Kandi(KNDI) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited financial statements and management's analysis for the first quarter, along with market risk disclosures and control assessments Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2022, and related notes Condensed Consolidated Balance Sheets As of March 31, 2022, total assets were $509.0 million, a slight decrease from $520.2 million, primarily due to reduced cash and cash equivalents, while liabilities also decreased Balance Sheet Summary | Balance Sheet Items | March 31, 2022 (Unaudited) ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Total Current Assets | $332,309,538 | $342,608,136 | | Total Assets | $509,030,721 | $520,160,272 | | Total Current Liabilities | $55,950,060 | $64,162,690 | | Total Liabilities | $66,731,808 | $76,959,945 | | Total Stockholders' Equity | $442,298,913 | $443,200,327 | | Cash and cash equivalents | $99,997,938 | $129,223,443 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Q1 2022 net revenues increased 55.8% to $24.9 million, but gross profit decreased 45.2% to $2.4 million, while net loss narrowed to $1.6 million due to reduced operating expenses Income Statement Summary | Income Statement | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :--- | :--- | :--- | | Revenues, Net | $24,891,404 | $15,977,754 | | Gross Profit | $2,387,163 | $4,354,351 | | Expense from Operations | ($5,703,653) | ($22,847,235) | | Net Loss Attributable to Stockholders | ($1,616,056) | ($6,402,720) | | Net Loss Per Share (Basic and Diluted) | ($0.02) | ($0.08) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity slightly decreased to $442.3 million in Q1 2022, primarily due to a $1.6 million net loss and stock buybacks, partially offset by foreign currency translation gains - Key changes in stockholders' equity for Q1 2022 included a stock buyback of $1,583,560, a net loss of $1,619,013, and a positive foreign currency translation adjustment of $1,009,811[21] Condensed Consolidated Statements of Cash Flows Q1 2022 saw $6.2 million cash generated from operations, a significant improvement, while $16.7 million was used in investing activities and $0.3 million in financing, leading to a $10.5 million overall cash decrease Cash Flow Summary | Cash Flow Activities | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,188,441 | ($6,017,280) | | Net cash (used in) provided by investing activities | ($16,716,300) | $11,130,031 | | Net cash used in financing activities | ($279,829) | $0 | | Net (Decrease) Increase in Cash | ($10,807,688) | $5,112,751 | Notes to Condensed Consolidated Financial Statements The notes detail the company's EV business, liquidity with $276.4 million working capital, customer and supplier concentrations, the Q1 2021 sale of a 22% affiliate stake, ongoing legal proceedings, and revenue breakdown by product and geography - The company is a leading producer of electric vehicle (EV) products, EV parts, and off-road vehicles, operating primarily through its PRC and US subsidiaries[30] - In Q1 2022, three customers (A, B, and C) each accounted for 13%, 10%, and 10% of consolidated revenue, indicating significant customer concentration[46][47] - On February 18, 2021, the company agreed to sell its remaining 22% equity interest in the Former Affiliate Company to Geely for approximately $48 million, with the transaction completed on March 9, 2021[93] Revenue by Product | Revenue by Product (Q1 2022 vs Q1 2021) | Q1 2022 Sales ($) | Q1 2021 Sales ($) | | :--- | :--- | :--- | | Off-road vehicles | $10,713,741 | $5,619,004 | | Lithium-ion cells | $8,017,054 | - | | EV parts | $3,667,778 | $6,368,331 | | Electric Scooters & parts | $2,127,365 | $3,868,925 | | EV products | $339,955 | $121,494 | | Total | $24,891,404 | $15,977,754 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2022 results, noting a 55.8% revenue increase to $24.9 million driven by off-road vehicles and lithium-ion cells, a gross margin decline to 9.6%, and a 94.7% R&D expense decrease, reducing net loss to $1.6 million Key Performance Indicators | Key Performance Indicators | Q1 2022 ($) | Q1 2021 ($) | | :--- | :--- | :--- | | Total Revenue | $24,891,404 | $15,977,754 | | Gross Profit | $2,387,163 | $4,354,351 | | Gross Margin | 9.6% | 27.3% | | Net Loss | ($1,619,013) | ($6,402,720) | - Revenue growth was mainly due to increased sales of off-road vehicles and the inclusion of lithium-ion cell sales from the newly acquired Jiangxi Huiyi[119] - Gross margin decreased primarily due to a product mix with a higher concentration of lower-margin products, such as lithium-ion cells, and aggressive pricing for a new off-road vehicle brand[130] - R&D expenses decreased by 94.7% to $1.1 million, as R&D for a new product was completed in the prior-year period[131] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks include foreign exchange fluctuations between USD and RMB, minimal interest rate risk, significant credit risk, and broader economic, political, and pandemic-related risks, especially those in China - The main market risk is foreign exchange rate fluctuation between the USD and RMB, as the majority of revenues and costs are denominated in RMB[149] - Interest rate risk is considered immaterial as of March 31, 2022, due to fixed-rate debt instruments and the short-term nature of cash equivalents[152] - Credit risk is significant and is managed through credit approvals, limits, and by typically requiring prepayment from customers[156] - The COVID-19 outbreak continues to pose a risk, potentially affecting demand, supply chains, and overall financial condition[157][159] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - 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[161] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[163] PART II — OTHER INFORMATION This section covers legal proceedings, updated risk factors, details on equity security sales, and a list of exhibits filed with the report Legal Proceedings The company is involved in various legal matters, including shareholder class actions, which management believes are without merit and for which potential loss cannot be estimated - The company is defending against several putative shareholder class actions and derivative lawsuits filed in U.S. federal courts[99][104][165] - The company is unable to estimate the possible loss, if any, associated with these litigations, noting that an unfavorable outcome could negatively impact its financial condition[105] Risk Factors This section updates risk factors, focusing on regulatory risks from China's Cybersecurity Review Measures and the U.S. Holding Foreign Companies Accountable Act (HFCAA), which could impact overseas listings and delisting - China's Cybersecurity Review Measures, effective February 15, 2022, require online platform operators with over one million users to undergo a cybersecurity review for foreign listings, which the company believes does not currently apply to its operations[167][169] - The Holding Foreign Companies Accountable Act (HFCAA) poses a risk of delisting from U.S. exchanges if the company's auditor cannot be inspected by the PCAOB for three (potentially reduced to two) consecutive years[172][176] - The company's current auditor is U.S.-based and subject to PCAOB inspection, making the HFCAA not currently applicable, but this status could change in the future[173][177] Unregistered Sales of Equity Securities and Use of Proceeds The company details its stock repurchase program, which authorized up to $20 million on December 1, 2021, with 1,138,785 shares repurchased at an average price of $3.48 as of March 31, 2022, leaving $16.0 million available Stock Repurchase Program | Period | Total Shares Purchased (Shares) | Average Price Paid ($) | Remaining Authorization ($) | | :--- | :--- | :--- | :--- | | Dec 2021 | 679,749 | $3.52 | $17,607,284 | | Jan 2022 | 459,036 | $3.42 | $16,037,380 | | Feb 2022 | - | - | $16,037,380 | | Mar 2022 | - | - | $16,037,380 | | Total as of Mar 31, 2022 | 1,138,785 | $3.48 | $16,037,380 | - Between April 1 and May 5, 2022, the company repurchased an additional 603,500 shares at an average price of $2.69 per share[108] Exhibits This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act and Inline XBRL financial data documents - The filing includes CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[182] - Interactive Data Files are provided in Inline XBRL format as required[182]