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Kandi(KNDI) - 2020 Q3 - Quarterly Report
KandiKandi(US:KNDI)2020-11-09 12:36

PART I — FINANCIAL INFORMATION Item 1. Financial Statements 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 | 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) | 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 | 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 | 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 NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES 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 markets14 - 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 recycling16 - Zhejiang Ruiheng Technology Co., Ltd. was established in September 2020 by Ruibo, Jinpeng, and Kandi Vehicles (10% ownership) to operate a ridesharing service across China17 - 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 advantages18 NOTE 2 - LIQUIDITY 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 vacation20 - 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 months21 NOTE 3 - BASIS OF PRESENTATION 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 presentation22 - 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 periods23 NOTE 4 - PRINCIPLES OF CONSOLIDATION 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 ownership25 - The Company's 22% equity interest in the Affiliate Company is accounted for using the equity method26 NOTE 5 - USE OF ESTIMATES 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 vary27 NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 statements28 NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS 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 statements2930 - 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 adoption3132 NOTE 8 - CONCENTRATIONS 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 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 price37 NOTE 10 - ACCOUNTS RECEIVABLE 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 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 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, 202040 NOTE 13 - OTHER RECEIVABLES 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 cash41 NOTE 14 - PROPERTY, PLANT AND EQUIPMENT, NET 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 201944 NOTE 15 - INTANGIBLE ASSETS 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 201945 NOTE 16 - LAND USE RIGHTS, NET 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 Agreement48 - 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, 202049 NOTE 17 - SHORT-TERM AND LONG-TERM LOANS 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 20205354 - 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 201955 NOTE 18 - TAXES 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 PRC56 | 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 date61 NOTE 19 - LEASES 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 202164 | 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 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 Autosports6870 - 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 income71 NOTE 21 - STOCK AWARD 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 Plan747576777879 | 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 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 201984 - 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 201989 NOTE 23 - COMMITMENTS AND CONTINGENCIES 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 remote92 - 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 loans93 - 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 pending9496 NOTE 24 - SEGMENT REPORTING 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 US100 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 This section reviews Kandi's financial performance, liquidity, and capital resources, highlighting COVID-19 impacts, strategic shifts, and recent corporate developments Forward-Looking Statements 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 expectations102104 Critical Accounting Policies and Estimates 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-K105 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 Vehicles109 - 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 modifications111 Results of Operations 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 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' recreation119 - 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 2019138 Comparison of the Nine Months Ended September 30, 2020 and 2019 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 Company168 LIQUIDITY AND CAPITAL RESOURCES 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 | 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 assets170 - Cash used in financing activities significantly increased due to $50.0 million in repayments of short-term bank loans171 Working Capital | 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 liquidity173 Contractual Obligations and Off-balance Sheet Arrangements 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 23174 Recent Development Activities - Kandi is exploring opening a manufacturing base in North America to target the fast-growing market and reduce costs175 - The company established China Battery Exchange Technology Co., Ltd. to monetize battery swap patents and attract strategic investors176 - Kandi entered a strategic agreement with Zhejiang State Grid Electric Vehicle Service Company for battery exchange cooperation177 - An operating company, Zhejiang Ruiheng Technology Company, was established to operate a ridesharing service across China178 - 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 market179 - Kandi America received EPA clearance for its K23 and K27 electric vehicle models180 Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable to the company - This item is not applicable to the company181 Item 4. Controls and Procedures 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 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020182 Changes in Internal Control over Financial Reporting - 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 period184 PART II – OTHER INFORMATION Item 1. Legal Proceedings 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 23186 Item 1A. Risk Factors 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 planned187 - 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 price188191192 Item 6. Exhibits 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 documents193194