Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q4 2020 Earnings Conference Call March 30, 2021 8:00 AM ET Company Participants Kewa Luo – Manager-Investor Relations Xiaoming Hu – Founder, Chairman and Chief Executive Officer Alan Lim – Chief Financial Officer Conference Call Participants Shawn Severson – Water Tower Research M Marin – Zacks Michael Fearnow – Focus Tech Investments Mike Pfeffer – Oppenheimer Mark Kahnau – Swiss Liquid Future Jim Parker – Private Investor Operator Hello, and welcome to Kandi Te ...

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q3 2020 Earnings Conference Call November 9, 2020 8:00 AM ET Company Participants Kewa Luo – Investor Relations Manager Xiaoming Hu – Founder, Chairman and Chief Executive Officer Alan Lim – Chief Financial Officer Conference Call Participants Marla Marin – Zacks Arthur Porcari – Corporate Strategies Joel Cramer – Private Investor Walter Hill – Carty & Company Michael Fearnow – Focus Tech Mark Miller – Private Investor Richard Goldstein – National Securities Mike ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Kandi Technologies Group, Inc. presents its unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric (USD) | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :---------------------- | :----------------------- | :-------------------- | | Cash & Cash Equivalents | $23,909,159 | $5,490,557 | | Restricted Cash | $250,000 | $11,022,078 | | Accounts Receivable | $38,370,898 | $61,181,849 | | Inventories | $30,244,514 | $27,736,566 | | Total Current Assets | $183,776,581 | $195,572,436 | | Total Assets | $348,582,939 | $371,218,396 | | Total Current Liabilities | $104,008,582 | $131,873,739 | | Total Liabilities | $123,616,624 | $153,361,469 | | Total Stockholders' Equity | $224,966,315 | $217,856,927 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) | Metric (USD) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenues, Net | $18,717,218 | $31,688,544 | $44,526,718 | $73,903,234 | | Cost of Goods Sold | $(14,806,322) | $(26,412,129) | $(35,911,785) | $(61,288,228) | | Gross Profit | $3,910,896 | $5,276,415 | $8,614,933 | $12,615,006 | | (Loss) Income from Operations | $(2,377,822) | $316,498 | $5,827,750 | $(2,695,741) | | Net (Loss) Income | $(1,458,263) | $12,089,441 | $1,022,137 | $361,811 | | Comprehensive Income (Loss) | $6,758,711 | $3,558,398 | $6,193,780 | $(7,680,793) | | Net (Loss) Income Per Share, Basic and Diluted | $(0.03) | $0.23 | $0.02 | $0.01 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) | Metric (USD) | Balance, Dec 31, 2019 | Stock Issuance & Awards | Net (Loss) Income | Foreign Currency Translation | Reduction in Affiliate Co. Equity | Balance, Sep 30, 2020 | | :--------------------------------- | :-------------------- | :---------------------- | :---------------- | :--------------------------- | :-------------------------------- | :-------------------- | | Common Stock | $52,839 | $1,772 | - | - | - | $54,611 | | Treasury Stock | $(2,477,965) | - | - | - | - | $(2,477,965) | | Additional Paid-in Capital | $259,691,370 | $4,058,052 | - | - | $(3,144,213) | $260,605,209 | | Accumulated Deficit | $(16,685,736) | - | $(1,458,263) | - | - | $(15,663,602) | | Accumulated Other Comprehensive Loss | $(22,723,581) | - | - | $8,216,974 | - | $(17,551,938) | | Total Stockholders' Equity | $217,856,927 | $4,059,824 | $(1,458,263) | $8,216,974 | $(3,144,213) | $224,966,315 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (USD) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $(13,365,968) | $(14,610,587) | | Investing Activities | $46,247,972 | $21,532,383 | | Financing Activities | $(25,770,794) | $(2,294,786) | | Net Increase in Cash | $7,111,210 | $4,627,010 | | Cash & Restricted Cash at End of Period | $24,159,159 | $26,051,641 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES](index=11&type=section&id=NOTE%201%20-%20ORGANIZATION%20AND%20PRINCIPAL%20ACTIVITIES) Kandi Technologies Group, Inc. specializes in EV products, parts, and off-road vehicles, expanding into battery swap systems, ridesharing, and intelligent transportation products - Kandi Technologies Group, Inc. is a leading producer and manufacturer of electric vehicle (EV) products, EV parts, and off-road vehicles in China and global markets[14](index=14&type=chunk) - The company formed China Battery Exchange Technology Co., Ltd. in September 2020 to monetize battery swap system patents and attract strategic investors for battery swapping services and used battery recycling[16](index=16&type=chunk) - Zhejiang Ruiheng Technology Co., Ltd. was established in September 2020 by Ruibo, Jinpeng, and Kandi Vehicles (**10%** ownership) to operate a ridesharing service across China[17](index=17&type=chunk) - Due to the COVID-19 impact on the EV market, Kandi plans to expand production of ancillary intelligent transportation products, such as Electric Scooters and Electric Self-Balancing Vehicles, leveraging its power electric motor and battery pack advantages[18](index=18&type=chunk) [NOTE 2 - LIQUIDITY](index=12&type=section&id=NOTE%202%20-%20LIQUIDITY) Working capital increased to **$79.8 million**, with cash and cash equivalents rising significantly, supported by real estate repurchase payments, ensuring sufficient liquidity | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :---------------------- | :----------- | :----------- | | Working Capital | $79,767,999 | $63,698,697 | | Cash & Cash Equivalents | $23,909,159 | $5,490,557 | | Restricted Cash | $250,000 | $11,022,078 | - Kandi Vehicles entered a Repurchase Agreement for land use rights for RMB 525 million (**$77 million**). The company received the first two payments totaling approximately **$53 million** by July 2020, with a final payment of **$23.8 million** pending land vacation[20](index=20&type=chunk) - The company has paid off all short-term bank loans as of September 30, 2020, but retains credit lines. Management believes current working capital is sufficient for the next twelve months[21](index=21&type=chunk) [NOTE 3 - BASIS OF PRESENTATION](index=13&type=section&id=NOTE%203%20-%20BASIS%20OF%20PRESENTATION) Unaudited condensed consolidated financial statements are prepared under U.S. GAAP and SEC regulations, with interim results not indicative of full fiscal year outcomes due to COVID-19 - The financial statements are prepared in accordance with U.S. GAAP for interim information and SEC rules, reflecting all normal adjustments for fair presentation[22](index=22&type=chunk) - The COVID-19 pandemic's impact on the company's operations remains uncertain, and interim operating results may not be indicative of future results for the full fiscal year 2020 or other future periods[23](index=23&type=chunk) [NOTE 4 - PRINCIPLES OF CONSOLIDATION](index=14&type=section&id=NOTE%204%20-%20PRINCIPLES%20OF%20CONSOLIDATION) Consolidated financial statements include Kandi Technologies Group, Inc., its wholly-owned subsidiaries, Kandi New Energy, and a **22%** equity method investment in the Affiliate Company - The Company consolidates its wholly-owned subsidiaries and Kandi New Energy, where it holds **100%** economic benefits and voting rights despite **50%** direct ownership[25](index=25&type=chunk) - The Company's **22%** equity interest in the Affiliate Company is accounted for using the equity method[26](index=26&type=chunk) [NOTE 5 - USE OF ESTIMATES](index=14&type=section&id=NOTE%205%20-%20USE%20OF%20ESTIMATES) Financial statement preparation involves management estimates and assumptions, impacting reported amounts, with actual results potentially differing - Management relies on estimates and assumptions in preparing financial statements, which affect reported amounts of assets, liabilities, revenue, and expenses; actual results may vary[27](index=27&type=chunk) [NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=NOTE%206%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Significant accounting policies are consistent with the 2019 Form 10-K, with cash flow statement reclassifications for presentation alignment - Certain reclassifications were made to the condensed consolidated statements of cash flows for the nine months ended September 30, 2019, to conform to the presentation of the 2020 statements[28](index=28&type=chunk) [NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS](index=14&type=section&id=NOTE%207%20-%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) The company adopted ASU 2018-2 and ASU 2018-13 in Q1 2020 with no material impact, and anticipates no material impact from future ASU adoptions - The Company adopted ASU 2018-2 and ASU 2018-13 in the first quarter of 2020, with no material impact on consolidated financial statements[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company is evaluating ASU 2019-12 (effective after December 15, 2020) and ASU 2020-01 (effective Q1 2021) and does not expect a material impact from their adoption[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 8 - CONCENTRATIONS](index=15&type=section&id=NOTE%208%20-%20CONCENTRATIONS) Customer A remained a major customer, accounting for **28%** of Q3 sales and **41%** of nine-month sales, with Zhejiang Kandi Supply Chain Management as the largest supplier **Major Customers (Sales %):** | Customer | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | | :--------- | :-------------------------- | :-------------------------- | | Customer A | 28% | 30% | | Customer B | 11% | 30% | | Customer C | 11% | - | **Major Customers (Sales %):** | Customer | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------- | :-------------------------- | :-------------------------- | | Customer A | 41% | 39% | | Customer B | 13% | 23% | **Major Suppliers (Purchases %):** | Supplier | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | | :------------------------------------- | :-------------------------- | :-------------------------- | | Zhejiang Kandi Supply Chain Management | 32% | 93% | | Supplier D | 28% | - | **Major Suppliers (Purchases %):** | Supplier | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------- | :-------------------------- | :-------------------------- | | Zhejiang Kandi Supply Chain Management | 48% | 67% | | Supplier D | 26% | 13% | [NOTE 9 - EARNINGS (LOSS) PER SHARE](index=17&type=section&id=NOTE%209%20-%20EARNINGS%20%28LOSS%29%20PER%20SHARE) Earnings per share are calculated using basic and diluted methods, with **3.9 million** stock options excluded from diluted EPS due to higher exercise prices - Approximately **3,900,000** options were excluded from the calculation of diluted net loss per share for the three-month and nine-month periods ended September 30, 2020, because the average market price of common stock was below the exercise price[37](index=37&type=chunk) [NOTE 10 - ACCOUNTS RECEIVABLE](index=17&type=section&id=NOTE%2010%20-%20ACCOUNTS%20RECEIVABLE) Accounts receivable are presented net of an allowance for doubtful accounts, which decreased to **$105,833** as of September 30, 2020 | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :---------------------- | :----------- | :----------- | | Allowance for Doubtful Accounts | $105,833 | $254,665 | [NOTE 11 - INVENTORIES](index=17&type=section&id=NOTE%2011%20-%20INVENTORIES) Total inventories increased to **$30.2 million** as of September 30, 2020, driven by a significant rise in work-in-progress inventory | Inventory Type (USD) | Sep 30, 2020 | Dec 31, 2019 | | :--------------- | :----------- | :----------- | | Raw material | $10,551,048 | $12,127,957 | | Work-in-progress | $13,643,534 | $4,545,736 | | Finished goods | $6,049,932 | $11,062,873 | | Total Inventories | $30,244,514 | $27,736,566 | [NOTE 12 - NOTES RECEIVABLE](index=18&type=section&id=NOTE%2012%20-%20NOTES%20RECEIVABLE) Notes receivable significantly decreased to **$235,249** due to the collection of commercial acceptance notes for the Affiliate Company's equity transfer | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :----------------- | :----------- | :----------- | | Notes Receivable | $235,249 | $42,487,225 | - The significant decrease in notes receivable is due to the collection of commercial acceptance notes from payments for equity transfer of the Affiliate Company during the nine months ended September 30, 2020[40](index=40&type=chunk) [NOTE 13 - OTHER RECEIVABLES](index=18&type=section&id=NOTE%2013%20-%20OTHER%20RECEIVABLES) Total other receivables increased substantially to **$54.7 million**, primarily due to a significant increase in short-term loans to an unrelated third party | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Loan to third party | $50,925,239 | $3,577,145 | | Others | $3,729,449 | $1,442,826 | | Total Other Receivables | $54,654,688 | $5,019,971 | - The increase in other receivables is mainly attributed to a **$50.9 million** short-term loan lent to an unrelated party at a **6%** annual interest rate to utilize idled cash[41](index=41&type=chunk) [NOTE 14 - PROPERTY, PLANT AND EQUIPMENT, NET](index=18&type=section&id=NOTE%2014%20-%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Net property, plant, and equipment decreased to **$71.1 million**, with pledged assets for bank loans reduced to **$0**, and depreciation expenses totaling **$5.3 million** | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :------------------------------- | :----------- | :----------- | | Property, Plant & Equipment, Net | $71,132,470 | $74,407,858 | | Pledged as collateral | $0 | $6,484,497 | - Depreciation expenses for the nine months ended September 30, 2020, were **$5,325,289**, a decrease from **$5,724,864** in the same period of 2019[44](index=44&type=chunk) [NOTE 15 - INTANGIBLE ASSETS](index=19&type=section&id=NOTE%2015%20-%20INTANGIBLE%20ASSETS) Net intangible assets decreased to **$3.26 million**, with amortization expenses for the nine months ended September 30, 2020, totaling **$463,743** | Intangible Asset (USD) | Sep 30, 2020 | Dec 31, 2019 | | :--------------------- | :----------- | :----------- | | Trade name | $492,235 | $492,235 | | Customer relations | $304,086 | $304,086 | | Patent | $4,675,577 | $4,564,506 | | Accumulated Amortization | $(2,207,398) | $(1,706,055) | | Intangible Assets, Net | $3,264,500 | $3,654,772 | - Aggregate amortization expenses for intangible assets were **$463,743** for the nine months ended September 30, 2020, compared to **$471,497** for the same period in 2019[45](index=45&type=chunk) [NOTE 16 - LAND USE RIGHTS, NET](index=20&type=section&id=NOTE%2016%20-%20LAND%20USE%20RIGHTS,%20NET) Net land use rights decreased to **$9.04 million**, partly due to a **$2.3 million** return to the government, with pledged rights reduced to **$0** | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :---------------------- | :----------- | :----------- | | Cost of Land Use Rights | $11,983,731 | $14,731,847 | | Accumulated Amortization | $(2,940,740) | $(3,459,032) | | Land Use Rights, Net | $9,042,991 | $11,272,815 | - During June 2020, land use rights with a net carrying value of **$2.3 million** were returned to the government as part of the Repurchase Agreement[48](index=48&type=chunk) - The net book value of land use rights pledged as collateral for bank loans decreased from **$4,937,138** at December 31, 2019, to **$0** at September 30, 2020[49](index=49&type=chunk) [NOTE 17 - SHORT-TERM AND LONG-TERM LOANS](index=20&type=section&id=NOTE%2017%20-%20SHORT-TERM%20AND%20LONG-TERM%20LOANS) All short-term bank loans totaling **$26 million** were paid off, while long-term loans increased to **$28.9 million**, including PPP and EIDL funds, with interest expenses rising **122%** | Loan Type (USD) | Sep 30, 2020 | Dec 31, 2019 | | :-------------- | :----------- | :----------- | | Short-term loans | $0 | $25,980,364 | | Long-term loans | $28,918,074 | $28,133,433 | - The company received **$244,116** under the Paycheck Protection Program (PPP) and **$150,000** from an Economic Injury Disaster Loan (EIDL) during 2020[53](index=53&type=chunk)[54](index=54&type=chunk) - Interest expenses for short-term and long-term loans increased by **122.0%** to **$2,095,222** for the nine months ended September 30, 2020, compared to **$1,304,062** for the same period in 2019[55](index=55&type=chunk) [NOTE 18 - TAXES](index=21&type=section&id=NOTE%2018%20-%20TAXES) Kandi Vehicles and Kandi Smart Battery Swap qualify for a **15%** HNTE tax rate, while others face **25%**. The effective tax rate was a **56.99%** expense, with significant NOL carryforwards - Kandi Vehicles and Kandi Smart Battery Swap are entitled to a reduced corporate income tax rate of **15%** as High and New Technology Enterprise (HNTE) companies in the PRC[56](index=56&type=chunk) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Effective Tax Rate (on pre-tax income) | 56.99% (tax expense) | 13.05% (tax benefit) | | Income Tax Provision (Benefit) | $(1,354,563) | $41,780 | - The company had aggregate Net Operating Losses (NOLs) of **$9.6 million** in 2019 and **$28.1 million** in 2018 from PRC and Hong Kong entities, with PRC NOLs expiring in five years and Hong Kong NOLs having no expiration date[61](index=61&type=chunk) [NOTE 19 - LEASES](index=23&type=section&id=NOTE%2019%20-%20LEASES) SC Autosports renewed corporate office leases with monthly payments of **$11,000-$12,000**, resulting in a right-of-use asset of **$80,561** and lease liability of **$82,823** - The company renewed corporate office leases for SC Autosports, with monthly payments ranging from **$11,000** to **$12,000** through April 2021[64](index=64&type=chunk) | Metric (USD) | Sep 30, 2020 | | :--------------------- | :----------- | | Right-of-Use Asset | $80,561 | | Lease Liability | $82,823 | | Operating Lease Expense (9 months) | $104,000 | [NOTE 20 - CONTINGENT CONSIDERATION LIABILITY](index=23&type=section&id=NOTE%2020%20-%20CONTINGENT%20CONSIDERATION%20LIABILITY) Contingent consideration liability decreased to **$3.4 million**, tied to net income or pre-tax profit milestones for Kandi Smart Battery Swap and SC Autosports, fair valued via Monte Carlo simulation | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :------------------------------- | :----------- | :----------- | | Contingent Consideration Liability | $3,403,000 | $5,197,000 | - The contingent consideration liability is tied to the achievement of net income-based milestones for Kandi Smart Battery Swap and pre-tax profit-based milestones for SC Autosports[68](index=68&type=chunk)[70](index=70&type=chunk) - The fair value of the contingent consideration liability is estimated using the Monte Carlo simulation method and re-measured each reporting period, with changes recorded in the consolidated statements of income[71](index=71&type=chunk) [NOTE 21 - STOCK AWARD](index=25&type=section&id=NOTE%2021%20-%20STOCK%20AWARD) The company grants restricted common stock as compensation to key employees, with stock award expenses for the nine months ended September 30, 2020, totaling **$870,471** - The Company compensates Board members, CFOs, and other key employees with restricted common stock under the 2008 Omnibus Long-Term Incentive Plan[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) | Metric (USD) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------- | :-------------------------- | :-------------------------- | | Employee Stock Award Expenses | $870,471 | $1,337,333 | [NOTE 22 - EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY](index=26&type=section&id=NOTE%2022%20-%20EQUITY%20METHOD%20INVESTMENT%20IN%20THE%20AFFILIATE%20COMPANY) The Affiliate Company reported a net loss of **$25.3 million**, significantly reduced from 2019, with Kandi's share decreasing to **$5.6 million** due to reduced losses and a lower **22%** equity interest **Affiliate Company Condensed Income Statement Information (USD):** | Metric | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--------- | :-------------------------- | :-------------------------- | | Net Sales | $49,065,507 | $4,605,880 | | Gross Loss | $(6,232,871) | $(3,006,051) | | Net Loss | $(25,272,713) | $(49,986,119) | **Kandi's Share of Loss (USD):** | Metric | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Share of loss after tax of Affiliate Company | $(5,631,867) | $(22,883,126) | - Kandi's equity interest in the Affiliate Company decreased from **50%** to **22%** after an equity transfer to Geely in March 2019, which also resulted in a **$20.6 million** gain from equity sale recognized in Q3 2019[84](index=84&type=chunk) - Sales to the Affiliate Company and its subsidiaries decreased by **100%** to **$962** for the nine months ended September 30, 2020, from **$10,543,190** in the same period of 2019[89](index=89&type=chunk) [NOTE 23 - COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=NOTE%2023%20-%20COMMITMENTS%20AND%20CONTINGENCIES) The company guarantees a **$2.9 million** loan for Nanlong Group, with no assets pledged as collateral, and is defending against shareholder class actions and derivative lawsuits - The Company provided a guarantee for a **$2.9 million** loan for Nanlong Group Co., Ltd. but expects the likelihood of incurring losses to be remote[92](index=92&type=chunk) - As of September 30, 2020, none of the Company's land use rights or plants and equipment were pledged as collateral for third-party bank loans[93](index=93&type=chunk) - Kandi is defending against shareholder class actions and derivative lawsuits related to past financial restatements, with a new class action transferred to New York federal court and remaining pending[94](index=94&type=chunk)[96](index=96&type=chunk) [NOTE 24 - SEGMENT REPORTING](index=29&type=section&id=NOTE%2024%20-%20SEGMENT%20REPORTING) The company operates as a single segment, with revenues and long-lived assets primarily in China and the US, reporting **$9.25 million** overseas and **$9.46 million** China revenue for Q3 2020 - The Company has one operating segment, with revenue and long-lived assets primarily derived from and located in China and the US[100](index=100&type=chunk) **Revenue by Geographical Market (USD):** | Market | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | | :------- | :-------------------------- | :-------------------------- | | Overseas | $9,253,750 | $5,703,050 | | China | $9,463,468 | $25,985,494 | **Revenue by Geographical Market (USD):** | Market | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------- | :-------------------------- | :-------------------------- | | Overseas | $19,955,855 | $15,975,711 | | China | $24,570,863 | $57,927,523 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Kandi's financial performance, liquidity, and capital resources, highlighting COVID-19 impacts, strategic shifts, and recent corporate developments [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to risks and uncertainties, where actual results may differ materially from expectations and are not guaranteed - The report contains forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially from expectations[102](index=102&type=chunk)[104](index=104&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes have occurred in the company's critical accounting policies and estimates from those disclosed in the 2019 Form 10-K - No material changes have occurred in the company's critical accounting policies and estimates from those disclosed in the 2019 Form 10-K[105](index=105&type=chunk) [Overview](index=30&type=section&id=Overview) Kandi's total revenue decreased by **39.7%** to **$44.5 million**, while net income increased by **182.5%** to **$1.0 million**, driven by COVID-19 impacts and strategic shifts | Metric (USD) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | Change (%) | | :----------- | :-------------------------- | :-------------------------- | :--------- | | Total Revenue | $44,526,718 | $73,903,234 | (39.7%) | | Gross Profit | $8,614,933 | $12,615,006 | (31.7%) | | Net Income | $1,022,137 | $361,811 | 182.5% | - The COVID-19 outbreak seriously impacted the EV market in 2020, prompting the company to expand into ancillary intelligent transportation products like Electric Scooters and Electric Self-Balancing Vehicles[109](index=109&type=chunk) - Kandi received EPA clearance for its K23 and K27 electric vehicle models for the U.S. market, but sales are pending satisfaction of U.S. Department of Transportation safety standards and further modifications[111](index=111&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Kandi's revenue declined significantly due to decreased EV parts sales, but gross margin improved, and nine-month net income increased due to asset disposal gains and reduced Affiliate Company losses [Comparison of the Three Months Ended September 30, 2020 and 2019](index=32&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202020%20and%202019) Q3 2020 total revenue decreased by **40.9%** to **$18.7 million**, driven by a **67.4%** drop in EV parts sales, resulting in a net loss due to the absence of a prior year equity sale gain | Metric (USD) | Q3 2020 | Q3 2019 | Change ($) | Change (%) | | :------------------------------- | :-------------- | :-------------- | :-------------- | :--------- | | Revenues, Net | $18,717,218 | $31,688,544 | $(12,971,326) | (40.9%) | | Gross Profit | $3,910,896 | $5,276,415 | $(1,365,519) | (25.9%) | | Net (Loss) Income | $(1,458,263) | $12,089,441 | $(13,547,704) | (112.1%) | | EV Parts Sales | $8,438,958 | $25,847,506 | $(17,408,548) | (67.4%) | | Off-road Vehicles Sales | $8,852,475 | $5,841,038 | $3,011,437 | 51.6% | | Electric Scooters, etc. Sales | $910,657 | - | $910,657 | - | | Share of loss of Affiliate Company | $(1,550,568) | $(8,433,767) | $6,883,199 | (81.6%) | | Gain from sale of equity in Affiliate Company | $0 | $20,574,217 | $(20,574,217) | (100.0%) | - The increase in off-road vehicle sales was mainly due to increased demand for 'socially distant' recreation[119](index=119&type=chunk) - The significant decrease in net income was primarily attributable to the absence of a **$20.6 million** gain from the sale of equity in the Affiliate Company recognized in Q3 2019[138](index=138&type=chunk) [Comparison of the Nine Months Ended September 30, 2020 and 2019](index=37&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202020%20and%202019) Nine-month total revenue decreased by **39.7%** to **$44.5 million**, driven by a **60.0%** decline in EV parts sales, while net income increased by **182.5%** to **$1.02 million** due to asset disposal gains and reduced Affiliate Company losses | Metric (USD) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | Change ($) | Change (%) | | :------------------------------- | :-------------------------- | :-------------------------- | :-------------- | :--------- | | Revenues, Net | $44,526,718 | $73,903,234 | $(29,376,516) | (39.7%) | | Gross Profit | $8,614,933 | $12,615,006 | $(4,000,073) | (31.7%) | | Net Income | $1,022,137 | $361,811 | $660,326 | 182.5% | | EV Parts Sales | $23,034,841 | $57,607,687 | $(34,572,846) | (60.0%) | | Off-road Vehicles Sales | $19,452,160 | $16,295,547 | $3,156,613 | 19.4% | | Electric Scooters, etc. Sales | $1,270,683 | - | $1,270,683 | - | | Gain on disposal of long-lived assets | $13,983,733 | - | $13,983,733 | - | | Share of loss of Affiliate Company | $(5,631,867) | $(22,883,126) | $17,251,259 | (75.4%) | - The increase in net income was primarily attributable to the gain on disposal of long-lived assets related to the Jinhua Facility's relocation and the decreased share of loss from the Affiliate Company[168](index=168&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=44&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Kandi's working capital increased to **$79.8 million**, with significant cash from investing activities, increased financing cash usage, and ongoing strategic developments [Cash Flow](index=44&type=section&id=Cash%20Flow) | Cash Flow Activity (USD) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(13,365,968) | $(14,610,587) | | Net cash provided by investing activities | $46,247,972 | $21,532,383 | | Net cash used in financing activities | $(25,770,794) | $(2,294,786) | - Major investing cash inflows included **$42.3 million** from equity sale in the Affiliate Company and **$51.9 million** from disposal of long-lived assets[170](index=170&type=chunk) - Cash used in financing activities significantly increased due to **$50.0 million** in repayments of short-term bank loans[171](index=171&type=chunk) [Working Capital](index=45&type=section&id=Working%20Capital) | Metric (USD) | Sep 30, 2020 | Dec 31, 2019 | | :-------------- | :----------- | :----------- | | Working Capital | $79,767,999 | $63,698,697 | - The company received two payments totaling approximately **$53 million** from a real estate repurchase agreement, contributing to liquidity[173](index=173&type=chunk) [Contractual Obligations and Off-balance Sheet Arrangements](index=45&type=section&id=Contractual%20Obligations%20and%20Off-balance%20Sheet%20Arrangements) Details on contractual obligations, including short-term and long-term loans, guarantees, and pledged collateral, are referenced in Notes 17 and 23 - Information on contractual obligations, including short-term and long-term loans, and off-balance sheet arrangements like guarantees and pledged collateral, is detailed in Note 17 and Note 23[174](index=174&type=chunk) [Recent Development Activities](index=45&type=section&id=Recent%20Development%20Activities) - Kandi is exploring opening a manufacturing base in North America to target the fast-growing market and reduce costs[175](index=175&type=chunk) - The company established China Battery Exchange Technology Co., Ltd. to monetize battery swap patents and attract strategic investors[176](index=176&type=chunk) - Kandi entered a strategic agreement with Zhejiang State Grid Electric Vehicle Service Company for battery exchange cooperation[177](index=177&type=chunk) - An operating company, Zhejiang Ruiheng Technology Company, was established to operate a ridesharing service across China[178](index=178&type=chunk) - Kandi initiated the IPO process for its wholly-owned subsidiary, Zhejiang Kandi Smart Battery Swap Technology Co., Ltd., on the Shanghai Stock Exchange's STAR market[179](index=179&type=chunk) - Kandi America received EPA clearance for its K23 and K27 electric vehicle models[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable to the company - This item is not applicable to the company[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[182](index=182&type=chunk) [Changes in Internal Control over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes to internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[184](index=184&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal matters, with no significant new issues beyond Note 23, and no expected material impact on financial results - The company is involved in legal matters in the ordinary course of business, with no significant new legal matters beyond those referenced in Note 23[186](index=186&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) Kandi's U.S. EV market development depends on meeting safety standards and vehicle modifications, while public scrutiny and allegations pose risks to reputation and stock price - The successful development of Kandi's U.S. EV markets depends on satisfying safety standards from the United States Department of Transportation and completing feature modifications and software upgrades, with no assurance that all conditions will be met as planned[187](index=187&type=chunk) - The company is a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, and malicious allegations, which could severely damage its reputation, business, and stock price[188](index=188&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including a supplementary agreement, officer certifications, and XBRL taxonomy documents - Exhibits include a supplementary agreement, certifications of principal executive and financial officers, and various XBRL taxonomy documents[193](index=193&type=chunk)[194](index=194&type=chunk)

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q2 2020 Results Earnings Conference Call August 10, 2020 8:00 AM ET Company Participants Kewa Luo - Investor Relations Xiaoming Hu - Chairman, President and Chief Executive Officer Jehn Ming Lim - Chief Financial Officer Conference Call Participants Walter Hill - Carty & Co. Michael Pfeffer - Oppenheimer & Co. Inc. Mark Kahnau - Swiss Liquid Future AG Mark Miller - Private Investor Arthur Porcari - Corporate Strategies Jay Levine - Private Investor Operator Greet ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2020 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______to______ Commission file number 001-33997 KANDI TECHNOLOGIES GROUP, INC. (Exact name of registrant as specified in charter) | --- | |------------------------------- ...

Financial Data and Key Metrics Changes - The company experienced a decline in revenue due to the COVID-19 crisis, which reduced production and consumer demand [6][8] - Management expressed optimism about recovery as demand is slowly improving and production is ramping back up [6][8] Business Line Data and Key Metrics Changes - The company is focusing on new market opportunities, particularly in the powertrain for electric scooters and self-balancing hoverboards, which is a growing market of 10 million units annually [9] - The company plans to potentially merge its motor and battery subsidiaries to create a specialized powertrain technology company [9][34] Market Data and Key Metrics Changes - The company is entering the U.S. market with consumer-friendly electric vehicles at competitive prices, which is expected to enhance its market presence [10] - The affiliate company Fengsheng is ramping up its new Maple model, targeting the rideshare market with a focus on high-performance electric vehicles [10][17] Company Strategy and Development Direction - The company is optimistic about government support for battery swapping technology, which it has pioneered [8] - The strategic focus includes leveraging technology expertise to explore new markets and enhance product offerings [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of COVID-19 but remains optimistic about the long-term outlook for electric vehicles [6][10] - The company is confident in its ability to adapt and grow in the evolving market landscape, particularly with the support of government policies [8][10] Other Important Information - The company received a $34 million down payment related to a $76 million payment for Jinhua, which will be reflected in future financial statements [27][30] - The new facility is expected to be completed by July 2020, with a construction area equivalent to the old factory but with a more efficient multi-story design [54] Q&A Session Summary Question: Concerns about U.S. listing and PCAOB compliance - Management reassured shareholders that Kandi is a U.S. company and has changed auditors to one that is PCAOB compliant, reducing delisting concerns [12] Question: Updates on Fengsheng and EV sales - Management confirmed that Fengsheng is expected to sell 30,000 units this year, despite COVID-19 challenges, and the new Maple 60V model is anticipated to be deployed in the rideshare market [21][26] Question: Battery exchange technology and consolidation plans - The quick battery exchange technology will be manufactured in-house, and the consolidation of subsidiaries is still under evaluation [32][34] Question: Off-road vehicle sales and expectations - Off-road vehicle sales are performing exceptionally well, with expectations to double last year's sales [43] Question: EV sales estimates for 2020 - A conservative estimate for Kandi's EV sales in 2020 is around 2,000 units for the K23 model [58]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details Kandi Technologies Group, Inc.'s Form 10-Q filing, including registrant status and the reason for delayed submission [Registrant Information](index=1&type=section&id=Registrant%20Information) Kandi Technologies Group, Inc. filed its Form 10-Q for the quarter ended March 31, 2020, as an accelerated filer and smaller reporting company - Kandi Technologies Group, Inc. is an accelerated filer and smaller reporting company[2](index=2&type=chunk) Common Stock Information (as of June 1, 2020) | Metric | Value | | :--- | :--- | | Shares Issued | 56,273,102 | | Shares Outstanding | 52,849,441 | | Par Value | $0.001 per share | [Explanatory Note](index=3&type=section&id=Explanatory%20Note) Kandi Technologies filed this 10-Q report after the original May 11, 2020 deadline, relying on a 45-day extension granted by the SEC due to the COVID-19 pandemic's impact - The company filed its Form 10-Q after the original due date of May 11, 2020, utilizing a 45-day SEC extension due to the COVID-19 pandemic's impact[3](index=3&type=chunk)[4](index=4&type=chunk) [PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's analysis, market risk disclosures, and controls evaluation [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Kandi Technologies Group, Inc. and its subsidiaries, including the Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Changes in Stockholders' Equity, and Statements of Cash Flows for the periods ended March 31, 2020 and December 31, 2019 (for balance sheet) or March 31, 2019 (for income statement, equity, and cash flow) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $177,432,424 | $195,572,436 | | Total Long-Term Assets | $169,551,390 | $175,645,960 | | **TOTAL ASSETS** | **$346,983,814** | **$371,218,396** | | Total Current Liabilities | $116,760,998 | $131,873,739 | | Total Long-Term Liabilities | $17,441,300 | $21,487,730 | | **TOTAL LIABILITIES** | **$134,202,298** | **$153,361,469** | | TOTAL STOCKHOLDERS' EQUITY | $212,781,516 | $217,856,927 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues, Net | $6,372,424 | $18,068,460 | $(11,696,036) | (64.7)% | | Gross Profit | $1,167,259 | $3,136,437 | $(1,969,178) | (62.8)% | | Loss from Operations | $(3,418,022) | $(58,527) | $(3,359,495) | 5740.1% | | Total Other Income (Expense), Net | $2,075,989 | $(5,159,433) | $7,235,422 | (140.2)% | | Loss Before Income Taxes | $(1,342,033) | $(5,217,960) | $3,875,927 | (74.3)% | | Income Tax (Expense) Benefit | $(232,613) | $808,488 | $(1,041,101) | (128.8)% | | **NET LOSS** | **$(1,574,646)** | **$(4,409,472)** | **$2,834,826** | **(64.3)%** | | Comprehensive Income (Loss) | $(5,097,711) | $994,556 | $(6,092,267) | (612.6)% | | Net Loss Per Share, Basic | $(0.03) | $(0.09) | $0.06 | (66.7)% | | Net Loss Per Share, Diluted | $(0.03) | $(0.09) | $0.06 | (66.7)% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (Three Months Ended March 31, 2020) | Metric | December 31, 2019 | March 31, 2020 | | :--- | :--- | :--- | | Common Stock | $52,839 | $52,849 | | Treasury Stock | $(2,477,965) | $(2,477,965) | | Additional Paid-in Capital | $259,691,370 | $259,713,660 | | Accumulated Deficit | $(16,685,736) | $(18,260,382) | | Accumulated Other Comprehensive Income (Loss) | $(22,723,581) | $(26,246,646) | | **TOTAL STOCKHOLDERS' EQUITY** | **$217,856,927** | **$212,781,516** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,526,069) | $(14,037,641) | | Net cash provided by (used in) investing activities | $11,460,291 | $(300,704) | | Net cash provided by financing activities | $8,452,964 | $0 | | Net decrease in cash and cash equivalents and restricted cash | $(6,612,814) | $(14,338,345) | | Cash and cash equivalents and restricted cash at end of period | $9,753,893 | $8,461,674 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering organizational structure, liquidity, accounting policies, specific balance sheet and income statement items, and commitments and contingencies [NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES](index=10&type=section&id=NOTE%201%20-%20ORGANIZATION%20AND%20PRINCIPAL%20ACTIVITIES) - Kandi Technologies Group, Inc. is a leading producer and manufacturer of EV products, EV parts, and off-road vehicles in China[14](index=14&type=chunk) - Due to COVID-19's impact on the EV market, the company is expanding into intelligent transportation products (e.g., Electric Scooters, Electric Self-Balancing Vehicles) by leveraging its power electric motor and battery pack advantages[15](index=15&type=chunk) [NOTE 2 - LIQUIDITY](index=12&type=section&id=NOTE%202%20-%20LIQUIDITY) Working Capital and Cash Position | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Working Capital | $60,671,426 | $63,698,697 | | Cash and Cash Equivalents | $3,719,142 | $5,490,557 | | Restricted Cash | $6,034,751 | $11,022,078 | - Kandi Vehicles entered a real estate repurchase agreement for **RMB 525 million ($75 million)**, with the first payment of **RMB 244 million ($34.4 million)** received on May 22, 2020[17](index=17&type=chunk)[97](index=97&type=chunk)[137](index=137&type=chunk) - Management believes current operations and borrowing resources are sufficient for capital requirements over the next twelve months[18](index=18&type=chunk) [NOTE 3 - BASIS OF PRESENTATION](index=13&type=section&id=NOTE%203%20-%20BASIS%20OF%20PRESENTATION) - Financial statements are prepared under U.S. GAAP for interim information and SEC rules, with interim results not necessarily indicative of full-year performance[19](index=19&type=chunk) [NOTE 4 - PRINCIPLES OF CONSOLIDATION](index=13&type=section&id=NOTE%204%20-%20PRINCIPLES%20OF%20CONSOLIDATION) - The company consolidates wholly-owned subsidiaries and accounts for its **22% investment** in the Affiliate Company using the equity method[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) [NOTE 5 - USE OF ESTIMATES](index=14&type=section&id=NOTE%205%20-%20USE%20OF%20ESTIMATES) - Financial statements involve management estimates and assumptions, and actual results may differ[23](index=23&type=chunk) [NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=15&type=section&id=NOTE%206%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Certain reclassifications were made to the 2019 cash flow statements for consistent presentation, including grouping due from employees into other receivables and customer deposits/deferred income into other payables[25](index=25&type=chunk) [NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS](index=15&type=section&id=NOTE%207%20-%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) - Adopted ASU 2018-2 and ASU 2018-13 in Q1 2020 with no material impact[26](index=26&type=chunk)[27](index=27&type=chunk) - Evaluating ASU 2020-01, effective Q1 2021, with no expected material impact[28](index=28&type=chunk) [NOTE 8 - CONCENTRATIONS](index=16&type=section&id=NOTE%208%20-%20CONCENTRATIONS) Major Customer Sales and Receivables (Three Months Ended March 31, 2020) | Major Customers | Sales (2020) | Sales (2019) | Trade Receivable (2020) | | :--- | :--- | :--- | :--- | | Customer A | 33% | 61% | 66% | | Customer B | 14% | 7% | 4% | Major Supplier Purchases and Payables (Three Months Ended March 31, 2020) | Major Suppliers | Purchases (2020) | Purchases (2019) | Accounts Payable (2020) | | :--- | :--- | :--- | :--- | | Zhejiang Kandi Supply Chain Management Co., Ltd. | 60% | 12% | 7% | | Supplier C | 27% | 20% | - | [NOTE 9 - EARNINGS (LOSS) PER SHARE](index=16&type=section&id=NOTE%209%20-%20EARNINGS%20(LOSS)%20PER%20SHARE) Earnings (Loss) Per Share (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Loss | $(1,574,646) | $(4,409,472) | | Weighted Average Shares Outstanding Basic | 52,361,077 | 51,565,287 | | Weighted Average Shares Outstanding Diluted | 52,361,077 | 51,565,287 | | Loss per Share, Basic | $(0.03) | $(0.09) | | Loss per Share, Diluted | $(0.03) | $(0.09) | - Approximately **3.9 million options** were excluded from diluted net loss per share calculation due to their exercise price being above the average market price and the company's operating loss[32](index=32&type=chunk) [NOTE 10 - ACCOUNTS RECEIVABLE](index=17&type=section&id=NOTE%2010%20-%20ACCOUNTS%20RECEIVABLE) Accounts Receivable, Net | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Accounts receivable | $54,146,409 | $61,436,514 | | Less: allowance for doubtful accounts | $(250,325) | $(254,665) | | **Accounts receivable, net** | **$53,896,084** | **$61,181,849** | [NOTE 11 - INVENTORIES](index=17&type=section&id=NOTE%2011%20-%20INVENTORIES) Inventories Breakdown | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Raw material | $12,322,568 | $12,127,957 | | Work-in-progress | $7,010,026 | $4,545,736 | | Finished goods | $10,839,957 | $11,062,873 | | **Inventories** | **$30,172,551** | **$27,736,566** | [NOTE 12 - NOTES RECEIVABLE](index=18&type=section&id=NOTE%2012%20-%20NOTES%20RECEIVABLE) - Notes receivable from unrelated parties decreased from **$42.49 million** at December 31, 2019, to **$0** at March 31, 2020, due to collections and reclassification to other receivables[38](index=38&type=chunk) [NOTE 13 - OTHER RECEIVABLES](index=18&type=section&id=NOTE%2013%20-%20OTHER%20RECEIVABLES) Other Receivables Breakdown | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Amount due from unrelated party for equity transfer of the Affiliate Company | $30,475,760 | $0 | | Loan to third party | $12,242,967 | $3,577,145 | | Others | $1,547,003 | $1,442,826 | | **Total other receivables** | **$44,265,730** | **$5,019,971** | [NOTE 14 - PROPERTY, PLANT AND EQUIPMENT, NET](index=19&type=section&id=NOTE%2014%20-%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Property, Plant and Equipment, Net | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | At cost | $118,666,089 | $120,719,212 | | Less: Accumulated depreciation | $(47,274,840) | $(46,311,354) | | **Property, plant and equipment, net** | **$71,391,249** | **$74,407,858** | - Depreciation expenses for Q1 2020 were **$1,780,152**, down from **$2,015,459** in Q1 2019[42](index=42&type=chunk) [NOTE 15 - INTANGIBLE ASSETS](index=19&type=section&id=NOTE%2015%20-%20INTANGIBLE%20ASSETS) Intangible Assets, Net | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Gross carrying amount | $5,283,030 | $5,360,827 | | Less: Accumulated amortization | $(1,840,517) | $(1,706,055) | | **Intangible assets, net** | **$3,442,513** | **$3,654,772** | - Amortization expenses for Q1 2020 were **$154,856**, down from **$159,503** in Q1 2019[45](index=45&type=chunk) [NOTE 16 - LAND USE RIGHTS, NET](index=20&type=section&id=NOTE%2016%20-%20LAND%20USE%20RIGHTS,%20NET) Land Use Rights, Net | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cost of land use rights | $14,480,760 | $14,731,847 | | Less: Accumulated amortization | $(3,479,807) | $(3,459,032) | | **Land use rights, net** | **$11,000,953** | **$11,272,815** | - Amortization expenses for Q1 2020 were **$80,961**, down from **$83,762** in Q1 2019[47](index=47&type=chunk) [NOTE 17 - SHORT-TERM AND LONG-TERM BANK LOANS](index=21&type=section&id=NOTE%2017%20-%20SHORT-TERM%20AND%20LONG-TERM%20BANK%20LOANS) Bank Loans Summary | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Short-term loans | $33,861,956 | $25,980,364 | | Long-term bank loans - current portion | $13,544,782 | $13,779,641 | | Long-term bank loans | $14,109,148 | $14,353,792 | | **Total Long-term loans (current and noncurrent)** | **$27,653,930** | **$28,133,433** | - Interest expenses for short-term and long-term bank loans increased by **123.8%** to **$842,049** in Q1 2020 from **$439,183** in Q1 2019[50](index=50&type=chunk) [NOTE 18 - TAXES](index=22&type=section&id=NOTE%2018%20-%20TAXES) - Kandi Vehicles and Jinhua Ankao benefit from a reduced **15% corporate income tax rate** as HNTE companies, while other entities face a **25% rate**[53](index=53&type=chunk) Effective Tax Rate and Income Tax (Expense) Benefit (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Effective Tax Rate | 17.33% (tax expense) | 15.49% (tax benefit) | | Income Tax (Expense) Benefit | $(232,613) | $808,488 | - The company had no liability for unrecognized tax benefits as of March 31, 2020, and holds significant NOLs from PRC and Hong Kong entities[57](index=57&type=chunk)[58](index=58&type=chunk) [NOTE 19 - LEASES](index=24&type=section&id=NOTE%2019%20-%20LEASES) Operating Lease Information (as of March 31, 2020) | Metric | Amount | | :--- | :--- | | Right-of-use asset | $149,614 | | Lease liability | $151,204 | | Operating lease cost (Q1 2020) | $33,000 | [NOTE 20 - CONTINGENT CONSIDERATION LIABILITY](index=25&type=section&id=NOTE%2020%20-%20CONTINGENT%20CONSIDERATION%20LIABILITY) Contingent Consideration Liability | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Contingent consideration liability | $1,405,000 | $5,197,000 | - The decrease in contingent consideration liability was primarily due to a lower forecast for SC Autosports' third-year net income and a decrease in the company's stock price in Q1 2020[68](index=68&type=chunk) [NOTE 21 - STOCK AWARD](index=25&type=section&id=NOTE%2021%20-%20STOCK%20AWARD) Employee Stock Award Expenses (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Employee stock award expenses | $22,925 | $31,675 | - Stock awards are granted to Board members, management, and consultants under the 2008 Plan, with fair value based on the common stock's closing price[73](index=73&type=chunk)[74](index=74&type=chunk) [NOTE 22 - SUMMARIZED INFORMATION OF EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY](index=27&type=section&id=NOTE%2022%20-%20SUMMARIZED%20INFORMATION%20OF%20EQUITY%20METHOD%20INVESTMENT%20IN%20THE%20AFFILIATE%20COMPANY) Affiliate Company Investment and Performance (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Company's share in net loss of Affiliate Company | $(1,102,770) | $(9,949,158) | | Sales to Affiliate Company | $0 | $1,733,497 | | Net amount due from Affiliate Company (as of March 31) | $20,026,310 | N/A (Dec 31, 2019: $31,330,763) | - The decrease in share of loss from the Affiliate Company is due to reduced operating expenses and Kandi's decreased equity interest (from **43.47% to 22%**) after equity dilution and transfer in 2019[78](index=78&type=chunk)[81](index=81&type=chunk)[128](index=128&type=chunk) [NOTE 23 - COMMITMENTS AND CONTINGENCIES](index=29&type=section&id=NOTE%2023%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - Kandi is a guarantor for a **$2.8 million** loan to Nanlong Group Co., Ltd. (NGCL), with expected remote likelihood of loss[85](index=85&type=chunk) - Kandi settled its guarantor liability for Zhejiang Shuguang Industrial Co., Ltd.'s (ZSICL) **$4.1 million** loan by paying **$3.0 million**, with ZSICL expected to reimburse the remainder[86](index=86&type=chunk) - Shareholder class actions filed against Kandi were dismissed in September 2019, but a derivative action in Delaware Court of Chancery had a motion to dismiss denied in April 2020, and a Special Litigation Committee investigation is ongoing[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [NOTE 24 - SEGMENT REPORTING](index=31&type=section&id=NOTE%2024%20-%20SEGMENT%20REPORTING) - The company operates as a single segment, with primary geographical markets in China and the US[95](index=95&type=chunk) Sales Revenue by Geographical Market (Three Months Ended March 31) | Market | 2020 Sales Revenue | 2019 Sales Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Overseas | $2,130,824 | $5,222,525 | (59.2)% | | China | $4,241,600 | $12,845,935 | (67.0)% | | **Total** | **$6,372,424** | **$18,068,460** | **(64.7)%** | [NOTE 25 - SUBSEQUENT EVENT](index=31&type=section&id=NOTE%2025%20-%20SUBSEQUENT%20EVENT) - Received first payment of **RMB 244 million ($34.4 million)** on May 22, 2020, from the real estate repurchase agreement[97](index=97&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2020, compared to the prior-year period, including an overview of performance, liquidity, and recent developments [Forward-Looking Statements](index=31&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[97](index=97&type=chunk)[99](index=99&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes in critical accounting policies and estimates from the 2019 Form 10-K[100](index=100&type=chunk) [Overview](index=32&type=section&id=Overview) Q1 2020 Financial Overview | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $6,372,424 | $18,068,460 | (64.7)% | | Gross Profit | $1,167,259 | $3,136,437 | (62.8)% | | Gross Margin | 18.3% | 17.4% | +0.9 pp | | Net Loss | $(1,574,646) | $(4,409,472) | (64.3)% | - COVID-19 significantly impacted the EV market, prompting the company to expand into intelligent transportation products (e.g., Electric Scooters, Electric Self-Balancing Vehicles) by leveraging its power electric motor and battery pack advantages[102](index=102&type=chunk)[103](index=103&type=chunk) - The company originally planned to export **2,000-5,000 EV units** to the U.S. in 2020, but this plan is subject to adjustment due to the COVID-19 pandemic[104](index=104&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) [Revenue](index=35&type=section&id=Revenue) Revenue by Product Type (Three Months Ended March 31) | Product Type | 2020 Revenue | 2019 Revenue | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | EV parts | $2,081,335 | $12,771,440 | $(10,690,105) | (83.7)% | | EV products | $255,819 | $0 | $255,819 | N/A | | Off-road vehicles | $4,035,270 | $5,297,020 | $(1,261,750) | (23.8)% | | **Total** | **$6,372,424** | **$18,068,460** | **$(11,696,036)** | **(64.7)%** | - The decrease in revenue was mainly due to the COVID-19 outbreak and lockdown policies in China affecting production and demand[106](index=106&type=chunk) [Cost of goods sold](index=37&type=section&id=Cost%20of%20goods%20sold) Cost of Goods Sold (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cost of goods sold | $5,205,165 | $14,932,023 | $(9,726,858) | (65.1)% | [Gross profit](index=37&type=section&id=Gross%20profit) Gross Profit and Margin by Product (Three Months Ended March 31) | Product Type | 2020 Gross Profit | 2020 Margin % | 2019 Gross Profit | 2019 Margin % | | :--- | :--- | :--- | :--- | :--- | | EV parts | $223,205 | 10.7% | $1,961,874 | 15.4% | | EV products | $14,432 | 5.6% | $0 | - | | Off-road vehicles | $929,622 | 23.0% | $1,174,563 | 22.2% | | **Total** | **$1,167,259** | **18.3%** | **$3,136,437** | **17.4%** | - Gross margin increased due to higher unit prices for parts from SC Autosports and the introduction of higher-margin ATVs[117](index=117&type=chunk) [Research and development](index=37&type=section&id=Research%20and%20development) Research and Development Expenses (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | R&D expenses | $640,240 | $537,433 | $102,807 | 19.1% | [Selling and marketing](index=37&type=section&id=Selling%20and%20marketing) Selling and Marketing Expenses (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Selling and marketing expenses | $878,306 | $618,003 | $260,303 | 42.1% | [General and administrative expenses](index=38&type=section&id=General%20and%20administrative%20expenses) General and Administrative Expenses (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | General and administrative expenses | $3,066,735 | $2,039,528 | $1,027,207 | 50.4% | - Increase largely due to depreciation of Hainan facilities' idle capacity charged to administrative expenses[121](index=121&type=chunk) [Interest income](index=38&type=section&id=Interest%20income) Interest Income (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest income | $338,944 | $252,404 | $86,540 | 34.3% | [Interest expenses](index=38&type=section&id=Interest%20expenses) Interest Expenses (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest expenses | $982,934 | $439,183 | $543,751 | 123.8% | [Change in fair value of contingent consideration](index=38&type=section&id=Change%20in%20fair%20value%20of%20contingent%20consideration) Change in Fair Value of Contingent Consideration (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gain from change in fair value of contingent consideration | $3,792,000 | $89,000 | $3,703,000 | 4160.7% | [Government grants](index=38&type=section&id=Government%20grants) Government Grants (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Government grants | $11,099 | $47,724 | $(36,625) | (76.7)% | [Gain from equity dilution in the Affiliate Company](index=38&type=section&id=Gain%20from%20equity%20dilution%20in%20the%20Affiliate%20Company) Gain from Equity Dilution in Affiliate Company (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gain from equity dilution | $0 | $4,365,390 | $(4,365,390) | (100.0)% | [Share of loss after tax of the Affiliate Company](index=39&type=section&id=Share%20of%20loss%20after%20tax%20of%20the%20Affiliate%20Company) Share of Loss After Tax of Affiliate Company (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Share of loss after tax | $(1,102,770) | $(9,949,158) | $8,846,388 | (88.9)% | [Other income, net](index=39&type=section&id=Other%20income,%20net) Other Income, Net (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Other income, net | $19,650 | $474,390 | $(454,740) | (95.9)% | [Income Taxes](index=39&type=section&id=Income%20Taxes) Income Tax (Expense) Benefit (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Effective Tax Rate | 17.33% (tax expense) | 15.49% (tax benefit) | | Income Tax (Expense) Benefit | $(232,613) | $808,488 | [Net loss](index=39&type=section&id=Net%20loss) Net Loss (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (Amount) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(1,574,646) | $(4,409,472) | $2,834,826 | (64.3)% | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,526,069) | $(14,037,641) | | Net cash provided by (used in) investing activities | $11,460,291 | $(300,704) | | Net cash provided by financing activities | $8,452,964 | $0 | | Net decrease in cash and cash equivalents and restricted cash | $(6,612,814) | $(14,338,345) | Working Capital | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Working Capital | $60,671,426 | $63,698,697 | - The company expects to use proceeds from the **$75 million** real estate repurchase agreement to fund land use acquisition, factory construction, growth initiatives, and general corporate purposes[137](index=137&type=chunk) [Contractual Obligations and Off-balance Sheet Arrangements](index=41&type=section&id=Contractual%20Obligations%20and%20Off-balance%20Sheet%20Arrangements) [Recent Development Activities](index=41&type=section&id=Recent%20Development%20Activities) - Kandi is expanding into intelligent transportation products (e.g., Electric Scooters, Electric Self-Balancing Vehicles) by leveraging its power electric motor and battery pack advantages[140](index=140&type=chunk) - Kandi has partnered with Hangzhou Chic Intelligent Technology Co., Ltd. to produce balance scooters using Kandi's power train system[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable to the company - This item is not applicable to the company[142](index=142&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=42&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2020[144](index=144&type=chunk) [Changes in Internal Control over Financial Reporting](index=42&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material changes to internal control over financial reporting during the reporting period[146](index=146&type=chunk) [PART II — OTHER INFORMATION](index=43&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, lists filed exhibits, and includes the official signatures for the Form 10-Q [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal matters arising in the ordinary course of business, with details referenced in Note 23 - The company is involved in legal matters, with details in Note 23. No other significant legal matters or pending litigation are currently known to materially affect financial results[148](index=148&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the land repurchase agreement, employment agreement for the new CFO, certifications, and XBRL taxonomy documents - Exhibits include the land repurchase agreement, new CFO employment agreement, certifications, and XBRL documents[149](index=149&type=chunk) [SIGNATURES](index=44&type=section&id=SIGNATURES) The report is signed by Hu Xiaoming, President and Chief Executive Officer, and Jehn Ming Lim, Chief Financial Officer, on June 5, 2020 - Report signed by Hu Xiaoming (CEO) and Jehn Ming Lim (CFO) on June 5, 2020[152](index=152&type=chunk)

Financial Data and Key Metrics Changes - Full year 2019 revenue was $135.7 million, an increase of 20.7% compared to the previous year, with gross margin expanding to 18.7% [6][8][10] Business Line Data and Key Metrics Changes - The company stopped production of previous EV products due to restructuring but laid groundwork for growth through new product development and market expansion [6][10] - The Hainan factory is currently manufacturing the K23 model for the rideshare market, but sales have been put on hold due to COVID-19 [13][15] Market Data and Key Metrics Changes - The company has about 50 dealerships ready to distribute Kandi EVs in the U.S., but the COVID crisis has delayed operations [15][16] - The Maple 30X SUV is expected to sell around 30,000 units this year, priced at approximately $10,000, significantly lower than competitors like Tesla [27][30] Company Strategy and Development Direction - The company is focusing on steady growth and is not actively planning acquisitions unless targeted opportunities arise [9][10] - Kandi is adjusting its model structure to increase battery production for intelligent electric transportation products [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth but emphasized the need to conserve resources due to the volatile nature of the COVID-19 crisis [9][10] - The company expects to see high growth in revenue from the Yongkang Scrou factory due to increased demand for motors [40] Other Important Information - The company has changed auditors to Marcum to gain PCAOB access to more auditing information, which is a priority for compliance [20][22] - The next model to be released will include quick battery exchange technology, targeting the rideshare market [32][34] Q&A Session Summary Question: Will Kandi take advantage of industry stress for acquisitions? - Management indicated that they are not planning acquisitions unless there are targeted companies, focusing on conserving resources for now [9] Question: What vehicles are manufactured at the Hainan factory? - The Hainan factory is manufacturing the K23 model, but sales are currently on hold due to COVID-19 [13] Question: How are U.S. sales progressing amid COVID-19? - Dealerships are ready to distribute Kandi EVs, but operations are delayed due to the pandemic [15] Question: When will Kandi get off the PCAOB non-compliant list? - The new auditor Marcum is expected to provide access to auditing information, which may help Kandi get off the non-compliant list within six months [20][22] Question: What is the status of the equity swap with Jinpeng? - The equity swap is being discussed, and if implemented, it will not significantly dilute Kandi's ownership [46] Question: Will the next model use quick battery exchange technology? - The next model will include quick battery exchange technology, but not necessarily from Ankao [34][32]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________to ___________ Commission file number 001-33997 KANDI TECHNOLOGIES GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 90-0363723 | -- ...