, the same in the same quarter last year.

GAAP Net Income

      3Q16 2Q16 3Q15
Net Income (Loss) (US$mln) ($ 0.6 ) $ 2.8   $ 2.3  
Earnings (Loss) per Weighted Average Common Share ($ 0.01 ) $ 0.06   $ 0.05  
Earnings (Loss) per Weighted Average Diluted Share ($ 0.01 ) $ 0.06   $ 0.05  
Stock award expenses (expense reversal) ($ 1.2 ) $ 8.3   $ 7.0  
Change of the fair value of financial derivatives ($ 0.0 ) ($ 0.5 ) ($ 3.0 )
Non-GAAP net income (loss) from continuing operations ($ 1.8 ) $ 10.5   $ 6.3  
 

Net loss was $0.6 million in the third quarter of 2016, compared with $2.3 million of net income in the same quarter of 2015. Net income was affected by significant decreases in sales, offsetting this quarter's decreased stock reward expenses due to weak financial performance.

Non-GAAP net loss was $1.8 million, a decrease of $8.1 million in the third quarter of 2016 compared to $6.3 million of non-GAAP net income in the same quarter of 2015. The decrease in Non-GAAP net income was mainly due to the decrease in revenue in this quarter.

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

In the third quarter of 2016, the JV Company sold 184 EV products, a decrease of 96.9% compared to 6,004 EV products sold in the same quarter of 2015.

The condensed financial income statement of JV Company for the third quarter of 2016 is below:
      3Q16 2Q16 3Q15 Q-o-Q% Y-o-Y%
Net Revenues (US$mln) $ 11.7   $ 111.8   $ 98.4     -89.5 %   -88.1 %
Gross Profit (US$mln) $ 5.9   $ 14.7   $ 13.3     -59.5 %   -55.4 %
Gross Margin   50.8 %   13.1 %   13.5 %   -     -  
Net Income (Loss) ($ 0.4 ) $ 8.6   $ 1.6     -     -  
% of Net revenue   -3.7 %   7.7 %   1.6 %   -     -  
 

Revenue for the JV Company was $11.7 million in the third quarter of 2016, a decrease of 88.1% compared to the same quarter of 2015. Net loss was $0.4 million, a decrease of $2.0 compared to $1.6 million of net income in the same quarter of 2015.

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 net loss or $0.2 million for this quarter. After eliminating intra-entity profits and losses, Kandi's share of the after-tax loss of the JV Company was $0.3 million for the third quarter of 2016.

Outlook

For the fourth quarter of 2016, Kandi expects net revenues to be in the range of $28 million to $30 million.

The Company also expects the JV Company to deliver 2,000 to 2,200 EV products in the fourth quarter.

This outlook reflects the current view of the management, which is subject to change.

Third Quarter of 2016 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss the Q3 2016 financial results at 8:00 AM (Eastern time) ) (9:00 P.M. Beijing Time) on November 9, 2016. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Mr. Wang Cheng (Henry), Chief Financial Officer of the Company, will deliver prepared remarks, to be 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://en.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

- Tables Below -

KANDI TECHNOLOGIES GROUP, INC.  
AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
   
    September 30, 2016     December 31, 2015  
             
Current assets            
Cash and cash equivalents $  3,689,850   $  16,738,559  
Restricted cash   14,240,615     16,172,009  
Short term investment   -     1,613,727  
Accounts receivable   40,805,693     8,136,421  
Inventories (net of provision for slow moving inventory of $472,910 and $485,901 as of September 30, 2016 and December 31, 2015, respectively   15,519,976     17,773,679  
Notes receivable   1,969,252     13,033,315  
Other receivables   3,243,391     332,922  
Prepayments and prepaid expense   746,748     181,534  
Due from employees   33,817     34,434  
Advances to suppliers   30,759,354     71,794  
Amount due from JV Company, net   114,763,704     76,172,471  
Amount due from related party   10,916,700     40,606,162  
TOTAL CURRENT ASSETS   236,689,100     190,867,027  
             
LONG-TERM ASSETS            
Property, Plant and equipment, net   16,690,437     20,525,126  
Land use rights, net   12,342,904     12,935,121  
Construction in progress   57,094,373     54,368,753  
Long Term Investment   1,424,062     1,463,182  
Investment in JV Company   87,721,955     90,337,899  
Goodwill   322,591     322,591  
Intangible assets   433,735     495,306  
Other long term assets   8,914,927     154,019  
TOTAL Long-Term Assets   184,944,984     180,601,997  
             
TOTAL ASSETS $  421,634,084   $  371,469,024  
             
CURRENT LIABILITIES            
Accounts payables $  111,682,048   $  73,957,969  
Other payables and accrued expenses   4,399,221     9,544,909  
Short-term loans   35,676,489     36,656,553  
Customer deposits   78,097     94,026  
Notes payable   3,093,511     3,850,478  
Income tax payable   1,142,678     624,276  
Due to employees   26,954     9,423  
Deferred taxes liabilities   87,387     2,374,924  
Financial derivate - liability   -     3,823,590  
Deferred income   14,990,122     13,726  
Total Current Liabilities   171,176,507     130,949,874  
             
LONG-TERM LIABILITIES            
Deferred taxes liabilities   1,284,335     1,593,582  
Total Long-Term Liabilities   1,284,335     1,593,582  
             
TOTAL LIABILITIES   172,460,842     132,543,456  
             
STOCKHOLDER'S EQUITY            
Common stock, $0.001 par value; 100,000,000 shares authorized; 47,699,638 and 46,964,855 shares issued and outstanding at September 30,2016 and December 31,2015, respectively   47,030     46,965  
Additional paid-in capital   226,929,764     212,564,334  
             
Retained earnings (the restricted portion is $4,172,324 and $4,172,324 at September 30,2016 and December 31,2015, respectively)   33,371,578     31,055,919  
Accumulated other comprehensive income(loss)   (11,175,130 )   (4,741,650 )
TOTAL STOCKHOLDERS' EQUITY   249,173,242     238,925,568  
             
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $  421,634,084   $  371,469,024  
   

KANDI TECHNOLOGIES GROUP, INC.  
AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND  
COMPREHENSIVE INCOME (LOSS)  
(UNAUDITED)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,     September 30,     September 30,  
    2016      2015     2016     2015  
                         
REVENUES, NET $  6,366,380   $ 50,528,545   $  112,241,641   $  142,273,091  
                         
COST OF GOODS SOLD   5,715,211     43,411,839     96,417,337     122,294,189  
                         
GROSS PROFIT   651,169     7,116,706     15,824,304     19,978,902  
                         
OPERATING EXPENSES:                        
Research and development   522,806     785,450     1,222,967     1,928,091  
Selling and marketing   374,102     122,873     1,150,880     312,284  
General and administrative   373,411     8,649,541     18,031,487     16,275,202  
Total Operating Expenses   1,270,319     9,557,864     20,405,334     18,515,577  
                         
INCOME(LOSS) FROM OPERATIONS   (619,150 )   (2,441,158 )   (4,581,030 )   1,463,325  
                         
OTHER INCOME(EXPENSE):                        
Interest income   832,031     1,140,756     2,397,364     2,454,079  
Interest expense   (425,152 )   (534,987 )   (1,299,549 )   (1,730,898 )
Change in fair value of financial instruments   10,692     3,049,242     3,823,590     11,802,586  
Government grants   594,323     (724 )   2,292,180     92,139  
Share of profit (loss) after tax of JV   (299,538 )   1,179,605     (203,375 )   1,900,128  
Other income (expense), net   (106,299 )   988,224     202,878     1,094,278  
Total other income, net   606,057     5,822,116     7,213,088     15,612,312  
                         
INCOME (LOSS) BEFORE INCOME TAXES   (13,093 )   3,380,958     2,632,058     17,075,637  
                         
INCOME TAX (EXPENSE)   (552,848 )   (1,037,763 )   (316,399 )   (3,175,287 )
                         
NET INCOME (LOSS)   (565,941 )   2,343,195     2,315,659     13,900,350  
                         
OTHER COMPREHENSIVE INCOME(LOSS)                        
Foreign currency translation   (805,216 )   (7,098,249 )   (6,433,480 )   (6,157,006 )
                         
COMPREHENSIVE INCOME(LOSS) $  (1,371,157 ) $ (4,755,054 ) $  (4,117,821 ) $  7,743,344  
                         
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC    47,695,290     46,959,638     47,436,418     46,670,533  
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED   47,695,290     46,959,638     47,436,418     46,945,277  
                         
NET INCOME (LOSS) PER SHARE, BASIC $  (0.01 ) $  0.05   $  0.05   $  0.30  
NET INCOME (LOSS) PER SHARE, DILUTED $  (0.01 ) $  0.05   $  0.05   $  0.30  
 

KANDI TECHNOLOGIES GROUP, INC.  
AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(UNAUDITED)  
   
    Nine Months Ended  
    September 30, 2016     September 30, 2015  
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
             
Net income $ 2,315,659   $ 13,900,350  
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation and amortization   3,681,345     4,388,902  
Deferred taxes   (2,608,702 )   (1,854,863 )
Change in fair value of financial instruments   (3,823,590 )   (11,802,586 )
Share of profit after tax of JV Company   203,375     (1,900,128 )
Stock compensation cost   13,930,829     12,486,881  
             
Changes in operating assets and liabilities, net of effects of acquisition:            
(Increase) Decrease In:            
Accounts receivable   (33,335,798 )   (19,286,512 )
Inventories   1,802,780     (17,289,849 )
Other receivables and other assets   (11,868,318 )   (298,976 )
Due from employee   17,718     (10,535 )
Prepayments and prepaid expenses   (31,684,685 )   6,265,899  
Amount due from JV Company   (41,182,480 )   (27,964,497 )
Due from related party   28,994,314     -  
             
Increase (Decrease) In:            
Accounts payable   40,240,135     44,980,746  
Other payables and accrued liabilities   10,415,706     (1,302,135 )
Customer deposits   (13,598 )   (2,502,087 )
Income Tax payable   607,422     1,062,643  
             
Net cash used in operating activities $ (22,307,888 ) $ (1,126,747 )
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Purchases of plant and equipment, net   (39,250 )   (408,850 )
Purchases of construction in progress   (4,236,301 )   (39,054 )
Issuance of notes receivable   (51,553,604 )   (72,040,444 )
Repayment of notes receivable   62,415,498     61,697,894  
Long Term Investment   -     (1,535,651 )
Short Term Investment   1,592,024     -  
             
Net cash provided by (used in) investing activities $ 8,178,367   $ (12,326,105 )
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
Restricted cash   1,519,477     (3,232,950 )
Proceeds from short-term bank loans   -     30,583,709  
Repayments of short-term bank loans   -     (27,512,406 )
Proceeds from notes payable   5,187,040     9,860,498  
Repayment of notes payable   (5,849,988 )   (12,299,436 )
Warrant exercise   434,666     -  
             
Net cash provided by (used in) financing activities $ 1,291,195   $ (2,600,585 )
             
NET INCREASE IN CASH AND CASH EQUIVALENTS   (12,838,326 )   (16,053,437 )
Effect of exchange rate changes on cash   (210,383 )   1,365,000  
Cash and cash equivalents at beginning of year   16,738,559     26,379,460  
             
CASH AND CASH EQUIVALENTS AT END OF PERIOD   3,689,850     11,691,023  
             
SUPPLEMENTARY CASH FLOW INFORMATION            
Income taxes paid   2,322,747     1,794,115  
Interest paid   1,283,843     1,718,257  
 

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

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