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 September 30, ~~2019~~2020

☐ 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)

Delaware		90-0363723
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Jinhua City Industrial Zone Jinhua, Zhejiang Province People’s Republic of China		321016
(Address of principal executive offices)		(Zip Code)

(86 - 579) 82239856

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		KNDI		NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	☐	Accelerated filer	☒
Non-accelerated filer ☐	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~5, 2019,~~3, 2020, the registrant had ~~56,243,102~~56,531,702 shares of common stock issued and ~~52,819,441~~54,610,758 shares of common stock outstanding, par value $0.001 per share.

TABLE OF CONTENTS

		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of September 30, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019	1

	Condensed Consolidated Statements of ~~Income (Loss)~~Operations and Comprehensive Income (Loss) (unaudited) – Three Months and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three Months and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	3

	Condensed Consolidated Statements of Cash Flows (unaudited) – Three Months and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	35

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 3.1A.	~~Quantitative and Qualitative Disclosures about Market~~ Risk Factors	3836

~~Item 4.~~	~~Controls and Procedures~~	38

~~PART II — OTHER INFORMATION~~

~~Item 1.~~	~~Legal proceedings~~	39

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	39

Item 6.	Exhibits	3936

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE ~~SHEET~~SHEETS

September 30,
2019 December 31,
2018
(UNAUDITED)
Current assets
Cash and cash equivalents $ 14,338,637 $ 15,662,201
Restricted cash 11,713,004 6,690,870
Accounts receivable (net of allowance for doubtful accounts of $130,420 and $120,010 as of September 30, 2019 and December 31, 2018, respectively) 54,859,801 34,274,728
Inventories 35,447,383 21,997,868
Notes receivable 41,549,888 72,712
Notes receivable from the Affiliate Company and related party - 3,861,032
Other receivables 12,859,304 1,264,323
Prepayments and prepaid expense 9,497,459 11,136,408
Due from employees 5,499 1,001
Advances to suppliers 4,474,104 4,705,183
Amount due from the Affiliate Company, net 25,335,894 67,683,462
Right - of - use asset 42,974 -
TOTAL CURRENT ASSETS 210,123,947 167,349,788

LONG-TERM ASSETS
Property, plant and equipment, net 74,491,204 82,045,923
Land use rights, net 11,084,717 11,749,728
Construction in progress 17,781 -
Deferred taxes assets - 8,204
Investment in the Affiliate Company 53,837,011 128,929,893
Goodwill 27,762,120 28,552,215
Intangible assets 3,723,988 4,328,127
Other long term assets 4,803,349 5,865,386
TOTAL Long-Term Assets 175,720,170 261,479,476

TOTAL ASSETS $ 385,844,117 $ 428,829,264

CURRENT LIABILITIES
Accounts payable $ 79,632,036 $ 112,309,683
Other payables and accrued expenses 4,843,001 4,251,487
Short-term loans 30,969,731 30,539,236
Customer deposits 33,535 94,408
Notes payable 11,463,004 12,787,619
Income tax payable 1,519,699 3,471,366
Due to employees 7,105 28,473
Deferred income 1,237,556 1,340,605
Lease liability 44,121 -
Total Current Liabilities 129,749,788 164,822,877

LONG-TERM LIABILITIES
Long term bank loans 27,606,502 28,794,136
Deferred taxes liability 1,758,643 1,711,343
Contingent consideration liability 6,562,000 7,256,000
Other long-term liability - 622,034
Total Long-Term Liabilities 35,927,145 38,383,513

TOTAL LIABILITIES 165,676,933 203,206,390

STOCKHOLDER’S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,263,102 and 55,992,002 shares issued and 52,839,441 and 51,484,444 outstanding at September 30, 2019 and December 31, 2018, respectively 52,839 51,484
Less: Treasury stock (487,155 shares with average price of $5.09 and 0 shares at September 30, 2019 and December 31, 2018, respectively ) (2,477,965 ) -
Additional paid-in capital 259,691,370 254,989,657
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at September 30, 2019 and December 31, 2018, respectively) (9,135,198 ) (9,497,009 )
Accumulated other comprehensive loss (27,963,862 ) (19,921,258 )
TOTAL STOCKHOLDERS’ EQUITY 220,167,184 225,622,874

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 385,844,117 $ 428,829,264

	September 30, 2020			December 31, 2019
	(UNAUDITED)
Current assets
Cash and cash equivalents	$	23,909,159		$	5,490,557
Restricted cash		250,000			11,022,078
Accounts receivable (net of allowance for doubtful accounts of $105,833 and $254,665 as of September 30, 2020 and December 31, 2019, respectively)		38,370,898			61,181,849
Inventories		30,244,514			27,736,566
Notes receivable		235,249			42,487,225
Other receivables		54,654,688			5,019,971
Prepayments and prepaid expense		10,980,473			10,615,063
Amount due from the Affiliate Company		20,869,315			31,330,763
Other current assets		4,262,285			688,364
TOTAL CURRENT ASSETS		183,776,581			195,572,436

NON-CURRENT ASSETS
Property, plant and equipment, net		71,132,470			74,407,858
Intangible assets, net		3,264,500			3,654,772
Land use rights, net		9,042,991			11,272,815
Investment in the Affiliate Company		39,442,126			47,228,614
Goodwill		28,792,031			28,270,400
Other long term assets		13,132,240			10,811,501
TOTAL NON-CURRENT ASSETS		164,806,358			175,645,960

TOTAL ASSETS	$	348,582,939		$	371,218,396

CURRENT LIABILITIES
Accounts payable	$	42,154,366		$	72,093,940
Other payables and accrued expenses		5,857,897			6,078,041
Short-term loans		-			25,980,364
Notes payable		-			10,765,344
Income tax payable		1,087,338			1,796,601
Advance receipts		36,691,372			-
Long term loans - current portion		16,761,501			13,779,641
Other current liabilities		1,456,108			1,379,808
TOTAL CURRENT LIABILITIES		104,008,582			131,873,739

NON-CURRENT LIABILITIES
Long term loans		12,156,573			14,353,792
Deferred taxes liability		3,460,346			1,362,786
Contingent consideration liability		3,403,000			5,197,000
Other long-term liabilities		588,123			574,152
TOTAL NON-CURRENT LIABILITIES		19,608,042			21,487,730

TOTAL LIABILITIES		123,616,624			153,361,469

STOCKHOLDER'S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,531,702 and 56,263,102 shares issued and 54,610,758 and 52,839,441 outstanding at September 30,2020 and December 31,2019, respectively		54,611			52,839
Less: Treasury stock (487,155 shares with average price of $5.09 at September 30,2020 and December 31,2019, respectively)		(2,477,965	)		(2,477,965	)
Additional paid-in capital		260,605,209			259,691,370
Accumulated deficit		(15,663,602	)		(16,685,736	)
Accumulated other comprehensive loss		(17,551,938	)		(22,723,581	)
TOTAL STOCKHOLDERS' EQUITY		224,966,315			217,856,927

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	348,582,939		$	371,218,396

See accompanying notes to condensed consolidated financial statements

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

Three Months Ended Nine Months Ended
September 30,
2019 September 30,
2018 September 30,
2019 September 30,
2018

REVENUES FROM UNRELATED PARTY, NET $ 26,968,385 $ 14,860,034 $ 63,360,044 $ 32,211,352
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET 4,720,159 23,135,326 10,543,190 30,479,521

REVENUES, NET 31,688,544 37,995,360 73,903,234 62,690,873

COST OF GOODS SOLD (26,412,129 ) (31,753,311 ) (61,288,228 ) (53,044,861 )

GROSS PROFIT 5,276,415 6,242,049 12,615,006 9,646,012

OPERATING EXPENSES:
Research and development (596,187 ) (5,691,649 ) (1,766,210 ) (7,091,836 )
Selling and marketing (930,810 ) (898,896 ) (2,448,291 ) (1,875,294 )
General and administrative (3,432,920 ) (2,070,947 ) (11,096,246 ) (5,534,039 )
Total Operating Expenses (4,959,917 ) (8,661,492 ) (15,310,747 ) (14,501,169 )

INCOME (LOSS) FROM OPERATIONS 316,498 (2,419,443 ) (2,695,741 ) (4,855,157 )

OTHER INCOME (EXPENSE): ��
Interest income 209,736 52,745 559,954 1,452,522
Interest expense (435,524 ) (483,376 ) (1,304,062 ) (1,505,409 )
Change in fair value of contingent consideration 57,000 (1,552,686 ) 694,000 1,814,326
Government grants 502,146 607,008 725,189 717,821
Gain from equity dilution in the Affiliate Company (49,285 ) - 4,291,974 -
Gain from equity sale in the Affiliate Company 20,574,217 - 20,574,217 -
Share of loss after tax of the Affiliate Company (8,433,767 ) (3,247,343 ) (22,883,126 ) (79,592 )
Other income , net 57,833 15,735 357,626 666,294
Total other income (expense), net 12,482,356 (4,607,917 ) 3,015,772 3,065,962

INCOME (LOSS) BEFORE INCOME TAXES 12,798,854 (7,027,360 ) 320,031 (1,789,195 )

INCOME TAX (EXPENSE) BENEFIT (709,413 ) 505,961 41,780 370,316

NET INCOME (LOSS) 12,089,441 (6,521,399 ) 361,811 (1,418,879 )

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation (8,531,043 ) (8,108,270 ) (8,042,604 ) (13,230,652 )

COMPREHENSIVE INCOME (LOSS) $ 3,558,398 $ (14,629,669 ) $ (7,680,793 ) $ (14,649,531 )

WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED 52,613,642 51,474,048 52,332,260 51,089,047

NET INCOME (LOSS) PER SHARE, BASIC AND DILUTED $ 0.23 $ (0.13 ) $ 0.01 $ (0.03 )

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

REVENUES FROM UNRELATED PARTIES, NET	$	18,717,212		$	26,968,385		$	44,525,756		$	63,360,044
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET		6			4,720,159			962			10,543,190

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

OPERATING EXPENSES:
Research and development		(987,285	)		(596,187	)		(2,777,426	)		(1,766,210	)
Selling and marketing		(2,165,383	)		(930,810	)		(3,807,355	)		(2,448,291	)
General and administrative		(3,212,209	)		(3,432,920	)		(10,186,135	)		(11,096,246	)
Gain on disposal of long-lived assets		76,159			-			13,983,733			-
TOTAL OPERATING EXPENSES, NET		(6,288,718	)		(4,959,917	)		(2,787,183	)		(15,310,747	)

(LOSS) INCOME FROM OPERATIONS		(2,377,822	)		316,498			5,827,750			(2,695,741	)

OTHER INCOME (EXPENSE):
Interest income		558,059			209,736			1,118,795			559,954
Interest expense		(788,589	)		(435,524	)		(2,894,579	)		(1,304,062	)
Change in fair value of contingent consideration		(1,069,000	)		57,000			1,794,000			694,000
Government grants		13,431			502,146			111,329			725,189
Gain (loss) from equity dilution in the Affiliate Company		-			(49,285	)		-			4,291,974
Gain from sale of equity in the Affiliate Company		-			20,574,217			-			20,574,217
Share of loss after tax of the Affiliate Company		(1,550,568	)		(8,433,767	)		(5,631,867	)		(22,883,126	)
Other income, net		988,287			57,833			2,051,272			357,626
TOTAL OTHER (EXPENSE) INCOME, NET		(1,848,380	)		12,482,356			(3,451,050	)		3,015,772

(LOSS) INCOME BEFORE INCOME TAXES		(4,226,202	)		12,798,854			2,376,700			320,031

INCOME TAX BENEFIT (EXPENSE)		2,767,939			(709,413	)		(1,354,563	)		41,780

NET (LOSS) INCOME		(1,458,263	)		12,089,441			1,022,137			361,811

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		8,216,974			(8,531,043	)		5,171,643			(8,042,604	)

COMPREHENSIVE INCOME (LOSS)	$	6,758,711		$	3,558,398		$	6,193,780		$	(7,680,793	)

WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED		54,112,981			52,613,642			53,282,066			52,332,260

NET (LOSS) INCOME PER SHARE, BASIC AND DILUTED	$	(0.03	)	$	0.23		$	0.02		$	0.01

See accompanying notes to condensed consolidated financial statements

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2018		51,484,444	$	51,484	$	-		$	254,989,657		$	(9,497,009	)	$	(19,921,258	)	$	225,622,874
Stock issuance and awards		1,096,397		1,097		-			3,387,379			-			-			3,388,476
Net loss		-		-		-			-			(4,409,472	)		-			(4,409,472	)
Foreign currency translation		-		-		-			-			-			5,404,028			5,404,028
Balance, March 31, 2019		52,580,841	$	52,581	$	-		$	258,377,036		$	(13,906,481	)	$	(14,517,230	)	$	230,005,906
Stock issuance and awards		238,600		238		-			1,259,569			-			-			1,259,807
Net loss		-		-		-			-			(7,318,158	)		-			(7,318,158	)
Foreign currency translation		-		-		-			-			-			(4,915,589	)		(4,915,589	)
Balance, June 30, 2019		52,819,441	$	52,819	$	-		$	259,636,605		$	(21,224,639	)	$	(19,432,819	)	$	219,031,966
Stock issuance and awards		20,000		20		-			69,380			-			-			69,400
Stock buyback		-		-		(2,477,965	)		-			-			-			(2,477,965	)
Commission in stock buyback		-		-		-			(14,615	)		-			-			(14,615	)
Net income						-			-			12,089,441			-			12,089,441
Foreign currency translation		-		-		-			-			-			(8,531,043	)		(8,531,043	)
Balance, September 30, 2019		52,839,441	$	52,839	$	(2,477,965	)	$	259,691,370		$	(9,135,198	)	$	(27,963,862	)	$	220,167,184

Number of Outstanding Shares Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total
Balance, December 31, 2018 51,484,444 51,484 - 254,989,657 (9,497,009 ) (19,921,258 ) 225,622,874
Stock issuance and award 1,096,397 1,097 -　 3,387,379 -　 -　 3,388,476
Net income (loss) - - - - (4,409,472 ) - (4,409,472 )
Foreign currency translation -　 -　 -　 -　 -　 5,404,028 5,404,028

Balance, March 31, 2019 52,580,841 52,581 - 258,377,036 (13,906,481 ) (14,517,230 ) 230,005,906
Stock issuance and award 238,600 238 -　 1,259,569 -　 -　 1,259,807
Net income (loss) - - - - (7,318,158 ) - (7,318,158 )
Foreign currency translation -　 -　 -　 -　 -　 (4,915,589 ) (4,915,589 )

Balance, June 30, 2019 52,819,441 52,819 - 259,636,605 (21,224,639 ) (19,432,819 ) 219,031,966
Stock issuance and award 20,000 20 -　 69,380 -　 -　 69,400
Stock buyback - - (2,477,965 ) - - - (2,477,965 )
Commission in stock buyback -　 -　 -　 (14,615 ) -　 -　 (14,615 )
Net income (loss) - - - - 12,089,441 - 12,089,441
Foreign currency translation -　 -　 -　 -　 -　 (8,531,043 ) (8,531,043 )

Balance, September 30, 2019 52,839,441 52,839 (2,477,965 ) 259,691,370 (9,135,198 ) (27,963,862 ) 220,167,184

Number of Outstanding Shares Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total
Balance, December 31, 2017 48,036,538 48,037 - 233,055,348 (3,802,310 ) (6,310,763 ) 222,990,312
Stock issuance and award 2,972,337 2,972 -　 19,099,556 -　 -　 19,102,528
Net income (loss) - - - - 3,727,995 - 3,727,995
Foreign currency translation -　 -　 -　 -　 -　 7,465,240 7,465,240

Balance, March 31, 2018 51,008,875 51,009 - 252,154,904 (74,315 ) 1,154,477 253,286,075
Stock issuance and award 288,600 289 -　 2,038,476 -　 -　 2,038,765
Net income (loss) - - - - 1,374,525 - 1,374,525
Foreign currency translation -　 -　 -　 -　 -　 (12,587,622 ) (12,587,622 )

Balance, June 30, 2018 51,297,475 51,298 - 254,193,380 1,300,210 (11,433,145 ) 244,111,743
Stock issuance and award 184,469 184 -　 787,529 -　 -　 787,713
Net income (loss) - - - - (6,521,399 ) - (6,521,399 )
Foreign currency translation -　 -　 -　 -　 -　 (8,108,271 ) (8,108,271 )

Balance, September 30, 2018 51,481,944 51,482 - 254,980,909 (5,221,189 ) (19,541,416 ) 230,269,786

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2019		52,839,441	$	52,839	$	(2,477,965	)	$	259,691,370		$	(16,685,736	)	$	(22,723,581	)	$	217,856,927
Stock issuance and awards		10,000		10		-			22,290			-			-			22,300
Net loss		-		-		-			-			(1,574,646	)		-			(1,574,646	)
Foreign currency translation		-		-		-			-			-			(3,523,065	)		(3,523,065	)
Balance, March 31, 2020		52,849,441	$	52,849	$	(2,477,965	)	$	259,713,660		$	(18,260,382	)	$	(26,246,646	)	$	212,781,516
Stock issuance and awards		1,502,717		1,503		-			3,164,925			-			-			3,166,428
Net income		-		-		-			-			4,055,043			-			4,055,043
Foreign currency translation		-		-		-			-			-			477,734			477,734
Balance, June 30, 2020		54,352,158	$	54,352	$	(2,477,965	)	$	262,878,585		$	(14,205,339	)	$	(25,768,912	)	$	220,480,721
Stock issuance and awards		258,600		259		-			870,837			-			-			871,096
Net loss		-		-		-			-			(1,458,263	)		-			(1,458,263	)
Foreign currency translation		-		-		-			-			-			8,216,974			8,216,974
Reduction in the Affiliate Company’s equity		-		-		-			(3,144,213	)		-			-			(3,144,213	)
Balance, September 30, 2020		54,610,758	$	54,611	$	(2,477,965	)	$	260,605,209		$	(15,663,602	)	$	(17,551,938	)	$	224,966,315

See accompanying notes to condensed consolidated financial statements.

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended
September 30,
2019 September 30,
2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 361,811 $ (1,418,879 )
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 6,443,422 2,271,599
Impairments 44,544 24,854
Allowance for doubtful accounts 15,366 (7,093 )
Deferred taxes 50,693 -
Share of loss after tax of the Affiliate Company 22,883,126 79,592
Gain from equity dilution in the Affiliate Company (4,291,974 ) -
Gain from equity sale in the Affiliate Company (20,574,217 ) -
Change in fair value of contingent consideration (694,000 ) (1,814,326 )
Stock compensation cost 1,337,333 253,934

Changes in operating assets and liabilities:
(Increase) Decrease In:
Accounts receivable (36,822,184 ) (52,845,923 )
Deferred taxes assets - (52,126 )
Notes receivable 174,881 491,272.00
Notes receivable from the Affiliate Company and related party 437,203 3,196,340
Inventories (14,813,147 ) 1,555,993
Other receivables and other assets (17,275,954 ) 1,497,230
Due from employee (25,861 ) 945
Advances to supplier and prepayments and prepaid expenses 1,357,001 (4,590,404 )
Amount due from the Affiliate Company 30,549,072 (81,549,214 )
Amount due from Affiliate Company-Long term - 15,907,183
Due from related party - 161,874

Increase (Decrease) In:
Accounts payable 11,383,411 101,684,965
Other payables and accrued liabilities 7,791,028 29,845,307
Notes payable (11,836,950 ) (12,434,813 )
Customer deposits (59,734 ) 20,350
Income tax payable (1,803,574 ) (2,353,826 )
Deferred income (56,448 ) (761,643 )
Net cash used in operating activities $ (25,425,152 ) $ (836,809 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (955,670 ) (304,745 )
Purchases of land use rights and other intangible assets - (105,480 )
Acquisition of Jinhua An Kao (net of cash received) - (3,610,846 )
Acquisition of SC Autosports - 486,954
Purchases of construction in progress (18,491 ) (425,241 )
Reimbursement of capitalize interests for construction in progress - 1,818,390
Cash received from equity sale in the Affiliate Company 32,061,558 -
Long Term Investment - 1,458,464
Net cash provided by (used in) investing activities $ 31,087,397 $ (682,504 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans 27,864,409 25,515,452
Repayments of short-term bank loans (26,261,331 ) (26,283,065 )
Repayments of long-term bank loans (145,734 ) (153,523 )
Proceeds from notes payable - 40,313,800
Repayment of notes payable - (43,024,633 )
Cash used for stock buyback (2,492,579 ) -
Net cash used in financing activities $ (1,035,235 ) $ (3,631,969 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 4,627,010 (5,151,282 )
Effect of exchange rate changes on cash (928,440 ) (512,545 )
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR 22,353,071 16,110,496

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD 26,051,641 10,446,669
-CASH AND CASH EQUIVALENTS AT END OF PERIOD 14,338,637 1,342,085
-RESTRICTED CASH AT END OF PERIOD 11,713,004 9,104,584

SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid 1,711,101 1,981,072
Interest paid 1,304,062 1,274,399

SUPPLEMENTAL NON-CASH DISCLOSURES:
Acquisition of Jinhua An Kao by stock - 20,718,859
Acquisition of SC Autosports by stock - 756,664
Amount due from the Affiliate Company converted to investment in the Affiliate Company - 83,669,804
Notes receivable from unrelated parties for equity transfer payment 43,137,369 -

	Nine Months Ended
	September 30, 2020			September 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,022,137		$	361,811
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		6,078,070			6,443,422
(Reversal) provision of allowance for doubtful accounts		(150,756	)		15,366
Deferred taxes		1,256,167			50,693
Share of loss after tax of the Affiliate Company		5,631,867			22,883,126
Gain from equity dilution in the Affiliate Company		-			(4,291,974	)
Gain from sale of equity in the Affiliate Company		-			(20,574,217	)
Gain on disposal of long-lived assets		(13,983,733	)		-
Change in fair value of contingent consideration		(1,794,000	)		(694,000	)
Stock based compensation expense		870,471			1,337,333

Changes in operating assets and liabilities:
Accounts receivable		18,165,084			(36,822,184	)
Notes receivable		-			174,881
Notes receivable from the Affiliate Company and related party		-			437,203
Inventories		(1,830,827	)		(14,768,603	)
Other receivables and other assets		(5,226,968	)		(7,746,801	)
Prepayments and prepaid expenses		(84,089	)		1,357,001
Amount due from the Affiliate Company		4,178,477			30,549,072

Increase (Decrease) In:
Accounts payable		(15,642,931	)		11,383,411
Other payables and accrued liabilities		2,675,156			8,934,397
Notes payable		(13,725,855	)		(11,836,950	)
Income tax payable		(804,238	)		(1,803,574	)
Net cash used in operating activities	$	(13,365,968	)	$	(14,610,587	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net		(383,568	)		(955,670	)
Payment for construction in progress		(1,604,427	)		(18,491	)
Proceeds from disposal of long-lived assets		51,872,829			-
Loan to third party		(45,958,247	)		(9,555,014	)
Cash received from sales of equity in the Affiliate Company		42,321,385			32,061,558
Net cash provided by investing activities	$	46,247,972		$	21,532,383

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans		24,163,223			27,864,409
Repayments of short-term loans		(50,042,178	)		(26,261,331	)
Repayments of long-term loans		(285,955	)		(145,734	)
Proceeds from long-term loans		394,116			-
Repayments of loan from third party		-			(1,259,551	)
Stock buyback with commission		-			(2,492,579	)
Net cash used in financing activities	$	(25,770,794	)	$	(2,294,786	)

NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		7,111,210			4,627,010
Effect of exchange rate changes		535,314			(928,440	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		16,512,635			22,353,071

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	24,159,159		$	26,051,641
-CASH AND CASH EQUIVALENTS AT END OF PERIOD		23,909,159			14,338,637
-RESTRICTED CASH AT END OF PERIOD		250,000			11,713,004

SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid	$	901,021		$	1,711,101
Interest paid	$	644,724		$	1,304,062

SUPPLEMENTAL NON-CASH DISCLOSURES:
Decrease in investment in the Affiliate Company due to change in its equity	$	3,057,540		$	-
Notes receivable from unrelated parties for equity transfer payment	$	-		$	43,137,369
Common stock issued for settlement of payables related to acquisitions (see Note 20)	$	3,166,427		$	3,357,425

See accompanying notes to condensed consolidated financial statements

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

Kandi Technologies Group, Inc. (“Kandi Technologies”) was incorporated under the laws of the State of Delaware on March 31, 2004. As used herein, the terms “Company” or “Kandi” refer to Kandi Technologies and its operating subsidiaries, as described below.

Headquartered in Jinhua City, Zhejiang Province, People’s Republic of China (“China” or “PRC”), the Company is one of China’s leading producers and manufacturers of electric vehicle (“EV”) products (through the Affiliate Company, formerly defined as the JV Company), EV parts, and off-road vehicles for sale in the Chinese and the global markets. The Company conducts its primary business operations through its wholly-owned subsidiaries, Zhejiang Kandi Vehicles Co., Ltd. (“Kandi Vehicles”), Kandi Vehicles’ wholly and partially-owned subsidiaries, and SC Autosports LLC (“SC Autosports”), d/b/a Kandi America).

The Company’s organizational chart as of ~~September 30, 2019~~the date of this report is as follows:

~~On March 21, 2019, Kandi Vehicle signed an Equity Transfer Agreement (the “Transfer Agreement”) with Geely Technologies Group~~

In June 2020, Jinhua An Kao Power Technology Co., Ltd. changed its name to Zhejiang Kandi Smart Battery Swap Technology Co., Ltd (“~~Geely”~~Kandi Smart Battery Swap”).

In September 2020, Kandi Vehicles transferred all of its equity interest in Yongkang Scrou Electric Co, Ltd. (“Yongkang Scrou”) to ~~transfer certain equity interests~~its wholly owned subsidiary, Kandi Smart Battery Swap.

In September 2020, to better monetize its dozens of patents in the ~~Kandi Electric Vehicles Group~~field of battery swap systems and attract strategic investors to participate across the whole sector value chain, including battery swapping services and used battery recycling, the Company formed China Battery Exchange Technology Co., Ltd. ~~(the “Affiliate Company”, formerly defined as the “JV Company”~~(“China Battery Exchange”) to Geely. Pursuant to the Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately $46.7 million) from Geely last year to equity in order to increase its cash flow. As a result, the registered capital of the Affiliate Company became RMB 2.40 billion (approximately $336.3 million), of which. Kandi Vehicles ~~then owned 43.47% and Geely owned 56.53%, respectively, upon the conversion of the loan into equity~~has 100% ownership interest in the Affiliate Company. After that, Kandi Vehicles further agreed to sell 21.47% of its equity interests in the Affiliate Company to Geely for a total amount of RMB 516 million (approximately $72.3 million).China Battery Exchange. As of September ~~29, 2019,~~30, 2020, China Battery Exchange has not commenced any business operations.

In September 2020, intending to operate a ridesharing service across China, Zhejiang Ruiheng Technology Co., Ltd (“Ruiheng”) was established by Zhejiang Ruibo New Energy Vehicle Service Company Ltd. (“Ruibo”), Jiangsu Jinpeng Group Ltd. (“Jinpeng”) and Kandi Vehicles. Ruibo, Jinpeng and Kandi Vehicles ~~has received payments in cash totaling RMB 220 million (approximately $30.9 million)~~each owns 80%, 10%, and ~~certain commercial acceptance notes~~10% of RMB 296 million (approximately $41.6 million), of which RMB 140 million (approximately $19.7 million) shall mature on January 20, 2020 and the remaining RMB 156 million (approximately $21.9 million) shall mature on March 29, 2020. As a result of the completion of the equity transfer on September 29, 2019, Kandi Vehicles now owns 22% and Geely and its affiliates own 78% of the equity interests of the Affiliate Company. As now the Company only owns 22% of the JV Company, it was redefined as the Affiliate Company.Ruiheng, respectively.

The Company’s original primary business operations consist of designing, developing, manufacturing and commercializing EV products (through Kandi Electric Vehicles (Hainan) Co., Ltd. and the Affiliate Company), EV parts and off-road vehicles. The COVID-19 outbreak has seriously impacted the EV market in 2020. As ~~part of its strategic objective of becoming~~ a ~~leading manufacturer of EV products (through the Affiliate Company) and related services,~~result, the Company ~~has increased~~plans to manufacture and sell a number of ancillary products aimed at the dynamic power train system of intelligent transportation. For example, the dynamic power train system of Electric Scooters and Electric Self-Balancing Vehicles. The Company is pursuing these opportunities by expanding production of intelligent transportation products that exploit its ~~focus on pure EV-related products, and is actively pursuing expansion~~advantages in the ~~Chinese~~Yongkang Scrou’s power electric motor and ~~international markets, especially the U.S. market.~~Kandi Smart Battery Swap’s power battery pack.

NOTE 2 - LIQUIDITY

The Company had a working capital of ~~$80,374,159~~$ 79,767,999 as of September 30, ~~2019,~~2020, an increase of ~~$77,847,248~~$ 16,069,302 from athe working capital of ~~$2,526,911~~$63,698,697 as of December 31, ~~2018.~~2019. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s cash and cash equivalents ~~was $14,338,637~~were $23,909,159 and ~~$ 15,662,201, respectively, the~~$5,490,557, respectively. The Company’s restricted cash was ~~$11,713,004~~$ 250,000 and ~~$6,690,870,~~$11,022,078, respectively.

~~During~~After two years of negotiations, on March 10, 2020, a real estate repurchase agreement (the “Repurchase Agreement”) was entered into by and between Kandi Vehicles and Jinhua Economic and Technological Development Zone pursuant to which the local government shall purchase the land use right over the land of 66 acres (400 mu, 265,029 square meters) that is owned by Kandi Vehicles for RMB 525 million ($77 million). Payments to Kandi Vehicles shall be made in three installments pursuant to the Repurchase Agreement. In addition, if Kandi Vehicles achieves certain milestones that contribute to local economic development, the Company will be eligible for tax rebates totaling up to RMB 500 million ($74 million) over the next eight years. On May 22, 2020, the Company received the first ~~quarter~~payment of ~~2019,~~RMB 244 million (approximately $36 million) under the Repurchase Agreement. On July 9, 2020, the Company ~~signed an agreement to sell 21.47% of its equity interests in~~received the ~~Affiliate Company to Geely for a total amount~~second payment of RMB ~~516~~119 million (approximately ~~$72.3~~$17 million)~~. As~~ under the Repurchase Agreement. The final payment of ~~September 29, 2019,~~RMB 162 million ($23.8 million) will be received when the Company ~~has received payments in cash totaling RMB 220 million (approximately $30.9 million)~~vacates the land, factory buildings, and ~~certain commercial acceptance notes~~other real estate and moves to the new facility. Kandi Vehicles intends to use a portion of RMB 296 million (approximately $41.6 million) from Geely, of which RMB 140 million (approximately $19.7 million) shall mature on January 20, 2020 and the remaining RMB 156 million (approximately $21.9 million) shall mature on March 29, 2020. The Company plans to apply the proceeds from the ~~equity transfer~~land repurchase (approximately RMB 130 million, or $19.1 million) to ~~its ongoing operations. The cash flow~~fund the land use acquisition and ~~operating capacity of~~factory construction in the ~~Company will be greatly improved after receiving~~New Energy Automotive Zone, and use the ~~above payments.~~

rest portion to fund growth initiatives and for general corporate purposes. Although the Company expects that most of its outstanding trade receivables from customers will be collected in the next twelve months, there are uncertainties with respect to the timing in collecting these receivables, especially the receivables due from the Affiliate Company, because most of them are indirectly impacted by the progress of the receipt of government subsidies.

The Company’s primary need for liquidity stems from its need to fund working capital requirements of the Company’s businesses, its capital expenditures and its general operations, including debt repayment. The Company has historically financed its operations through short-term commercial bank loans from Chinese banks, as well as its ongoing operating activities by using funds from operations, external credit or financing arrangements. ~~The~~Although the Company ~~routinely monitors current and expected operational requirements and financial market conditions to evaluate~~has paid off all the ~~use~~short-term bank loans as of ~~available financing sources. Considering~~September 30, 2020, it still retains the ~~existing working capital position and~~credit line, which can be used at any time when the ~~ability to access debt funding sources,~~Company has special needs. In addition, the Company received the remaining RMB186 million (approximately $27.3 million) equity transfer payment from Geely in July, 2020. The management believes that the ~~Company’s operations and borrowing resources are~~Company currently has sufficient ~~to provide for its current and foreseeable~~working capital ~~requirements~~ to support its ongoing operations for the next twelve months.

NOTE 3 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the management’s opinion, the interim financial statements reflect all normal adjustments that are necessary to provide a fair presentation of the financial results for the interim periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for an entire fiscal year. The condensed consolidated balance sheet as of December 31, ~~2018~~2019 has been derived from the audited consolidated financial statements as of such date. For a more complete understanding of the Company’s business, financial position, operating results, cash flows, risk factors and other matters, please refer to its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Form 10-K”).

Beginning in 2020, a strain of new coronavirus (“COVID-19”) has spread globally and at this point. Though it becomes more stable in China, there are new cases reported continuously at present. The extent to which the COVID-19 may impact operations of the Company, with majority of operations based in China, is alleviated though it remains uncertain due to the fact that the COVID-19 is not completely over. The extent of the impact of the COVID-19 on the Company’s business and operations will depend on several factors, such as the duration, severity, and geographic spread of the pandemic, development of the testing and treatment and stimulus measures of the government. The Company is monitoring and assessing the evolving situation closely and evaluating its potential exposure. The operating results for the nine months ended September 30, 2020 may not be indicative of the future operating results for the fiscal year ending December 31, 2020 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the Company’s business.

NOTE 4 - PRINCIPLES OF CONSOLIDATION

The Company’s condensed consolidated financial statements reflect the accounts of the Company and its ownership interests in the following subsidiaries:

(1)	Continental Development Limited (“Continental”), a wholly-owned subsidiary of the Company, incorporated under the laws of Hong Kong;

(2)	Kandi Vehicles, a wholly-owned subsidiary of ~~Continental;~~Continental, incorporated under the laws of the PRC;

(3)

~~Jinhua~~ Kandi New Energy ~~Vehicles~~Vehicle Co., Ltd. (“Kandi New Energy”), a 50%-owned subsidiary of Kandi Vehicles (Mr. Hu Xiaoming owns the other 50%)., incorporated under the laws of the PRC. Pursuant to agreements executed in January 2011, Mr. Hu Xiaoming contracted with Kandi Vehicles for the operation and management of Kandi New Energy and put his shares of Kandi New Energy into escrow. As a result, Kandi Vehicles is entitled to 100% of the economic benefits, voting rights and residual interests of Kandi New Energy;

(4)	~~YongkangScrou Electric Co, Ltd. (“YongkangScrou”), a wholly-owned subsidiary of Kandi Vehicles in China;~~

~~(5)~~

Kandi Electric Vehicles (Hainan) Co., Ltd. (“Kandi Hainan”), a subsidiary, ~~in China,~~ 10% owned by Kandi New Energy and 90% owned by Kandi ~~Vehicles;~~Vehicles, incorporated under the laws of the PRC;

(5)

~~(6)~~

~~Jinhua An Kao Power~~Zhejiang Kandi Smart Battery Swap Technology Co., ~~Ltd.~~Ltd (“~~Jinhua An Kao”~~Kandi Smart Battery Swap”), a wholly-owned subsidiary of Kandi Vehicles, ~~in China; and~~incorporated under the laws of the PRC;

(6)	Yongkang Scrou Electric Co, Ltd. (“Yongkang Scrou”), a wholly-owned subsidiary of Kandi Smart Battery Swap, incorporated under the laws of the PRC; and

(7)	SC Autosports (d/b/a Kandi America), a wholly-owned subsidiary of the Company informed under the ~~U.S.~~laws of the State of Texas.

Equity Method ~~Investees~~Investee

The Company’s consolidated net income also includes the Company’s proportionate share of the net income or loss of its equity method ~~investees as follows:~~investment in the Affiliate Company, in which the Company owns 22% equity interest.

~~The Affiliate Company, a 22% owned subsidiary of Kandi Vehicles and its subsidiaries~~

All intra-entity profits and losses with regard to the Company’s equity method ~~investees~~investee have been eliminated.

NOTE 5 - USE OF ESTIMATES

The preparation of financial statements in conformity with ~~generally accepted accounting principles in the United States~~U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results when ultimately realized could differ from those estimates.

NOTE 6 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are detailed in “Note 26 - Summary of Significant Accounting Policies” of the Company’s 2019 Form 10-K, excepting the following.

(v) Reclassification

Certain reclassifications have been made to the condensed consolidated statements of cash flows for nine months ended September 30, 2019 to conform to the presentation of condensed consolidated financial statement for nine months ended September 30, 2020. The Company ~~2018 Form 10-K.~~reclassified the following 1) grouping due from employees into other receivables and other assets; 2) grouping customer deposits and deferred income into other payables and accrued liabilities; 3) reclassifying a portion of other receivables and other assets under operating activities to loan to third party under investing activities; 4) reclassifying a portion of other payables and accrued liabilities under operating activities to repayments of loan from third party under financing activities.

NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02, together with subsequent Accounting Standards Updates collectively known as the “leases standard” or “ASC 842”. ASC 842 requires a lessee recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements. Effective January 1, 2019, the Company adopted the new standard using the effective date approach. The Company elected to adopt both the transition relief provided in ASU 2018-11 and the package of practical expedients which allowed us, among other things, to retain historical lease classifications and accounting for any leases that existed prior to adoption of the standard. Additionally, the management elected the practical expedients allowing the Company not to separate lease and non-lease components and not record leases with an initial term of twelve months or less (“short-term leases”) on the balance sheet across all existing asset classes.

Adoption of the new standard resulted in the recording of operating lease assets and operating lease liabilities of $140,000 as of January 1, 2019, which primarily relates to the corporate office leases for SC Autosports. The standard did not materially impact the condensed consolidated statements of operations or cash flows. Adopting the new standard did not have a material impact on the accounting for leases under which the Company is the lessee.

In January 2017, the FASB issued ASU No. 2017-04 (Topic 350) Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU will be applied on a prospective basis and is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company plans to adopt this ASU in the fourth quarter of 2019 and does not expect the adoption to have a material impact on the Consolidated Financial Statements.

In February 2018, the FASB released ASU 2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard update addresses a specific consequence of the Tax Cuts and Jobs Act ~~(“U.S. tax reform”~~(the “Tax Act”) and allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from ~~U.S. tax reform.~~the Tax Act. Consequently, the update eliminates the stranded tax effects that were created as a result of the historical U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The Company is required to adopt this standard in the first quarter of fiscal year 2020, with early adoption permitted. The amendments in this update should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company ~~has finished~~adopted this ASU in the ~~evaluation~~first quarter of 2020 and ~~determined there is no~~the new standard did not have a material impact of on ~~its Condensed Consolidated Financial Statements.~~the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU in the first quarter of 2020 and the new standard did not have a material impact on the consolidated financial statements.

In December 18, 2019, the FASB issued ASU 2019-12, income Taxes — Simplifying the Accounting for Income Taxes serves to simplify the accounting for income taxes by removing certain following Codification exceptions, including exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment. This guidance will be effective after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the new guidance and do not expect the adoption of this guidance will have a material impact on the ~~Consolidated Financial Statements.~~consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities, Investments—Equity Method and Joint Ventures, and Derivatives and Hedging, which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective in the first quarter of 2021 on a prospective basis, with early adoption permitted. The Company is currently evaluating the impact of the new guidance and do not expect the adoption of this guidance will have a material impact on the consolidated financial statements.

NOTE 8 - CONCENTRATIONS

(a) Customers

For the three-month period ended September 30, ~~2019,~~2020, the Company’s major customers, each of whom accounted for more than 10% of the Company’s consolidated revenue, were as follows:

Sales Trade Receivable
Three Months Three Months
Ended Ended
September 30, September 30, September 30, December 31,
Major Customers 2019 2018 2019 2018
Customer A 30 % 24 % 27 % 22 %
Customer B 30 % 4 % 12 % 2 %
Kandi Electric Vehicles Group Co., Ltd. and its subsidiaries (related party) 15 % 61 % 30 % 66 %
Customer D 10 % - 8 % 7 %

	Sales						Trade Receivable
	Three Months			Three Months
	Ended			Ended
	September 30,			September 30，			September 30,			December 31,
Major Customers	2020			2019			2020			2019
Customer A		28	%		30	%		49	%		55	%
Customer B		11	%		30	%		9	%		5	%
Customer C		11	%		-			4	%		-

For the nine-month period ended September 30, ~~2019,~~2020, the Company’s major customers, each of whom accounted for more than 10% of the Company’s consolidated revenue, were as follows:

Sales Trade Receivable
Nine Months Nine Months
Ended Ended
September 30, September 30, September 30, December 31,
Major Customers 2019 2018 2019 2018
Customer A 39 % 24 % 27 % 22 %
Customer B 23 % 6 % 12 % 2 %
Kandi Electric Vehicles Group Co., Ltd. and its subsidiaries (related party) 14 % 49 % 30 % 66 %

	Sales						Trade Receivable
	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,			September 30,			December 31,
Major Customers	2020			2019			2020			2019
Customer A		41	%		39	%		49	%		55	%
Customer B		13	%		23	%		9	%		5	%

(b) Suppliers

For the three-month period ended September 30, ~~2019,~~2020, the Company’s ~~material~~major suppliers, each of whom accounted for more than 10% of the Company’s total purchases, were as follows:

Purchases Accounts Payable
Three Months Three Months
Ended Ended
September 30, September 30, September 30, December 31
Major Suppliers 2019 2018 2019 2018
Supplier E 93 % - 12 % -

	Purchases						Accounts Payable
	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,			September 30,			December 31,
Major Suppliers	2020			2019			2020			2019
Zhejiang Kandi Supply Chain Management Co., Ltd.		32	%		93	%		9	%		8	%
Supplier D		28	%		-			5	%		-

For the ~~nine-month~~nine -month period ended September 30, ~~2019,~~2020, the Company’s ~~material~~major suppliers, each of whom accounted for more than 10% of the Company’s total purchases, were as follows:

Purchases Accounts Payable
Nine Months Nine Months
Ended Ended
September 30, September 30, September 30, December 31,
Major Suppliers 2019 2018 2019 2018
Supplier E 67 % - 12 % -
Supplier F 13 % 3 % 6 % -

	Purchases						Accounts Payable
	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,			September 30,			December 31,
Major Suppliers	2020			2019			2020			2019
Zhejiang Kandi Supply Chain Management Co., Ltd.		48	%		67	%		9	%		8	%
Supplier D		26	%		13	%		5	%		-

NOTE 9 - EARNINGS (LOSS) PER SHARE

The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the reporting period. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options and warrants (using treasury stock method). Due to the average market price of the common stock during the period below the exercise price of the options, approximately 3,900,000 options were excluded from the calculation of diluted net loss per share, for the ~~three~~three-month and ~~nine months~~nine-month period ended September 30, 2019, respectively. Due to the loss from operations, approximately 3,900,000 options were excluded from the calculation of diluted net loss per share, for the three and nine months ended September 30, 2018, respectively.2020.

~~The following is the calculation of earnings per share for the three-month periods ended September 30, 2019 and 2018:~~

For three months ended
September 30,
2019 2018
Net income (loss) $ 12,089,441 $ (6,521,399 )
Weighted average shares used in basic computation 52,613,642 51,474,048
Dilutive shares - -
Weighted average shares used in diluted computation 52,613,642 51,474,048

Earnings (Loss) per share:
Basic and diluted $ 0.23 $ (0.13 )

~~The following is the calculation of earnings per share for the nine-month periods ended September 30, 2019 and 2018:~~

For nine months ended
September 30,
2019 2018
Net income (loss) $ 361,811 $ (1,418,879 )
Weighted average shares used in basic computation 52,332,260 51,089,047
Dilutive shares - -
Weighted average shares used in diluted computation 52,332,260 51,089,047

Earnings (Loss) per share:
Basic and diluted $ 0.01 $ (0.03 )

NOTE 10 - ACCOUNTS RECEIVABLE

Accounts receivable are summarized as follows:

September 30, December 31,
2019 2018
Accounts receivable $ 54,990,221 $ 34,394,738
Less: allowance for doubtful accounts (130,420 ) (120,010 )
Accounts receivable, net $ 54,859,801 $ 34,274,728

	September 30,			December 31,
	2020			2019
Accounts receivable	$	38,476,731		$	61,436,514
Less: allowance for doubtful accounts		(105,833	)		(254,665	)
Accounts receivable, net	$	38,370,898		$	61,181,849

NOTE 11 - INVENTORIES

Inventories are summarized as follows:

September 30, December 31,
2019 2018
Raw material $ 11,192,506 $ 7,040,728
Work-in-progress 13,778,920 1,571,179
Finished goods 10,475,957 13,385,961
Inventories $ 35,447,383 $ 21,997,868

	September 30,		December 31,
	2020		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
Inventories	$	30,244,514	$	27,736,566

NOTE 12 - NOTES RECEIVABLE

As of September 30, 2020, there was $235,249 notes receivable from unrelated parties. As of December 31, 2019, there was ~~$41,549,888~~$42,487,225 notes receivable from unrelated parties, ~~among~~ which ~~$70,067 were bank acceptance notes from payments for sales and $41,479,821 were~~was commercial acceptance notes from payments for equity transfer of the Affiliate Company, ~~(refer to Note 24-summarized information of equity method investment in~~which had been collected during the ~~Affiliate Company). As of December 31, 2018, there was $72,712 notes receivable from unrelated parties, among which $72,712 were bank acceptance notes from payments for sales.~~

~~As of~~nine-month ended September 30, 2019, there was $0 notes receivable from the Affiliate Company and related parties. As of December 31, 2018. there was $3,861,032 notes receivable from the Affiliate Company and related parties, among which $3,861,032 were bank acceptance notes from payments for sales.2020.

NOTE 13 - ~~Other receivables~~OTHER RECEIVABLES

Other ~~receivable is summarized as follows:~~receivables consist of the following:

September 30, December 31,
2019 2018
Loan to third party $ 9,187,863 $ -
Others 3,671,441 1,264,323
Total other receivables $ 12,859,304 $ 1,264,323

	September 30,		December 31,
	2020		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

As of September 30, 2020 and December 31, 2019, the Company’s other receivable includes ~~$9.2 million~~$50,925,239 and $3,577,145 short-term loan lent to an unrelated party with a 6% annual interest rate to maximize the use of idled cash. This loan can be redeemed at any time.

NOTE 14 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plants and equipment as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, consisted of the following:

September 30, December 31,
2019 2018
At cost:
Buildings $ 29,703,216 $ 30,638,417
Machinery and equipment 61,376,817 63,398,627
Office equipment 998,625 852,172
Motor vehicles and other transport equipment 403,253 418,476
Molds and others 25,420,383 26,849,806
117,902,294 122,157,498
Less : Accumulated depreciation
Buildings $ (5,579,392 ) $ (5,019,075 )
Machinery and equipment (12,395,351 ) (8,442,940 )
Office equipment (464,806 ) (393,893 )
Motor vehicles and other transport equipment (344,633 ) (325,917 )
Molds and others (24,626,908 ) (25,486,100 )
(43,411,090 ) (39,667,925 )
Less: impairment - (443,650 )
Property, plant and equipment, net $ 74,491,204 $ 82,045,923

	September 30,			December 31,
	2020			2019
At cost:
Buildings	$	31,196,057		$	30,447,480
Machinery and equipment		64,833,897			62,973,794
Office equipment		1,098,001			1,048,651
Motor vehicles and other transport equipment		430,468			413,046
Molds and others		26,466,491			25,836,241
		124,024,914			120,719,212

Less : Accumulated depreciation	$	(52,892,444	)	$	(46,311,354	)
Property, plant and equipment, net	$	71,132,470		$	74,407,858

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the net book value of property, plant and equipment pledged as collateral for the Company’s bank loans totaled ~~$7,441,479~~$0 and ~~$8,105,419,~~$6,484,497, respectively. Also see Note ~~18.~~17.

Depreciation expenses for the three months ended September 30, 2020 and 2019 were $1,795,124 and ~~September 30, 2018 were $1,832,83 and $239,434,~~$1,832,835, respectively. Depreciation expenses for the nine months ended September 30, 2020 and 2019 were $5,325,289 and ~~September 30, 2018 were $5,724,863 and $1,511,018, respectively~~$5,724,864, respectively.

NOTE 15 - INTANGIBLE ASSETS

Intangible assets include acquired ~~other~~ intangibles of trade name, customer relations and ~~patent recorded at estimated fair values in accordance with purchase accounting guidelines for acquisitions.~~patent.

The following table provides the gross carrying value and accumulated amortization for each major class of our intangible assets, other than goodwill:

Remaining September 30, December 31,
useful life 2019 2018
Gross carrying amount:
Trade name 2.25 years $ 492,235 $ 492,235
Customer relations 2.25 years 304,086 304,086
Patent 5.75-7.42 years 4,456,278 4,624,513
5,252,599 5,420,834
Less : Accumulated amortization
Trade name $ (376,366 ) $ (338,307 )
Customer relations (232,505 ) (208,993 )
Patent (919,740 ) (545,407 )
(1,528,611 ) (1,092,707 )
Intangible assets, net $ 3,723,988 $ 4,328,127

	Remaining	September 30,			December 31,
	useful life	2020			2019
Gross carrying amount:
Trade name	1.25 years	$	492,235		$	492,235
Customer relations	1.25 years		304,086			304,086
Patent	4.75-6.42 years		4,675,577			4,564,506
			5,471,898			5,360,827
Less : Accumulated amortization
Trade name		$	(427,113	)	$	(389,053	)
Customer relations			(263,854	)		(240,342	)
Patent			(1,516,431	)		(1,076,660	)
			(2,207,398	)		(1,706,055	)
Intangible assets, net		$	3,264,500		$	3,654,772

The aggregate amortization expenses for those intangible assets ~~that continue to be amortized is reflected in amortization of intangible assets in the Consolidated Statements of Income~~were $156,040 and ~~Comprehensive Income and were~~ $154,027 ~~and $157,817~~ for the three months ended September 30, 2020 and 2019, respectively. The aggregate amortization expenses for those intangible assets were $463,743 and ~~2018, respectively. And~~ $471,497 ~~and $493,405~~ for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Amortization expenses for the next five years and thereafter are as follows:

2019 (Three Months) $ 157,166
2020 628,663
2021 628,663
2022 549,304
2023 546,568
Thereafter 1,213,624
Total $ 3,723,988

Three months ending December 31, 2020	$	156,041
Years ending December 31,
2021		624,165
2022		544,805
2023		542,070
2024		542,070
Thereafter		855,349
Total	$	3,264,500

NOTE 16 - LAND USE RIGHTS, NET

The Company’s land use rights consist of the following:

September 30, December 31,
2019 2018
Cost of land use rights $ 14,382,544 $ 14,925,518
Less: Accumulated amortization (3,297,827 ) (3,175,790 )
Land use rights, net $ 11,084,717 $ 11,749,728

	September 30,			December 31,
	2020			2019
Cost of land use rights	$	11,983,731		$	14,731,847
Less: Accumulated amortization		(2,940,740	)		(3,459,032	)
Land use rights, net	$	9,042,991		$	11,272,815

During June 2020, land use right in the net carrying value of $2.3 million was returned to the government as the Company began to perform its obligations under the Repurchase Agreement.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the net book value of land use rights pledged as collateral for the Company’s bank loans was ~~$7,366,117~~$0 and ~~$7,756,253,~~$4,937,138, respectively. Also see Note ~~18.~~17.

The amortization expenses for the three months ended September 30, 2020 and 2019, were $65,229 and ~~September 30, 2018, were~~ $80,462, ~~and $82,586,~~ respectively. The amortization expenses for the nine months ended September 30, 2020 and 2019, were $225,941 and ~~September 30, 2018, were~~ $247,061, ~~and $267,177,~~ respectively. Amortization expenses for the next five years and thereafter is as follows:

2019 (Three Months) $ 82,354
2020 329,415
2021 329,415
2022 329,415
2023 329,415
Thereafter 9,684,703
Total $ 11,084,717

Three months ending December 31, 2020	$	75,314
Years ending December 31,
2021		301,255
2022		301,255
2023		301,255
2024		301,255
Thereafter		7,762,657
Total	$	9,042,991

NOTE 17 ~~- CONSTRUCTION-IN-PROGRESS~~

In September 2019, in order to further increase the production capacity, YongkangScrou started building a factory of efficient new energy vehicle drive motors with a space of 6,639.9 square meters on the basis of the original plant. The total contract amount was RMB 6.6 million (approximately $0.9 million). The project is expected to be completed by 2020. As of September 30, 2019 and December 31, 2018, the Company’s Construction-in-Progress (“CIP”) were $17,781 and $0, respectively. No depreciation is provided for CIP until such time as the facility is completed and placed into operation. There was no interest expense capitalized for CIP for the three and nine months ended September 30, 2019.

~~NOTE 18~~ - SHORT-TERM AND LONG-TERM ~~BANK~~ LOANS

Short-term loans are summarized as follows:

	September 30,		December 31,
	2020		2019
Bank A
Interest rate 5.66% per annum, paid off on May 22, 2020, secured by the assets of Kandi Vehicle, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16.		-		7,004,650

Interest rate 5.66% per annum, paid off on May 22, 2020,secured by the assets of Kandi Vehicle, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16.		-		4,621,921
Bank B
Interest rate 5.22% per annum, paid off on April 22, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16.		-		5,741,517
Interest rate 5.22% per annum, paid off on April 24, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16.		-		4,306,138
Interest rate 5.22% per annum, paid off on April 26, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16.		-		4,306,138
	$	-	$	25,980,364

September 30, December 31,
2019 2018
Loans from China Ever-bright Bank
Interest rate 5.655% per annum, paid off on April 18, 2019, secured by the assets of Kandi Vehicle, guaranteed by Mr. Hu Xiaoming and his wife, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16. - 10,179,745
Loans from Hangzhou Bank
Interest rate 5.66% per annum, paid off on October 14, 2019, secured by the assets of Kandi Vehicle, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16. 6,838,565 7,096,737
Interest rate 5.66% per annum, due on December 31, 2019, secured by the assets of Kandi Vehicle, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16. 5,605,381 5,816,997
Interest rate 5.66% per annum, due on July 4, 2020, secured by the assets of Kandi Vehicle, also guaranteed by company’s subsidiaries. Also see Note 14 and Note 16. 4,512,332 4,682,683
Interest rate 5.66% per annum, paid off on April 24, 2019, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16. - 2,763,074
Loans from Agricultural Bank of China
Interest rate 5.22% per annum, due on April 18, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16. 4,204,036 -
Interest rate 5.22% per annum, due on April 23, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16. 5,605,381 -
Interest rate 5.22% per annum, due on May 3, 2020, secured by the assets of Kandi Vehicle. Also see Note 14 and Note 16. 4,204,036 -
$ 30,969,731 $ 30,539,236

Long-term loans are summarized as follows:

September 30, December 31,
2019 2018
Loans from Haikou Rural Credit Cooperative
Interest rate 7% per annum, due on December 12, 2021, guaranteed by Kandi Vehicle and Kandi New Energy. 27,606,502 28,794,136
$ 27,606,502 28,794,136

	September 30,		December 31,
	2020		2019

Long term bank loans from bank C
Interest rate 7% per annum, due on December 12, 2021, guaranteed by the Company’s subsidiaries.	$	28,523,958	$	28,133,433
Other long term loans:
Loan under Paycheck Protection Program①		244,116		-
Economic Injury Disaster Loan②		150,000		-
Total long term loans	$	28,918,074	$	28,133,433
Long term loans - current portion		16,761,501		13,779,641
Long term loans - noncurrent portion		12,156,573		14,353,792
Total long term loans - current and noncurrent portion	$	28,918,074	$	28,133,433

①

②

In addition, Economic Injury Disaster Loans (“EIDL”) through the SBA was also made available under the CARES Act passed by Congress in response to the COVID-19 pandemic. During June 2020, $150,000 of EIDL loan was approved with the term of a 3.75% rate over 30 years, and a 12-month deferment on the first repayment of principal with interest accrued during deferment.

The interest expenses of short-term and long-term ~~bank~~ loans for the three months ended September 30, 2020 and 2019 were $504,905 and ~~2018 were~~ $435,524, ~~and $426,167,~~ respectively. The interest expenses of short-term and long-term ~~bank~~ loans for the nine months ended September 30, 2020 and 2019 were $2,095,222 and ~~2018 were~~ $1,304,062, ~~and $1,274,399,~~ respectively.

As of September 30, ~~2019,~~2020, the aggregate amount of short-term and long-term loans guaranteed by various third parties was $0.

NOTE ~~19 - NOTES PAYABLE~~

Notes payable is presented to certain suppliers as a payment against the outstanding trade payable. Notes payable are mainly bank acceptance notes and commercial acceptance notes which are non-interest bearing and generally mature within one year.

As of September 30, 2019, there was $11,463,004 notes payable, among which $11,463,004 was bank acceptance notes. As of December 31, 2018, there was $12,787,619 notes payable, among which $8,767,670 were bank acceptance notes, $2,763,074 were commercial acceptance notes and $1,256,875 were other notes payable. $11,463,004 and $6,440,870 were held as collateral for the notes payable as of September 30, 2019 and December 31, 2018, respectively.

~~NOTE 20~~18 - TAXES

(a) Corporation Income Tax

Pursuant to the tax laws and regulations of the PRC, the Company’s applicable corporate income tax (“CIT”) rate is 25%. However, Kandi Vehicles and ~~Jinhua Ankao~~Kandi Smart Battery Swap qualify as High and New Technology Enterprise (“HNTE”) companies in the PRC, and are entitled to pay a reduced income tax rate of 15% for the years presented. A HNTE Certificate is valid for three years. An entity may re-apply for an HNTE certificate when the prior certificate expires. Historically, Kandi Vehicles has successfully re-applied for such certificates when the its prior certificates expired. ~~Jinhua Ankao~~Kandi Smart Battery Swap has been qualified as HNTE since 2018. Therefore no records for renewal are available. The applicable CIT rate of each of the Company’s three other subsidiaries, Kandi New Energy, Yongkang Scrou and Kandi Hainan, the Affiliate Company and its subsidiaries is 25%.

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of ~~our~~its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the management makes a cumulative adjustment. For ~~2019,~~2020, the management estimates that its effective tax rate will be favorably affected by non-taxable income such as the share of income of the Affiliate Company and the gain from the change of fair value of contingent liabilities and certain research and development super-deduction and adversely affected by non-deductible expenses such as stock compensation inelegible for U.S. income tax deduction and part of entertainment expenses. The Company records valuation allowances against the deferred tax assets associated with losses for which weit may not realize a related tax benefit. After combining research and development tax credits of 25% on certain qualified research and development expenses, the Company’s effective tax ~~rates~~rate for the nine months ended September 30, 2020 and 2019 ~~and 2018~~ were a tax expense of 56.99% on a reported income before taxes of approximately $2.4 million, a tax benefit of 13.05% on a reported income before taxes of approximately $0.3 million, ~~and an effective income tax rate with a tax benefit of 20.70% for the same period of last year on a reported loss before taxes of approximately $1.8 million,~~ respectively.

The quarterly tax provision, and the quarterly estimate of ~~our~~the Company’s annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting ~~our~~the Company’s pre-tax and taxable income and loss, acquisitions (including integrations) and investments, changes in ~~our~~its stock price, changes in ~~our~~its deferred tax assets and liabilities and their valuation, return to provision true-up, foreign currency gains (losses), changes in regulations and interpretations related to tax, accounting, and other areas. Additionally, ~~our~~the Company’s effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. The income tax provision for the nine months ended September 30, 2020 and 2019 was tax expense of $1,354,563 and ~~2018 was~~ tax benefit of $41,780, ~~and tax benefit of $370,316,~~ respectively.

~~Effective January 1, 2007, the Company adopted the guidance in~~Under ASC 740 guidance relating to uncertain tax ~~positions. The guidance~~positions, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial ~~statements. Under ASC 740,~~statements, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of ~~December 31, 2018,~~September 30, 2020, the Company did not have any liability for unrecognized tax benefits. The Company files income tax returns with the U.S. Internal Revenue Services (“IRS”) and those states where the Company has operations. The Company is subject to U.S. federal or state income tax examinations by the IRS and relevant state tax authorities for years after 2006. During the periods open to examination, the Company has net operating loss carry forwards (“NOLs”) for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs may be utilized in future periods, they remain subject to examination. The Company also files certain tax returns in the PRC. As of September 30, ~~2019,~~2020, the Company was not aware of any pending income tax examinations by U.S. or PRC tax authorities. The Company records interest and penalties on uncertain tax provisions as income tax expense. As of September 30, ~~2019~~2020, the Company has no accrued interest or penalties related to uncertain tax positions.

The aggregate NOLs in 2019 was $9.6 million deriving from entities in the PRC and Hong Kong. The aggregate NOLs in 2018 was $28.1 million deriving from entities in the PRCand Hong Kong. ~~The aggregate NOLs in 2017 was $22.7 million deriving from entities in the PRC, Hong Kong and U.S.~~ The NOLs will start to expire from 2021 if they are not used. The cumulative net operating loss in the PRC can be carried forward for five years, to offset future net profits for income tax purposes. The Company has $28,709 cumulative net operating loss ~~Pre-2018~~ in ~~the~~ U.S. ~~can be carried~~to carry forward ~~for twenty years.~~as of September 30, 2020. The cumulative net operating loss in Hong Kong can be carried forward without an expiration date.

(b) Tax Holiday Effect

For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the PRC CIT rate was 25%. Certain subsidiaries of the Company are entitled to tax exemptions (tax holidays) for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

The combined effects of income tax expense exemptions and reductions available to the Company for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	Nine Months Ended
	September 30,
	2020		2019
Tax benefit (holiday) credit	$	1,669,668	$	377,303
Basic net income per share effect	$	0.000	$	0.000

Nine Months Ended
September 30,
2019 2018
Tax benefit (holiday) credit $ 377,303 $ 1,345,541
Basic net income per share effect $ 0.000 $ 0.000

On ~~December 22, 2017,~~March 27, 2020, the ~~SEC staff issued Staff Accounting Bulletin (SAB) No. 118, which provides guidance on accounting~~“Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for ~~the tax effects of the Tax Act. SAB 118 provides a measurement period that should~~qualified improvement property. The Company does not ~~extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the~~anticipate significant income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate inimpact on its financial ~~statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should~~and continue to ~~apply ASC 740~~examine the impacts this CARES Act may have on ~~the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.~~its business.

NOTE 19 - LEASES

In connection with our initial analysis of the impact of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), the Company recorded provisional estimates related to the re-measurement of deferred taxes and the Deemed Repatriation Transition Tax in our financial statements for the fiscal year ended December 31, 2017. The measurement period ended on December 22, 2018. As of December 22, 2018, we have completed the accounting for the impact of the Tax Act based on the guidance, interpretations, and data available. No adjustments to these provisional estimates have been recorded.

Under the Tax Act, Global Intangible Low-Taxed Income (“GILTI”) tax rules the Company must make an accounting policy election to either (1) recognize taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factor such amount into the Company’s measure of its deferred taxes (the “deferred method”). The Company elected to treat the GILTI as a current-period expense when incurred.

~~NOTE 21 – LEASES~~

The Company has renewed its corporate office leases for SC Autosports, with a term of 3715 months from January 31, ~~2017~~2020 to ~~January 31, 2020.~~April 30, 2021. The monthly lease payment is ~~$11,000.~~$11,000 from February 2020 to April 2020 and $12,000 from May 2020 to April 2021. The Company ~~adopted ASC 842 to record~~recorded operating lease assets and operating lease liabilities ~~as of~~at January ~~1, 2019,~~31, 2020, with a remaining lease term of 1315 months and discount rate of ~~4.75%~~4.25%.

As of September 30, ~~2019,~~2020, the Company’s right - of - use asset (grouped in other long term assets on the balance sheet) was ~~$ 42,974~~$80,561 and lease liability (grouped in other current liability on the balance sheet) was ~~$44,121.~~$82,823. For the three months ~~and~~ended September 30, 2020, the Company’s operating lease expense was $36,000. For the nine months ended September 30, ~~2019,~~2020, the Company’s operating lease expense was ~~$33,000 and $99,000, respectively.~~$104,000.

Supplemental information related to operating leases was as follows:

		Nine months ended September 30, 2020
Cash payments for operating leases		$	104,000

Maturities of lease liabilities as of September 30, ~~2019~~2020, were as follow:

Maturity of Lease Liabilities:
2019 (Three Months) $ 32,611
2020 11,510
Total $ 44,121

Maturity of Lease Liabilities:	Lease payable
Three months ended December 31,2020	$	35,245
Year ended December 31, 2021		47,578
Total	$	82,823

NOTE ~~22 –~~20 - CONTINGENT CONSIDERATION LIABILITY

On January 3, 2018, the Company completed the acquisition of 100% of the equity of Jinhua An ~~Kao.~~Kao, currently known as Kandi Smart Battery Swap Co., Ltd. (“Kandi Smart Battery Swap”). The Company paid approximately RMB 25.93 million (approximately $4 million) at the closing of the transaction using cash on hand and issued a total of 2,959,837 shares of restrictive stock or 6.2% of the Company’s total outstanding shares of the common stock immediately prior to the closing of the acquisition valued at approximately $20.7 million to the former ~~shareholder~~shareholders of ~~Jinhua An Kao~~Kandi Smart Battery Swap and his designees (the ~~“An Kao~~“KSBS Shareholders”), and may be required to pay future consideration of up to an additional 2,959,837 shares of common stock, which are being held in escrow and to be released contingent upon the achievement of certain net income-based milestones in the next three years. Any escrowed shares that are not released from escrow to the ~~An Kao~~KSBS Shareholders ~~for~~as a result of the failure to achieve the milestones will be forfeited and returned to the Company for cancellation. While the escrowed shares are held in escrow, the Company will retain all voting rights with respect to ~~the~~such shares. For the year ended December 31, 2018, ~~Jinhua An Kao~~Kandi Smart Battery Swap achieved its first year net profit target. ~~According to~~Accordingly, the ~~agreement, the former shareholders of An Kao~~KSBS Shareholders received 739,959 shares of Kandi’s restrictive common stock or 12.5% of the total equity consideration (i.e., 5,919,674 total shares) as part of the purchase price. For the year ended December 31, 2019, Kandi Smart Battery Swap achieved its second year net profit target. Accordingly, the KSBS Shareholders received 986,810 shares of Kandi’s restrictive common stock or 16.67% of the total equity consideration (i.e., 5,919,674 total shares) as part of the purchase price. All the escrowed shares have been included in the ~~purchase price.~~Company’s registration statement on Form S-3 declared effective by the SEC on April 5, 2019.

As the outbreak of COVID-19 in 2020 affected Kandi Smart Battery Swap’s operation and business, on July 7, 2020, the Company and the KSBS Shareholders made the following supplements to Condition III of the original Supplementary Agreement: The KSBC Shareholders have the right to receive an aggregate of 20.83% of the total equity consideration (i.e., 5,919,674 total shares), provided that Kandi Smart Battery Swap realizes a net profit of RMB50,000,000 or more for the period from January 1, 2020 to June 30, 2021 (as opposed to be the originally stated “December 31, 2020”), and such profit is audited or reviewed and Kandi Smart Battery Swap gets annual or quarterly financial report issued under US GAAP.

On July 1, 2018, the Company completed the acquisition of 100% of the equity of SC ~~Autosports.~~Autosports (d/b/a Kandi America). The Company issued a total of 171,969 shares of restrictive stock or approximately 0.3% of the Company’s total outstanding shares of the common stock immediately prior to the closing of the acquisition valued at approximately $0.8 million at the closing of transaction to the former members of SC Autosports within 30 days from the signing date of the Transfer Agreement, and may be required to pay future consideration of up to an additional 1,547,721 shares of common stock of the Company, which are being held in escrow and to be released contingent upon the achievement of certain pre-tax profit based milestones in the next three years. Any escrowed shares that are not released from escrow to the SC Autosports former members ~~for~~due to the failure to achieve the milestones will be forfeited and returned to the Company for cancellation. While the escrowed shares are held in escrow, the Company will retain all voting rights with respect to the shares. For the year ended December 31, 2018, SC Autosports achieved its first year pre-tax profit target. ~~According to the agreement,~~Accordingly, the former members of SC Autosports received 343,938 shares of Kandi’s restrictive common stock or 20% of the total ~~Kandi stock~~equity consideration in the purchase price. For the year ended December 31, 2019, SC Autosports achieved its second year pre-tax profit target. Accordingly, the former members of SC Autosports received 515,907 shares of Kandi’s restrictive common stock or 30% of the total equity consideration in the purchase price. All the escrowed shares have been included in the Company’s registration statement on Form S-3 declared effective by the SEC on April 5, 2019.

The Company recorded contingent consideration liability of the estimated fair value of the contingent consideration the Company currently expects to pay to ~~Jinahua Ankao~~the KSBS Shareholders and SC Autosports’ former members upon the achievement of certain milestones. The fair value of the contingent consideration liability associated with remaining shares of restrictive common stock was estimated by using the Monte Carlo simulation method, which took into account all possible scenarios. This fair value measurement is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurement and Disclosures. In accordance with ASC Topic 805, Business Combinations, the Company will re-measure this liability each reporting period and record changes in the fair value through a separate line item within the Company’s consolidated statements of ~~Income.~~income.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s contingent consideration liability was ~~$6,562,000~~$3,403,000 and ~~$7,256,000,~~$5,197,000, respectively.

Details of the contingent consideration liability as of September 30, 2020 and December 31, 2019 were as follow:

	September 30,		December 31,
	2020		2019
Contingent consideration liability to KSBS Shareholders	$	3,403,000	$	2,505,000
Contingent consideration liability to former members of SC Autosports		-		2,692,000
Total contingent consideration liability	$	3,403,000	$	5,197,000

NOTE 2321 - STOCK AWARD

In connection with the appointment of Mr. Henry Yu as a member of the Board of Directors (the “Board”), the Board authorized the Company to compensate Mr. Henry Yu with 5,000 shares of Company’s restricted common stock every six months as compensation, beginning in July 2011.

As compensation for Mr. Jerry Lewin’s services as a member of the Board, the Board authorized the Company to compensate Mr. Jerry Lewin with 5,000 shares of Company’s restricted common stock every six months, beginning in August 2011.

As compensation for Ms. Kewa Luo’s services as the Company’s investor relation officer, the Board authorized the Company to compensate Ms. Kewa Luo with 5,000 shares of the Company’s common stock every six months, beginning in September 2013.

In November 2016, the Company entered into a three-year employment agreement with Mr. Mei Bing, to hire him as the Company’s Chief Financial Officer. Under the agreement, Mr. Mei Bing was entitled to receive an aggregate 10,000 shares of common stock each year, vested in four equal quarterly installments of 2,500 shares. On January 29, 2019, Mr. Mei resigned from his position as the Company’s CFO.

On January 29, 2019, the Board appointed Ms. Zhu Xiaoying as interim Chief Financial Officer. Ms. Zhu was entitled to receive 10,000 shares of the common stock annually under the Company’s 2008 Omnibus Long-Term Incentive Plan (the “2008 Plan”) as a year-end equity bonus. Effective May 15, 2020, Ms. Zhu resigned from her position as interim Chief Financial Officer of the Company.

On May 15, 2020, the Board appointed Mr. Jehn Ming Lim as the Chief Financial Officer. Mr. Lim was entitled to receive 6,000 shares of the common stock annually, which shall be issuable evenly on each six-month anniversary hereof.

The fair value of stock awards ~~based on~~with service condition is determined based on the closing price of the common stock on the date the shares are ~~approved by the Board for grant.~~granted. The compensation costs for awards of common stock are recognized over the requisite service ~~period of three or six months.~~period.

On December 30, 2013, the Board approved a proposal (as submitted by the Compensation Committee) of an award (the “Board’s Pre-Approved Award Grant Sub-Plan under the 2008 Plan”) for certain executives and other key employees. The fair value of each award granted under the 2008 Plan is determined based on the closing price of the Company’s stock on the date of grant of such award. On September 26, 2016, the Board approved to terminate the previous Board’s Pre-Approved Award Grant Sub-Plan under the 2008 Plan and adopted a new plan to grant the total number of shares of common stock of the stock award for selected executives and key employees 250,000 shares of common stock for each fiscal year. On April 18, 2018, the ~~Board authorized the~~ Company ~~to grant~~granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On April 30, 2019, the ~~Board authorized~~Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On May 9, 2020, the Company ~~to grant~~granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan.

For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized $22,925 and ~~$31,675~~$22,925 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members, management and consultants under General and Administrative Expenses, respectively. For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized ~~$1,337,333~~$870,471 and ~~$1,311,885~~$1,337,333 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members, management and consultants under General and Administrative Expenses, respectively.

NOTE 2422 - ~~SUMMARIZED INFORMATION OF~~ EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY

The Company’s condensed consolidated ~~net income (loss)~~statement of operations includes the Company’s proportionate share of the net income or loss of the Company’s equity method ~~investees.~~investee. When the Company records its proportionate share of net income (loss) in such ~~investees,~~investee, it increases ~~equity~~other income ~~(loss) – net~~(expense) in the Company’s consolidated statements of ~~income~~operations and increase (decrease) the Company’s carrying value in that investment. Conversely, when the Company records its proportionate share of a net loss in such investees, it decreases equity income (loss) – net in the Company’s consolidated statements of income (loss) and the Company’s carrying value in that investment. All intra-entity profits and losses with the Company’s equity method investees have been eliminated.

On March 21, 2019, Kandi ~~Vehicle~~Vehicles signed an Equity Transfer Agreement with Geely Technologies Group Co., Ltd. (“Geely”) to transfer certain equity interests in the Affiliate Company to Geely. Pursuant to the Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately ~~$46.7~~$46.2 million) from Geely ~~Group last~~in the year of 2019 to equity in order to increase its cash flow. As a result, the registered capital of the Affiliate Company became RMB 2.40 billion (approximately ~~$336.3~~$352.8 million), of which Kandi Vehicles owned 43.47% and Geely owned 56.53%, respectively, upon the conversion of the loan into equity in the Affiliate ~~Company (the “March Affiliate Loan to Equity Conversion”).~~Company. Kandi Vehicles further ~~agree to sell~~sold 21.47% of its equity interests in the Affiliate Company to Geely for a total ~~amount~~consideration of RMB 516 million (approximately ~~$72.3~~$75.9 million) ~~(the “Affiliate Equity Transfer”)~~. Kandi Vehicles ~~shall own~~owns 22% of the equity interests of the Affiliate Company as a result of the transfer. As of September 29, 2019, the Company ~~has~~had received payments in cash totaling RMB 220 million (approximately ~~$30.9~~$32.3 million) and certain commercial acceptance notes of RMB 296 million (approximately ~~$41.6~~$43.5 million) from Geely, of which RMB 140 million (approximately ~~$19.7~~$20.6 million) ~~shall mature~~matured on January 20, 2020 and the remaining RMB 156 million (approximately ~~$21.9~~$22.9 million) ~~shall mature~~matured on March 29, 2020. As of September 30, 2019, the equity transfer ~~has~~had been completed. Therefore, in the third quarter of 2019, the Company ~~has~~ recognized the gain from equity sale of $20,574,217. As of September 30, 2020, all the equity transfer payment has been collected.

The Company accounted for its investments in the Affiliate Company under the equity method of accounting. ~~Since the March Affiliate Loan to Equity Conversion was completed at the very end of the first quarter, the~~The Company ~~still~~ recorded ~~50%~~22% of the Affiliate Company’s loss for the first quarter of 2019. Starting from the second quarter of the 2019, since the equity interests in the Affiliate Company have been reduced to 43.47% and the Affiliate Equity Transfer was completed at the very end of the third quarter, the Company recorded 43.47% of the Affiliate Company’s loss for the second and third quarter of 2019.nine months ended September 30, 2020.

The consolidated results of operations and financial position of the Affiliate Company are summarized below:

Three Months ended
September 30,
2019 2018
Condensed income statement information:
Net sales $ 520,275 $ 19,880,543
Gross loss (377,700 ) 3,133,283
Gross margin -72.6 % 15.8 %
Net(loss) income (19,435,546 ) (5,860,746 )

Nine Months ended
September 30,
2019 2018
Condensed income statement information:
Net sales $ 4,605,880 $ 73,292,774
Gross (loss) profits (3,006,051 ) 4,007,896
Gross margin -65.3 % 5.5 %
Net (loss) income (49,986,119 ) (87,969 )

September 30, December 31,
2019 2018
Condensed balance sheet information:
Current assets $ 609,002,781 $ 751,143,254
Noncurrent assets 65,386,057 140,736,300
Total assets $ 674,388,838 $ 891,879,554
Current liabilities 429,675,791 633,711,465
Noncurrent liabilities - -
Equity 244,713,047 258,168,089
Total liabilities and equity $ 674,388,838 $ 891,879,554

~~Note: The following table illustrates the captions used in the Company’s Income Statements for its equity based investment in the Affiliate Company.~~

	Three Months ended
	September 30,
	2020			2019
Condensed income statement information:
Net sales	$	25,981,694		$	520,275
Gross loss		(3,590,584	)		(377,700	)
Gross margin		-13.8	%		-72.6	%
Net loss		(6,700,345	)		(19,435,546	)

	Nine Months ended
	September 30,
	2020			2019
Condensed income statement information:
Net sales	$	49,065,507		$	4,605,880
Gross loss		(6,232,871	)		(3,006,051	)
Gross margin		-12.7	%		-65.3	%
Net loss		(25,272,713	)		(49,986,119	)

	September 30,		December 31,
	2020		2019
Condensed balance sheet information:
Current assets	$	612,861,812	$	640,688,401
Noncurrent assets		275,555,271		64,589,516
Total assets	$	888,417,083	$	705,277,917
Current liabilities		693,913,123		490,625,640
Noncurrent liabilities		8,738,570		-
Shareholder’s equity		179,241,720		214,652,277
Non-controlling interest		6,523,670		-
Total liabilities and equity	$	888,417,083	$	705,277,917

The change for the Company’s ~~equity method~~ investments in the Affiliate Company for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

Nine Months ended
September 30,
2019 2018
Investment in the Affiliate Company, beginning of the period, $ 128,929,893 $ 70,681,013
Investment in Affiliate Company in 2018 - 79,370,859
Investment decreased in 2019 (72,309,417 )
Gain from equity dilution 4,291,974 -
Gain from equity sale 20,574,217 -
Company’s share in net (loss) income of Affiliate based on 50% ownership for three months ended March 31, 2019, 43.47%⁽¹⁾ ownership for six months ended September 30, 2019 and 50% ownership for three months ended September 30, 2018 (23,025,049 ) (43,985 )
Intercompany transaction elimination (12,557 ) (484,037 )
Year 2018 unrealized profit realized 154,480 448,429
Subtotal (22,883,126 ) (79,593 )
Exchange difference (4,766,530 ) (3,699,548 )
Investment in Affiliate Company, end of the period $ 53,837,011 $ 146,272,731

	Nine Months ended
	September 30,
	2020			2019
Investment in the Affiliate Company, beginning of the period,	$	47,228,614		$	128,929,893
Investment decreased in 2019					(72,309,417	)
Gain from equity dilution		-			4,291,974
Gain from sale of equity		-			20,574,217
Reduction in the equity of the Affiliate Company*		(3,144,213	)		-
Company’s share in net loss of Affiliate Company based on 22% ownership for nine months ended September 30, 2020 and 50% ownership for three months ended March 31, 2019, 43.47% ownership for six months ended September 30, 2019		(5,561,258	)		(23,025,049	)
Non-controlling interest		(76,189	)		-
Intercompany transaction elimination		-			(12,557	)
Prior year’s unrealized profit realized		5,580			154,480
Subtotal		(5,631,867	)		(22,883,126	)
Exchange difference		989,592			(4,766,530	)
Investment in Affiliate Company, end of the period	$	39,442,126		$	53,837,011

⁽¹⁾

~~Represents~~The Affiliate Company converted RMB 1.2 billion of the ~~rounded result~~debt due from Zhejiang ZuoZhongYou Automobile Service Co., Ltd (“ZuoZhongYou”) into 85% of ~~dividing RMB1,045~~its equity interest. ZuoZhongYou is under common control with the Affiliate Company by Geely. On August 28, 2020. There was about RMB 97.2 million ~~(the Company’s ownership interest~~of difference between the carrying value of the debt of RMB 1.2 billion and the carrying value of ZuoZhongYou’s net asset at the transaction date. Hence, there is a decrease of RMB 21.4 million (approximately $3.1 million, which is 22% of the RMB 97.2 million) of “Investment in the Affiliate ~~Company) by RMB2,404 million (the Affiliate Company’s total equity interest). We used the actual result and kept full decimals when calculating~~Company” on the Company’s ~~share~~book, with a corresponding decrease to the additional paid in ~~net (loss) income of the Affiliate Company.~~capital.

The gain from equity dilution for ~~nine~~three months ended ~~September 30,~~March 31, 2019 resulted from the Affiliate Company issuing shares to the major shareholder of the Affiliate Company, ~~partner,~~ Greely, in exchange for extinguishment of a loan from Greely, resulting in dilution of equity ownership of the Company from 50% to 43.47%. This dilutive transaction was treated as if the Company sold a proportional share of its investment in the Affiliate Company.

Sales to the Company’s ~~customers,~~related parties, the Affiliate Company and its subsidiaries, for the three months ended September 30, ~~2019,~~2020, were ~~$4,720,159~~$6 (due to exchange rate difference) or ~~14.9%~~0% of the Company’s total revenue, a decrease of ~~79.6%~~100% from ~~$23,135,326~~$4,720,159 of the same quarter last year. Sales to the Company’s ~~customers,~~related parties, the Affiliate Company and its subsidiaries, for the nine months ended September 30, ~~2019,~~2020, were ~~$10,543,190~~$ 962 or ~~14.3%~~0% of the Company’s total revenue, a decrease of ~~65.4%~~100% from ~~$30,479,521~~$10,543,190 of the same ~~quarter~~period last year. Sales to the Affiliate Company and its subsidiaries were primarily of battery packs, body parts, EV drive motors, EV controllers, air conditioning units and other auto parts.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the ~~net current and noncurrent~~ net amount due from the Affiliate Company and its subsidiaries, was ~~$25,335,894~~$20,869,315 and ~~$67,683,462,~~$31,330,763, respectively. As of September 30, 2020 and December 31, 2019 the net amount due from the Affiliate Company and its subsidiaries included $2,106,607 and $2,056,564 interest receivable related to the loan lent to the Affiliate Company that was paid off.

NOTE 2523 - COMMITMENTS AND CONTINGENCIES

Guarantees and pledged collateral for bank loans to other parties

(1) Guarantees for bank loans

September 30, December 31,
Guarantee provided to 2019 2018
Kandi Electric Vehicles Group Co., Ltd. - 7,271,247
Kandi Electric Vehicles Jiangsu Co., Ltd. - 7,271,247
Total $ - $ 14,542,494

On March 15, 2013, the Company entered into a guarantee contract to serve as the guarantor of Nanlong Group Co., Ltd. (“NGCL”) for NGCL’s ~~$2,802,691~~$2,940,614 (RMB 20 million) loan from Shanghai Pudong Development Bank Jinhua Branch, with a related loan period offrom March 15, 2013 to March 15, 2016. NGCL is not related to the Company. Under this guarantee contract, the Company agreed to assume joint liability as the loan guarantor. In April 2017, Shanghai Pudong Development Bank filed a lawsuit against NGCL, the Company and ten other parties in Zhejiang Province People’s Court in Yongkang City, alleging NGCL defaulted on a bank loan borrowed from Shanghai Pudong Development Bank for a principal amount of approximately $2.9 million and demanded that the guarantor bear the liability for compensation. On May 27, 2017, a judicial mediation took place in Yongkang City and parties reached a settlement in mediation, in which the plaintiff agreed NGCL would repay the loan principal and interest in installments. ~~So long as~~If there were an event of default that NGCL ~~repays~~could not repay the ~~principal and interest according to the agreement, the plaintiff will not ask~~loan, the Company ~~for recovery. As~~may be obligated to bear the liability of ~~the date of this report, the~~defaulted amount. The Company expects the likelihood of incurring losses in connection with this matter to be remote.

On September 29, 2015, the Company entered into a guarantee contract to serve as the guarantor of Zhejiang Shuguang Industrial Co., Ltd. (“ZSICL”) for a bank loan in the amount of $4,063,901 (RMB 29 million) from Ping An Bank, with a related loan period of September 29, 2015, to September 28, 2016. ZSICL is not related to the Company. Under this guarantee contract, the Company agreed to perform all the obligations of ZSICL under the loan contract if ZSICL failed to perform its obligations as set forth therein. In August 2016, Ping An Bank Yiwu Branch (“Ping An Bank”) filed a lawsuit against ZSICL, the Company, and three other parties in Zhejiang Province People’s Court in Yiwu City, alleging ZSICL defaulted on a bank loan it had borrowed from Pin An Bank for a principal amount of RMB 29 million or approximately $4.2 million (the “Principal”), for which the Company was a guarantor along with other three parties. On December 25, 2016, the court ruled that ZSICL should repay Ping An Bank the principal and associated interest remaining on the bank loan within 10 days once the adjudication was effective. Additionally, the court found that the Company and the three other parties, acting as guarantors, have joint liability for this bank loan. On July 31, 2017, the Company and Ping An Bank reached an agreement to settle. According to the agreement, the Company was to pay Ping An Bank RMB 20 million or approximately $3.0 million in four installments before October 31, 2017 to release the Company from its guarantor liability for this default. As of October 31, 2017, the Company has paid all four installments totaling RMB 20 million or approximately $3.0 million to Ping An Bank and thus the Company has been released from its guarantor liability for this default. According to the Company’s agreement with ZSICL, ZSICL agreed to reimburse all the Company’s losses due to ZSICL’s default on the loan principal and interests, of which RMB 11.9 million has been reimbursed to the Company as of the date of this report and the remainder is expected to be reimbursed in installments within next two years. The Company expects the likelihood of incurring losses in connection with this matter to be low.

On August 29, 2018, the Company entered into a guarantee contract to serve as the guarantor for the Affiliate Company for bank acceptance notes in the aggregate amount of $2,942,825 (RMB 21 million) from Bank of China, with a related period of August 29, 2018 to February 29, 2019, and which were paid off on February 29, 2019 by the Affiliate Company.

On August 30, 2018, the Company entered into a guarantee contract to serve as the guarantor for Kandi Jiangsu for bank loans in the aggregate amount of $7,006,726 (RMB 50 million) from China Merchants Bank Nantong branch, with a related loan period of August 31, 2018 to February 28, 2019, and was paid off on February 1, 2019. On February 1, 2019, the loan was renewed with a term of February 1, 2019 to July 31, 2019 and was paid off on July 31, 2019 by Kandi Jiangsu.

On September 3, 2018, the Company entered into a guarantee contract to serve as the guarantor for the Affiliate Company for bank acceptance notes in the aggregate amount of $4,063,901 (RMB 29 million) from Bank of China, with a related period of September 3, 2018 to March 3, 2019 and was paid off on March 3, 2019 by the Affiliate Company.

(2) Pledged collateral for bank loans tofor which the parties other ~~parties.~~than the Company are the borrowers.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, none of the Company’s land use rights or plants and equipment were pledged as collateral securing bank loans tofor which the parties other ~~parties.~~than the Company are the borrowers.

~~Construction commitment~~

Litigation

Beginning in March 2017, putative shareholder class actions were filed against Kandi Technologies Group, Inc. (“Kandi”) and certain of its current and former directors and officers in the United States District Court for the Central District of California and the United States District Court for the Southern District of New York. The complaints generally alleged violations of the federal securities laws based Kandi’s disclosure in March 2017 that its financial statements for the years 2014, 2015 and the first three quarters of 2016 would need to be restated, and ~~sought~~seek damages on behalf of putative classes of shareholders who purchased or acquired Kandi’s securities prior to March 13, 2017. Kandi moved to dismiss the remaining cases, all of which were pending in the New York federal court, and that motion was granted by an order entered on September 30, 2019, and the time to appeal has run. In June 2020, a similar but separate putative securities class action was filed against Kandi and certain of its current and former directors and officers in California federal court. In September 2020, this action was transferred to the New York federal court and remains pending.

Beginning in May 2017, purported shareholder derivative actions based on the same underlying events described above were filed against certain current and former directors of Kandi in the United States District Court for the Southern District of New York. The New York federal court confirmed the voluntary dismissal of these actions in April 2019.

In October 2017, a shareholder filed a books and records action against the Company in the Delaware Court of Chancery pursuant to 8 Del. C. Section 220 seeking the production of certain documents generally relating to the same underlying items described above as well as attorney’s fees (the “Section 220 Litigation”). On September 28, 2018, the parties, through their respective counsel, agreed to dismiss the Section 220 Litigation with prejudice and with each party bearing its own attorney’s fees, costs, and expenses, thereby concluding the action. In February 2019, this same shareholder commenced a derivative action against certain current and former directors of Kandi in the Delaware Court of Chancery. A motion to dismiss this derivative action was filed in May 2019 and ~~remains pending.~~that motion was denied on April 27, 2020.

Separately, in connection with allegations of misconduct identified in pre-suit demands made by putative shareholders of Kandi, Kandi formed a Special Litigation Committee (“SLC”) and retained a Delaware law firm as independent counsel to the SLC to aid in the SLC’s investigation of, and to ultimately report on, the allegations of misconduct set forth in the pre-suit demands. The ~~investigation remains ongoing.~~SLC recommended to Kandi’s board of directors in June 2020 that the SLC be dissolved in light of the ongoing derivative action pending in the Delaware Court of Chancery, and this recommendation was adopted by the board in August 2020.

While the Company believes that the claims in these litigations are without merit and will defend itself vigorously, the Company is unable to estimate the possible loss, if any, associated with these litigations. The ultimate outcome of any litigation is uncertain and the outcome of these matters, whether favorable or unfavorable, could have a negative impact on the Company’s financial condition or results of operations due to defense costs, diversion of management resources and other factors. Defending litigation can be costly, and adverse results in the litigations could result in substantial monetary judgments. No assurance can be made that litigation will not have a material adverse effect on the Company’s future financial position.

NOTE 2624 - SEGMENT REPORTING

The Company has ~~one~~1 operating segment. The Company’s revenue and long-lived assets are primarily derived from and located in ~~China.~~China and US. The Company does not have manufacturing operations outside of China.

The following table sets forth disaggregation of revenue:

Three Months Ended
September 30,
2019 2018
Sales Revenue Sales Revenue
Primary geographical markets
Overseas $ 5,703,050 $ 5,849,353
China 25,985,494 32,146,007
Total $ 31,688,544 $ 37,995,360

Major products
EV parts $ 25,847,506 $ 32,065,497
Off-road vehicles 5,841,038 5,929,863
Total $ 31,688,544 $ 37,995,360

Timing of revenue recognition
Products transferred at a point in time $ 31,688,544 $ 37,995,360

Nine Months Ended
September 30,
2019 2018
Sales Revenue Sales Revenue
Primary geographical markets
Overseas $ 15,975,711 $ 8,337,793
China 57,927,523 54,353,080
Total $ 73,903,234 $ 62,690,873

Major products
EV parts $ 57,607,687 $ 53,947,874
Off-road vehicles 16,295,547 8,742,999
Total $ 73,903,234 $ 62,690,873

Timing of revenue recognition
Products transferred at a point in time $ 73,903,234 $ 62,690,873

	Three Months Ended September 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	9,253,750	$	5,703,050
China		9,463,468		25,985,494
Total	$	18,717,218	$	31,688,544

Major products
EV parts	$	8,438,958	$	25,847,506
EV products		515,128		-
Off-road vehicles		8,852,475		5,841,038
Electric Scooters, Electric Self-Balancing Scooters and associated parts		910,657		-
Total	$	18,717,218	$	31,688,544

Timing of revenue recognition
Products transferred at a point in time	$	18,717,218	$	31,688,544
Total	$	18,717,218	$	31,688,544

	Nine Months Ended September 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	19,955,855	$	15,975,711
China		24,570,863		57,927,523
Total	$	44,526,718	$	73,903,234

Major products
EV parts	$	23,034,841	$	57,607,687
EV products		769,034		-
Off-road vehicles		19,452,160		16,295,547
Electric Scooters, Electric Self-Balancing Scooters and associated parts		1,270,683		-
Total	$	44,526,718	$	73,903,234

Timing of revenue recognition
Products transferred at a point in time	$	44,526,718	$	73,903,234
Total	$	44,526,718	$	73,903,234

NOTE 25 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of issuance of the interim condensed consolidated financial statements, there were no other subsequent events occurred that would require recognition or disclosure in the interim condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report contains forward-looking statements within the meaning of the federal securities laws that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by ~~terminology,~~terminologies, such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential” or “continue” or the negative of such terms or other comparable ~~terminology,~~terminologies, although not all forward-looking statements contain such terms.

In addition, these forward-looking statements include, but are not limited to, statements regarding implementing our business strategy; development and marketing of our products; our estimates of future revenue and profitability; our expectations regarding future expenses, including research and development, sales and marketing, manufacturing and general and administrative expenses; difficulty or inability to raise additional financing, if needed, on terms acceptable to us; our estimates regarding our capital requirements and our needs for additional financing; attracting and retaining customers and employees; sources of revenue and anticipated revenue; and competition in our market.

Forward-looking statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All of our forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors and the timing of any of those risk factors described in the ~~2018~~2019 Form 10-K and those set forth from time to time in our other filings with the SEC. These documents are available on the SEC’s Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly from actual results, the impact to the condensed consolidated financial statements may be material. There have been no material changes in our critical accounting policies and estimates from those disclosed in on the ~~2018~~2019 Form 10-K. Please refer to Part II, Item 7 of such a report for a discussion of our critical accounting policies and estimates.

~~Results of Operations~~Overview

~~Overview~~

We are one of the leading manufacturers of EV products (through Kandi Hainan and the Affiliate Company), EV parts and off-road vehicles in China. For the~~three~~ nine months ended September 30, ~~2019,~~2020, we recognized total revenue of ~~$31,688,544~~$44,526,718 as compared to ~~$37,995,360~~$73,903,234 for the three months ended September 30, 2018, a decrease of $6,306,816, or 16.6%. For the three months ended September 30, 2019, we recorded $5,276,415 of gross profits, a decrease of $965,634 or 15.5% from the same period of ~~2018. Gross margin for the three months ended September 30,~~ 2019, ~~was 16.7%, an increase compared to 16.4% for the three months ended September 30, 2018. We recorded~~ a ~~net income~~decrease of $12,089,441 for the three months ended September 30, 2019, compared to net loss of $6,521,399 in the same period of 2018, primarily attributable to the gain from equity sale in the Affiliate Company and the decreased research and development expense. For the nine months ended September 30, 2019, we recognized total revenue of $73,903,234 as compared to $62,690,873 for the nine months ended September 30, 2018, an increase of $11,212,361,$29,376,516 or ~~17.9%~~39.7%. For the nine months ended September 30, ~~2019,~~2020, we recorded ~~$12,615,006~~$8,614,933 of gross ~~profits, an increase~~profit, a decrease of ~~$2,968,994 or 30.8%~~31.7% from the same period of ~~2018.~~2019. Gross margin for the nine months ended September 30, ~~2019~~2020 was ~~17.1%~~19.3%, ~~an increase~~ compared to ~~15.4%~~17.1% for the same period of 2019. We recorded a net income of $1,022,137 for the nine months ended September 30, ~~2018. We recorded~~2020, compared to a net income of $361,811 ~~for the nine months ended September 30, 2019, compared to net loss of $1,418,879~~ in the same period of ~~2018, largely~~2019, an increase of $660,326 or 182.5%.

The spread of COVID-19 around China and other parts of the world has caused significant volatility in the markets of China, U.S., and the rest of the world. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in China and elsewhere. Although the Company’s operations in China has fully resumed in early March 2020, the COVID-19 has affected the Company’s business performance in 2020. Though it becomes more stable in China, there are new cases reported continuously at present. The extent to which the COVID-19 may impact operations of the Company, with majority of operations based in China, is alleviated though it remains uncertain due to the ~~increased revenue, decreased research~~fact that the COVID-19 is not completely over. The extent to which the COVID-19 impacts our operations will depend on its future developments, which are highly uncertain and ~~development expense~~cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the ~~gain from equity sale~~actions to contain the coronavirus or minimize its harm, among others.

As we approach year-end, despite the challenges posed by COVID-19 around the world, we were still productive in the ~~Affiliate Company.~~third quarter. Most importantly, after a lengthy process of preparation, the ‘300,000 government-accredited pure EV within 5 years rideshare’ program—of which Kandi was a co-founder-- has begun its trial with the gradual delivery of 1,000 EVs to the city of Haikou in Hainan province and 2,500 EVs to the city of Shaoxing in Zhejiang province. All the EVs delivered for the program include our battery swap feature. We believe that this program can drive the production and sales of our EV parts and battery swap equipment, and we can thus restore growth in our pure EV business.

The ~~current subsidy standard~~COVID-19 outbreak has seriously impacted the EV market in 2020, leading us to explore how to augment our business. As we looked at other market opportunities that leverage our expertise, the management of the Company found potential in a number of ancillary products aimed at intelligent transportation. For example, Electric Scooters and Electric Self-Balancing Vehicles have distinct potential, with tens of millions of units sold each year around the world. The Company is ~~provided for~~pursuing these opportunities by expanding production of intelligent transportation products that exploit our advantages in the ~~Circular~~Yongkang Scrou’s power electric motor and Kandi Smart Battery Swap’s power battery pack. Our products aimed at this market combines our motors and battery packs into a dynamic power train system. Through extensive product trials, we are able to meet a leading standard in China, and thus went into production in the second quarter. As this business is developing quickly and progressing, the Company transferred all of its equity interest in Yongkang Scrou to Jinhua An Kao (changed name to Kandi Smart Battery Swap), and the work of listing Kandi Smart Battery Swap on ~~Further Improving~~Shanghai Stock Exchange’s STAR Board has been started.

The Company originally planned to export 2,000 to 5,000 units of electric vehicles to the ~~Subsidy Policies~~U.S. in 2020, but due to the COVID-19 pandemic in the first half of 2020, the plan are being adjusted according to the situation of COVID-19 control in the U.S, as well as the progress of clearance from relevant government agencies such as United States Environmental Protection Agency. As of the date of this report, it has received the required clearance from the United States Environmental Protection Agency (EPA) for its two electric vehicle (EV) models, the K23 and K27 via Certificates of Conformity. We are performing self-inspection comparing to the safety standards published by the United States Department of Transportation. We are also in the process of modifying features, upgrading the software and technology for the ~~Promotion and Application~~EVs to cater for our potential U.S. constomers. Thus, no units of New Energy Vehicles, which was jointly promulgated by the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology and the National Development and Reform Commission in 2019. The current subsidy standard reduces the amount of national subsidies and cancels local subsidies, resulting in a significant reductionelectric vehicles have been sold in the total subsidy amount as compared to 2018. We believe the new subsidy standard presents both challenges and opportunities to the Company. In the past few years, although the government had a strong support policy for new energy vehicles, the unstable subsidy policy and the unpredictable timing of receiving such subsidies have exerted tremendous pressure on the Company’s cash flow. Currently, in order to adapt to the new subsidy standard, the Affiliate Company is making full use of Geely’s resources and developing new models with goals to be independent of the government’s subsidies and have strong competitiveness at the same time. The new model are expected to be placed to market by the end of this year or at the beginning of 2020. We believe the Company will have greater opportunities for development at that time.U.S.

Results of Operations

Comparison of the Three Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

The following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of ~~income (loss)~~operations and comprehensive income (loss) for the three months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

Three Months Ended
September 30, 2019 % of Revenue September 30, 2018 % of Revenue Change in Amount Change in %

REVENUES FROM UNRELATED PARTY, NET $ 26,968,385 85.1 % $ 14,860,034 39.1 % 12,108,351 81.5 %
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET 4,720,159 14.9 % 23,135,326 60.9 % (18,415,167 ) (79.6 )%

REVENUES, NET 31,688,544 37,995,360 (6,306,816 ) (16.6 )%

COST OF GOODS SOLD (26,412,129 ) (83.3 )% (31,753,311 ) (83.6 )% 5,341,182 (16.8 )%

GROSS PROFIT 5,276,415 16.7 % 6,242,049 16.4 % (965,634 ) (15.5 )%

OPERATING EXPENSES:
Research and development (596,187 ) (1.9 )% (5,691,649 ) (15.0 )% 5,095,462 (89.5 )%
Selling and marketing (930,810 ) (2.9 )% (898,896 ) (2.4 )% (31,914 ) 3.6 %
General and administrative (3,432,920 ) (10.8 )% (2,070,947 ) (5.5 )% (1,361,973 ) 65.8 %
Total Operating Expenses (4,959,917 ) (15.7 )% (8,661,492 ) (22.8 )% 3,701,575 (42.7 )%

LOSS FROM OPERATIONS 316,498 1.0 % (2,419,443 ) (6.4 )% 2,735,941 (113.1 )%

OTHER INCOME (EXPENSE):
Interest income 209,736 0.7 % 52,745 0.1 % 156,991 297.6 %
Interest expense (435,524 ) (1.4 )% (483,376 ) (1.3 )% 47,852 (9.9 )%
Change in fair value of contingent consideration 57,000 0.2 % (1,552,686 ) (4.1 )% 1,609,686 (103.7 )%
Government grants 502,146 1.6 % 607,008 1.6 % (104,862 ) (17.3 )%
Gain from equity dilution in the Affiliate Company (49,285 ) (0.2 )% - 0.0 % (49,285 ) -
Gain from equity sale in the Affiliate Company 20,574,217 64.9 % - 0.0 % 20,574,217 -
Share of loss after tax of the Affiliate Company (8,433,767 ) (26.6 )% (3,247,343 ) (8.5 )% (5,186,424 ) 159.7 %
Other income , net 57,833 0.2 % 15,735 0.0 % 42,098 267.5 %
Total other income (expense), net 12,482,356 39.4 % (4,607,917 ) (12.1 )% 17,090,273 (370.9 )%

INCOME(LOSS) BEFORE INCOME TAXES 12,798,854 40.4 % (7,027,360 ) (18.5 )% 19,826,214 (282.1 )%

INCOME TAX (EXPENSE) BENEFIT (709,413 ) (2.2 )% 505,961 1.3 % (1,215,374 ) (240.2 )%

NET INCOME (LOSS) 12,089,441 38.2 % (6,521,399 ) (17.2 )% 18,610,840 (285.4 )%

	Three Months Ended
	September 30, 2020			% of Revenue			September 30, 2019			% of Revenue			Change in Amount			Change in %

REVENUES FROM UNRELATED PARTIES, NET	$	18,717,212			100.0	%	$	26,968,385			85.1	%		(8,251,173	)		(30.6	%)
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET		6			0.0	%		4,720,159			14.9	%		(4,720,153	)		(100.0	%)

REVENUES, NET		18,717,218						31,688,544						(12,971,326	)		(40.9	%)

COST OF GOODS SOLD		(14,806,322	)		(79.1	%)		(26,412,129	)		(83.3	%)		11,605,807			(43.9	%)

GROSS PROFIT		3,910,896			20.9	%		5,276,415			16.7	%		(1,365,519	)		(25.9	%)

OPERATING EXPENSES:
Research and development		(987,285	)		(5.3	%)		(596,187	)		(1.9	%)		(391,098	)		65.6	%
Selling and marketing		(2,165,383	)		(11.6	%)		(930,810	)		(2.9	%)		(1,234,573	)		132.6	%
General and administrative		(3,212,209	)		(17.2	%)		(3,432,920	)		(10.8	%)		220,711			(6.4	%)
Gain on disposal of long-lived assets		76,159			0.4	%		-			0.0	%		76,159			-
TOTAL OPERATING EXPENSES, NET		(6,288,718	)		(33.6	%)		(4,959,917	)		(15.7	%)		(1,328,801	)		26.8	%

(LOSS) INCOME FROM OPERATIONS		(2,377,822	)		(12.7	%)		316,498			1.0	%		(2,694,320	)		(851.3	%)

OTHER INCOME (EXPENSE):
Interest income		558,059			3.0	%		209,736			0.7	%		348,323			166.1	%
Interest expense		(788,589	)		(4.2	%)		(435,524	)		(1.4	%)		(353,065	)		81.1	%
Change in fair value of contingent consideration		(1,069,000	)		(5.7	%)		57,000			0.2	%		(1,126,000	)		(1975.4	%)
Government grants		13,431			0.1	%		502,146			1.6	%		(488,715	)		(97.3	%)
Gain (loss) from equity dilution in the Affiliate Company		-			0.0	%		(49,285	)		(0.2	%)		49,285			(100.0	%)
Gain from sale of equity in the Affiliate Company		-			0.0	%		20,574,217			64.9	%		(20,574,217	)		(100.0	%)
Share of loss after tax of the Affiliate Company		(1,550,568	)		(8.3	%)		(8,433,767	)		(26.6	%)		6,883,199			(81.6	%)
Other income, net		988,287			5.3	%		57,833			0.2	%		930,454			1608.9	%
TOTAL OTHER (EXPENSE) INCOME, NET		(1,848,380	)		(9.9	%)		12,482,356			39.4	%		(14,330,736	)		(114.8	%)

(LOSS) INCOME BEFORE INCOME TAXES		(4,226,202	)		(22.6	%)		12,798,854			40.4	%		(17,025,056	)		(133.0	%)

INCOME TAX BENEFIT (EXPENSE)		2,767,939			14.8	%		(709,413	)		(2.2	%)		3,477,352			(490.2	%)
NET (LOSS) INCOME		(1,458,263	)		(7.8	%)		12,089,441			38.2	%		(13,547,704	)		(112.1	%)

(a) Revenue

For the three months ended September 30, ~~2019,~~2020, our revenue was ~~$31,688,544~~$18,717,218 compared to ~~$37,995,360~~$31,688,544 for the same period of ~~2018,~~2019, representing a decrease of ~~$6,306,816~~$12,971,326 or ~~16.6%~~40.9%. The decrease in revenue was mainly due to the decrease in EV parts ~~sales during this quarter. The decrease~~sales. Due to the outbreak of COVID-19 in China, the demand of EV parts ~~sales~~from customers was ~~primarily due to~~significantly affected during the ~~Affiliate Company’s temporary declining sales, which was caused by its product adjustments.~~first three quarters of 2020.

The following table summarizes our revenues by product types for the three months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

	Three Months Ended September 30,
	2020		2019
	Sales		Sales
EV parts	$	8,438,958	$	25,847,506
EV products		515,128		-
Off-road vehicles		8,852,475		5,841,038
Electric Scooters, Electric Self-Balancing Scooters and associated parts		910,657		-
Total	$	18,717,218	$	31,688,544

Three Months Ended
September 30,
2019 2018
Sales Sales
EV parts $ 25,847,506 $ 32,065,497
Off-road vehicles 5,841,038 5,929,863
Total $ 31,688,544 $ 37,995,360

EV Parts

During the three months ended September 30, ~~2019,~~2020, our revenues from the sales of EV parts were ~~$25,847,506,~~$8,438,958, representing a decrease of ~~$6,217,991~~$17,408,548 or ~~19.4%~~67.4% from ~~$32,065,497~~$25,847,506 for the same quarter of ~~2018.~~2019.

Our revenue for the three months ended September 30, ~~2019~~2020 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers, air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for ~~81.6%~~45.1% of total sales.

During the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our revenue from the sale of EV parts to the Affiliate Company and its subsidiaries accounted for approximately ~~15%~~0% and ~~61%~~14.9% of our total net revenue for ~~the~~each quarter, respectively. ~~The decrease is mainly due to the Affiliate Company’s temporary declining sales, which was caused by its product adjustments. In this year, the~~

EV ~~parts we provided to the Affiliate Company were primarily used for battery upgrade and market maintenance for the EV products that were previously put into the leasing market.~~Products

~~Off-Road Vehicles~~

During the three months ended September 30, ~~2019,~~2020, our revenue from the sale of EV Products was $515,128, which was due to the export sales of Hainan factories’ products. There weren’t any EV products sales in the same period of 2019.

Off-Road Vehicles

During the three months ended September 30, 2020, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”) and others, were ~~$5,841,038,~~$8,852,475, representing ~~a decrease~~an increase of ~~$88,825~~$3,011,437 or ~~1.5%~~51.6% from ~~$5,929,863,~~$5,841,038, for the same quarter of ~~2018.~~2019. The increase was mainly due to the increased sales from SC Autosports because of increased demand due to the power sports’ unique form of “socially distant” recreation.

Our off-road vehicles business line accounted for approximately ~~18.4%~~47.3% of our total net revenue for the three months ended September 30, 2020.

Electric Scooters, Electric Self-Balancing Scooters and associated parts

During the three months ended September 30, 2020, our revenue from the sale of Electric Scooters, Electric Self-Balancing Scooters and associated parts was $910,657. There were no Electric Scooters and Electric Self-Balancing Scooters and associated parts sales in the same quarter of 2019.

The following table shows the breakdown of our net revenues:

	Three Months Ended September 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	9,253,750	$	5,703,050
China		9,463,468		25,985,494
Total	$	18,717,218	$	31,688,544

Major products
EV parts	$	8,438,958	$	25,847,506
EV products		515,128		-
Off-road vehicles		8,852,475		5,841,038
Electric Scooters, Electric Self-Balancing Scooters and associated parts		910,657		-
Total	$	18,717,218	$	31,688,544

Timing of revenue recognition
Products transferred at a point in time	$	18,717,218	$	31,688,544
Total	$	18,717,218	$	31,688,544

(b) Cost of goods sold

Cost of goods sold was ~~$26,412,129~~$14,806,322 during the three months ended September 30, ~~2019,~~2020, representing a decrease of ~~$5,341,182,~~$11,605,807, or ~~16.8%~~43.9%, compared to ~~$31,753,311~~$26,412,129 for the same period of ~~2018.~~2019. The decrease was primarily due to the corresponding decrease in sales. Please refer to the Gross Profit section below for product margin analysis.

(c) Gross profit

Our margins by product for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as set forth below:

	Three Months Ended September 30,
	2020									2019
	Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %
EV parts	$	8,438,958		7,200,214		1,238,744		14.7	%	$	25,847,506		21,929,420		3,918,086		15.2	%
EV products		515,128		248,945		266,183		51.7	%		-		-		-		-
Off-road vehicles		8,852,475		6,483,014		2,369,461		26.8	%		5,841,038		4,482,709		1,358,329		23.3	%
Electric Scooters, Electric Self-Balancing Scooters and associated parts		910,657		874,149		36,508		4.0	%		-		-		-		-
Total	$	18,717,218		14,806,322		3,910,896		20.9	%	$	31,688,544		26,412,129		5,276,415		16.7	%

Three Months Ended September 30,
2019 2018
Sales Cost Gross Profit Margin % Sales Cost Gross Profit Margin %
EV parts $ 25,847,506 21,929,420 3,918,086 15.2 % $ 32,065,497 27,268,332 4,797,165 15.0 %
Off-road vehicles 5,841,038 4,482,709 1,358,329 23.3 % 5,929,863 4,484,979 1,444,884 24.4 %
Total $ 31,688,544 26,412,129 5,276,415 16.7 % $ 37,995,360 31,753,311 6,242,049 16.4 %

Gross profit for the third quarter of ~~2019~~2020 decreased ~~15.5%~~25.9% to ~~$5,276,415,~~$3,910,896, compared to ~~$6,242,049~~$5,276,415 for the same period last year. This was primarily attributable to the sales ~~decrease.~~decrease of EV Parts, which was primarily due to the outbreak of COVID-19 in 2020. Our gross margin increased to ~~16.7%~~20.9% compared to ~~16.4%~~16.7% for the same period of ~~2018.~~2019. The increase in our gross margin was mainly due to the sales under SC Autosports which has increased ~~selling~~the unit price for the parts since the end of ~~the charging and exchanging equipment and the increased proportion of the high-margin battery processing business this year.~~2019.

(d) Research and development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled ~~$596,187~~$987,285 for the third quarter of ~~2019, a decrease~~2020, an increase of ~~$5,095,462~~$391,098 or ~~89.5%~~65.6% compared to ~~$5,691,649~~$596,187 for the same period of last year. The ~~decrease~~increase was mainly due to the R&D expense related to the ~~development~~technology upgrading of ~~EV Model K23 at Hainan facility in~~ the ~~third quarter of last year. Such R&D work has been completed in year 2018.~~Company’s products and new products development.

(e) Sales and marketing

Selling and distribution expenses were ~~$930,810~~$2,165,383 for the third quarter of ~~2019,~~2020, compared to ~~$898,896~~$930,810 for the same period last year, representing an increase of ~~$31,914~~$1,234,573 or ~~3.6%~~132.6%. The increase was primarily attributable to the ~~increased freight expense incurred by SC Autosports.~~

increasing labor and advertising expenses in connection with the expansion the U.S. electric vehicle market.

(f) General and administrative expenses

General and administrative expenses were ~~$3,432,920~~$3,212,209 for the third quarter of ~~2019,~~2020, compared to ~~$2,070,947~~$3,432,920 for the same period last year, representing ~~an increase~~a decrease of ~~$1,361,973~~$220,711 or ~~65.8%~~6.4%. For the three months ended September 30, ~~2019,~~2020, general and administrative expenses included $22,925 as expenses for common stock awards ~~and stock options~~ to employees and Board members, compared to ~~$31,675 of common stock awards and stock options expenses~~$22,925 for the same period in ~~2018.~~2019. Besides stock compensation expense, our net general and administrative expenses for the three months ended September 30, ~~2019~~2020 were ~~$3,409,995,~~$3,189,284, representing ~~an increase~~a decrease of ~~$1,370,723,~~$220,711, from ~~$2,039,272~~$3,409,995 for the same period of ~~2018,~~2019, which was largely due to the ~~increased operation~~implementation of cost cutting strategy and tighter budget control by the management.

(g) Gain on disposal of ~~the Company since Hainan facility has been put into operation.~~long-lived assets

~~(g) Interest income~~

~~Interest income~~Gain on disposal of long-lived assets was ~~$209,736~~$76,159 for the third quarter of ~~2019,~~2020, which was due to exchange rate difference.

(h) Interest income

Interest income was $558,059 for the third quarter of 2020, representing an increase of ~~$156,991~~$348,323 or ~~297.6%~~166.1% compared to ~~$52,745~~$209,736 for the same period of last year. The increase was primarily attributable to increased interest earned on ~~loans~~the loan to a third party.

~~(h)~~(i) Interest expenses

Interest expenses were ~~$435,524~~$788,589 in the third quarter of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$47,852~~$353,065 or ~~9.9%~~81.1% compared to ~~$483,376~~$435,524 for the same period of last year. The ~~decrease~~increase was primarily due to ~~decreased interest expenses incurred associated with the note payable to a third party, as well as decreased discounts associated with the settlement of bank acceptance notes. Of~~ the interest ~~expenses, $0 and $24,930 were discounts associated with the settlement~~expense of ~~bank acceptance notes for the three months ended September 30, 2019 and 2018, respectively.~~Hainan factory’s long-term debt.

~~(i)~~(j) Change in fair value of contingent consideration

For the third quarter of ~~2019,~~2020, the loss related to changes in the fair value of contingent consideration was $1,069,000, a decrease of $1,126,000 or 1975.4% compared to gain related to changes in the fair value of contingent consideration ~~was~~of $57,000 ~~an increase of $1,609,686 or 103.7% compared to loss related to changes in the fair value of contingent consideration of $1,552,686~~ for the same period of last year, which was mainly due to the ~~decrease in~~adjustment of the fair value of the contingent consideration liability ~~between December 31, 2018 and September 30, 2019 while there~~associated with the remaining shares of restrictive common stock (Please refer to NOTE 20 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was ~~an increase in~~estimated at each reporting date by using the ~~same period of last year.~~Monte Carlo simulation method, which took into account all possible scenarios.

~~(j)~~(k) Government grants

Government grants were ~~$502,146~~$13,431 for the third quarter of ~~2019,~~2020, compared to ~~$607,008~~$502,146 for the same quarter last year, representing a decrease of ~~$104,862,~~$488,715, or ~~17.3%~~97.3%, which was largely attributable to the ~~fact that Kandi Vehicles~~subsidies received ~~the subsidies of land use tax~~by Hainan factory in the third quarter of ~~last year while the same kind of~~2019 for its science and technology projects. There were no similar subsidies ~~were~~ received in the ~~second~~third quarter ~~of 2019, instead of~~ in ~~the third quarter.~~2020.

~~(k)~~

(l) Gain (loss) from equity dilution in the Affiliate Company

Gain from equity dilution was ~~a negative $49,285~~$0 for the third quarter of ~~2019,~~2020, compared to loss of $49,285 for the same quarter last year which was due to exchange rate difference. ~~There was no equity dilution in the third quarter of 2019.~~

~~(l)~~(m) Gain from sale of equity ~~sale~~ in the Affiliate Company

Gain from sale of equity ~~sale~~ was ~~$20,574,217~~$0 for the third quarter of ~~2019,~~2020, compared to $20,574,217 for the same quarter last year which was due to the Affiliate Equity Transfer. In March 2019, Kandi Vehicles agreed to sell 21.47% of its equity interests in the Affiliate Company to Geely for a total ~~amount~~consideration of RMB 516 million (approximately $72.3 million). AsIn the third quarter of ~~September 30,~~ 2019, the equity transfer ~~had been completed. Therefore, in the third quarter of 2019,~~was completed and the Company recognized the gain from equity sale.

~~(m)~~(n) Share of ~~income (loss)~~loss after tax of the Affiliate Company

For the third quarter of ~~2019,~~2020, our share of loss of the Affiliate Company was ~~$8,433,767~~$1,550,568 as compared to share of loss of $3,247,343 for the same period of last year. The losses incurred by the Affiliate Company were largely attributable to the Affiliate Company’s temporary declining sales, which was caused by its product adjustments.

~~(n) Other income (loss), net~~

~~Net other income was $57,833 for the third quarter of 2019, representing an increase of $42,098 or 267.5% compared to net other income of $15,735~~$8,433,767 for the same period of last year, representing a decrease of share of loss of $6,883,199, which was largely attributable to the decreasing loss of the Affiliate Company and the fact that our equity interests of the Affiliate Company has been decreased after the equity dilution and equity transfer in 2019.

(o) Other income, net

Other income, net was $988,287 for the third quarter of 2020, compared to $57,833 for the same period of last year, representing an increase of $930,454, or 1608.9%, which was largely due to the ~~disposal~~discount and cancellation of ~~certain waste materials during the third quarter.~~accounts payable after negotiation with suppliers.

~~(o)~~(p) Income Taxes

In accordance with the relevant Chinese tax laws and regulations, our applicable corporate income tax rate is 25%. However, Kandi Vehicle and ~~Jinhua An Kao~~Kandi Smart Battery Swap are qualified as high technology companies in China and are therefore entitled to a reduced corporate income tax rate of 15%.

Each of our wholly-owned subsidiaries, Kandi New Energy, Yongkang Scrou and Kandi Hainan, has an applicable corporate income tax rate of 25%.

We have a 22% ownership interest in the Affiliate Company, which has an applicable corporate income tax rate of 25%. Each of the Affiliate Company’s subsidiaries has an applicable corporate income tax rate of 25%.

Our actual effective income tax rate for the third quarter of ~~2019~~2020 was a tax benefit of 65.49% on a reported loss before taxes of approximately $4.2 million, compared to a tax expense of 5.54% on a reported income before taxes of approximately $12.8 million ~~compared to a tax benefit of 7.20% on a reported loss before taxes of approximately $7.0 million~~ for the same period of last year.

~~(p)~~(q) Net income (loss)

Net ~~income~~loss was ~~$12,089,441~~$1,458,263 for the third quarter of ~~2019,~~2020, representing ~~an increase of $18,610,840~~a decrease by $13,547,704 compared to net ~~loss $6,521,399~~income of $12,089,441 for the same period of last year. The ~~increase~~decrease was primarily attributable to the gain from sale of equity ~~sale~~ in the Affiliate Company ~~and the decreased research and development expense.~~

~~Excluding (i) the effects~~ of ~~stock compensation expenses, which were $22,925 and $31,675 for~~approximately $20.6 million we recognized in the third quarter of 2019 and 2018, respectively, and (ii) the change in fair value of contingent consideration which was a gain of $57,000 and a loss of $1,552,686 for the three months ended September 30, 2019 and 2018, respectively, our non-GAAP net income was $12,055,366 for the three months ended September 30, 2019 as compared to non-GAAP net loss $4,937,038 for the same period of 2018, an increase of $16,992,404, or 344.2%. The increase in net income (non-GAAP) was primarily attributable to the gain from equity sale in the Affiliate Company and the decreased research and development expense.2019.

We make reference to certain non-GAAP financial measures, i.e., adjusted net income. Management believes that such adjusted financial results are useful for investors in evaluating our operating performance because they present a meaningful measure of corporate performance. See the non-GAAP reconciliation table below. Any non-GAAP measures should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance prepared in accordance with GAAP.

~~The following table summarizes our non-GAAP net income for the three months ended September 30, 2019 and 2018:~~

Three Months Ended
September 30,
2019 2018
GAAP net income (loss) $ 12,089,441 $ (6,521,399 )
Stock compensation expenses 22,925 31,675
Change in fair value of contingent consideration (57,000 ) 1,552,686
Non-GAAP net income (loss) $ 12,055,366 $ (4,937,038 )

Comparison of the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

The following table sets forth the amounts and percentage to revenue of certain items in our condensed consolidated statements of ~~income (loss)~~operations and comprehensive income (loss) for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

Nine Months Ended
September 30, 2019 % of Revenue September 30, 2018 % of Revenue Change in Amount Change in %

REVENUES FROM UNRELATED PARTY, NET $ 63,360,044 85.7 % $ 32,211,352 51.4 % 31,148,692 96.7 %
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET 10,543,190 14.3 % 30,479,521 48.6 % (19,936,331 ) (65.4 )%

REVENUES, NET 73,903,234 100.0 % 62,690,873 100.0 % 11,212,361 17.9 %

COST OF GOODS SOLD (61,288,228 ) (82.9 )% (53,044,861 ) (84.6 )% (8,243,367 ) 15.5 %

GROSS PROFIT 12,615,006 17.1 % 9,646,012 15.4 % 2,968,994 30.8 %

OPERATING EXPENSES:
Research and development (1,766,210 ) (2.4 )% (7,091,836 ) (11.3 )% 5,325,626 (75.1 )%
Selling and marketing (2,448,291 ) (3.3 )% (1,875,294 ) (3.0 )% (572,997 ) 30.6 %
General and administrative (11,096,246 ) (15.0 )% (5,534,039 ) (8.8 )% (5,562,207 ) 100.5 %
Total Operating Expenses (15,310,747 ) (20.7 )% (14,501,169 ) (23.1 )% (809,578 ) 5.6 %

LOSS FROM OPERATIONS (2,695,741 ) (3.6 )% (4,855,157 ) (7.7 )% 2,159,416 (44.5 )%

OTHER INCOME (EXPENSE):
Interest income 559,954 0.8 % 1,452,522 2.3 % (892,568 ) (61.4 )%
Interest expense (1,304,062 ) (1.8 )% (1,505,409 ) (2.4 )% 201,347 (13.4 )%
Change in fair value of contingent consideration 694,000 0.9 % 1,814,326 2.9 % (1,120,326 ) (61.7 )%
Government grants 725,189 1.0 % 717,821 1.1 % 7,368 1.0 %
Gain from equity dilution in the Affiliate Company 4,291,974 5.8 % - 0.0 % 4,291,974 -
Gain from equity sale in the Affiliate Company 20,574,217 27.8 % - 0.0 % 20,574,217 -
Share of loss after tax of the Affiliate Company (22,883,126 ) (31.0 )% (79,592 ) (0.1 )% (22,803,534 ) 28650.5 %
Other income , net 357,626 0.5 % 666,294 1.1 % (308,668 ) (46.3 )%
Total other income, net 3,015,772 4.1 % 3,065,962 4.9 % (50,190 ) (1.6 )%

INCOME (LOSS) BEFORE INCOME TAXES 320,031 0.4 % (1,789,195 ) (2.9 )% 2,109,226 (117.9 )%

INCOME TAX BENEFIT 41,780 0.1 % 370,316 0.6 % (328,536 ) (88.7 )%

NET INCOME (LOSS) 361,811 0.5 % (1,418,879 ) (2.3 )% 1,780,690 (125.5 )%

	Nine Months Ended
	September 30, 2020			% of Revenue			September 30, 2019			% of Revenue			Change in Amount			Change in %

REVENUES FROM UNRELATED PARTIES, NET	$	44,525,756			100.0	%	$	63,360,044			85.7	%		(18,834,288	)		(29.7	%)
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTIES, NET		962			0.0	%		10,543,190			14.3	%		(10,542,228	)		(100.0	%)

REVENUES, NET		44,526,718			100.0	%		73,903,234			100.0	%		(29,376,516	)		(39.7	%)

COST OF GOODS SOLD		(35,911,785	)		(80.7	%)		(61,288,228	)		(82.9	%)		25,376,443			(41.4	%)

GROSS PROFIT		8,614,933			19.3	%		12,615,006			17.1	%		(4,000,073	)		(31.7	%)

OPERATING EXPENSES:
Research and development		(2,777,426	)		(6.2	%)		(1,766,210	)		(2.4	%)		(1,011,216	)		57.3	%
Selling and marketing		(3,807,355	)		(8.6	%)		(2,448,291	)		(3.3	%)		(1,359,064	)		55.5	%
General and administrative		(10,186,135	)		(22.9	%)		(11,096,246	)		(15.0	%)		910,111			(8.2	%)
Gain on disposal of long-lived assets		13,983,733			31.4	%		-			0.0	%		13,983,733			-
TOTAL OPERATING EXPENSES, NET		(2,787,183	)		(6.3	%)		(15,310,747	)		(20.7	%)		12,523,564			(81.8	%)

INCOME (LOSS) FROM OPERATIONS		5,827,750			13.1	%		(2,695,741	)		(3.6	%)		8,523,491			(316.2	%)

OTHER INCOME (EXPENSE):
Interest income		1,118,795			2.5	%		559,954			0.8	%		558,841			99.8	%
Interest expense		(2,894,579	)		(6.5	%)		(1,304,062	)		(1.8	%)		(1,590,517	)		122.0	%
Change in fair value of contingent consideration		1,794,000			4.0	%		694,000			0.9	%		1,100,000			158.5	%
Government grants		111,329			0.3	%		725,189			1.0	%		(613,860	)		(84.6	%)
Gain from equity dilution in the Affiliate Company		-			0.0	%		4,291,974			5.8	%		(4,291,974	)		(100.0	%)
Gain from sale of equity in the Affiliate Company		-			0.0	%		20,574,217			27.8	%		(20,574,217	)		(100.0	%)
Share of loss after tax of the Affiliate Company		(5,631,867	)		(12.6	%)		(22,883,126	)		(31.0	%)		17,251,259			(75.4	%)
Other income, net		2,051,272			4.6	%		357,626			0.5	%		1,693,646			473.6	%
TOTAL OTHER (EXPENSE) INCOME, NET		(3,451,050	)		(7.8	%)		3,015,772			4.1	%		(6,466,822	)		(214.4	%)

INCOME BEFORE INCOME TAXES		2,376,700			5.3	%		320,031			0.4	%		2,056,669			642.6	%

INCOME TAX (EXPENSE) BENEFIT		(1,354,563	)		(3.0	%)		41,780			0.1	%		(1,396,343	)		(3342.1	%)

NET INCOME		1,022,137			2.3	%		361,811			0.5	%		660,326			182.5	%

(a) Revenue

For the nine months ended September 30, ~~2019,~~2020, our revenue was ~~$73,903,234~~$44,526,718 compared to ~~$62,690,873~~$73,903,234 for the same period of ~~2018,~~2019, representing ~~an increase~~a decrease of ~~$11,212,361~~$29,376,516 or ~~17.9%~~39.7%. The ~~increase~~decrease in revenue was mainly due to the ~~increase in both EV parts and off-road vehicles sales during this quarter. The increase~~decrease in EV parts ~~sales was primarily due~~sales. Due to the ~~increased sales volume~~outbreak of ~~battery packs.~~COVID-19 in China, the production of EV parts was interrupted during the first quarter of 2020, and the overall demand of EV parts from customers was significantly affected during the first three quarters of 2020.

The following table summarizes our revenues by product types for the nine months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

	Nine Months Ended September 30,
	2020		2019
	Sales		Sales
EV parts	$	23,034,841	$	57,607,687
EV products		769,034		-
Off-road vehicles		19,452,160		16,295,547
Electric Scooters, Electric Self-Balancing Scooters and associated parts		1,270,683		-
Total	$	44,526,718	$	73,903,234

EV Parts

Nine Months Ended
September 30,
2019 2018
Sales Sales
EV parts $ 57,607,687 $ 53,947,874
Off-road vehicles 16,295,547 8,742,999
Total $ 73,903,234 $ 62,690,873

~~EV Parts~~

During the nine months ended September 30, ~~2019,~~2020, our ~~revenue~~revenues from the ~~sale~~sales of EV parts ~~was~~were $23,034,841, representing a decrease of $34,572,846 or 60.0% from $57,607,687 ~~representing an increase of $3,659,813 or 6.8% from $53,947,874~~ for the same period of ~~2018.~~2019.

Our revenue for the nine months ended September 30, ~~2018~~2020 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers, air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for ~~78.0%~~51.7% of ~~the~~ total sales.

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our revenue from the sale of EV parts to the Affiliate Company and its subsidiaries accounted for approximately ~~14%~~0% and ~~49%~~14.3% of our total net revenue for the ~~period,~~quarter, respectively. ~~The decrease largely attributable to the Affiliate Company’s temporary declining sales, which was caused by its product adjustments. In this year, the~~

EV ~~parts we provided to the Affiliate Company were primarily used for battery upgrade and market maintenance for the EV products that were previously put into the leasing market.~~Products

~~Off-Road Vehicles~~

During the nine months ended September 30, ~~2019,~~2020, our revenue from the sale of EV Products was $769,034, which was due to the export sales of Hainan factories’ products. There weren’t any EV products sales in the same period of 2019.

Off-Road Vehicles

During the nine months ended September 30, 2020, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”) and others, were ~~$16,295,547,~~$19,452,160, representing an increase of ~~$7,552,548~~$3,156,613 or ~~86.4%~~19.4% from ~~$8,742,999~~$16,295,547, for the same ~~quarter~~period of ~~2018. The increase in revenue of the off-road vehicles was largely due to the additional sales from SC Autosports, which became our wholly-owned U.S. subsidiary in July 2018.~~2019.

Our off-road vehicles business line accounted for approximately ~~22.0%~~43.7% of our total net revenue for the nine months ended September 30, ~~2019.~~2020.

Electric Scooters, Electric Self-Balancing Scooters and associated parts

During the nine months ended September 30, 2020, our revenue from the sale of Electric Scooters, Electric Self-Balancing Scooters and associated parts was $1,270,683. There were no Electric Scooters and Electric Self-Balancing Scooters and associated parts sales in the same period of 2019.

The following table shows the breakdown of our net revenues:

	Nine Months Ended September 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	19,955,855	$	15,975,711
China		24,570,863		57,927,523
Total	$	44,526,718	$	73,903,234

Major products
EV parts	$	23,034,841	$	57,607,687
EV products		769,034		-
Off-road vehicles		19,452,160		16,295,547
Electric Scooters, Electric Self-Balancing Scooters and associated parts		1,270,683		-
Total	$	44,526,718	$	73,903,234

Timing of revenue recognition
Products transferred at a point in time	$	44,526,718	$	73,903,234
Total	$	44,526,718	$	73,903,234

(b) Cost of goods sold

Cost of goods sold was ~~$61,288,228~~$35,911,785 during the nine months ended September 30, ~~2019,~~2020, representing ~~an increase~~a decrease of ~~$8,243,367,~~$25,376,443, or ~~15.5%~~41.4%, compared to ~~$53,044,861~~$61,288,228 for the same period of ~~2018.~~2019. The ~~increase~~decrease was primarily due to the corresponding ~~increase~~decrease in sales. Please refer to the ~~below~~ Gross Profit section below for product margin analysis.

(c) Gross profit

Our margins by product for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as set forth below:

Nine Months Ended September 30,
2019 2018
Sales Cost Gross Profit Margin % Sales Cost Gross Profit Margin %
EV parts $ 57,607,687 48,565,387 9,042,300 15.7 % $ 53,947,874 46,093,092 7,854,782 14.6 %
Off-road vehicles 16,295,547 12,722,841 3,572,706 21.9 % 8,742,999 6,951,769 1,791,230 20.5 %
Total $ 73,903,234 61,288,228 12,615,006 17.1 % $ 62,690,873 53,044,861 9,646,012 15.4 %

	Nine Months Ended September 30,
	2020									2019
	Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %
EV parts	$	23,034,841		19,803,364		3,231,477		14.0	%	$	57,607,687		48,565,387		9,042,300		15.7	%
EV products		769,034		485,539		283,495		36.9	%		-		-		-		-
Off-road vehicles		19,452,160		14,416,321		5,035,839		25.9	%		16,295,547		12,722,841		3,572,706		21.9	%
Electric Scooters, Electric Self-Balancing Scooters and associated parts		1,270,683		1,206,561		64,122		5.0	%		-		-		-		-
Total	$	44,526,718		35,911,785		8,614,933		19.3	%	$	73,903,234		61,288,228		12,615,006		17.1	%

Gross profit for the first three quarters of ~~2019 increased 30.8%~~2020 decreased 31.7% to ~~$12,615,006,~~$8,614,933, compared to ~~$9,646,012~~$12,615,006 for the same period last year. This was primarily attributable to the sales ~~increase.~~decrease, which was primarily due to the outbreak of COVID-19 in 2020. Our gross margin increased to ~~17.1%~~19.3% compared to ~~15.4%~~17.1% for the same period of ~~2018.~~2019. The increase in our gross margin was mainly due to the sales under SC which has increased ~~selling~~the unit price for the parts since end of the charging and exchanging equipment and the increased proportion of the high-margin battery processing business this year. The higher gross margin from the off-road vehicle sales of SC Autosports, which became our wholly-owned U.S. subsidiary in July 2018, also contribute to the increased gross margin.

2019.

(d) Research and development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled ~~$1,766,210~~$2,777,426 for the first three quarters of ~~2019, representing a decrease~~2020, an increase of ~~$5,325,626~~$1,011,216 or ~~75.1%~~57.3% compared to ~~$7,091,836~~$1,766,210 for the same period of last year. The ~~decrease~~increase was ~~primarily~~mainly due to the R&D expense related to the ~~development~~technology upgrading of ~~EV Model K23 at Hainan facility in~~ the ~~third quarter of last year. Such R&D work has been completed in year 2018.~~Company’s products and new products development.

(e) Sales and marketing

Selling and distribution expenses were ~~$2,448,291~~$3,807,355 for the first three quarters of ~~2019,~~2020, compared to ~~$1,875,294~~$2,448,291 for the same period last year, representing an increase of ~~$572,997~~$1,359,064 or ~~30.6%~~55.5%. The increase was primarily attributable to ~~inclusion of~~ the ~~sales~~increasing labor and ~~marketing~~advertising expenses ~~from SC Autosports, which became our wholly-owned~~in connection with the expansion the U.S. ~~subsidiary in July 2018.~~electric vehicle market.

(f) General and administrative expenses

General and administrative expenses were ~~$11,096,246~~$10,186,135 for the first three quarters of ~~2019,~~2020, compared to ~~$5,534,039~~$11,096,246 for the same period of last year, representing ~~an increase~~a decrease of ~~expenses of $5,562,207~~$910,111 or ~~100.5%~~8.2%. For the nine months ended September 30, ~~2019,~~2020, general and administrative expenses included ~~$1,337,333~~$870,471 as expenses for common stock awards ~~and stock options~~ to employees and Board members, compared to ~~$253,934~~$1,337,333 for the same period of 2018, representing the result of $2,898,811 as expenses for common stock awards and stock options to employees and Board members net of $2,644,877 of reversal of previously accrued stock option expenses for forfeited stock option for the nine months ended September 30, 2018. Excludingin 2019. Besides stock compensation ~~expenses,~~expense, our net general and administrative expenses for the nine months ended September 30, ~~2019~~2020 were ~~$9,758,913,~~$9,315,664, representing ~~an increase~~a decrease of ~~$4,478,808, or 84.8%,~~$443,249, from ~~$5,280,105~~$9,758,913 for the same period of ~~2018,~~2019, which was largely due to the ~~increased operation costs~~implementation of cost cutting strategy and tighter budget control by the ~~Company since Hainan facility has been put into production.~~management.

(g) ~~Interest income~~Gain on disposal of long-lived assets

~~Interest income~~Gain on disposal of long-lived assets was ~~$559,954~~$13,983,733 for the first three quarters of ~~2019,~~2020, which was related to the real estate repurchase agreement of our Jinhua Facility’s relocation. In June 2020, 73,333 square meters of land use right was transferred to the local government, and the related gain was recognized.

(h) Interest income

Interest income was $1,118,795 for the first three quarters of 2020, representing ~~a decrease~~an increase of ~~$892,568~~$558,841 or ~~61.4%~~99.8% compared to ~~$1,452,522~~$559,954 for the same period of last year. The ~~decrease~~increase was primarily attributable to ~~the decreased~~increased interest earned on ~~loans to~~ the ~~Affiliate Company since Kandi Vehicles’~~ loan to ~~Affiliate converted to equity in the second quarter of 2018.~~a third party.

~~(h)~~(i) Interest expenses

Interest expenses were ~~$1,304,062~~$2,894,579 in the first three quarters of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$201,347~~$1,590,517 or ~~13.4%~~122.0% compared to ~~$1,505,409~~$1,304,062 for the same period of last year. The ~~decrease~~increase was primarily due to ~~decreased interest expenses incurred associated with the note payable to a third party, as well as decreased discounts associated with the settlement of bank acceptance notes. Of~~ the interest ~~expenses, $0, and $78,272 were discounts associated with the settlement~~expense of ~~bank acceptance notes for the nine months ended September 30, 2019 and 2018, respectively.~~Hainan factory’s long-term debt.

~~(i)~~(j) Change in fair value of contingent consideration

For the first three quarters of ~~2019,~~2020, the gain related to changes in the fair value of contingent consideration was ~~$694,000, representing a decrease~~$1,794,000, an increase of ~~$1,120,326~~$1,100,000 or ~~61.7%~~158.5% compared to ~~gain related to changes in the fair value of contingent consideration of $1,814,326~~$694,000 for the same period of last year, which was mainly due to the ~~decrease in~~adjustment of the fair value of the contingent consideration liability ~~between December 31, 2018 and September 30, 2019~~associated with the remaining shares of restrictive common stock (Please refer to NOTE 20 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was ~~less than~~estimated at each reporting date by using the ~~decrease in the same period of last year.~~

Monte Carlo simulation method, which took into account all possible scenarios.

~~(j)~~

(k) Government grants

Government grants were ~~$725,189~~$111,329 for the first three quarters of ~~2019,~~2020, compared to ~~$717,821~~$725,189 for the same quarter last year, representing ~~an increase~~a decrease of ~~$7,368,~~$613,860, or ~~1.0%. This increase~~84.6%, which was largely attributable to the subsidies received by Hainan factory in ~~government grants was because~~the third quarter of 2019 for its science and technology projects. There were no similar subsidies received in the ~~government’s implementation~~first three quarters of ~~a new policy with the purpose of supporting companies that have no or less layoff of their employees.~~2020.

~~(k)~~(l) Gain from equity dilution in the Affiliate Company

Gain from equity dilution was ~~$4,291,974~~$0 for the first three quarters of ~~2019~~2020, compared to $4,291,974 for the same period of last year, which was primarily due to gain from the conversion of the loan into equity in the Affiliate Company in March ~~Affiliate Loan to Equity Conversion.~~2019. Pursuant to the Equity Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately ~~$45.7~~$44.3 million) from Geely Group ~~last year~~ to equity in order to increase its cash ~~flow. As a result, our~~flow (for details please refer to Note 22 - EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY).

(m) Gain from sale of equity ~~interests~~ in the Affiliate Company ~~decreased to 43.47% in March, 2019.~~

~~(l)~~ Gain from sale of equity ~~sale in~~was $0 for the ~~Affiliate Company~~

~~Gain from equity sale was $20,574,217 for~~ first three quarters of ~~2019,~~2020, compared to $20,574,217 for the same period of last year which was due to the Affiliate Equity Transfer. In March 2019, Kandi Vehicles agreed to sell 21.47% of its equity interests in the Affiliate Company to Geely for a total ~~amount~~consideration of RMB 516 million (approximately $72.3 million). ~~As of September 30, 2019, the equity transfer had been completed.~~ Therefore, in the third quarter of 2019, the equity transfer was completed and the Company ~~has~~ recognized the gain from equity sale.

~~(m)~~(n) Share ~~of income (loss) after tax of the Affiliate Company~~

~~For the first three quarters of 2019, our share~~ of loss after tax of the Affiliate Company ~~was $22,883,126 for~~

For the first three quarters of ~~2019~~2020, our share of loss of the Affiliate Company was $5,631,867 as compared to share of loss of ~~$79,592 in~~$22,883,126 for the same period of last ~~year. The losses incurred by the Affiliate Company were~~year, representing a decrease of share of loss of $17,251,259, which was largely attributable to the decreasing loss of the Affiliate ~~Company’s temporary declining sales decline, which was caused by its product adjustments.~~Company and the fact that our equity interests of the Affiliate Company has been decreased after the equity dilution and equity transfer in 2019.

~~(n)~~(o) Other income, net

~~Net other~~Other income, net was ~~$357,626~~$2,051,272 for the first three quarters of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$308,668~~$1,693,646 or ~~46.3%~~473.6% compared to ~~net other income of $666,294~~$357,626 for the same period of last year, which was largely due to the ~~fees earned on technology development services in the same period~~discount and cancellation of ~~last year.~~accounts payable after negotiation with supplier.

~~(o)~~

(p) Income Taxes

Each of our wholly-owned subsidiaries, Kandi New Energy, Yongkang Scrou and Kandi Hainan, has an applicable corporate income tax rate of 25%.

Our actual effective income tax rate for the first three quarters of ~~2019~~2020 was a tax expense of 56.99% on a reported income before taxes of approximately $2.4 million, compared to a tax benefit of 13.05% on a reported income before taxes of approximately $0.3 million ~~compared to a tax benefit~~for the same period of ~~20.70% on a reported loss before taxes of approximately $1.8 million.~~

last year.

~~(p)~~

(q) Net income (loss)

Net income was ~~$361,811~~$1,022,137 for the first three quarters of ~~2019,~~2020, representing an increase of ~~$1,780,690~~$660,326 compared to net ~~loss $1,418,879~~income $361,811 for the same period of last year. The increase was primarily attributable to the ~~increased revenue, decreased research and development expense~~gain on disposal of long-live asset which was related to the real estate repurchase agreement of our Jinhua Facility’ relocation and the ~~gain from equity sale in~~decreased share of loss of the Affiliate ~~Company.~~Company .

Excluding (i) the effects of stock compensation expenses, which were $1,337,333 and $2,898,811 net of a reversal for forfeited stock option of $2,644,877 for the first three quarters of 2019 and 2018, respectively, and (ii) the change in fair value of contingent consideration which was a gain of $694,000 and $1,814,326 for the nine months ended September 30, 2019 and 2018, respectively, our non-GAAP net income was $1,005,144 for the nine months ended September 30, 2019 as compared to non-GAAP net loss $2,979,271 for the same period of 2018, an increase of $3,984,415, or 133.7%. The increase in net income (non-GAAP) was primarily attributable to the increased revenue, decreased research and development expense and the gain from equity sale in the Affiliate Company.

~~The following table summarizes our non-GAAP net income for the nine months ended September 30, 2019 and 2018:~~

Nine Months Ended
September 30,
2019 2018
GAAP net income (loss) $ 361,811 $ (1,418,879 )
Stock compensation expenses 1,337,333 253,934
Change in fair value of contingent consideration (694,000 ) (1,814,326 )
Non-GAAP net income (loss) $ 1,005,144 $ (2,979,271 )

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

~~Cash Flow~~

	Nine Months Ended,
	September 30, 2020			September 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	)
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		7,111,210			4,627,010
Effect of exchange rate		535,314			(928,440	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		16,512,635			22,353,071
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		24,159,159			26,051,641

For the first three quarters of ~~2019,~~2020, cash used in operating activities was ~~$25,425,152,~~$13,365,968, as compared to ~~cash used in operating activities of $836,809~~$14,610,587 for the same period last year. Our operating cash inflows include cash received primarily from sales of our EV parts and off-road vehicles. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, employee compensation, and interest expenses of our financings. The major operating activities that provided cash for the first three quarters of ~~2019~~2020 were a decrease of ~~amount due from the Affiliate Company~~accounts receivable of ~~$30,549,072.~~$18,165,084. The major operating activity that used cash for the first three quarters of ~~2019~~2020 was ~~an increase~~a decrease of accounts ~~receivable~~payable of ~~$36,822,184.~~$15,642,931.

For the first three quarters of ~~2019,~~2020, cash derived from investing activities was ~~$31,087,397,~~$46,247,972, as compared to ~~cash used in investing activities of $682,504~~$21,532,383 for the same period of last year. The major investing activities that provided cash for the first three quarters of ~~2019~~2020 were an increase of cash received from equity sale in the Affiliate Company of ~~$32,061,558.~~$42,321,385 and an increase of proceeds from disposal of long-lived assets of $51,872,829. The major investing activities that used cash for the first three quarters of ~~2019~~2020 were ~~$955,670~~$45,958,247 used for ~~the purchases of property, plant and equipment.~~loan to third party.

For the first three quarters of ~~2019, cash used from financing activities was $1,035,235, as compared to~~2020, cash used in financing activities ~~of $3,631,969~~was $25,770,794, as compared to $2,294,786 for the same period of last year. The major financing activities that provided cash for the first three quarters of ~~2019~~2020 were proceeds from short-term bank loans of ~~$27,864,409.~~$24,163,223. The major financing activities that used cash for the first three quarters of ~~2019~~2020 were ~~$26,261,331 of repayment~~repayments of short-term bank ~~loans.~~loans of $50,042,178.

Working Capital

We had a working capital of ~~$80,374,159~~$ 79,767,999 at September 30, ~~2019,~~2020, which reflects an increase of ~~$77,847,248~~$16,069,302 from a working capital of ~~$2,526,911~~$63,698,697 as of December 31, ~~2018.~~2019.

~~We believe the working capital of~~local economic development, the Company will be ~~greatly improved after we receive the above payments.~~

~~Capital Requirements and Capital Provided~~

~~Capital requirements and capital provided~~eligible for ~~the nine months ended September 30, 2019 were as follows:~~

Nine Months Ended
September 30, 2019
(In Thousands)
Capital requirements
Purchase of plant and equipment $ 956
Purchase of construction in progress 18
Repayments of short-term bank loans 26,261
Repayments of long-term bank loans 146
Cash used for stock buyback 2,493
Internal cash used in operations 25,425
Increase in cash 3,699
Total capital Requirements $ 58,998

Capital provided
Proceeds from short-term bank loan 27,864
Cash received from equity sale in the Affiliate Company 32,062
Total capital provided $ 59,926

~~The difference between capital provided and capital required is caused by the effect of exchange rate changes~~tax rebates that could total up to RMB 500 million ($74 million) over the ~~past nine months.~~next eight years. On May 22, 2020, the Company received the first payment of RMB 244 million (approximately $36 million) under the Repurchase Agreement. On July 9, 2020, the Company received the second payment of RMB 119 million (approximately $17 million) under the Repurchase Agreement.

Contractual Obligations and Off-balance Sheet Arrangements

Short-term and long-term Loans:

For the discussion of short-term and long-term loans, please refer to Note 1817 - Short-term and Long-term Loans under Notes to Condensed Consolidated Financial Statements.

~~Notes payable:~~

~~For the discussion of notes payable, please refer to Note 19 - Notes Payable under Notes to Condensed Consolidated Financial Statements.~~

Guarantees and pledged collateral for third party bank loans

For the discussion of guarantees and pledged collateral for third party bank loans, please refer to Note 2523 – Commitments and Contingencies under Notes to Condensed Consolidated Financial Statements.

Recent Development ~~Activities:~~Activities

On August 20, 2020, we announced that we are actively exploring the possibility of opening a manufacturing base in North America for its popular EV and off-road vehicles. We plan to more aggressively target the fast-growing North America market and ensure affordability by eliminating shipping costs and tariffs. The Company is in preliminary discussion with various potential partners, including local government agencies from the US-Mexico border, and has received positive feedback. The Company cautioned that the exploration process is in its early stage and any negotiations would not guarantee a North American plant will be built.

On September ~~23, 2019,~~14, 2020, we announced the establishment of a wholly-owned subsidiary for our battery swapping services: China Battery Exchange Technology Co., Ltd. By establishing the China Battery Exchange Technology Company, we can better monetize our dozens of patents in the field of battery swap systems. The new company can also attract strategic investors to participate across the whole sector value chain, including battery swapping services and used battery recycling.

On October 22, 2020, we announced that the Company entered into a strategic agreement with the Zhejiang State Grid Electric Vehicle Service Company to cooperate in the area of battery exchange for pure electric vehicles.

On October 26, 2020, we announced the establishment of an operating company that intends to operate a ridesharing service across China. The operating company will operate under the name Zhejiang Ruiheng Technology Company (“Ruiheng”). The company was established by Zhejiang Ruibo New Energy Vehicle Service Company Ltd. (“Ruibo”), Jiangsu Jinpeng Group Ltd. (“Jinpeng”) and Kandi Vehicles. Ruibo, Jinpeng and Kandi Vehicles each owns 80%, 10%, and 10% of Ruiheng, respectively. The establishment of the operating company was approved by the Hangzhou Xihu District Market Supervision Administration after an extensive application process.

On November 2, 2020, we announced that on October 30, 2020 we signed a cooperation agreement each with CITIC Securities, Grandall Law Firm (Hangzhou) and Pan-China Certified Public Accountants LLP to initiate the IPO process to list our wholly owned subsidiary, Zhejiang Kandi Smart Battery Swap Technology Co, Ltd on the Shanghai Stock Exchange’s Sci-Tech Innovation Board (“STAR”) market. CITIC Securities will act as the IPO sponsor and lead underwriter, Grandall Law Firm will act as the legal advisor, and Pan-China Certified Public Accountants LLP will act as the auditor for the IPO.

On November 4, 2020, we announced that Kandi Vehicles and DGL Group signed a Purchase Framework Agreement (the “Agreement”) on behalf of Kandi Vehicles and DGL Group regarding an initial batch order of 300,000 electric scooters and 500,000 electric self-balancing scooters. The total valueAmerica, the U.S. subsidiary of the ~~Agreement is expected to be about RMB 500 million (approximately $70.5 million).The purchased products are expected to be completed and delivered within one year~~Company, has received the required clearance from the ~~date~~United States Environmental Protection Agency (EPA) for its two electric vehicle (EV) models, the K23 and K27 via Certificates of ~~signing this Agreement.~~Conformity.

~~On September 30, 2019, the Company announced that it has completed the transfer of 21.74% of equity interests in the Affiliate Company to Geely on September 29, 2019.~~

On October 2, 2019, the Company announced that Kandi brand EV model K23, manufactured by Kandi Hainan, received eligibility for up to $7,500 in tax credits under the New Qualified Plug-in Electric Drive Motor Vehicle Credit (the “Credit”) from the Internal Revenue Service. Therefore, new U.S. buyers who purchase model K23 will qualify for the Credit. SC Autosports hosted EV model K23 Launch Conference in Garland, Texas during September 21-23, 2019, with over 120 distributors from all over the U.S. as attendants. After an on-site test drive, the distributors were enthusiastic about K23’s market potential in the U.S. and showed their high interests in distributing model K23. As a result, Kandi Hainan signed a supply contract (the “Contract”) for the initial 2000 model K23 with SC Autosports on October 1, 2019. The value of the Contract is about $32 million. According to the Contract, the first 200 vehicles are expected to be delivered by the end of 2019.

On October 14, 2019, the Company announced that according to the executed Purchase Framework Agreement dated September 22, 2019 between its wholly-owned subsidiary, Kandi Vehicles and DGL Group, Kandi Vehicles started delivering the initial batch of 1,232 electric scooters and 37,755 electric self-balancing scooters on October 11, 2019.

On November 4, 2019, the Company announced that it has newly developed two new mini pure EV models. The first model is a four-wheeled mini pure EV. The second model is a three-wheeled mini pure EV. These vehicles are intended for use in residential settings to meet U.S. market demand according to DGL Group Inc. (USA) (“DGL Group”)’s market analysis research. After Kandi has undergone several rounds of technical and performance tests on the mini EVs, five of each mini EV model prototypes are completed and ready to be shipped to DGL Group for further tests in the beginning of this month.

On November 11, 2019, the Company announced that its first automatic intelligent battery exchange system passed the inspection on November 10, 2019. The system features automatic functions which perform an intelligent charging and battery exchange. The battery exchanging time for each vehicle is only 90 seconds, which ranks among the current top battery exchange equipment.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to us.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have evaluated, under the supervision of our Chief Executive Officer (“CEO”) and our ~~interim~~ Chief Financial Officer (“~~Interim~~ CFO”), the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of September 30, ~~2019.~~2020. Based on this evaluation, our CEO and ~~Interim~~ CFO concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to management, including our CEO and ~~Interim~~ CFO, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above.

Changes in Internal Control over Financial Reporting

There was no change to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Except as set forth in Note 2523 - COMMITMENTS AND CONTINGENCIES under Notes to Condensed Consolidated Financial Statements, our management is currently not aware of any legal matters or pending litigation that would have a significant effect on the Company’s results of operation of financial ~~statements. Furthermore,~~statements, nor is the Company ~~is not~~ aware of any other legal matters in which any director, officer, or any owner of record or beneficial owner of more than five percent of any class of voting securities of the Company, or any affiliate of any such director, officer, affiliate of the Company, or security holder, is a party adverse to the Company or has a material adverse interest to the Company. For the detailed discussion of our legal proceedings, please refer to Note 2523 - COMMITMENTS AND CONTINGENCIES under Notes to Condensed Consolidated Financial Statements, which is incorporated by reference herein.

Item 1A.Risk Factors.

~~Item 2.~~~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~Issuer Purchases of Equity Securities~~

~~On May 14, 2019, we announced that our board of directors had authorized the repurchase of up to $20 million worth~~The successful development of our ~~common~~U.S. EV markets depends on various factors.

On August 18, 2020, our subsidary in U.S., Kandi America held a virtual launch event to introduce the K23 and K27 EVs into the U.S. market. While it has received the required clearance from the United States Environmental Protection Agency (EPA) for its two electric vehicle (EV) models – the K23 and K27 – via Certificates of Conformity; the sale of such EVs into the U.S. market is conditioned upon the satisfaction of the safety standards set by the United States Department of Transportation and the completion of the feature modification, software and technology upgrades catering for our potentioal U.S. costomers. Thus, no units of electric vehicles have been sold in the U.S. There is no assurance all conditions for the sale of EVs in the U.S. could be satisifed as planned.

We have and may increasingly become a target for public scrutiny, including complaints to regulatory agencies, coverage, and malicious allegations, all of which could severely damage our reputation and materially and adversely affect our business, prospects and stock price.

We have been a target for public scrutiny, including complaints to regulatory agencies, coverage, and malicious allegations. For example, from 2013 to 2015, all the EVs we sold had the features of battery exchange, which exposed us to subsidies fraud investigation. Although we believe that these allegations are not true and the fact the Chinese government granted us subsidies after they completed investigation, negative publicity surrounding this incident had adversely affected our reputation.

In addition, we have adopted policies and procedures, specifically a Related Party Transactions Policy, to identify, review, consider and approve such conflicts of interest. In general, if an affiliate of a director, executive officer or significant stockholder, intends to engage in ~~open market~~a transaction involving us, that director, executive officer or significant stockholder must report the transaction for consideration and approval by our audit committee and any such transactions have to be conducted at arms-length terms. We also follow the SEC regulations and the U.S. GAAP in reporting related party transactions. For example, under U.S. GAAP, it is permitted not to disclose a specific name of a major customer and/or supplier if they are not related parties to us. However, there are no assurances that negative media who may not have thorough understanding of the SEC disclosure rules and U.S. GAAP cast any incorrect critisizm on our disclosure.

From time to time, the allegations, regardless of their veracity, may result in ~~privately negotiated transactions. The following table sets forth information regarding shares~~consumer dissatisfaction, public protests or negative publicity, which could result in government inquiry or substantial harm to our brand, reputation, operations and stock price.

Moreover, as our business expands and grows, both organically and through acquisitions of ~~our common stock~~and investments in other businesses, domestically and internationally, we may be exposed to heightened public scrutiny in jurisdictions where we already operate as well as in new jurisdictions where we may operate. There is no assurance that we ~~repurchased during~~would not become a target for regulatory or public scrutiny in the ~~three months ended September 30, 2019.~~

Period (a)
Total number of shares purchased (b)
Average price paid per share (c)
Total number of shares purchased as part of publicly announced plans or programs (d)
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
July 1 to July 30, 2019 - $ - - $ 20,000,000
August 1 to August 31, 2019 487,155 $ 5.09 487,155 $ 17,520,381
September 1 to September 30, 2019 - $ - - $ -
Total 487,155 $ 5.09 487,155 $ 17,520,381

~~In summary, the Company had repurchased a total of 487,155 common shares at an average~~future or that scrutiny and public exposure would not severely damage our reputation as well as our business, prospects and stock ~~price of $5.09 per share as of September 30, 2019.~~price.

Item 6. Exhibits

Exhibit Number		Description
~~31.1~~10.1		English Translation of the Supplementary Agreement II to the Share Transfer Agreement of Jinhua An Kao Power Technology Co., Ltd. dated July 7, 2020 (Incorporate by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 10, 2020)
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Definitions Linkbase Document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November ~~12, 2019~~9, 2020	By:	/s/ Hu Xiaoming
		Hu Xiaoming
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: November ~~12, 2019~~9, 2020	By:	/s/ ~~Zhu Xiaoying~~Jehn Ming Lim
		~~Zhu Xiaoying~~Jehn Ming Lim
		~~Interim~~ Chief Financial Officer
		(Principal Financial Officer and
		Accounting Officer)

4037

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses. As of September 30, 2020, the Company had received $244,116 under the PPP. In addition, Economic Injury Disaster Loans (“EIDL”) through the SBA was also made available under the CARES Act passed by Congress in response to the COVID-19 pandemic. During June 2020, $150,000 of EIDL loan was approved with the term of a 3.75% rate over 30 years, and a 12-month deferment on the first repayment of principal with interest accrued during deferment. The Affiliate Company converted RMB 1.2 billion of the debt due from Zhejiang ZuoZhongYou Automobile Service Co., Ltd (“ZuoZhongYou”) into 85% of its equity interest. ZuoZhongYou is under common control with the Affiliate Company by Geely. On August 28, 2020. There was about RMB 97.2 million of difference between the carrying value of the debt of RMB 1.2 billion and the carrying value of ZuoZhongYou’s net asset at the transaction date. Hence, there is a decrease of RMB 21.4 million (approximately $3.1 million, which is 22% of the RMB 97.2 million) of “Investment in the Affiliate Company” on the Company’s book, with a corresponding decrease to the additional paid in capital. false --12-31 Q3 0001316517 2020-05-22 2020-05-22 2020-04-22 2020-04-24 2020-04-26

	September 30, 2019			December 31, 2018
	(UNAUDITED)
Current assets
Cash and cash equivalents	$	14,338,637		$	15,662,201
Restricted cash		11,713,004			6,690,870
Accounts receivable (net of allowance for doubtful accounts of $130,420 and $120,010 as of September 30, 2019 and December 31, 2018, respectively)		54,859,801			34,274,728
Inventories		35,447,383			21,997,868
Notes receivable		41,549,888			72,712
Notes receivable from the Affiliate Company and related party		-			3,861,032
Other receivables		12,859,304			1,264,323
Prepayments and prepaid expense		9,497,459			11,136,408
Due from employees		5,499			1,001
Advances to suppliers		4,474,104			4,705,183
Amount due from the Affiliate Company, net		25,335,894			67,683,462
Right - of - use asset		42,974			-
TOTAL CURRENT ASSETS		210,123,947			167,349,788

LONG-TERM ASSETS
Property, plant and equipment, net		74,491,204			82,045,923
Land use rights, net		11,084,717			11,749,728
Construction in progress		17,781			-
Deferred taxes assets		-			8,204
Investment in the Affiliate Company		53,837,011			128,929,893
Goodwill		27,762,120			28,552,215
Intangible assets		3,723,988			4,328,127
Other long term assets		4,803,349			5,865,386
TOTAL Long-Term Assets		175,720,170			261,479,476

TOTAL ASSETS	$	385,844,117		$	428,829,264

CURRENT LIABILITIES
Accounts payable	$	79,632,036		$	112,309,683
Other payables and accrued expenses		4,843,001			4,251,487
Short-term loans		30,969,731			30,539,236
Customer deposits		33,535			94,408
Notes payable		11,463,004			12,787,619
Income tax payable		1,519,699			3,471,366
Due to employees		7,105			28,473
Deferred income		1,237,556			1,340,605
Lease liability		44,121			-
Total Current Liabilities		129,749,788			164,822,877

LONG-TERM LIABILITIES
Long term bank loans		27,606,502			28,794,136
Deferred taxes liability		1,758,643			1,711,343
Contingent consideration liability		6,562,000			7,256,000
Other long-term liability		-			622,034
Total Long-Term Liabilities		35,927,145			38,383,513

TOTAL LIABILITIES		165,676,933			203,206,390

STOCKHOLDER’S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,263,102 and 55,992,002 shares issued and 52,839,441 and 51,484,444 outstanding at September 30, 2019 and December 31, 2018, respectively		52,839			51,484
Less: Treasury stock (487,155 shares with average price of $5.09 and 0 shares at September 30, 2019 and December 31, 2018, respectively )		(2,477,965	)		-
Additional paid-in capital		259,691,370			254,989,657
Accumulated deficit (the restricted portion is $4,422,033 and $4,422,033 at September 30, 2019 and December 31, 2018, respectively)		(9,135,198	)		(9,497,009	)
Accumulated other comprehensive loss		(27,963,862	)		(19,921,258	)
TOTAL STOCKHOLDERS’ EQUITY		220,167,184			225,622,874

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	385,844,117		$	428,829,264

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total
Balance, December 31, 2018		51,484,444		51,484		-			254,989,657			(9,497,009	)		(19,921,258	)		225,622,874
Stock issuance and award		1,096,397		1,097		-			3,387,379			-			-			3,388,476
Net income (loss)		-		-		-			-			(4,409,472	)		-			(4,409,472	)
Foreign currency translation		-		-		-			-			-			5,404,028			5,404,028

Balance, March 31, 2019		52,580,841		52,581		-			258,377,036			(13,906,481	)		(14,517,230	)		230,005,906
Stock issuance and award		238,600		238		-			1,259,569			-			-			1,259,807
Net income (loss)		-		-		-			-			(7,318,158	)		-			(7,318,158	)
Foreign currency translation		-		-		-			-			-			(4,915,589	)		(4,915,589	)

Balance, June 30, 2019		52,819,441		52,819		-			259,636,605			(21,224,639	)		(19,432,819	)		219,031,966
Stock issuance and award		20,000		20		-			69,380			-			-			69,400
Stock buyback		-		-		(2,477,965	)		-			-			-			(2,477,965	)
Commission in stock buyback		-		-		-			(14,615	)		-			-			(14,615	)
Net income (loss)		-		-		-			-			12,089,441			-			12,089,441
Foreign currency translation		-		-		-			-			-			(8,531,043	)		(8,531,043	)

Balance, September 30, 2019		52,839,441		52,839		(2,477,965	)		259,691,370			(9,135,198	)		(27,963,862	)		220,167,184

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total
Balance, December 31, 2017		48,036,538		48,037		-			233,055,348			(3,802,310	)		(6,310,763	)		222,990,312
Stock issuance and award		2,972,337		2,972		-			19,099,556			-			-			19,102,528
Net income (loss)		-		-		-			-			3,727,995			-			3,727,995
Foreign currency translation		-		-		-			-			-			7,465,240			7,465,240

Balance, March 31, 2018		51,008,875		51,009		-			252,154,904			(74,315	)		1,154,477			253,286,075
Stock issuance and award		288,600		289		-			2,038,476			-			-			2,038,765
Net income (loss)		-		-		-			-			1,374,525			-			1,374,525
Foreign currency translation		-		-		-			-			-			(12,587,622	)		(12,587,622	)

Balance, June 30, 2018		51,297,475		51,298		-			254,193,380			1,300,210			(11,433,145	)		244,111,743
Stock issuance and award		184,469		184		-			787,529			-			-			787,713
Net income (loss)		-		-		-			-			(6,521,399	)		-			(6,521,399	)
Foreign currency translation		-		-		-			-			-			(8,108,271	)		(8,108,271	)

Balance, September 30, 2018		51,481,944		51,482		-			254,980,909			(5,221,189	)		(19,541,416	)		230,269,786

	Nine Months Ended
	September 30, 2019			September 30, 2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	361,811		$	(1,418,879	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		6,443,422			2,271,599
Impairments		44,544			24,854
Allowance for doubtful accounts		15,366			(7,093	)
Deferred taxes		50,693			-
Share of loss after tax of the Affiliate Company		22,883,126			79,592
Gain from equity dilution in the Affiliate Company		(4,291,974	)		-
Gain from equity sale in the Affiliate Company		(20,574,217	)		-
Change in fair value of contingent consideration		(694,000	)		(1,814,326	)
Stock compensation cost		1,337,333			253,934

Changes in operating assets and liabilities:
(Increase) Decrease In:
Accounts receivable		(36,822,184	)		(52,845,923	)
Deferred taxes assets		-			(52,126	)
Notes receivable		174,881			491,272.00
Notes receivable from the Affiliate Company and related party		437,203			3,196,340
Inventories		(14,813,147	)		1,555,993
Other receivables and other assets		(17,275,954	)		1,497,230
Due from employee		(25,861	)		945
Advances to supplier and prepayments and prepaid expenses		1,357,001			(4,590,404	)
Amount due from the Affiliate Company		30,549,072			(81,549,214	)
Amount due from Affiliate Company-Long term		-			15,907,183
Due from related party		-			161,874

Increase (Decrease) In:
Accounts payable		11,383,411			101,684,965
Other payables and accrued liabilities		7,791,028			29,845,307
Notes payable		(11,836,950	)		(12,434,813	)
Customer deposits		(59,734	)		20,350
Income tax payable		(1,803,574	)		(2,353,826	)
Deferred income		(56,448	)		(761,643	)
Net cash used in operating activities	$	(25,425,152	)	$	(836,809	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net		(955,670	)		(304,745	)
Purchases of land use rights and other intangible assets		-			(105,480	)
Acquisition of Jinhua An Kao (net of cash received)		-			(3,610,846	)
Acquisition of SC Autosports		-			486,954
Purchases of construction in progress		(18,491	)		(425,241	)
Reimbursement of capitalize interests for construction in progress		-			1,818,390
Cash received from equity sale in the Affiliate Company		32,061,558			-
Long Term Investment		-			1,458,464
Net cash provided by (used in) investing activities	$	31,087,397		$	(682,504	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans		27,864,409			25,515,452
Repayments of short-term bank loans		(26,261,331	)		(26,283,065	)
Repayments of long-term bank loans		(145,734	)		(153,523	)
Proceeds from notes payable		-			40,313,800
Repayment of notes payable		-			(43,024,633	)
Cash used for stock buyback		(2,492,579	)		-
Net cash used in financing activities	$	(1,035,235	)	$	(3,631,969	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		4,627,010			(5,151,282	)
Effect of exchange rate changes on cash		(928,440	)		(512,545	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		22,353,071			16,110,496

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		26,051,641			10,446,669
-CASH AND CASH EQUIVALENTS AT END OF PERIOD		14,338,637			1,342,085
-RESTRICTED CASH AT END OF PERIOD		11,713,004			9,104,584

SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid		1,711,101			1,981,072
Interest paid		1,304,062			1,274,399

SUPPLEMENTAL NON-CASH DISCLOSURES:
Acquisition of Jinhua An Kao by stock		-			20,718,859
Acquisition of SC Autosports by stock		-			756,664
Amount due from the Affiliate Company converted to investment in the Affiliate Company		-			83,669,804
Notes receivable from unrelated parties for equity transfer payment		43,137,369			-

	For three months ended
	September 30,
	2019		2018
Net income (loss)	$	12,089,441	$	(6,521,399	)
Weighted average shares used in basic computation		52,613,642		51,474,048
Dilutive shares		-		-
Weighted average shares used in diluted computation		52,613,642		51,474,048

Earnings (Loss) per share:
Basic and diluted	$	0.23	$	(0.13	)

	For nine months ended
	September 30,
	2019		2018
Net income (loss)	$	361,811	$	(1,418,879	)
Weighted average shares used in basic computation		52,332,260		51,089,047
Dilutive shares		-		-
Weighted average shares used in diluted computation		52,332,260		51,089,047

Earnings (Loss) per share:
Basic and diluted	$	0.01	$	(0.03	)

2019 (Three Months)	$	157,166
2020		628,663
2021		628,663
2022		549,304
2023		546,568
Thereafter		1,213,624
Total	$	3,723,988

2019 (Three Months)	$	82,354
2020		329,415
2021		329,415
2022		329,415
2023		329,415
Thereafter		9,684,703
Total	$	11,084,717

Maturity of Lease Liabilities:
2019 (Three Months)	$	32,611
2020		11,510
Total	$	44,121

	September 30,		December 31,
Guarantee provided to	2019		2018
Kandi Electric Vehicles Group Co., Ltd.		-		7,271,247
Kandi Electric Vehicles Jiangsu Co., Ltd.		-		7,271,247
Total	$	-	$	14,542,494

	Three Months Ended
	September 30, 2019			% of Revenue			September 30, 2018			% of Revenue			Change in Amount			Change in %

REVENUES FROM UNRELATED PARTY, NET	$	26,968,385			85.1	%	$	14,860,034			39.1	%		12,108,351			81.5	%
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET		4,720,159			14.9	%		23,135,326			60.9	%		(18,415,167	)		(79.6	)%

REVENUES, NET		31,688,544						37,995,360						(6,306,816	)		(16.6	)%

COST OF GOODS SOLD		(26,412,129	)		(83.3	)%		(31,753,311	)		(83.6	)%		5,341,182			(16.8	)%

GROSS PROFIT		5,276,415			16.7	%		6,242,049			16.4	%		(965,634	)		(15.5	)%

OPERATING EXPENSES:
Research and development		(596,187	)		(1.9	)%		(5,691,649	)		(15.0	)%		5,095,462			(89.5	)%
Selling and marketing		(930,810	)		(2.9	)%		(898,896	)		(2.4	)%		(31,914	)		3.6	%
General and administrative		(3,432,920	)		(10.8	)%		(2,070,947	)		(5.5	)%		(1,361,973	)		65.8	%
Total Operating Expenses		(4,959,917	)		(15.7	)%		(8,661,492	)		(22.8	)%		3,701,575			(42.7	)%

LOSS FROM OPERATIONS		316,498			1.0	%		(2,419,443	)		(6.4	)%		2,735,941			(113.1	)%

OTHER INCOME (EXPENSE):
Interest income		209,736			0.7	%		52,745			0.1	%		156,991			297.6	%
Interest expense		(435,524	)		(1.4	)%		(483,376	)		(1.3	)%		47,852			(9.9	)%
Change in fair value of contingent consideration		57,000			0.2	%		(1,552,686	)		(4.1	)%		1,609,686			(103.7	)%
Government grants		502,146			1.6	%		607,008			1.6	%		(104,862	)		(17.3	)%
Gain from equity dilution in the Affiliate Company		(49,285	)		(0.2	)%		-			0.0	%		(49,285	)		-
Gain from equity sale in the Affiliate Company		20,574,217			64.9	%		-			0.0	%		20,574,217			-
Share of loss after tax of the Affiliate Company		(8,433,767	)		(26.6	)%		(3,247,343	)		(8.5	)%		(5,186,424	)		159.7	%
Other income , net		57,833			0.2	%		15,735			0.0	%		42,098			267.5	%
Total other income (expense), net		12,482,356			39.4	%		(4,607,917	)		(12.1	)%		17,090,273			(370.9	)%

INCOME(LOSS) BEFORE INCOME TAXES		12,798,854			40.4	%		(7,027,360	)		(18.5	)%		19,826,214			(282.1	)%

INCOME TAX (EXPENSE) BENEFIT		(709,413	)		(2.2	)%		505,961			1.3	%		(1,215,374	)		(240.2	)%

NET INCOME (LOSS)		12,089,441			38.2	%		(6,521,399	)		(17.2	)%		18,610,840			(285.4	)%

	Nine Months Ended
	September 30, 2019
	(In Thousands)
Capital requirements
Purchase of plant and equipment	$	956
Purchase of construction in progress		18
Repayments of short-term bank loans		26,261
Repayments of long-term bank loans		146
Cash used for stock buyback		2,493
Internal cash used in operations		25,425
Increase in cash		3,699
Total capital Requirements	$	58,998

Capital provided
Proceeds from short-term bank loan		27,864
Cash received from equity sale in the Affiliate Company		32,062
Total capital provided	$	59,926

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
July 1 to July 30, 2019		-	$	-		-	$	20,000,000
August 1 to August 31, 2019		487,155	$	5.09		487,155	$	17,520,381
September 1 to September 30, 2019		-	$	-		-	$	-
Total		487,155	$	5.09		487,155	$	17,520,381