Kandi(KNDI) - 2021 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Q1 2021 financial statements show revenue growth to $16.0 million but a net loss of $6.4 million due to increased R&D, partially offset by a $17.7 million gain from an equity sale Condensed Consolidated Balance Sheets As of March 31, 2021, total assets slightly decreased to $484.6 million, while cash and equivalents increased to $146.7 million, and stockholders' equity declined to $399.0 million Condensed Consolidated Balance Sheet Highlights (in USD) | Financial Metric | March 31, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $146,714,469 | $142,078,190 | | Total Current Assets | $322,355,382 | $307,115,576 | | Total Assets | $484,571,960 | $495,249,840 | | Liabilities & Equity | | | | Total Current Liabilities | $78,263,142 | $83,797,425 | | Total Liabilities | $85,590,077 | $91,483,176 | | Total Stockholders' Equity | $398,981,883 | $403,766,664 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Q1 2021 revenues increased 150.7% to $16.0 million, but a $22.8 million operating loss, driven by surging R&D, resulted in a $6.4 million net loss despite a $17.7 million equity sale gain Q1 2021 vs Q1 2020 Statement of Operations (in USD) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues, Net | $15,977,754 | $6,372,424 | | Gross Profit | $4,354,351 | $1,167,259 | | Research and development | ($21,624,597) | ($640,240) | | Loss from Operations | ($22,847,235) | ($3,418,022) | | Gain from sale of equity in the Affiliate Company | $17,700,260 | - | | Net Loss | ($6,402,720) | ($1,574,646) | | Net Loss Per Share | ($0.08) | ($0.03) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $6.0 million in Q1 2021, while investing activities provided $11.1 million, leading to a period-end cash balance of $147.2 million Cash Flow Summary (in USD) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,017,280) | ($26,526,069) | | Net cash provided by investing activities | $11,130,031 | $11,460,291 | | Net cash provided by financing activities | $0 | $8,452,964 | | Net increase (decrease) in cash | $5,112,751 | ($6,612,814) | | Cash at end of period | $147,195,073 | $9,753,893 | Notes to Condensed Consolidated Financial Statements Notes detail significant accounting policies, the $47.0 million sale of Affiliate Company equity yielding a $17.7 million gain, expected $25 million real estate payment, and ongoing legal proceedings - The company's working capital increased to $244.1 million as of March 31, 2021, from $223.3 million at year-end 2020[19] - On February 18, 2021, the company agreed to sell its remaining 22% equity in the Affiliate Company to Geely for approximately $47.0 million The transaction was completed on March 9, 2021, and resulted in a recognized gain of $17.7 million in Q1 2021[21][27][84] - The company is involved in several ongoing legal proceedings, including putative shareholder class actions and a derivative action, but believes the claims are without merit and is unable to estimate any potential loss[90][92][94] Revenue by Product and Geography (Q1 2021 vs Q1 2020, in USD) | Category | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | By Geography | | | | Overseas | $7,867,426 | $2,130,824 | | China | $8,110,328 | $4,241,600 | | By Product | | | | EV parts | $6,368,331 | $2,081,335 | | Off-road vehicles | $5,619,004 | $4,035,270 | | Electric Scooters & parts | $3,868,925 | - | | EV products | $121,494 | $255,819 | | Total Revenue | $15,977,754 | $6,372,424 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2021 revenue growth to EV parts and scooters, with the net loss driven by surging R&D expenses, while liquidity improved from asset sales and new EV products are under development - Total revenue for Q1 2021 was $16.0 million, a 150.7% increase from Q1 2020, while net loss increased to $6.4 million from $1.6 million, mainly due to higher R&D investment[105] - The company is developing a short-distance small-scale pure EV with a target cost under RMB 30,000 and a high-end pure electric four-wheel drive UTV, both planned for launch within the year[146] - After selling its stake in the Affiliate Company, Kandi is no longer bound by non-compete provisions and is actively seeking to acquire a company to continue its growth in the electric vehicle field[146] Results of Operations Q1 2021 revenue grew 150.7% to $16.0 million driven by EV parts and new electric scooters, with gross margin improving to 27.3%, despite operating expenses surging due to a 3,277.6% increase in R&D Revenue by Product Type (in USD) | Product Type | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | EV parts | $6,368,331 | $2,081,335 | 206.0% | | Off-road vehicles | $5,619,004 | $4,035,270 | 39.2% | | Electric Scooters & parts | $3,868,925 | - | N/A | | EV products | $121,494 | $255,819 | (52.5%) | | Total | $15,977,754 | $6,372,424 | 150.7% | - Gross margin increased to 27.3% in Q1 2021 from 18.3% in Q1 2020, mainly due to an increased sales proportion of higher-margin battery processing business and contributions from new intelligent transportation products[124] - Research and development expenses surged by 3,277.6% to $21.6 million in Q1 2021, compared to $0.64 million in Q1 2020, due to investment in a new product[125] - The company recognized a gain of $17.7 million from the sale of its 22% equity interest in the Affiliate Company to Geely, which was completed on March 9, 2021[133] LIQUIDITY AND CAPITAL RESOURCES Liquidity improved with working capital increasing by $20.8 million to $244.1 million, and cash used in operations significantly decreased to $6.0 million, bolstered by $23.5 million from an equity sale and an expected $25 million real estate payment - Working capital was $244.1 million at March 31, 2021, an increase of $20.8 million from December 31, 2020[142] - The company received the first payment of RMB 154 million (approx. $23.5 million) in March 2021 for the sale of its Affiliate Company equity, with the remainder expected within six months[144] - The company anticipates receiving a final installment payment of RMB 162 million (approx. $25 million) from a real estate repurchase agreement with the Jinhua government after vacating its old factory property[143][99] Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to the company as a smaller reporting company - The company states that this item is not applicable[149] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[150] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[152] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ongoing legal proceedings, including shareholder class actions, which management believes are without merit, though the ultimate financial impact remains uncertain - The company is subject to ongoing legal proceedings, including a putative securities class action filed in December 2020 based on claims made in a Hindenburg Research report[94][154] - Management believes the claims in these litigations are without merit but is unable to estimate the possible loss, if any, associated with them[96] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Equity Transfer Agreement with Geely, officer certifications, and XBRL data files - The exhibits include the Equity Transfer Agreement with Geely, CEO/CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 906), and XBRL data files[155]