þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
90-0363723
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company þ
|
Page
|
|||
PART
I-- FINANCIAL INFORMATION
|
|||
Item
1.
|
Condensed
Consolidated Financial Statements
|
1
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
31
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
44
|
|
Item
4.
|
Controls
and Procedures
|
45
|
|
PART
II-- OTHER INFORMATION
|
|||
Item
1A.
|
Risk
Factors
|
II-1
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
II-1
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
II-1
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
II-1
|
|
Item
5.
|
Other
information
|
II-1
|
|
Item
6.
|
Exhibits
|
II-2
|
June
30,
2010 (Unaudited) |
December
31, 2009 |
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 879,564 | $ | 218,207 | ||||
Restricted
cash
|
8,080,492 | 5,704,984 | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $0 as of June 30,
2010 and December 31, 2009
|
12,174,776 | 14,879,968 | ||||||
Inventories,
net of reserve for slow moving inventories of $152,918 and $152,278 as of
June, 30, 2010 and December 31, 2009, respectively
|
9,596,453 | 5,382,760 | ||||||
Notes
receivable
|
17,234,751 | 2,267,599 | ||||||
Other
receivables
|
520,994 | 321,336 | ||||||
Prepayments
and prepaid expenses
|
34,702 | 30,083 | ||||||
Due
from employees
|
58,761 | 28,228 | ||||||
Advances
to suppliers
|
534,708 | 1,164,672 | ||||||
Total
Current Assets
|
49,115,201 | 29,997,837 | ||||||
LONG-TERM
ASSETS
|
||||||||
Plant
and equipment, net
|
22,173,396 | 23,146,833 | ||||||
Land
use rights, net
|
10,642,435 | 10,719,528 | ||||||
Deferred
tax asset
|
210,021 | 207,747 | ||||||
Total
Long-Term Assets
|
33,025,852 | 34,074,108 | ||||||
TOTAL
ASSETS
|
$ | 82,141,053 | $ | 64,071,945 |
June,
30, 2010 |
December
31, 2009 |
|||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 7,920,356 | $ | 4,738,543 | ||||
Other
payables and accrued expenses
|
1,590,368 | 1,871,020 | ||||||
Short-term
bank loans
|
27,465,265 | 26,326,566 | ||||||
Customer
deposits
|
149,976 | 39,371 | ||||||
Notes
payable
|
10,281,115 | 7,931,540 | ||||||
Income
tax payable
|
125,197 | 201,564 | ||||||
Due
to employees
|
7,010 | 88,306 | ||||||
Due
to related party
|
841,251 | 841,251 | ||||||
Deferred
tax liability
|
52,492 | 62,544 | ||||||
Total
Current Liabilities
|
48,433,030 | 42,100,705 | ||||||
LONG
TERM LIABILITIES
|
||||||||
Note
payable, net of discount of $6,997,517 and $0 as of June, 30,
2010 and December 31, 2009, respectively
|
1,177,483 | - | ||||||
Warrant
liabilities
|
4,791,969 | - | ||||||
Total
Long-Term Liabilities
|
5,969,452 | - | ||||||
TOTAL
LIABILITIES
|
54,402,482 | 42,100,705 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; 19,994,350 and
19,961,000 shares issued and outstanding at June, 30, 2010 and December
31, 2009, respectively
|
21,693 | 19,961 | ||||||
Additional
paid-in capital
|
13,590,889 | 8,967,012 | ||||||
Retained
earnings (the restricted portion is $890,912 at June, 30, 2010 and
December 31, 2009)
|
12,057,780 | 11,046,999 | ||||||
Accumulated
other comprehensive income
|
2,068,209 | 1,937,268 | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
27,738,571 | 21,971,240 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 82,141,053 | $ | 64,071,945 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
2010
|
June
30,
2009
|
June
30,
2010
|
June
30,
2009
|
|||||||||||||
REVENUES,
NET
|
$ | 9,911,884 | $ | 5,481,551 | $ | 18,166,224 | $ | 9,487,455 | ||||||||
COST
OF GOODS SOLD
|
(7,559,235 | ) | (4,037,629 | ) | (13,963,654 | ) | (7,063,351 | ) | ||||||||
GROSS
PROFIT
|
2,352,649 | 1,443,922 | 4,202,570 | 2,424,104 | ||||||||||||
Research
and development
|
400,370 | 580,772 | 743,768 | 1,106,973 | ||||||||||||
Selling
and distribution expenses
|
89,685 | 97,810 | 942,013 | 183,994 | ||||||||||||
General
and administrative expenses
|
1,147,061 | 678,278 | 1,797,872 | 1,456,210 | ||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
715,533 | 87,062 | 718,917 | (323,073 | ) | |||||||||||
Interest
income (expense), net
|
541,224 | (109,253 | ) | 333,273 | (418,557 | ) | ||||||||||
Government
grants
|
45,950 | 24,951 | 75,789 | 124,005 | ||||||||||||
Other
income, net
|
10,801 | 245,971 | 57,859 | 302,185 | ||||||||||||
INCOME
(LOSS) FROM OPERATIONS BEFORE INCOME TAXES
|
1,313,508 | 248,731 | 1,185,838 | (315,440 | ) | |||||||||||
INCOME
TAX (EXPENSE) BENEFIT
|
(124,741 | ) | (22,358 | ) | (175,056 | ) | (41,085 | ) | ||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
1,188,767 | 226,373 | 1,010,782 | (356,525 | ) | |||||||||||
NET
INCOME (LOSS)
|
1,188,767 | 226,373 | 1,010,782 | (356,525 | ) |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
2010
|
June
30,
2009
|
June
30,
2010
|
June
30,
2009
|
|||||||||||||
OTHER
COMPREHENSIVE INCOME
|
||||||||||||||||
Foreign
currency translation
|
137,493 | 16,121 | 130,941 | 28,419 | ||||||||||||
COMPREHENSIVE
INCOME (LOSS)
|
1,326,260 | 242,494 | 1,141,723 | (328,106 | ) | |||||||||||
|
||||||||||||||||
WEIGHTED
AVERAGE SHARES OUTSTANDING BASIC
|
20,866,109 | 19,961,000 | 20,424,671 | 19,961,000 | ||||||||||||
WEIGHTED
AVERAGE SHARES OUTSTANDING DILUTED
|
24,677,264 | 21,126,517 | 22,004,992 | 19,961,000 | ||||||||||||
|
||||||||||||||||
NET
INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS, BASIC
|
$ | 0.06 | $ | 0.01 | $ | 0.05 | $ | (0.02 | ) | |||||||
NET
INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS,
DILUTED
|
$ | 0.05 | $ | 0.01 | $ | 0.05 | $ | (0.02 | ) | |||||||
|
||||||||||||||||
NET
INCOME (LOSS) PER SHARE, BASIC
|
$ | 0.06 | $ | 0.01 | $ | 0.05 | $ | (0.02 | ) | |||||||
NET
INCOME (LOSS) PER SHARE, DILUTED
|
$ | 0.05 | $ | 0.01 | $ | 0.05 | $ | (0.02 | ) |
Six
Months Ended
June,
30
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss) income
|
$ | 1,010,782 | $ | (356,525 | ) | |||
Adjustments
to reconcile net (loss) income to net cash (used in) provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
1,935,980 | 1,630,498 | ||||||
Deferred
taxes
|
(10,549 | ) | 41, 085 | |||||
Option
and warrant expense
|
2,055,699 | 525,292 | ||||||
Inventory
reserve
|
- | 152,109 | ||||||
Change
of derivative instrument’s fair value
|
(2,205,548 | ) | - | |||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
Decrease In:
|
||||||||
Accounts
receivable
|
2,757,111 | 1,085,132 | ||||||
Inventories
|
(4,175,053 | ) | (6,907,531 | ) | ||||
Other
receivables and prepaid expenses
|
(197,550 | ) | (1,227,810 | ) | ||||
Due
from employees
|
(111,654 | ) | (28,499 | ) | ||||
Prepayments
and prepaid expenses
|
627,935 | (1,963,636 | ) | |||||
Increase
(Decrease) In:
|
||||||||
Accounts
payable
|
3,149,816 | (511,665 | ) | |||||
Other
payables and accrued liabilities
|
(285,960 | ) | 1,109,534 | |||||
Customer
deposits
|
110,017 | (654,013 | ) | |||||
Income
tax payable
|
(76,918 | ) | - | |||||
Net
cash (used in) provided by operating activities
|
$ | 4,584,108 | $ | (7,106,029 | ) | |||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of plant and equipment
|
(700,530 | ) | (23,718 | ) | ||||
Purchase
of construction in progress
|
- | (2,110,952 | ) | |||||
Issuance
of notes receivable
|
(17,168,835 | ) | (18,490,767 | ) | ||||
Repayments
of notes receivable
|
2,268,415 | 28,545,269 | ||||||
Net
cash provided by (used in) investing activities
|
$ | (15,600,950 | ) | $ | 7,919,832 |
Six
Months Ended
June,
30
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Restricted
cash
|
$ | (2,342,549 | ) | $ | 3,200,521 | |||
Proceeds
from short-term bank loans
|
19,166,786 | 17,829,741 | ||||||
Repayments
of short-term bank loans
|
(18,142,607 | ) | (19,145,049 | ) | ||||
Proceeds
from notes payable
|
20,241,794 | 10,084,034 | ||||||
Repayments
of notes payable
|
(7,934,394 | ) | (13,102,078 | ) | ||||
Option
exercise
|
744,911 | - | ||||||
Repayments
of advances to related parties
|
- | 199,358 | ||||||
Net
cash provided by financing activities
|
11,733,941 | (933,473 | ) | |||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
717,099 | (119,670 | ) | |||||
Effect
of exchange rate changes on cash
|
(55,742 | ) | 62,346 | |||||
Cash
and cash equivalents at beginning of period
|
218,207 | 141,380 | ||||||
CASH AND CASH
EQUIVALENTS AT END OF PERIOD
|
$ | 879,564 | $ | 84,056 | ||||
SUPPLEMENTARY
CASH FLOW INFORMATION
|
||||||||
Income
taxes paid
|
$ | 262,591 | $ | - | ||||
Interest
paid
|
$ | 891,042 | $ | 808,100 |
(i)
|
Continental
Development Ltd. (“Continental”), a wholly-owned subsidiary of the
Company;
|
(ii)
|
Zhejiang
Kandi Vehicles Co. Ltd. (“Kandi”), a wholly-owned subsidiary of
Continental; and
|
(iii)
|
Kandi
Special Vehicles Co., Ltd. (“KSV”, formerly known as Kandi New Energy
Vehicles Co. Ltd. “KNE”), a wholly-owned subsidiary of the
Company.
|
·
|
Level
1—defined as observable inputs such as quoted prices in active
markets;
|
·
|
Level
2—defined as inputs other than quoted prices in active markets that are
either directly or indirectly observable; and
|
·
|
Level
3—defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own
assumptions.
|
Fair
Value Measurements at Reporting
Date
Using Quoted Prices in
|
||||||||||||||||
Carrying
value
as of
June
30,
2010
|
Active
Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||||||
(Level
1)
|
(Level
2)
|
(Level
3)
|
||||||||||||||
Cash
and cash equivalents
|
$ | 879,564 | $ | 879,564 | - | - | ||||||||||
Restricted
cash
|
$ | 8,080,492 | $ | 8,080,492 | - | - | ||||||||||
Conversion
features
|
$ | 3,284,395 | - | $ | 3,284,395 | - | ||||||||||
Warrants
|
$ | 1,507,574 | - | $ | 1,507,574 | - |
Buildings
|
30
years
|
|
Machinery
and equipment
|
10
years
|
|
Office
equipment
|
5
years
|
|
Motor
vehicles
|
5
years
|
|
Moulds
|
5
years
|
·
|
Persuasive
evidence of an arrangement exists;
|
·
|
Delivery
has occurred or services have been
rendered;
|
·
|
The
seller’s price to the buyer is fixed or determinable;
and
|
·
|
Collectability
is reasonably assured.
|
June
30,
2010
|
December
31,
2009
|
June
30,
2009
|
||||||||||
Period
end RMB : USD exchange rate
|
6.8086 | 6.8372 | 6.8448 | |||||||||
Average
quarterly RMB : USD exchange rate
|
6.8347 | 6.8409 | 6.8425 |
Sales
|
Accounts
Receivable
|
|||||||||||||||
Major
Customers
|
Six
Months Ended
June,
30,
2010
|
Six
Months Ended
June,
30,
2009
|
June,
30,
2010
|
December
31,
2009
|
||||||||||||
Company
A
|
63 | % | 77 | % | 49 | % | 92 | % | ||||||||
Company
B
|
27 | % | - | 44 | % | - | ||||||||||
Company
C
|
6 | % | 22 | % | - | 7 | % | |||||||||
Company
D
|
2 | % | - | 3 | % | - | ||||||||||
Company
E
|
2 | % | - | 3 | % | - |
Purchases
|
Accounts
Payable
|
|||||||||||||||
Major
Suppliers
|
Six
Months Ended
June,
30,
2010
|
Six
Months Ended
June,
30,
2009
|
June,
30,
2010
|
December
31,
2009
|
||||||||||||
Company
F
|
87 | % | 76 | % | 44 | % | - | |||||||||
Company
G
|
2 | % | 1 | % | 4 | % | 5 | % | ||||||||
Company
H
|
1 | % | 1 | % | - | - | ||||||||||
Company
I
|
1 | % | - | 2 | % | 4 | % | |||||||||
Company
J
|
1 | % | 1 | % | 1 | % | 3 | % |
Six
months Ended June 30,
|
2010
|
2009
|
||||||
Net
income (loss)
|
$ | 1,010,782 | $ | (356,525 | ) | |||
Weighted
– average shares of common stock outstanding
|
||||||||
Basic
|
20,424,671 | 19,961,000 | ||||||
Dilutive
shares
|
1,580,321 | - | ||||||
Diluted
|
22,004,992 | 19,961,000 | ||||||
Basic
earning(loss) per share
|
$ | 0.05 | $ | (0.02 | ) | |||
Diluted
earning (loss) per share
|
$ | 0.05 | $ | (0.02 | ) |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Raw
material
|
$ | 1,029,636 | $ | 956,378 | ||||
Work-in-progress
|
8,035,177 | 3,785,506 | ||||||
Finished
goods
|
684,558 | 793,154 | ||||||
9,749,370 | 5,535,038 | |||||||
Less:
reserve for slow moving inventories
|
(152,918 | ) | (152,278 | ) | ||||
Inventories,
net
|
$ | 9,596,453 | $ | 5,382,760 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Notes
receivable from unrelated companies:
|
||||||||
Due
February 24, 2010, interest at 5.0% per annum
|
$ | - | $ | 1,146,574 | ||||
Due
February 24, 2010, interest at 5.0% per annum
|
- | 389,731 | ||||||
Due
April 29, 2010, interest at 5.31% per annum
|
- | 731,294 | ||||||
Due
September 29, 2010, interest at 6.0% per annum
|
3,595,339 | - | ||||||
Due
September 30, 2010, interest at 8.0% per annum
|
3,245,895 | - | ||||||
Due
December 30, 2010, interest at 8.0% per annum
|
8,078,019 | - | ||||||
Due
March 3, 2011, interest at 6.0% per annum
|
1,170,195 | - | ||||||
Due
March 5, 2011, interest at 6.0% per annum
|
410,937 | - | ||||||
Due
April 29, 2011, interest at 5.31% per annum
|
734,366 | - | ||||||
Notes
receivable from unrelated companies
|
17,234,751 | 2,267,599 | ||||||
Bank
acceptance notes:
|
||||||||
Bank
acceptance notes
|
- | - | ||||||
Notes
receivable
|
$ | 17,234,751 | $ | 2,267,599 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Cost
of land use rights
|
$ | 11,241,764 | $ | 11,168,397 | ||||
Less:
Accumulated amortization
|
(599,329 | ) | (448,869 | ) | ||||
Land
use rights, net
|
$ | 10,642,435 | $ | 10,719,528 |
2010
(six months)
|
$ | 122,120 | ||
2011
|
244,241 | |||
2012
|
244,241 | |||
2013
|
244,241 | |||
2014
|
244,241 | |||
Thereafter
|
9,543,351 | |||
Total
|
$ | 10,642,435 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
At
cost:
|
||||||||
Buildings
|
$ | 12,695,884 | $ | 12,413,935 | ||||
Machinery
and equipment
|
9,349,008 | 9,252,390 | ||||||
Office
equipment
|
119,153 | 114,380 | ||||||
Motor
vehicles
|
167,316 | 166,616 | ||||||
Moulds
|
11,172,048 | 10,715,666 | ||||||
33,503,409 | 32,662,987 | |||||||
Less
: Accumulated depreciation
|
||||||||
Buildings
|
$ | (1,183,783 | ) | $ | (970,725 | ) | ||
Machinery
and equipment
|
(6,091,331 | ) | (5,601,424 | ) | ||||
Office
equipment
|
(98,724 | ) | (95,295 | ) | ||||
Motor
vehicles
|
(108,615 | ) | (95,697 | ) | ||||
Moulds
|
(3,847,560 | ) | (2,753,013 | ) | ||||
(11,330,013 | ) | (9,516,154 | ) | |||||
Plant
and equipment, net
|
$ | 22,173,396 | $ | 23,146,833 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Loans
from ICBC-Exploration Zone Branch
|
||||||||
Monthly
interest only payments at 6.43% per annum, due April 6, 2010, secured by
the assets of the Company.
|
$ | - | $ | 731,294 | ||||
Monthly
interest only payments at 5.31% per annum, due April 15,
2010. Collateralized by a time deposit.
|
- | 1,316,328 | ||||||
Monthly
interest only payments at 5.31% per annum, due June 3, 2010, secured by
the assets of the Company.
|
- | 731,294 | ||||||
Monthly
interest only payments at 5.31% per annum, due August 10, 2010, secured by
the assets of the Company (repaid before its due date).
|
- | 394,899 | ||||||
Monthly
interest only payments at 5.31% per annum, due August 11, 2010, secured by
the assets of the Company (repaid before its due date).
|
- | 438,776 | ||||||
Monthly
interest only payments at 5.31% per annum, due October 11, 2010, secured
by the assets of the Company (repaid before its due date).
|
- | 658,164 | ||||||
Monthly
interest only payments at 5.31% per annum, due October 13, 2010, secured
by the assets of the Company (repaid before its due date).
|
- | 702,042 | ||||||
Monthly
interest only payments at 5.31% per annum, due November 12, 2010, secured
by the assets of the Company (repaid before its due date).
|
- | 146,259 | ||||||
Monthly
interest only payments at 5.31% per annum, due December 3, 2010, secured
by the assets of the Company (repaid before its due date).
|
- | 585,035 | ||||||
|
||||||||
Loans
from Huaxia Bank
|
||||||||
Monthly
interest only payments at 5.58% per annum, due September 21, 2010, secured
by the assets of the Company, guaranteed by Mr. Hu Xiaoming, Yongkang
Kangli Metal Manufacturing Co. and Kandi Investment Group
Co.
|
3,965,574 | 3,948,985 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Loans
from Commercial Bank-Jiangnan Branch
|
||||||||
Monthly
interest only payments at 5.84% per annum, due January 5, 2010, guaranteed
by Yongkang Kangli Metal Manufacturing Co. and pledged by Jingdezhen De'er
Industrial Investment Co., Ltd.
|
- | 2,925,174 | ||||||
Monthly
interest only payments at 5.84% per annum, due May 5, 2010, secured by the
assets of the Company, and guaranteed by Mr. Hu Xiaoming and Ms. Ling
Yueping.
|
- | 1,462,587 | ||||||
Monthly
interest only payments at 5.10% per annum, due October 15, 2010, secured
by the assets of the Company.
|
1,468,731 | - | ||||||
Monthly
interest only payments at 5.10% per annum, due December 10, 2010, secured
by the assets of the Company, and guaranteed by Mr. Hu Xiaoming and Ms.
Ling Yueping.
|
734,365 | - | ||||||
Monthly
interest only payments at 5.84% per annum, due January 5, 2011, guaranteed
by Mr. Hu Xiaoming, Mr. Lu Qinjiang, Mr. Lu Qinbo, Ms. Ling Yueping and
Yongkang Kangli Metal Manufacturing Co. and pledged by Jingdezhen De'er
Industrial Investment Co., Ltd.
|
2,937,461 | - | ||||||
|
||||||||
Loans
from China Every-bright Bank
|
||||||||
Monthly
interest only payments at 5.58% per annum, due February 22, 2010, pledged
office building of Mr. Hu Xiaoming and Ms. Ling Yueping, guaranteed by
Nanlong Group Co., Ltd., and Yongkang Kangli Metal Manufacturing
Co.
|
- | 4,387,761 | ||||||
Monthly
interest only payments at 5.20% per annum, due August 4, 2010, pledged
office building of Mr. Hu Xiaoming and Ms. Ling Yueping, guaranteed by
Nanlong Group Co., Ltd., and Zhejiang Mengdeli Electric
Company.
|
4,406,193 | - | ||||||
Monthly
interest only payments at 5.35% per annum, due October 13, 2010, secured
by the assets of the Company, and guaranteed by Nanlong Group Co., Ltd.,
Zhejiang Mengdeli Electric Company Mr. Hu Xiaoming and Ms. Ling
Yueping.
|
4,406,193 | - | ||||||
Monthly
interest only payments at 4.86% per annum, due October 13, 2010, secured
by the Company’s account receivables.
|
2,937,461 | - |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Loans
from Shanghai Pudong Development Bank
|
||||||||
Monthly
interest only payments at 4.78% per annum, due April 28, 2010,
collateralized by a time deposit.
|
- | 1,316,328 | ||||||
Monthly
interest only payments at 5.58% per annum, due December 8, 2010, pledged
house of Hu Xiaoming and Ms. Ling Yueping, guaranteed by Nanlong Group
Co., Ltd. and Mr. Hu Xiaoming.
|
2,937,461 | 2,925,174 | ||||||
|
||||||||
Loans
from China Every-growing Bank
|
||||||||
Monthly
interest only payments at 5.84% per annum, due October 27, 2010,
guaranteed by Zhejiang Shuguang Industrial Co., Ltd., and Zhejiang
Mengdeli Electric Company.
|
2,937,461 | 2,925,173 | ||||||
Loans from China Communication Bank-Jinhua
Branch
|
||||||||
Monthly
interest only payments at 5.58% per annum, due February 15, 2010,
guaranteed by Zhejiang Shuguang Industrial Co., Ltd. and Mr. Hu
Xiaoming.
|
- | 731,293 | ||||||
Monthly
interest only payments at 5.84% per annum, due February 4, 2011,
guaranteed by Mr. Hu Xiaoming, Mr. Yan Guanwei and Zhejiang
Shuguang industrial Co., Ltd.
|
734,365 | - | ||||||
Total
|
$ | 27,465,265 | $ | 26,326,566 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Bank
acceptance notes:
|
||||||||
Due
March 8, 2010
|
$ | - | $ | 1,462,587 | ||||
Due
March 24, 2010
|
- | 1,462,587 | ||||||
Due
April 14, 2010
|
- | 1,316,328 | ||||||
Due
July 6, 2010
|
1,468,731 | - | ||||||
Due
September 9, 2010
|
1,468,731 | - | ||||||
Due
September 23, 2010
|
1,468,731 | |||||||
Due
October 26, 2010
|
2,203,095 | |||||||
Due
November 5, 2010
|
734,365 | |||||||
Due
November 5, 2010
|
1,468,731 | |||||||
Due
November 12, 2010
|
1,468,731 | - | ||||||
Subtotal
|
$ | 10,281,115 | $ | 4,241,502 | ||||
Notes
payable to unrelated companies:
|
||||||||
Due
December 1, 2010
|
$ | - | $ | 3,690,038 | ||||
Due
January 20, 2012
|
1,177,483 | - | ||||||
Subtotal
|
1,177,483 | 3,690,038 | ||||||
Total
|
$ | 11,458,598 | $ | 7,931,540 |
Due
July 6, 2010
|
$ | 1,468,731 | ||
Due
September 9, 2010
|
1,468,731 | |||
Due
September 23, 2010
|
1,468,731 | |||
Due
October 26, 2010
|
2,203,095 | |||
Due
November 5, 2010
|
734,365 | |||
Due
November 5, 2010
|
1,468,731 | |||
Due
November 12, 2010
|
1,468,731 | |||
Subtotal
|
$ | 10,281,115 |
For
the Six Months
Ended
June
30, (Unaudited) |
||||||||
2010
|
2009
|
|||||||
Current:
|
||||||||
Provision
for CIT
|
$ | 185,673 | $ | - | ||||
Deferred:
|
||||||||
Provision
for CIT
|
(10,617 | ) | 41,085 | |||||
Income
tax expense (benefit)
|
$ | 175,056 | $ | 41,085 |
For
the Six Months
Ended
June
30, (Unaudited) |
||||||||
2010
|
2009
|
|||||||
Computed
"expected" (benefit) expense
|
$ | 221,568 | $ | (78,860 | ) | |||
Favorable
tax rate
|
(185,673 | ) | 83,196 | |||||
Permanent
differences
|
58,159 | 30,118 | ||||||
Valuation
allowance
|
81,002 | 6,631 | ||||||
Income
tax expense (benefit)
|
$ | 175,056 | $ | 41,085 |
June
30,
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Current
portion:
|
||||||||
Deferred
tax assets:
|
||||||||
Expense
|
$ | 6,710 | $ | 23,028 | ||||
Subtotal
|
6,710 | 23,028 | ||||||
Deferred
tax liabilities:
|
||||||||
Sales
cut-off
|
(59,202 | ) | (85,572 | ) | ||||
Other
|
- | - | ||||||
Subtotal
|
(59,202 | ) | (85,572 | ) | ||||
Total
deferred tax liabilities – current portion
|
(52,492 | ) | (62,544 | ) | ||||
Non-current
portion:
|
||||||||
Deferred
tax assets:
|
||||||||
Depreciation
|
506,600 | 504,258 | ||||||
Loss
carried forward
|
160,399 | 75,397 | ||||||
Valuation
allowance
|
(160,399 | ) | (75,397 | ) | ||||
Subtotal
|
506,600 | 504,258 | ||||||
Deferred
tax liabilities:
|
||||||||
Accumulated
other comprehensive gain
|
(296,579 | ) | (296,511 | ) | ||||
Subtotal
|
(296,579 | ) | (296,511 | ) | ||||
Total
deferred tax assets – non-current portion
|
210,021 | 207,747 | ||||||
Net
deferred tax assets
|
$ | 157,529 | $ | 145,203 |
For
the Six Months
Ended
June
30
(Unaudited)
|
||||||||
2010
|
2009
|
|||||||
Tax
holiday credit
|
$ | 185,673 | $ | (83,196 | ) | |||
Basic
net (loss) income per share effect
|
$ | 0.01 | $ | (0.00 | ) |
Activity
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding
as of January 1, 2010
|
2,950,000 | $ | 0.88 | |||||
Granted
|
- | - | ||||||
Exercised
|
1,116,696 | 0.96 | ||||||
Cancelled
|
- | - | ||||||
Outstanding
as of June 30, 2009
|
1,833,304 | 0.84 |
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||
Number
of
shares
|
Exercise
Price
|
Remaining
Contractual
life
(in
years)
|
Number
of
shares
|
Exercise
Price
|
||||||||||||||
1,733,304 | $ | 0.80 | 9 | 1,733,304 | $ | 0.80 | ||||||||||||
100,000 | 1.50 | 10 | 100,000 | 1.50 |
Guarantee
provided to
|
Amount
|
|||
Yongkang
Kangli Metal Manufacturing Co.
|
$ | 4,406,192 | ||
Zhejiang
Mengdeli Electric Company
|
2,496,842 | |||
Zhejiang
Shuguang industrial Co., Ltd.
|
2,937,461 | |||
Zhejiang
Yiran Auto Sales Company
|
734,365 | |||
Wuyi
Qilong Vehicle Co., Ltd.
|
1,321,858 | |||
Zhejiang
Taiping Trade Co., Ltd
|
3,378,081 | |||
Total
|
$ | 15,274,799 |
·
|
Persuasive
evidence of an arrangement exists;
|
·
|
Delivery
has occurred or services have been
rendered;
|
·
|
The
seller’s price to the buyer is fixed or determinable;
and
|
·
|
Collectability
is reasonably assured.
|
For
Six Months Ended
June
30,
2010
|
%
Of
Revenue
|
For
Six Months Ended
June
30,
2009
|
%
Of
Revenue
|
Change
In Amount
|
Change
In %
|
|||||||||||||||||||
REVENUES,
NET
|
$ | 18,166,224 | 100.0 | % | $ | 9,487,455 | 100.0 | % | $ | 8,678,769 | 91.5 | % | ||||||||||||
COST
OF GOODS SOLD
|
(13,963,654 | ) | (76.9 | %) | (7,063,351 | ) | (74.4 | %) | (6,900,303 | ) | 97.7 | % | ||||||||||||
GROSS
PROFIT
|
4,202,570 | 23.1 | % | 2,424,104 | 25.6 | % | 1,778,466 | 73.4 | % | |||||||||||||||
Research
and development
|
743,768 | 4.1 | % | 1,106,973 | 11.7 | % | (363,205 | ) | (32.8 | %) | ||||||||||||||
Selling
and distribution expenses
|
942,013 | 5.1 | % | 183,994 | 1.9 | % | 758,019 | 412.0 | % | |||||||||||||||
General
and administrative expenses
|
1,797,872 | 9.9 | % | 1,456,210 | 15.3 | % | 341,662 | 23.5 | % | |||||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
718,917 | 4.0 | % | (323,073 | ) | (3.4 | %) | 1,041,990 | (322.5 | %) | ||||||||||||||
Interest
income (expense), net
|
333,273 | 1.8 | % | (418,557 | ) | (4.4 | %) | 751,830 | (179.6 | %) | ||||||||||||||
Government
grants
|
75,789 | 0.4 | % | 124,005 | 1.3 | % | (48,216 | ) | 38.9 | % | ||||||||||||||
Other
income, net
|
57,859 | 0.3 | % | 302,185 | 3.2 | % | (244,326 | ) | (80.9 | %) | ||||||||||||||
INCOME
(LOSS) FROM OPERATIONS BEFORE INCOME TAXES
|
1,185,838 | 6.5 | % | (315,440 | ) | (3.3 | %) | 1,501,278 | (475.9 | %) | ||||||||||||||
INCOME
TAX BENEFIT (EXPENSE)
|
(175,056 | ) | (0.9 | %) | (41,085 | ) | (0.2 | %) | (133,971 | ) | (326.1 | %) | ||||||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
1,010,782 | 5.6 | % | (356,525 | ) | (3.5 | %) | 1,367,307 | (383.5 | %) | ||||||||||||||
NET
INCOME (LOSS)
|
1,010,782 | 5.6 | % | (356,525 | ) | (3.5 | %) | 1,367,307 | (383.5 | %) |
Six
Months Ended June 30
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Unit
|
Sales
|
Unit
|
Sales
|
|||||||||||||
ATV
|
2,184 | $ | 1,595,181 | 1,774 | $ | 1,053,633 | ||||||||||
CoCo
|
1,377 | 5,810,682 | 474 | 1,704,025 | ||||||||||||
GoKart
|
6,387 | 6,906,990 | 2,563 | 2,380,224 | ||||||||||||
Utility
vehicles (“UTVs”)
|
1,052 | 2,301,724 | 1,458 | 3,671,762 | ||||||||||||
Three-wheeled
motorcycle (“TT”)
|
678 | 1,551,647 | 336 | 677,812 |
Six
Months Ended June 30
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Sales
|
Percentage
|
Sales
|
Percentage
|
|||||||||||||
North
America
|
$ | 2,363,454 | 13 | % | $ | 1,262,506 | 13 | % | ||||||||
China
|
15,577,145 | 86 | % | 8,071,643 | 85 | % | ||||||||||
Europe
|
255,625 | 1 | % | 153,306 | 2 | % | ||||||||||
Total
|
$ | 18,166,224 | 100 | % | $ | 9,487,455 | 100 | % |
For
Three Months Ended June 30,
2010
|
%
Of
Revenue
|
For
Three Months Ended June 30,
2009
|
%
Of
Revenue
|
Change
In Amount
|
Change
In %
|
|||||||||||||||||||
REVENUES,
NET
|
$ | 9,911,884 | 100.0 | % | $ | 5,481,551 | 100.0 | % | $ | 4,430,333 | 80.8 | % | ||||||||||||
COST
OF GOODS SOLD
|
(7,559,235 | ) | (76.3 | %) | (4,037,629 | ) | (73.7 | %) | (3,521,606 | ) | 87.2 | % | ||||||||||||
GROSS
PROFIT
|
2,352,649 | 23.7 | % | 1,443,922 | 26.3 | % | 908,727 | 62.9 | % | |||||||||||||||
Research
and development
|
400,370 | 4.0 | % | 580,772 | 10.6 | % | (180,402 | ) | (31.1 | %) | ||||||||||||||
Selling
and distribution expenses
|
89,685 | 0.9 | % | 97,810 | 1.8 | % | (8,125 | ) | (8.3 | %) | ||||||||||||||
General
and administrative expenses
|
1,147,061 | 11.6 | % | 678,278 | 12.3 | % | 468,783 | 69.1 | % | |||||||||||||||
INCOME
FROM OPERATIONS
|
715,533 | 7.2 | % | 87,062 | 1.6 | % | 628,471 | 721.9 | % | |||||||||||||||
Interest
income (expense), net
|
541,224 | 5.5 | % | (109,253 | ) | (2.0 | %) | 650,477 | (595.4 | %) | ||||||||||||||
Government
grants
|
45,950 | 0.5 | % | 24,951 | 0.5 | % | 20,999 | 84.2 | % | |||||||||||||||
Other
income, net
|
10,801 | 0.1 | % | 245,971 | 4.5 | % | (235,170 | ) | (95.6 | %) | ||||||||||||||
INCOME
FROM OPERATIONS BEFORE INCOME TAXES
|
1,313,508 | 13.3 | % | 248,731 | 4.5 | % | 1,064,777 | 428.1 | % | |||||||||||||||
INCOME
TAX (EXPENSE) BENEFIT
|
(124,741 | ) | 1.3 | % | (22,358 | ) | (0.4 | %) | (102,383 | ) | (457.9 | %) | ||||||||||||
|
||||||||||||||||||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
1,188,767 | 12.0 | % | 226,373 | 4.1 | % | 962,394 | 425.1 | % | |||||||||||||||
NET
(LOSS) INCOME
|
1,188,767 | 12.0 | % | 226,373 | 4.1 | % | 962,394 | 425.1 | % |
Three
Months Ended June 30
|
||||||||||||||||
|
2010
|
2009
|
||||||||||||||
|
Unit
|
Sales
|
Unit
|
Sales
|
||||||||||||
ATV
|
1,131 | $ | 593,949 | 1,028 | $ | 612,841 | ||||||||||
CoCo
|
1,005 | 4,131,674 | 305 | 1,264,406 | ||||||||||||
GoKart
|
2,785 | 3,141,901 | 2,288 | 2,243,425 | ||||||||||||
Utility
vehicles (“UTVs”)
|
485 | 1,006,094 | 419 | 942,789 | ||||||||||||
Three-wheeled
motorcycle (“TT”)
|
461 | 1,038,266 | 138 | 418,089 |
Three
Months Ended June 30
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Sales
|
Percentage
|
Sales
|
Percentage
|
|||||||||||||
North
America
|
$ | 1,341,512 | 14 | % | $ | 847,736 | 15 | % | ||||||||
China
|
8,448,853 | 85 | % | 4,523,364 | 83 | % | ||||||||||
Europe
|
121,519 | 1 | % | 110,451 | 2 | % | ||||||||||
Total
|
$ | 9,911,884 | 100 | % | $ | 5,481,551 | 100 | % |
Capital requirements
|
Six
months
Ended
June
30,
2010
(In
thousands)
|
|||
Purchase
of plant and equipment
|
$ | 701 | ||
Purchase
of construction in progress
|
- | |||
Issuance
of notes receivable
|
17,169 | |||
Repayments
of short-term bank loans
|
18,143 | |||
Repayments
of notes payable
|
7,934 | |||
Increase
in restricted cash
|
2,343 | |||
Increase
in cash
|
717 | |||
Total
capital requirements
|
$ | 47,007 |
Capital provided
|
||||
Internal
cash provided by operation
|
4,584 | |||
Proceeds
from short-term bank loan
|
19,167 | |||
Proceeds
from notes payable
|
20,242 | |||
Repayments
of notes receivable
|
2,269 | |||
Other
financing activities
|
745 | |||
Total
capital provided
|
$ | 47,007 |
Exhibit
Number
|
Description
|
|
31.1
|
Certification
pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of
1934
|
|
31.2
|
Certification
pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of
1934
|
|
32.1
|
Certification
of CEO and CFO pursuant to 18 U.S.C. § 1350,
as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of
2002
|
Kandi Technologies, Corp. | |||
Date:
August 16, 2010
|
By:
|
/s/
Hu Xiaoming
|
|
Hu
Xiaoming
|
|||
President
and Chief Executive Officer
(Principal
Executive Officer)
|
Date:
August 16, 2010
|
By:
|
/s/
Zhu Xiaoying
|
|
Zhu
Xiaoying
|
|||
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|