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Kandi Technologies Reports Second Quarter 2018 Financial Results

- Q2 GAAP net income of $1.4 million compared to net loss of $11.6 million in the same period last year -
- Q2 JV Company sold 1,802 EV products, a 393.7% increase yoy -

JINHUA, China, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), today announced its financial results for the second quarter of 2018.

Second Quarter Highlights

  • Total revenues were $16.4 million for the second quarter of 2018, a decrease of 40.1% from total revenues of $27.3 million for the same period in 2017.
     
  • Electric Vehicle (“EV”) parts sales decreased by 40.8%, to $15.5 million for the second quarter of 2018, compared with EV parts sales of $26.2 million for the same period in 2017.
     
  • Revenues from sales of off-road vehicles decreased by 24.3%, to $0.8 million for the second quarter of 2018, compared with revenues from sales of off-road vehicles of $1.1 million for the same period in 2017.
     
  • Kandi Electric Vehicles Group Co., Ltd. (the "JV Company") sold 1,802 EV products, for the second quarter of 2018 compared to 365 EV products sold in the same period last year.
  • GAAP net income for the second quarter of 2018 was $1.4 million, or $0.03 per fully diluted share, compared with GAAP net loss of $11.6 million, or loss of $0.24 per fully diluted share for the same period in 2017.
  • Non-GAAP adjusted net income1, which excludes stock compensation expenses and the change in fair value of contingent consideration, was $2.5 million in the second quarter of 2018, compared with Non-GAAP adjusted net loss of $9.5 million for the same period in 2017. Non-GAAP adjusted earnings per share1 was $0.05 per fully diluted share for the second quarter of 2018, compared with Non-GAAP adjusted loss per share1 of $0.20 per fully diluted share for the same period in 2017.
  • Working capital deficit was $8.6 million as of June 30, 2018. Cash, cash equivalents and restricted cash totaled $9.5 million as of June 30, 2018.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, “due to the 2018 government subsidy policy adjustments in product structure requirements, the JV Company discontinued the manufacturing and selling of its EV products with a driving range of less than 200km and shifted its focus to the development of new EV models with a driving range exceeding 300km. Currently, our new 300km EV models K23,K27,and K28 (EX3) received the approval from the Ministry of Industry and Information Technology of the People’s Republic of China. The JV Company has resumed its normal production and sales. With restored production and a recovery of sales, we believe that Kandi's growth will return to the previous predicted track. Despite recent weak stock performance, the management team is dedicated to improving Kandi’s market competitiveness and regaining our leading position in the EV industry.”

Net Revenues and Gross Profit

    2Q18     2Q17   Y-o-Y%  
Net Revenues (US$million) $ 16.4   $ 27.3   -40.1 %
Gross Profit (US$million) $ 2.1   $ 3.8   -45.2 %
Gross Margin   12.6 %   13.7 % -  
                 

Net revenues for the second quarter of 2018 decreased by 40.1% compared to the same period last year. The decrease in net revenues was mainly due to the decrease in EV parts sales during this quarter. The selling prices of our products for the three months ended June 30, 2018 did not change materially on average from the same period last year. The decrease in revenue was primarily due to the decrease of sales volume.

Operating Income (Loss)

    2Q18     2Q17   Y-o-Y%  
Operating Expenses (US$million) $ 4.7   $ 7.1   -33.4 %
Operating Loss (US$million) $ (2.7 ) $ (3.3 ) -20.1 %
Operating Margin   -16.3 %   -12.2 % -  
                 

Total operating expenses in the second quarter of 2018 were $4.7 million, compared with $7.1 million in the same quarter of 2017. The decrease in total operating expenses was due to decreased R&D expenses, which were $0.6 million in this quarter compared with $5.1 million in the same quarter last year.

GAAP & Non-GAAP Net Income

    2Q18     2Q17   Y-o-Y%  
Net Income (Loss) (US$million) $ 1.4   $ (11.6 ) -111.9 %
Earnings (loss) per Weighted Average Common Share   0.03   $ (0.24 ) -  
Earnings (loss) per Weighted Average Diluted Share   0.03   $ (0.24 ) -  
Stock Compensation  Expenses $ 1.8   $ 2.0   -8.8 %
Change in fair value of contingent consideration   (0.7   -   -  
Non-GAAP Net Income (Loss) $ 2.5   $ (9.5 ) -126.5 %
                 

Net income was $1.4 million in the second quarter of 2018, compared with net loss of $11.6 million in the same quarter of 2017. The increase was primarily attributable to the profits from the JV Company and decreased R&D expenses in the second quarter as compared to the same period of last year.

Non-GAAP net income was $2.5 million in the second quarter of 2018, a 126.5% increase compared to Non-GAAP net loss of $9.5 million in the same quarter of 2017. The increase was primarily attributable to the profits from the JV Company and decreased R&D expenses in the second quarter as compared to the same period of last year.

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

In the second quarter of 2018, the JV Company sold 1,802 units of EV products.

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

    2Q18     2Q17   Y-o-Y%  
Net Revenues (US$million) $ 19.6   $ 18.7   5.3 %
Gross Loss (US$million) $ (4.7 ) $ (1.5 ) 214.9 %
Net Income (loss) $ 4.8   $ (14.6 ) -132.6 %
% of Net revenue   24.2 %   -78.2 % -  
                 

Revenue for the JV Company was $19.6 million in the second quarter of 2018, an increase of 5.3% compared to the same quarter of 2017. Net income was $4.8 million, a 132.6% increase compared to net loss of $14.6 million in the same quarter of 2017.

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 profit of $2.4 million for this quarter. After eliminating intra-entity profits and losses, Kandi’s share of the after-tax income of the JV Company was $2.4 million for the second quarter of 2018.

Second Quarter 2018 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss its second quarter 2018 financial results at 8:00 A.M. Eastern Time (8:00 P.M. Beijing Time) on August 9, 2018. 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:

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.

__________
Non-GAAP measures, including Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change in fair value of contingent consideration and the effects of stock compensation 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.

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”), Sportsman Country, LLC (“Sportsman Country”), 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.

Follow us on Twitter: @ Kandi_Group
Company Contact:

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

- Tables Below -

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

    June 30,
2018
    December 31,
2017
 
    (Unaudited)        
Current assets            
Cash and cash equivalents   $ 1,612,459     $ 4,891,808  
Restricted cash     7,878,200       11,218,688  
Accounts receivable(net of allowance for doubtful accounts of $331,362 and
   $133,930 as of June 30, 2018 and December 31, 2017, respectively)
    34,071,931       34,397,858  
Inventories (net of provision for slow moving inventory of $938,624 and $620,919
   as of June 30, 2018 and December 31, 2017, respectively)
    11,644,868       15,979,794  
Notes receivable from JV Company and related party     -       1,137,289  
Other receivables     2,342,060       2,650,668  
Prepayments and prepaid expense     6,099,704       6,536,839  
Due from employees     4,527       7,070  
Advances to suppliers     15,211,522       14,908,385  
Amount due from JV Company, net     64,775,429       146,422,440  
Amount due from related party     -       162,048  
TOTAL CURRENT ASSETS     143,640,700       238,312,887  
                 
LONG-TERM ASSETS                
Property, Plant and equipment, net     12,806,094       12,000,971  
Land use rights, net     12,377,307       12,666,047  
Construction in progress     69,541,416       53,083,925  
Deferred taxes assets     3,301,698       4,383,425  
Long Term Investment     -       1,460,034  
Investment in JV Company     154,866,326       70,681,013  
Goodwill     24,156,275       322,591  
Intangible assets     4,811,077       331,116  
Advances to suppliers     -       21,592,918  
Other long term assets     6,855,927       7,590,734  
Amount due from JV Company, net     -       15,907,183  
TOTAL Long-Term Assets     288,716,120       200,019,957  
                 
TOTAL ASSETS   $ 432,356,820     $ 438,332,844  
                 
CURRENT LIABILITIES                
Accounts payables   $ 92,759,784     $ 111,595,540  
Other payables and accrued expenses     5,323,548       6,556,209  
Short-term loans     32,482,003       33,042,864  
Customer deposits     274,205       205,544  
Notes payable     18,848,520       28,075,945  
Income tax payable     1,181,776       2,902,699  
Due to employees     10,521       35,041  
Deferred income     1,404,431       2,191,143  
Total Current Liabilities     152,284,788       184,604,985  
                 
LONG-TERM LIABILITIES                
Long term bank loans     30,064,737       30,737,547  
Contingent liability     5,345,985       -  
Other long-term liability     549,568       -  
Total Long-Term Liabilities     35,960,290       30,737,547  
                 
TOTAL LIABILITIES     188,245,078       215,342,532  
                 
STOCKHOLDER’S EQUITY                
Common stock, $0.001 par value; 100,000,000 shares authorized; 54,257,312 and
   48,036,538 shares issued and 51,297,475 and 48,036,538 outstanding at June
   30,2018 and December 31,2017, respectively
    51,297       48,037  
Additional paid-in capital     254,193,380       233,055,348  
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at June
   30,2018 and December 31,2017, respectively)
    1,300,210       (3,802,310 )
Accumulated other comprehensive loss     (11,433,145 )     (6,310,763 )
TOTAL STOCKHOLDERS’ EQUITY     244,111,742       222,990,312  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 432,356,820     $ 438,332,844  
                 

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,
2018
    June 30,
2017
    June 30,
2018
    June 30,
2017
 
                         
REVENUES FROM UNRELATED PARTY, NET     11,618,855       1,153,555     $ 17,351,318     $ 4,116,486  
REVENUES FROM JV COMPANY AND RELATED PARTY, NET     4,740,751       26,171,724       7,344,195       27,483,366  
                                 
REVENUES, NET     16,359,606       27,325,279       24,695,513       31,599,852  
                                 
COST OF GOODS SOLD     (14,301,594 )     (23,568,343 )     (21,291,550 )     (27,175,584 )
                                 
GROSS PROFIT     2,058,012       3,756,936       3,403,963       4,424,268  
                                 
OPERATING EXPENSES:                                
Research and development     (642,889 )     (5,142,041 )     (1,400,187 )     (25,911,773 )
Selling and marketing     (228,173 )     (402,253 )     (976,398 )     (760,562 )
General and administrative     (3,861,263 )     (1,558,652 )     (3,463,092 )     (9,877,946 )
Total Operating Expenses     (4,732,325 )     (7,102,946 )     (5,839,677 )     (36,550,281 )
                                 
(LOSS) FROM OPERATIONS     (2,674,313 )     (3,346,010 )     (2,435,714 )     (32,126,013 )
                                 
OTHER INCOME(EXPENSE):                                
Interest income     456,784       559,425       1,399,777       1,090,067  
Interest expense     (471,616 )     (548,810 )     (1,022,033 )     (1,163,263 )
Change in fair value of contingent consideration     686,833       -       3,367,012       -  
Government grants     15,558       262,137       110,813       5,329,611  
Share of income (loss) after tax of JV     2,372,696       (8,738,254 )     3,167,751       (13,899,967 )
Other income , net     627,582       121,556       650,559       150,177  
Total other income (expense), net     3,687,837       (8,343,946 )     7,673,879       (8,493,375 )
                                 
INCOME (LOSS) BEFORE INCOME TAXES     1,013,524       (11,689,956 )     5,238,165       (40,619,388 )
INCOME TAX BENEFIT (EXPENSE)     361,001       131,939       (135,645 )     4,907,936  
                                 
NET INCOME (LOSS)     1,374,525       (11,558,017 )     5,102,520       (35,711,452 )
                                 
OTHER COMPREHENSIVE (LOSS) INCOME                                
Foreign currency translation     (12,587,622 )     3,118,462       (5,122,382 )     4,910,278  
                                 
COMPREHENSIVE (LOSS)   $ (11,213,097 )   $ (8,439,555 )   $ (19,862 )   $ (30,801,174 )
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC     51,140,542       47,974,974       50,893,356       47,854,351  
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED     51,140,542       47,974,974       50,893,356       47,854,351  
                                 
NET INCOME (LOSS) PER SHARE, BASIC   $ 0.03     $ (0.24 )   $ 0.10     $ (0.75 )
NET INCOME (LOSS) PER SHARE, DILUTED   $ 0.03     $ (0.24 )   $ 0.10     $ (0.75 )
                                 

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

       
    Six Months Ended  
    June 30,
2018
    June 30,
2017
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income (loss)   $ 5,102,520     $ (35,711,452 )
Adjustments to reconcile net income to net cash provided by operating activities                
Depreciation and amortization     1,791,762       2,334,776  
Assets impairments     341,261       38,548  
Allowance for doubtful accounts     (7,257 )     -  
Deferred taxes     -       (5,415,959 )
Share of income after tax of JV Company     (3,167,751 )     13,899,967  
Reserve for fixed assets     (54,799 )     -  
Change in fair value of contingent consideration     (3,367,012 )     -  
Stock compensation cost     222,259       4,493,187  
                 
Changes in operating assets and liabilities, net of effects of acquisition:                
(Increase) Decrease In:                
Accounts receivable     (36,123,904 )     (2,826,433 )
Deferred taxes assets     (53,330 )      -    
Notes receivable     502,623       -  
Notes receivable from JV Company and related party     2,060,755       4,875,795  
Inventories     5,020,163       (1,242,422 )
Other receivables and other assets     927,544       (498,376 )
Due from employee     (22,355 )     (23,344 )
Advances to supplier and prepayments and prepaid expenses     (2,626,098 )     23,946,781  
Advances to suppliers-long term     -       (4,099,879 )
Amount due from JV Company     (39,263,079 )     (21,853,571 )
Amount due from JV Company-Long term     15,907,183       -  
Due from related party     165,614       -  
                 
Increase (Decrease) In:                
Accounts payable     41,319,755       25,017,146  
Other payables and accrued liabilities     25,636,794       127,252  
Notes payable     (11,936,770 )     (2,731,692 )
Customer deposits     75,010       132,765  
Income tax payable     (1,837,147 )     (31,314 )
Deferred income     (779,240 )     (5,077,291 )
Loss contingency-litigation     -       2,909,151  
Net cash used in operating activities   $ (165,499 )   $ (1,736,365 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property, plant and equipment, net     (122,407 )     (128,509 )
Purchases of land use rights and other intangible assets     (107,917 )     -  
Acquisition of Jinhua An Kao (net of cash received)     (3,694,275 )     -  
Purchases of construction in progress     (48,042 )     (1,029,516 )
Reimbursement of capitalize interests for construction in progress     1,860,287       -  
Long Term Investment     1,492,162       -  
Short term investment     -       4,509,183  
Net cash (used in) provided by investing activities   $ (620,192 )   $ 3,351,158  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from short-term bank loans     14,764,553       13,963,923  
Repayments of short-term bank loans     (14,764,553 )     (17,018,531)    
Repayments of long-term bank loans     (157,070 )      -    
Proceeds from notes payable     34,702,510       5,713,368  
Repayment of notes payable     (40,349,566 )      -    
Net cash (used in) provided by financing activities   $ (5,804,126 )   $ 2,658,760  
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH     (6,589,817 )     4,273,553  
Effect of exchange rate changes on cash     (30,020 )     648,835  
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR     16,110,496       25,193,298  
                 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD     9,490,659       30,115,686  
                 
SUPPLEMENTARY CASH FLOW INFORMATION                
Income taxes paid     1,815,156       1,001,501  
Interest paid     848,232       742,958  
                 
SUPPLEMENTAL NON-CASH DISCLOSURES:                
Advances to suppliers-long term transferred to construction in progress     22,068,080       8,712,000  
Advances to suppliers transferred to construction in progress     6,090,219       -  
Purchase of construction in progress in accounts payable     -       5,974,383  
Settlement of due from JV Company and related parties with notes receivable     36,310,747       22,819,847  
Settlement of accounts receivables with notes receivable from unrelated parties     39,932,517       1,076,386  
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable     12,570,974       1,076,386  
Assignment of notes receivable from JV Company and related parties to supplier to settle accounts payable     35,176,703       18,348,424  
Settlement of accounts payable with notes payables     19,480,843       18,839,444  
Deferred tax changed to other comprehensive income     -       24,486  
Acquisition of Jinhua An Kao by stock     20,718,859       -  
Cancellation of notes payables     10,994,880       -  
Amount due from JV Company converted to investment in JV Company     85,602,991       -  
Adjustment of construction in progress with accounts payable     8,299,226       -  
Adjustment of advance to supplier with accounts payable     3,703,808       -  
                 

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