UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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. ~~(Check one):~~

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 ~~May 4,~~November 5, 2019, the registrant had ~~56,004,502~~56,243,102 shares of common stock issued and ~~52,580,841~~52,819,441 shares of common stock outstanding, par value $0.001 per share.

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(UNAUDITED)						(UNAUDITED)
Current assets
Cash and cash equivalents	$	3,327,013		$	15,662,201		$	14,338,637		$	15,662,201
Restricted cash		5,134,661			6,690,870			11,713,004			6,690,870
Accounts receivable (net of allowance for doubtful accounts of $138,678 and $120,010 as of March 31, 2019 and December 31, 2018, respectively)		49,397,918			34,274,728
Inventories (net of provision for slow moving inventory of $829,523 and $840,701 as of March 31, 2019 and December 31, 2018, respectively)		27,223,890			21,997,868
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		-			72,712			41,549,888			72,712
Notes receivable from the JV Company and related party		3,769,874			3,861,032
Notes receivable from the Affiliate Company and related party								-			3,861,032
Other receivables		2,662,856			1,264,323			12,859,304			1,264,323
Prepayments and prepaid expense		10,864,614			11,136,408			9,497,459			11,136,408
Due from employees		2,522			1,001			5,499			1,001
Advances to suppliers		4,919,164			4,705,183			4,474,104			4,705,183
Amount due from the JV Company, net		61,060,228			67,683,462
Amount due from the Affiliate Company, net								25,335,894			67,683,462
Right - of - use asset		108,324			-			42,974			-
TOTAL CURRENT ASSETS		168,471,064			167,349,788			210,123,947			167,349,788

LONG-TERM ASSETS
Property, plant and equipment, net		82,341,986			82,045,923			74,491,204			82,045,923
Land use rights, net		11,954,930			11,749,728			11,084,717			11,749,728
Construction in progress								17,781			-
Deferred taxes assets		11,461			8,204			-			8,204
Investment in the JV Company		126,492,405			128,929,893
Investment in the Affiliate Company								53,837,011			128,929,893
Goodwill		29,087,159			28,552,215			27,762,120			28,552,215
Intangible assets		4,268,365			4,328,127			3,723,988			4,328,127
Other long term assets		5,708,341			5,865,386			4,803,349			5,865,386
TOTAL Long-Term Assets		259,864,647			261,479,476			175,720,170			261,479,476

TOTAL ASSETS	$	428,335,711		$	428,829,264		$	385,844,117		$	428,829,264

CURRENT LIABILITIES
Accounts payable	$	114,345,244		$	112,309,683		$	79,632,036		$	112,309,683
Other payables and accrued expenses		4,353,437			4,251,487			4,843,001			4,251,487
Short-term loans		31,291,443			30,539,236			30,969,731			30,539,236
Customer deposits		132,921			94,408			33,535			94,408
Notes payable		6,300,010			12,787,619			11,463,004			12,787,619
Income tax payable		2,046,046			3,471,366			1,519,699			3,471,366
Due to employees		8,595			28,473			7,105			28,473
Deferred income		1,362,082			1,340,605			1,237,556			1,340,605
Lease liability		108,324			-			44,121			-
Total Current Liabilities		159,948,102			164,822,877			129,749,788			164,822,877

LONG-TERM LIABILITIES
Long term bank loans		29,503,360			28,794,136			27,606,502			28,794,136
Deferred taxes liability		1,711,343			1,711,343			1,758,643			1,711,343
Contingent liability		7,167,000			7,256,000
Contingent consideration liability								6,562,000			7,256,000
Other long-term liability		-			622,034			-			622,034
Total Long-Term Liabilities		38,381,703			38,383,513			35,927,145			38,383,513

TOTAL LIABILITIES		198,329,805			203,206,390			165,676,933			203,206,390

STOCKHOLDER’S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,004,502 and 55,992,002 shares issued and 52,580,841 and 51,484,444 outstanding at March 31,2019 and December 31,2018, respectively		52,581			51,484
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		258,377,036			254,989,657			259,691,370			254,989,657
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at March 31,2019 and December 31,2018, respectively)		(13,906,481	)		(9,497,009	)
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		(14,517,230	)		(19,921,258	)		(27,963,862	)		(19,921,258	)
TOTAL STOCKHOLDERS’ EQUITY		230,005,906			225,622,874			220,167,184			225,622,874

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	428,335,711		$	428,829,264		$	385,844,117		$	428,829,264

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31, 2019			March 31, 2018			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018

REVENUES FROM UNRELATED PARTY, NET		16,334,963			5,732,463		$	26,968,385		$	14,860,034		$	63,360,044		$	32,211,352
REVENUES FROM THE JV COMPANY AND RELATED PARTY, NET		1,733,497			2,603,444
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET								4,720,159			23,135,326			10,543,190			30,479,521

REVENUES, NET		18,068,460			8,335,907			31,688,544			37,995,360			73,903,234			62,690,873

COST OF GOODS SOLD		(14,932,023	)		(6,989,956	)		(26,412,129	)		(31,753,311	)		(61,288,228	)		(53,044,861	)

GROSS PROFIT		3,136,437			1,345,951			5,276,415			6,242,049			12,615,006			9,646,012

OPERATING EXPENSES:
Research and development		(537,433	)		(757,298	)		(596,187	)		(5,691,649	)		(1,766,210	)		(7,091,836	)
Selling and marketing		(618,003	)		(748,225	)		(930,810	)		(898,896	)		(2,448,291	)		(1,875,294	)
General and administrative		(2,039,528	)		398,171			(3,432,920	)		(2,070,947	)		(11,096,246	)		(5,534,039	)
Total Operating Expenses		(3,194,964	)		(1,107,352	)		(4,959,917	)		(8,661,492	)		(15,310,747	)		(14,501,169	)

(LOSS) INCOME FROM OPERATIONS		(58,527	)		238,599
INCOME (LOSS) FROM OPERATIONS								316,498			(2,419,443	)		(2,695,741	)		(4,855,157	)

OTHER INCOME (EXPENSE):												��
Interest income		252,404			942,993			209,736			52,745			559,954			1,452,522
Interest expense		(439,183	)		(550,417	)		(435,524	)		(483,376	)		(1,304,062	)		(1,505,409	)
Change in fair value of contingent consideration		89,000			2,680,179			57,000			(1,552,686	)		694,000			1,814,326
Government grants		47,724			95,255			502,146			607,008			725,189			717,821
Gain from equity dilution in JV		4,365,390			-
Share of (loss) income after tax of the JV Company		(9,949,158	)		795,055
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		474,390			22,977			57,833			15,735			357,626			666,294
Total other (expense) income, net		(5,159,433	)		3,986,042
Total other income (expense), net								12,482,356			(4,607,917	)		3,015,772			3,065,962

(LOSS) INCOME BEFORE INCOME TAXES		(5,217,960	)		4,224,641
INCOME (LOSS) BEFORE INCOME TAXES								12,798,854			(7,027,360	)		320,031			(1,789,195	)

INCOME TAX BENEFIT (EXPENSE)		808,488			(496,646	)
INCOME TAX (EXPENSE) BENEFIT								(709,413	)		505,961			41,780			370,316

NET (LOSS) INCOME		(4,409,472	)		3,727,995
NET INCOME (LOSS)								12,089,441			(6,521,399	)		361,811			(1,418,879	)

OTHER COMPREHENSIVE INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation		5,404,028			7,465,240			(8,531,043	)		(8,108,270	)		(8,042,604	)		(13,230,652	)

COMPREHENSIVE INCOME		994,556		$	11,193,235
COMPREHENSIVE INCOME (LOSS)							$	3,558,398		$	(14,629,669	)	$	(7,680,793	)	$	(14,649,531	)

WEIGHTED AVERAGE SHARES OUTSTANDING BASIC		51,565,287			50,643,423
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED		51,565,287			50,643,423
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED								52,613,642			51,474,048			52,332,260			51,089,047

NET (LOSS) INCOME PER SHARE, BASIC		(0.09	)	$	0.07
NET (LOSS) INCOME PER SHARE, DILUTED		(0.09	)	$	0.07
NET INCOME (LOSS) PER SHARE, BASIC AND DILUTED							$	0.23		$	(0.13	)	$	0.01		$	(0.03	)

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended						Nine Months Ended
	March 31, 2019			March 31, 2018			September 30, 2019			September 30, 2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(4,409,472	)	$	3,727,995
Net income (loss)							$	361,811		$	(1,418,879	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,258,224			875,463			6,443,422			2,271,599
Assets impairments		(31,718	)		-
Impairments								44,544			24,854
Allowance for doubtful accounts		15,629			240,419			15,366			(7,093	)
Deferred taxes		-			(308,406	)		50,693			-
Share of (loss) income after tax of the JV Company		9,949,158			(795,055	)
Gain from equity dilution in JV		(4,365,390	)		-
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		(89,000	)		(2,680,179	)		(694,000	)		(1,814,326	)
Stock compensation cost		31,675			(1,615,706	)		1,337,333			253,934

Changes in operating assets and liabilities, net of effects of acquisition:
Changes in operating assets and liabilities:
(Increase) Decrease In:
Accounts receivable		(17,991,854	)		12,343,813			(36,822,184	)		(52,845,923	)
Deferred taxes assets		-			(53,414	)		-			(52,126	)
Notes receivable		74,114			-			174,881			491,272.00
Notes receivable from the JV Company and related party		444,682			(5,015,238	)
Notes receivable from the Affiliate Company and related party								437,203			3,196,340
Inventories		(4,659,780	)		265,800			(14,813,147	)		1,555,993
Other receivables and other assets		(14,256,807	)		752,017			(17,275,954	)		1,497,230
Due from employee		(21,961	)		(23,838	)		(25,861	)		945
Advances to supplier and prepayments and prepaid expenses		436,768			3,144,325			1,357,001			(4,590,404	)
Advances to suppliers-long term		-			(3,712,576	)
Amount due from the JV Company		(2,339,431	)		(9,902,514	)
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		22,593,966			19,319,570			11,383,411			101,684,965
Other payables and accrued liabilities		5,459,852			(2,503,830	)		7,791,028			29,845,307
Notes payable		(5,624,153	)		(16,117,038	)		(11,836,950	)		(12,434,813	)
Customer deposits		36,544			120,458			(59,734	)		20,350
Income tax payable		(1,537,204	)		(819,372	)		(1,803,574	)		(2,353,826	)
Deferred income		(11,483	)		1,670,173			(56,448	)		(761,643	)
Net cash used in operating activities	$	(14,037,641	)	$	(1,087,133	)	$	(25,425,152	)	$	(836,809	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net		(300,704	)		(109,160	)		(955,670	)		(304,745	)
Purchases of land use rights and other intangible assets		-			(99,404	)		-			(105,480	)
Acquisition of Jinhua An Kao (net of cash received)		-			(3,699,801	)		-			(3,610,846	)
Acquisition of SC Autosports								-			486,954
Purchases of construction in progress		-			(82,792	)		(18,491	)		(425,241	)
Net cash used in investing activities	$	(300,704	)	$	(3,991,157	)
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		2,816,317			3,775,587			27,864,409			25,515,452
Repayments of short-term bank loans		(2,816,317	)		(3,775,587	)		(26,261,331	)		(26,283,065	)
Repayments of long-term bank loans								(145,734	)		(153,523	)
Proceeds from notes payable		-			25,539,803			-			40,313,800
Repayment of notes payable		-			(28,607,869	)		-			(43,024,633	)
Cash used for stock buyback								(2,492,579	)		-
Net cash used in financing activities	$	-		$	(3,068,066	)	$	(1,035,235	)	$	(3,631,969	)

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(14,338,345	)		(8,146,356	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH								4,627,010			(5,151,282	)
Effect of exchange rate changes on cash		446,948			568,965			(928,440	)		(512,545	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		22,353,071			16,110,496			22,353,071			16,110,496

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		8,461,674			8,533,105			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		594,425			1,466,761			1,711,101			1,981,072
Interest paid		439,183			414,319			1,304,062			1,274,399

SUPPLEMENTAL NON-CASH DISCLOSURES:
Long term and short term Advances to suppliers transferred to Construction in progress		-			3,712,576
Settlement of due from the JV Company and related parties with notes receivable from related parties		10,586,387			20,337,201
Settlement of accounts receivables with notes receivable from unrelated parties		3,750,148			7,866
Settlement of other receivables with notes receivable from unrelated parties		2,001,067			-
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable		5,751,215			7,866
Assignment of notes receivable from the JV Company and related parties to supplier to settle accounts payable		15,277,778			18,996,867
Assignment of notes receivable from the JV Company and related parties to supplier to settle other payable		6,166,252			-
Settlement of accounts payable with notes payables		2,488,735			786,581
Replacement of notes payables with accounts payable		3,631,566			-
Deferred tax changed to other comprehensive income		-			42,528
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			-

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”~~, “The 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”), 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 Chinese and global markets. The Company conducts its primary business operations through its wholly-owned subsidiaries, Zhejiang Kandi Vehicles Co., Ltd. (“Kandi Vehicles”), ~~and~~ Kandi Vehicles’ wholly and partially-owned subsidiaries, and SC Autosports LLC (“SC Autosports”).

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

Pursuant to certain VIE (as defined below in this report) agreements that were executed in January 2011, Kandi Vehicles is entitled to 100% of the economic benefits, voting rights and residual interests (100% of profits and losses) of Jinhua Kandi New Energy Vehicles Co., Ltd. (“Kandi New Energy”). Kandi New Energy currently holds battery pack production licensing rights, and supplies battery packs to the JV Company (as such term is defined below).

In April 2012, pursuant to an agreement with the shareholders of YongkangScrou Electric Co, Ltd. (“YongkangScrou”), the Company acquired 100% of YongkangScrou, a manufacturer of automobile and EV parts. YongkangScrou currently manufactures and sells EV drive motors, EV controllers, air conditioners and other electric products to the JV Company.

In March 2013, pursuant to a joint venture agreement (the “JV Agreement”) entered into by Kandi Vehicles and Shanghai Maple Guorun Automobile Co., Ltd. (“Shanghai Guorun”), a 99%-owned subsidiary of Geely Automobile Holdings Ltd. (“Geely”), the parties established Zhejiang Kandi Electric Vehicles Co., Ltd. (the “JV Company”) to develop, manufacture and sell EV products and related auto parts. In March 2014, the JV Company changed its name to Kandi Electric Vehicles Group Co., Ltd. On March 21, 2019, Kandi Vehicle signed an Equity Transfer Agreement (the “Transfer Agreement”) with Geely Technologies Group Co., Ltd. (“Geely”) to transfer certain equity interests in the ~~JV Company~~Kandi Electric Vehicles Group Co., Ltd. (the “Affiliate Company”, formerly defined as the “JV Company”) to Geely. Pursuant to the Transfer Agreement, the JVAffiliate Company converted a loan of RMB 314 million (approximately $46.7 million) from Geely ~~Group~~ last year to equity in order to increase its cash flow. As a result, the registered capital of the JVAffiliate Company became RMB ~~2.44~~2.40 billion (approximately ~~$363.2~~$336.3 million), of which Kandi Vehicles ~~owns~~then owned 43.47% and Geely ~~owns~~owned 56.53%, ~~of the equity interests in the JV Company,~~ respectively, upon the conversion of the loan into equity in the JVAffiliate Company. After that, Kandi Vehicles further agreed to sell 21.47% of its equity interests in the JVAffiliate Company to Geely for a total amount of RMB 516 million (approximately ~~$76.9~~$72.3 million). As of September 29, 2019, Kandi Vehicles has received payments in cash totaling RMB 220 million (approximately $30.9 million) and certain commercial acceptance notes 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 ~~22%~~78% of the equity interests of the ~~JV Company after the transfer.~~Affiliate Company. As ~~of the date of this report, the equity transfer has not been completed yet. ..~~

In March 2013, Kandi Vehicles formed Kandi Electric Vehicles (Changxing) Co., Ltd. (“KandiChangxing”) in the Changxing (National) Economic and Technological Development Zone. KandiChangxing is engaged in the production of EV products. In the fourth quarter of 2013, Kandi Vehicles entered into an ownership transfer agreement with the JV Company pursuant to which Kandi Vehicles transferred 100% of its ownership in KandiChangxing to the JV Company. The Company, through its 43.47% ownership interest in the JV Company, owns an indirect 43.47% economic interest in KandiChangxing.

~~In November 2013, Kandi Electric Vehicles Jinhua Co., Ltd. (“Kandi Jinhua”) was formed by the JV Company. The JV Company has a 100% ownership interest in Kandi Jinhua, and~~now the Company ~~through its 43.47% ownership interest in the JV Company, indirectly~~only owns ~~a 43.47% economic interest in Kandi Jinhua. In April 2017, Kandi Jinhua was reorganized to be owned directly by Kandi Jiangsu, which is 100% directly owned by the JV Company.~~

In November 2013, Zhejiang Ji He Kang Electric Vehicle Sales Co., Ltd. (“Ji He Kang”) was formed by the JV Company. JiHeKang is engaged in the car sales business. The JV Company has a 100% ownership interest in JiHeKang, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in JiHeKang. In April 2017, JiHeKang was reorganized to be owned directly by Kandi Jiangsu, which is 100% directly owned by the JV Company.

In December 2013, the JV Company entered into an ownership transfer agreement with Shanghai Guorun, pursuant to which the JV Company acquired a 100% ownership interest in Kandi Electric Vehicles (Shanghai) Co., Ltd. (“Kandi Shanghai”). As a result, Kandi Shanghai is a wholly-owned subsidiary22% of the JV Company, ~~and~~it was redefined as the ~~Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Kandi Shanghai.~~

In January 2014, Kandi Electric Vehicles Jiangsu Co., Ltd. (“Kandi Jiangsu”) was formed by the JV Company. The JV Company has a 100% ownership interest in Kandi Jiangsu, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Kandi Jiangsu. Kandi Jiangsu is primarily engaged in EV research and development, manufacturing, and sales. As of the date of this report, Kandi Jiangsu directly owns 100% of JiHeKang, JiHeKang Service Company, Liuchuang and KandiJinhua.

In November 2015, the JV Company formed Hangzhou Puma Investment Management Co., Ltd. (“Puma Investment”). Puma Investment provides investment and consulting services. The JV Company has a 50% ownership interest in Puma Investment (the other 50% is owned by Zuozhongyou Electric Vehicles Service (Hangzhou) Co., Ltd.). The Company, through its ownership of the JV Company, indirectly owns an 21.74% economic interest in Puma Investment.

In November 2015, the JV Company formed Hangzhou JiHeKang Electric Vehicle Service Co., Ltd. ( “JiHeKang Service Company”). JiHeKang Service Company focuses on after-market services for EV products. In April 2017, JiHeKang Service Company was reorganized to be owned directly by Kandi Jiangsu, which is 100% directly owned by the JV Company. The JV Company has a 100% ownership interest in the JiHeKang Service Company. The Company, through the JV Company, indirectly owns a 43.47% economic interest in JiHeKang ServiceAffiliate Company.

In April 2013, Kandi Vehicles and Kandi New Energy formed Kandi Electric Vehicles (Wanning) Co., Ltd., which was renamed Kandi Electric Vehicles (Hainan) Co., Ltd. (“Kandi Hainan”), when it was relocated from Wanning City to Haikou City in January 2016. Kandi Vehicles has a 90% ownership interest in Kandi Hainan, and Kandi New Energy has the remaining 10% ownership interest. Kandi Vehicles is, effectively, entitled to 100% of the economic benefits, voting rights and residual interests (100% of the profits and losses) of Kandi Hainan as Kandi Vehicles is entitled to 100% of the economic benefits, voting rights and residual interests of Kandi New Energy.

In August 2016, JiHeKang formed Jiangsu JiDian Electric Vehicle Sales Co., Ltd. (“Jiangsu JiDian”). Jiangsu JiDian is engaged in the car sales business. Since JiHeKang is 100% owned by the JV Company, the JV Company has a 100% ownership interest in Jiangsu JiDian, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Jiangsu JiDian.

In October 2016, JiHeKang acquired Tianjin BoHaiWan Vehicle Sales Co., Ltd. (“Tianjin BoHaiWan”), which is engaged in the car sales business. Since JiHeKang is 100% owned by the JV Company, the JV Company has a 100% ownership interest in Tianjin BoHaiWan, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Tianjin BoHaiWan.

In November 2016, JiHeKang formed Guangdong JiHeKang Electric Vehicle Sales Co., Ltd. (“Guangdong JiHeKang”). Guangdong JiHeKang is engaged in the car sales business. Since JiHeKang is 100% owned by the JV Company, the JV Company has a 100% ownership interest in Guangdong JiHeKang, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Guangdong JiHeKang.

In March 2017, Kandi Jiangsu formed Hangzhou Liuchuang Electric Vehicle Technology Co., Ltd. (“Liuchuang”) . Since Kandi Jiangsu is 100% owned by the JV Company, the JV Company has a 100% ownership interest in Liuchuang, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Liuchuang.

In December 2017, the JV Company formed Zhejiang Chang Dian Technology Co., Ltd. (“Zhejiang Chang Dian”). Zhejiang Chang Dian is primarily engaged in the battery replacement business. Zhejiang Chang Dian is 100% owned by the JV Company, and the Company, through its 43.47% ownership interest in the JV Company, indirectly owns a 43.47% economic interest in Zhejiang Chang Dian.

In December 2017, Kandi Vehicles and the sole shareholder of Jinhua An Kao Power Technology Co., Ltd. (“Jinhua An Kao”) entered into a Share Transfer Agreement and a Supplementary Agreement, pursuant to which Kandi Vehicles acquired Jinhua An Kao. The two agreements were signed on December 12, 2017 and the closing took place on January 3, 2018. Kandi Vehicles acquired 100% of the equity interests of Jinhua An Kao for a purchase price of approximately RMB 25.93 million (approximately $4 million) in cash. In addition, pursuant to the Supplementary Agreement, the Company 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 to the shareholder of Jinhua An Kao, and may be required to pay future consideration of an additional 2,959,837 shares of common stock, which are being held in escrow, to be released upon the achievement of certain net income-based milestones in the next three years. The Supplementary Agreement sets forth the terms and conditions of the issuance of these shares, including a provision that gives the Company the voting rights of the make good shares until conditions for vesting such shares are satisfied.

In March 2018, Zhejiang Chang Dian formed Jiangsu Gu Xiang New Energy Technology Co., Ltd. (“Jiangsu Gu Xiang”). Jiangsu Gu Xiang is primarily engaged in technical research, development, servicing and consultation for new energy vehicles, battery replacement and maintenance, and other related business.

In April 2018, Zhejiang Chang Dian Technology Co., Ltd. Hangzhou Tonglu Branch (“Chang Dian Tonglu”) was formed by Zhejiang Chang Dian. Chang Dian Tonglu is primarily engaged in the battery replacement business.

In April 2018, Zhejiang Chang Dian formed Zhejiang Chang Dian Technology Co., Ltd. Changxing Branch (“Chang Dian Changxing”). Chang Dian Changxing is primarily engaged in the battery replacement business. Chang Dian Changxing was dissolved in January 2019.

On May 31, 2018, the Company entered into a Membership Interests Transfer Agreement (the “Transfer Agreement”) with the two members of SC Autosports LLC (“SC Autosports”) (formerly known as: Sportsman Country, LLC) pursuant to which the Company acquired 100% of the ownership of SC Autosports. SC Autosports is a Dallas-based sales company primarily engaged in the wholesale of off-road vehicle products, with a small percentage of business in wholesale and retail of off-road vehicle parts. According to the terms of the Transfer Agreement, the Company transferred $10.0 million worth of restricted shares to acquire 100% of the membership interests of SC Autosports, of which the Company was required to issue $1.0 million of corresponding restricted shares within 30 days of the signing date of the Transfer Agreement, and the remaining $9.0 million of corresponding restricted shares to be released from escrow based on SC Autosports’s pre-tax profit performance over the course of the following three years. The transaction closed in July 2018.

On March 4, 2019, in order to build a logistics network composed of suppliers, manufacturers, warehouses, distribution centers and channel providers, meeting the needs of production and operation, and optimizing the cost of supply chain system, Zhejiang Kandi Supply Chain Management Co., Ltd. (“Kandi Supply Chain”) was formed. Kandi Vehicle has a 10% ownership interest in Kandi Supply Chain, the remaining 90% is owned by parties unrelated to Kandi Vehicle. As of the date of this report, Kandi Vehicle has not made any capital contribution to Kandi Supply Chain and there is no time limit to contribute any capital under the current laws of the PRC. As a minority shareholder, Kandi Vehicle is not involved in its operations.

The Company’s primary business operations consist of designing, developing, manufacturing and commercializing EV products (through Kandi ~~Hainan~~Electric Vehicles (Hainan) Co., Ltd. and the JVAffiliate Company), EV parts and off-road vehicles. As part of its strategic objective of becoming a leading manufacturer of EV products (through the JVAffiliate Company) and related services, the Company has increased its focus on pure EV-related products, and is actively pursuing expansion in the Chinese and international markets, especially the U.S. market.

The Company had a working capital of ~~$8,522,962~~$80,374,159 as of ~~March 31,~~September 30, 2019, an increase of ~~$5,996,051~~$77,847,248 from a working capital of $2,526,911 as of December 31, 2018. As of September 30, 2019 and December 31, 2018, the Company’s cash and cash equivalents was $14,338,637 and $ 15,662,201, respectively, the Company’s restricted cash was $11,713,004 and $6,690,870, respectively.

During the first quarter of 2019, the Company signed an agreement 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). As of September 29, 2019, the Company has received payments in cash totaling RMB 220 million (approximately $30.9 million) and certain commercial acceptance notes 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 to its ongoing operations. The cash flow and operating capacity of the Company will be greatly improved after receiving the above payments.

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 JVAffiliate Company, because most of them are indirectly impacted by the progress of the receipt of government subsidies. During the first quarter of 2019, the Company signed an agreement to sell 21.47% of its equity interests in the JV Company to Geely for a total amount of RMB 516 million (approximately $76.9 million). On April 11, 2019, the Company has received RMB 100 million (approximately $14.9 million) from Geely, and the rest is expected to be collected before September 25, 2019. The Company plans to apply the proceeds from the equity transfer to its ongoing operations.

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. These loans typically have one year terms, and upon the payment of all outstanding principal and interest on a particular loan, the~~ banks, have typically rolled over the loan for an additional one-year term, with adjustments made to the interest rate to reflect prevailing market rates. This practice has been ongoing and the Company believes that short-term bank loans will remain available on normal trade terms if needed. In 2019, management will take measures to grow the business and further improve the Company’s liquidity. The Company acknowledges that it continues to face a challenging competitive environment and expects to take actions that will enhance the Company’s liquidity and financial flexibility to support the Company’s operation needs.

~~We finance our~~as well as its ongoing operating activities by using funds from ~~our~~ operations, external credit or financing arrangements. WeThe Company routinely ~~monitor~~monitors current and expected operational requirements and financial market conditions to evaluate the use of available financing sources. Considering ~~our~~the existing working capital position and ~~our~~the ability to access debt funding sources, ~~we believe~~the management believes that ~~our~~the Company’s operations and borrowing resources are sufficient to provide for ~~our~~its current and foreseeable capital requirements to support ~~our~~its ongoing operations for the next twelve months.

The ~~Company maintains its general ledger and journals using the accrual method of accounting for financial reporting purposes. The Company’s~~accompanying unaudited condensed consolidated financial statements ~~and notes are the representations of the Company’s management. Accounting policies adopted by the Company conform to~~have been prepared in accordance with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“U.S. GAAP”) for interim information, and ~~have~~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 has been ~~consistently applied in~~derived from the audited consolidated financial statements as of such date. For a more complete understanding of the Company’s ~~presentation of~~business, financial position, operating results, cash flows, risk factors and other matters, please refer to its ~~financial statements.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Form 10-K”).

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

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:

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

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 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.

~~The Company’s operations~~Our significant accounting policies are ~~conducted~~detailed in ~~China. As a result, the Company’s business, financial condition and results~~“Note 2 - Summary of operations may be influenced by the political, economic and legal environments in China, and by the general state of the Chinese economy. In addition, the Company’s earnings are subject to movements in foreign currency exchange rates when transactions are denominated in Renminbi (“RMB”), which is the Company’s functional currency. Accordingly, the Company’s operating results are affected by changes in the exchange rate between the U.S. dollar and the RMB.

The Company’s operations in China are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange restrictions. The Company’s performance may be adversely affected by changes in the political and social conditions in China, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

~~Level 1—defined as observable inputs such as quoted prices in active markets;~~

~~Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and~~

~~Level 3—defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.~~

The Company’s financial instruments primarily consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, other receivables, accounts payable, other payables and accrued liabilities, short-term bank loans, notes payable, and contingent consideration.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, other receivables, accounts payable, other payables and accrued liabilities approximate fair value because of the short-term nature of these items. The estimated fair values of short-term bank loans were not materially different from their carrying value as presented due to the brief maturities and because the interest rates on these borrowings approximate those that would have been available for loans of similar remaining maturities and risk profiles. As the carrying amounts are reasonable estimates of fair value, these financial instruments are classified within Level 1 of the fair value hierarchy. The Company identified notes payable as Level 2 instruments due to the fact that the inputs to valuation are primarily based upon readily observable pricing information. The balance of notes payable, which were measured and disclosed at fair value, was $6,300,010 and $12,787,619 at March 31, 2019 and December 31, 2018, respectively.

Contingent consideration related to the acquisitions of Jinhua An Kao and SC Autosports, which is accounted for as liabilities, are measured at each reporting date for their fair value using Level 3 inputs. The fair value of contingent consideration was $7,167,000 and $7,256,000 at March 31, 2019 and December 31, 2018, respectively.

~~The Company considers highly-liquid investments purchased with original maturities of three months or less to be cash equivalents.~~

~~As of March 31, 2019 and December 31, 2018, the Company’s restricted cash was $5,134,661 and $6,690,870, respectively.~~

Inventories are stated at the lower of cost or net realizable value (market value). The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the basis of weighted average and comprises direct materials, direct labor and an appropriate proportion of overhead.

Net realizable value is based on estimated selling prices less selling expenses and any further costs expected to be incurred for completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances.

Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts is recorded for periods in which the Company determines a loss is probable, based on its assessment of specific factors, such as troubled collections, historical experience, accounts aging, ongoing business relations and other factors. Accounts are written off after exhaustive collection efforts. If accounts receivable are to be provided for, or written off, they are recognized in the consolidated statement of operations within the operating expenses line item. If accounts receivable previously written off is recovered in a later period or when facts subsequently become available to indicate that the amount provided as an allowance for doubtful accounts was incorrect, an adjustment is made to restate allowance for doubtful accounts.

As of March 31, 2019 and December 31, 2018, credit terms with the Company’s customers were typically 180 to 360 days after delivery. As of March 31, 2019 and December 31, 2018, the Company had a $138,678 and $120,010 allowance for doubtful accounts, as per the Company management’s judgment based on their best knowledge. The Company conducts quarterly assessments of the state of the Company’s outstanding receivables and reserves any allowance for doubtful accounts if it becomes necessary.

Notes receivable represent short-term loans to third parties with maximum terms of six months. Interest income is recognized according to each agreement between a borrower and the Company on an accrual basis. For notes receivable with banks, the interest rates are determined by banks. For notes receivable with other parties, the interest rates are based on agreements between the parties. If notes receivable are paid back, that transaction will be recognized in the relevant year. If notes receivable are not paid back, or are written off, that transaction will be recognized in the relevant year if default is probable, reasonably assured, and the loss can be reasonably estimated. The Company will recognize income if the written-off loan is recovered at a future date. In case of any foreclosure proceedings or legal actions, the Company provides an accrual for the related foreclosure and litigation expenses. The Company also receives notes receivable from the JV Company and other parties to settle accounts receivable. If the Company decides to sell notes receivable at a discount for the purpose of receiving immediate cash, the current discount rate is approximately in the range of 3.50% to 4.50% annually. As of March 31, 2019 and December 31, 2018, the Company had notes receivable from unrelated parties of $0 and $72,712, respectively, which notes receivable typically mature within six months. As of March 31, 2019 and December 31, 2018, the Company had notes receivable from JV Company and other related parties of $3,769,874 and $3,861,032, respectively, which notes receivable typically mature within six months.

~~Advances to suppliers represent cash paid in advance to suppliers, and include advances to raw material suppliers, mold manufacturers, and equipment suppliers.~~

Advances for raw material purchases are typically settled within two months of the Company’s receipt of the raw materials. Prepayment is offset against the purchase price after the equipment or materials are delivered.

Property, Plants and equipment are carried at cost less accumulated depreciation. Depreciation is calculated over the asset’s estimated useful life, using the straight-line method. Leasehold improvements are amortized over the life of the asset or the term of the lease, whichever is shorter. Estimated useful lives are as follows:

The costs and related accumulated depreciation of assets sold or otherwise retired are eliminated from the Company’s accounts and any gain or loss is included in the statements of income. The cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized.

Construction in progress (“CIP”) represents the direct costs of construction, and the acquisition costs of buildings or machinery. Capitalization of these costs ceases, and construction in progress is transferred to plants and equipment, when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for until the assets are completed and ready for their intended use.

Land in China is owned by the government and land ownership rights cannot be sold to an individual or to a private company. However, the Chinese government grants the user a “land use right” to use the land. The land use rights granted to the Company are amortized using the straight-line method over a fifty-year term.

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in Statement of Financial Accounting Standards (“SFAS”) No. 144 (now known as “ASC 360”). The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for disposal costs.

The Company adopted ASC Topic 606 Revenue from Contracts with Customers with a date of the initial application of January 1, 2018 using the modified retrospective method. As a result, the Company has changed its accounting policy for revenue recognition. The impact of the adoption of ASC Topic 606 on the Company’s consolidated financial statements is not material.

In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company generates revenue through EV parts and off-road vehicles. The revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the performance obligation is fulfilled, usually at the time of delivery, at the net sales price (transaction price). Estimates of variable consideration, such as volume discounts and rebates, are determined, reviewed and revised periodically by management. The amount of variable consideration recognize is limited and is not likely to be reversed. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods are accounted for as fulfillment costs rather than separate performance obligations and recorded as sales and marketing expenses.

The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

~~Receivables are recorded when the Company has an unconditional right to consideration.~~

See Note 23 “Segment Reporting” for disaggregation of revenue by reporting segments. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Expenditures relating to the development of new products and processes, including improvements to existing products, are expensed as incurred. Research and development expenses were $537,433 and $757,298 for the three months ended March 31, 2019, and March 31, 2018, respectively.

Grants and subsidies received from the Chinese government are recognized when the proceeds are received or collectible and related milestones have been reached and all contingencies have been resolved.

~~For the three months ended March 31, 2019 and March 31, 2018, $47,724 and $95,255, respectively, were received by the Company’s subsidiaries from the Chinese government.~~

The Company accounts for income tax using an asset and liability approach, which allows for the recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The accounting for deferred tax calculation represents the Company management’s best estimate of the most likely future tax consequences of events that have been recognized in our financial statements or tax returns and related future anticipation. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization will be uncertain.

~~The accompanying consolidated financial statements are presented in United States dollars. The functional currency~~Policies” of the Company is the Renminbi (RMB). Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred.

Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the reporting period, which rates are obtained from the website: http://www.oanda.com

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation changes.

In accordance with ASC 280-10, Segment Reporting, the Company’s chief operating decision makers rely upon the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company. As a result of the assessment made by the Company’s chief operating decision makers, the Company has only one operating segment. The Company does not distinguish between markets or segments for the purpose of internal reporting.

~~The Company’s stock option expenses are recorded in accordance with ASC 718 and ASC 505.~~

The fair value of stock options is estimated using the Black-Scholes-Merton model. The Company’s expected volatility assumption is based on the historical volatility of the Company’s common stock. The expected life assumption is primarily based on the expiration date of the option. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The recognition of stock option expenses is based on awards expected to vest. ASC standards require forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

~~The stock-based option expenses for the three months ended March 31, 2019 and March 31,~~ 2018 ~~were $0 and $997,496 net of a reversal for forfeited stock option of $2,644,877, respectively. See Note 18. There were no forfeitures estimated during the reporting period.~~Form 10-K.

The Company allocates goodwill from business combinations to reporting units based on the expectation that the reporting unit is to benefit from the business combination. The Company evaluates its reporting units on an annual basis and, if necessary, reassigns goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

Application of the goodwill impairment test requires judgments, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit. The Company first assesses qualitative factors to determine whether it is more likely than not that goodwill is impaired. If the more likely than not threshold is met, the Company performs a quantitative impairment test.

~~As of March 31, 2019 and March 31, 2018, the Company determined that its goodwill was not impaired.~~

Intangible assets consist of patent, trade names and customer relations associated with the purchase price from the allocation of YongkangScrou and Jinhua An Kao. Such assets are being amortized over their estimated useful lives. Intangible assets are amortized as of March 31, 2019. The amortization expenses for intangible assets were $159,503 and $169,821 for the three months ended March 31, 2019 and March 31, 2018, respectively.

Gross proceeds are first allocated according to the initial fair value of the freestanding derivative instruments (i.e. the warrants issued to the Company’s investors in its previous offerings, or the “Investor Warrants”). The remaining proceeds are allocated to common stock. The related issuance expenses, including the placement agent cash fees, legal fees, the initial fair value of the warrants issued to the placement agent and others were allocated between the common stock and the Investor Warrants based on how the proceeds are allocated to these instruments. Expenses related to the issuance of common stock were charged to paid-in capital. Expenses related to the issuance of derivative instruments were expensed upon issuance.

In accordance with accounting standards regarding consolidation of variable interest entities, or VIEs, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The Company has concluded, based on the contractual arrangements, that Kandi New Energy is a VIE and that the Company’s wholly-owned subsidiary, Kandi Vehicles, absorbs a majority of the risk of loss from the activities of this company, thereby enabling the Company, through Kandi Vehicles, to receive a majority of its expected residual returns.

Additionally, because Kandi New Energy is under common control with other entities, the consolidated financial statements have been prepared as if the transactions had occurred retroactively as to the beginning of the reporting period of these consolidated financial statements.

Control and common control are defined under the accounting standards as “an individual, enterprise, or immediate family members who hold more than 50 percent of the voting ownership interest of each entity.” Because the owners collectively own 100% of Kandi New Energy, and have agreed to vote their interests in concert since the establishment of each of these three companies as memorialized in the Voting Rights Proxy Agreement, the Company believes that the owners collectively have control and common control of Kandi New Energy. Accordingly, the Company believes that Kandi New Energy was constructively held under common control by Kandi Vehicles as of the time the contractual agreements were entered into, establishing Kandi Vehicles as their primary beneficiary. Kandi Vehicles, in turn, is owned by Continental, which is owned by the Company.

~~Recent accounting pronouncements that the Company has adopted or may be required to adopt in the future are summarized below:~~

In May 2014, the FASB issued a new standard on revenue recognition related to contracts with customers. This standard supersedes nearly all existing revenue recognition guidance and involves a five-step principles-based approach to recognizing revenue. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive. The new standard also require additional qualitative and quantitative about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted this standard in the first quarter of 2018 using the modified retrospective approach. The impact of adoption on its Condensed Consolidated Financial Statements for any period presented is not material.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” This ASU amends existing guidance to require that deferred income tax assets and liabilities be classified as non-current in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax assets and liabilities into a current amount and a non-current amount in a classified balance sheet. The Company adopted this standard prospectively in the first quarter of 2018. The impact of adoption on its Condensed Consolidated Financial Statements for any period presented is not material.

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, ~~we have~~the Company adopted the new standard using the effective date approach. WeThe 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, wethe management elected the practical expedients allowing usthe 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 ~~$140k~~$140,000 as of January 1, 2019, which primarily relates to ~~our~~the corporate office leases for SC Autosports. The standard did not materially impact ~~our~~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 ~~we are~~the Company is the lessee.

In June 2016, the FASB issued ASU 2016-13,” Measurement of Credit Losses on Financial Instruments”, to require financial assets carried at amortized cost to be presented at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards. The ASUs are effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. Adoption of the ASUs is modified retrospective. We are currently obtaining an understanding of the ASUs and plan to adopt them on January 1, 2020.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory, which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. The Company adopted this standard prospectively in the first quarter of 2018. The impact of adoption on its Condensed Consolidated Financial Statements for any period presented is not material.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” (“ASU 2016-18”). This ASU requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard in the first quarter of 2018. The impact of adoption on its Condensed Consolidated Financial Statements for any period presented is not material.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company adopted this standard prospectively in the first quarter of 2018. The impact of adoption on its Condensed Consolidated Financial Statements for any period presented is not material.

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”) and allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from U.S. tax reform. 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 the evaluation and determined there is no impact of on its Condensed 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 is currently evaluating the impact of adoption on the Consolidated Financial Statements.

For the three-month ~~periods~~period ended ~~March 31,~~September 30, 2019, the Company’s major customers, ~~who~~each of whom accounted for more than 10% of the Company’s consolidated revenue, were as follows:

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

For the three-month ~~periods~~period ended ~~March 31,~~September 30, 2019, the Company’s material suppliers, each of whom accounted for more than 10% of the Company’s total purchases, were as follows:

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

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). ~~For~~Due to the ~~three months ended March 31, 2019 and 2018,~~average market price of the common stock during the period below the exercise price of the options, approximately 3,900,000 ~~and 3,900,000 potentially dilutive shares~~options were excluded from the calculation of ~~dilutive earnings~~diluted net loss per share, ~~because their effect would have been anti-dilutive.~~for the three and nine months 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.

The following is the calculation of earnings per share for ~~three months~~the three-month periods ended ~~March 31,~~September 30, 2019 and 2018:

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

	March 31,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
Accounts receivable	$	49,536,596		$	34,394,738		$	54,990,221		$	34,394,738
Less: allowance for doubtful accounts		(138,678	)		(120,010	)		(130,420	)		(120,010	)
Accounts receivable, net	$	49,397,918		$	34,274,728		$	54,859,801		$	34,274,728

	March 31,			December 31,			September 30,		December 31,
	2019			2018			2019		2018
Raw material	$	7,401,777		$	7,741,264		$	11,192,506	$	7,040,728
Work-in-progress		9,676,284			1,571,179			13,778,920		1,571,179
Finished goods		10,975,352			13,526,126			10,475,957		13,385,961
Total inventories		28,053,413			22,838,569
Less: provision for slow moving inventories		(829,523	)		(840,701	)
Inventories, net	$	27,223,890		$	21,997,868
Inventories							$	35,447,383	$	21,997,868

As of ~~March 31,~~September 30, 2019, ~~and December 31, 2018, are summarized as follows:~~

~~Details of~~there was $41,549,888 notes receivable from unrelated parties, asamong which $70,067 were bank acceptance notes from payments for sales and $41,479,821 were commercial acceptance notes from payments for equity transfer of the Affiliate Company (refer to Note 24-summarized information of equity method investment in the Affiliate Company). As of December 31, 2018, ~~are as set forth below:~~there was $72,712 notes receivable from unrelated parties, among which $72,712 were bank acceptance notes from payments for sales.

~~Notes~~As of September 30, 2019, there was $0 notes receivable from the JVAffiliate Company and related parties. As of December 31, 2018. there was $3,861,032 notes receivable from the Affiliate Company and related parties, ~~as of March 31, 2019 and December 31, 2018, are~~among which $3,861,032 were bank acceptance notes from payments for sales.

~~Details~~As of ~~notes~~September 30, 2019, the Company’s other receivable ~~from~~includes $9.2 million short-term loan lent to an unrelated party with a 6% annual interest rate to maximize the ~~JV Company and related parties as~~use of ~~March 31, 2019, are as set forth below:~~idled cash. This loan can be redeemed at any time.

~~Details of Notes Receivable from JV Company and related party as of December 31, 2018 were as follows:~~

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

	March 31,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
At cost:
Buildings	$	31,393,469		$	30,638,417		$	29,703,216		$	30,638,417
Machinery and equipment		65,062,668			63,398,627			61,376,817			63,398,627
Office equipment		873,309			852,172			998,625			852,172
Motor vehicles and other transport equipment		428,784			418,476			403,253			418,476
Molds and others		27,707,878			26,849,806			25,420,383			26,849,806
		125,466,108			122,157,498			117,902,294			122,157,498
Less : Accumulated depreciation
Buildings	$	(5,405,651	)	$	(5,019,075	)	$	(5,579,392	)	$	(5,019,075	)
Machinery and equipment		(10,236,825	)		(8,442,940	)		(12,395,351	)		(8,442,940	)
Office equipment		(438,139	)		(393,893	)		(464,806	)		(393,893	)
Motor vehicles and other transport equipment		(347,663	)		(325,917	)		(344,633	)		(325,917	)
Molds and others		(26,241,266	)		(25,486,100	)		(24,626,908	)		(25,486,100	)
		(42,669,544	)		(39,667,925	)		(43,411,090	)		(39,667,925	)
Less: provision for impairment for fixed assets		(454,578	)		(443,650	)
Less: impairment								-			(443,650	)
Property, plant and equipment, net	$	82,341,986		$	82,045,923		$	74,491,204		$	82,045,923

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the net book value of property, plant and equipment pledged as collateral for the Company’s bank loans totaled ~~$8,195,010~~$7,441,479 and $8,105,419, respectively. ~~See also~~Also see Note ~~15.~~18.

Depreciation expenses for the three months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018 were ~~$2,015,459~~$1,832,83 and ~~$618,540,~~$239,434, respectively. Depreciation expenses for the nine months ended September 30, 2019 and September 30, 2018 were $5,724,863 and $1,511,018, respectively

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.

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

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 and Comprehensive Income and were $154,027 and $157,817 for the three months ended September 30, 2019 and 2018, respectively. And $471,497 and $493,405 for the nine months ended September 30, 2019 and 2018, respectively.

	March 31,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
Cost of land use rights	$	15,293,146		$	14,925,518		$	14,382,544		$	14,925,518
Less: Accumulated amortization		(3,338,216	)		(3,175,790	)		(3,297,827	)		(3,175,790	)
Land use rights, net	$	11,954,930		$	11,749,728		$	11,084,717		$	11,749,728

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the net book value of land use rights pledged as collateral for the Company’s bank loans was ~~$7,889,892~~$7,366,117 and $7,756,253, respectively. Also see Note ~~15.~~18.

The amortization expenses for the three months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, were ~~$83,762~~$80,462 and ~~$88,899,~~$82,586, respectively.

The amortization expenses for the nine months ended September 30, 2019 and September 30, 2018, were $247,061 and $267,177, respectively. Amortization expenses for the next five years and thereafter is as follows:

2019 (Nine Months)	$	251,286
2019 (Three Months)			$	82,354
2020		335,048		329,415
2021		335,048		329,415
2022		335,048		329,415
2023		335,048		329,415
Thereafter		10,363,452		9,684,703
Total	$	11,954,930	$	11,084,717

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.

	March 31,		December 31,		September 30,		December 31,
	2019		2018		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.		29,503,360		28,794,136		27,606,502		28,794,136
	$	29,503,360		28,794,136	$	27,606,502		28,794,136

The interest ~~expense~~expenses of short-term and long-term bank loans for the three months ended ~~March 31,~~September 30, 2019, and 2018 ~~was $439,183~~were $435,524 and ~~$414,319,~~$426,167, respectively. The interest expenses of short-term and long-term bank loans for the nine months ended September 30, 2019, and 2018 were $1,304,062 and $1,274,399, respectively.

As of ~~March 31,~~September 30, 2019, the aggregate amount of short-term and long-term loans guaranteed by various third parties was $0.

~~By issuing~~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, ~~rather than paying cash to suppliers, the Company can defer payments until the~~among which $11,463,004 was bank acceptance notes. As of December 31, 2018, there was $12,787,619 notes payable, are due. Depending on bank requirements, the Company may need to deposit restricted cash in banks to back up the bank notes payable, while the restricted cash deposited in the banks will generate interest income.

Aamong which $8,767,670 were bank acceptance ~~note is a promised future payment, or time draft, which is accepted~~notes, $2,763,074 were commercial acceptance notes and ~~guaranteed by a bank and drawn on a deposit at the bank. The banker’s acceptance note specifies the amount of the funds, the date, and the person to which the payment is due.~~

After acceptance, the draft becomes an unconditional liability of the bank, but the holder of the draft can sell (exchange) it for cash at a discount to a buyer who is willing to wait until the maturity date for the funds in the deposit. $4,884,661$1,256,875 were other notes payable. $11,463,004 and $6,440,870 were held as collateral for the notes payable as of ~~March 31,~~September 30, 2019 and December 31, 2018, respectively.

~~As is common business practice in the PRC, the Company issues notes payable to its suppliers as settlement for accounts payable.~~NOTE 20 - TAXES

~~Notes payable for March 31, 2019 and December 31, 2018 were summarized as follows:~~

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 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 ~~qualify~~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 JVAffiliate Company and its subsidiaries is 25%.

~~Our~~The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter ~~we update our~~the Company updates its estimate of the annual effective tax rate, and if ~~our~~its estimated tax rate changes, ~~we make~~the management makes a cumulative adjustment. For 2019, ~~we estimate~~the management estimates that ~~our~~its effective tax rate will be favorably affected by non-taxable income such as the share of income of the JVAffiliate 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 part of entertainment expenses. ~~We record~~The Company records valuation allowances against the deferred tax assets associated with losses for which we 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 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019, and 2018 were a tax benefit of ~~15.49%~~13.05% on a reported ~~loss~~income before taxes of approximately ~~$5.2~~$0.3 million, and an effective income tax rate with a tax ~~expense~~benefit of ~~11.76%~~20.70% for the same period of last year on a reported ~~income~~loss before taxes of approximately ~~$4.2~~$1.8 million, respectively.

~~Our~~The quarterly tax provision, and ~~our~~the quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss, acquisitions (including integrations) and investments, changes in our stock price, changes in our 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 effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. ~~Our~~The income tax provision for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 was tax benefit of ~~$808,488~~$41,780 and tax ~~expense~~benefit of ~~$496,646,~~$370,316, respectively.

Effective January 1, 2007, the Company adopted the guidance in ASC 740 relating to uncertain tax positions. The guidance 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, 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, 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 ~~March 31,~~September 30, 2019, 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 ~~March 31,~~September 30, 2019 the Company has no accrued interest or penalties related to uncertain tax positions.

The aggregate NOLs in 2018 was $28.1 million deriving from entities in the PRCand ~~the~~Hong Kong. The aggregate NOLs in 2017 was $22.7 million deriving from entities in the PRC, Hong Kong and ~~US.~~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 cumulative net operating loss Pre-2018 in the U.S. can be carried forward for twenty years. The cumulative net operating loss in Hong Kong can be carried forward without an expiration date.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, the PRC CIT rate was 25%. Certain subsidiaries of the Company are entitled to tax exemptions (tax holidays) for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018.

The combined effects of income tax expense exemptions and reductions available to the Company for the ~~three~~nine months ~~March 31,~~ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Nine Months Ended
	March 31,				September 30,
	2019		2018		2019		2018
Tax benefit (holiday) credit	$	71,569	$	23,610	$	377,303	$	1,345,541
Basic net income per share effect	$	0.000	$	0.000	$	0.000	$	0.000

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin (SAB) No. 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should 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 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 in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Cuts and Jobs Act of 2017 (the ~~“TCJA”~~“Tax Act”) ~~Tax Act, we~~, the Company recorded provisional estimates related to the re-measurement of deferred taxes and the Deemed Repatriation Transition Tax in our financial statements for ~~our~~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 ~~TCJA,~~the Tax Act, Global Intangible Low-Taxed Income ~~(” GILTI “)~~(“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.

The Company has corporate office leases for SC Autosports, with a term of 37 months from January 31, 2017 to January 31, 2020. The monthly lease payment is $11,000. The Company adopted ASC 842 to record operating lease assets and operating lease liabilities as of January 1, 2019, with a remaining lease term of 13 months and discount rate of 4.75%.

As of September 30, 2019, the Company’s right - of - use asset was $ 42,974 and lease liability was $44,121. For three months and nine months ended September 30, 2019, the Company’s lease expense was $33,000 and $99,000, respectively.

On ~~May 29, 2015,~~January 3, 2018, the ~~Compensation Committee~~Company completed the acquisition of 100% of the ~~Board~~equity of ~~Directors~~Jinhua An Kao. The Company paid approximately RMB 25.93 million (approximately $4 million) at the closing of the ~~Company approved~~transaction using cash on hand and issued a total of 2,959,837 shares of restrictive stock or 6.2% of the ~~grant of stock options to purchase 4,900,000~~Company’s total outstanding shares of the ~~Company’s~~ common stock valued at ~~an exercise price of $9.72 per share,~~approximately $20.7 million to the ~~Company’s directors, officers~~former shareholder of Jinhua An Kao and ~~senior employees. The~~his designees (the “An Kao Shareholders”), and may be required to pay future consideration up to an additional 2,959,837 shares of common stock, ~~options~~which are being held in escrow, to be released contingent upon the achievement of certain net income-based milestones in next three years. Any escrowed shares that are not released from escrow to the An Kao Shareholders for failure to achieve the milestones will ~~vest ratably over three years~~be forfeited and ~~expire on~~returned to the ~~tenth anniversary~~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, Jinhua An Kao achieved its first year net profit target. According to the agreement, the former shareholders of An Kao received 739,959 shares of Kandi’s restrictive common stock or 12.5% of total Kandi stock in the purchase price.

On July 1, 2018, the Company completed the acquisition of 100% of the ~~grant date.~~equity of SC Autosports. 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 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 up to an additional 1,547,721 shares of common stock, ~~options at $39,990,540~~which are being held in escrow, 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 failure to achieve the milestones will be forfeited and ~~had amortized~~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, the former members of SC Autosports received 343,938 shares of Kandi’s restrictive common stock ~~compensation expense using~~or 20% of total Kandi stock in the ~~straight-line method over~~purchase price.

The Company recorded contingent consideration liability of the ~~service period from May 29, 2015, through May 29, 2018. The~~estimated fair value of the ~~stock options was estimated using~~contingent consideration the ~~Black Scholes Model with an expected volatility~~Company currently expects to pay to Jinahua Ankao and SC Autosports’ former members upon the achievement of 90%, an expected life of 10 years, a risk-free interest rate of 2.23% and an expected dividend yield of 0.00%. For three months ended March 31, 2019, there were $0 in stock compensation expenses associated with stock options booked, as all expenses had been amortized as of May 29, 2018.

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 ~~the 4,900,000 options issued to the employees and directors on May 29, 2015 is $8.1613 per share.~~Income.

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

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 ~~provide~~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 ~~provide~~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 ~~provide~~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~~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.

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

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 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 the Company to grant 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan.

For three months ended ~~March 31,~~September 30, 2019 and 2018, the Company recognized ~~$31,675~~$22,925 and $31,675 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.

~~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.~~

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

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 and Comprehensive Income and were $159,503 and $168,025 for the three For nine months ended ~~March 31,~~September 30, 2019 and 2018, the Company recognized $1,337,333 and $1,311,885 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.

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

NOTE ~~21 –~~24 - SUMMARIZED INFORMATION OF EQUITY METHOD INVESTMENT IN THE JVAFFILIATE COMPANY

The Company’s condensed consolidated net income (loss) includes the Company’s proportionate share of the net income or loss of the Company’s equity method investees. When the Company records its proportionate share of net income (loss) in such investees, it increases equity income (loss) – net in the Company’s consolidated statements of income and 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 signed an Equity Transfer Agreement with Geely Technologies Group Co., Ltd. to transfer certain equity interests in the JVAffiliate Company to Geely. Pursuant to the Transfer Agreement, the JVAffiliate Company converted a loan of RMB 314 million (approximately $46.7 million) from Geely Group last year to equity in order to increase its cash flow. As a result, the registered capital of the JVAffiliate Company became RMB ~~2.44~~2.40 billion (approximately ~~$363.2~~$336.3 million), of which Kandi Vehicles owned 43.47% and Geely owned 56.53%, ~~of the equity interests in the JV Company,~~ respectively, upon the conversion of the loan into equity in the JVAffiliate Company (the “March JVAffiliate Loan to Equity Conversion”). Kandi Vehicles further agree to sell 21.47% of its equity interests in the JVAffiliate Company to Geely for a total amount of RMB 516 million (approximately ~~$76.9~~$72.3 million) (the ~~“JV~~“Affiliate Equity Transfer”). Kandi Vehicles shall own 22% of the equity interests of the JVAffiliate Company as a result of the transfer. As of September 29, 2019, the Company has received payments in cash totaling RMB 220 million (approximately $30.9 million) and certain commercial acceptance notes 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 ~~31,~~29, 2020. As of September 30, 2019, the equity transfer has ~~not~~ been ~~completed yet.~~completed. Therefore, in the ~~first~~third quarter of 2019, the Company has ~~not~~ recognized the gain from equity ~~sale.~~

As of March 31, 2019, the JV Company consolidated its interests in the following entities on its financial statements: (1) its 100% interest in Kandi Changxing; (2) its 100% interest in Zhejiang Chang Dian and each of its two direct wholly-owned subsidiaries, Chang Dian Tonglu and Jiangsu Gu Xiang; (3) its 100% interest in Kandi Shanghai; (4) its 100% interest in Kandi Jiangsu and each of its four direct wholly-owned subsidiaries, i.e., JiHeKang, JiHeKang Service Company, Liuchuang and KandiJinhua; and (5) 100% interest in each of the directly wholly-owned subsidiaries of JiHeKang, i.e., Tianjin BoHaiWan, Jiangsu JiDian and Guangdong JiHeKang. The Company accounted for its investments in the JVAffiliate Company under the equity method of accounting. Since the March JVAffiliate Loan to Equity Conversion was completed at the very end of ~~this~~the first quarter, ~~and~~ the ~~JV Equity Transfer has not been completed as of March 31, 2019, we~~Company still recorded 50% of the JVAffiliate Company’s loss for the first quarter of 2019. ~~As a result, the Company’s consolidated net income for three months ended March 31, 2019 and 2018, included equity income~~Starting from the JVsecond quarter of the 2019, since the equity interests in the Affiliate Company ~~during such periods.~~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.

The ~~combined~~consolidated results of operations and financial position of the JVAffiliate Company are summarized below:

	Three Months ended						Three Months ended
	March 31,						September 30,
	2019			2018			2019			2018
Condensed income statement information:
Net sales	$	1,256,873		$	33,772,205		$	520,275		$	19,880,543
Gross profits		(21,542	)		5,560,402
Gross loss								(377,700	)		3,133,283
Gross margin		-1.7	%		16.5	%		-72.6	%		15.8	%
Net(loss) income		(20,191,314	)		1,021,639			(19,435,546	)		(5,860,746	)
% of net sales		-1606.5	%		3.0	%
Company’s share in net (loss) income of JV based on 50% ownership	$	(10,095,657	)	$	510,819

For the three months ended March 31, 2019 and 2018, the JV Company’s revenues were derived primarily from the sales of EV products and EV parts in China. Because the Company has a 43.47% ownership interest in the JV Company as of March 31, 2019 and 50% as of March 31, 2018 and accounted for its investments in the JV Company under the equity method of accounting, the Company did not consolidate the JV Company’s financial results, but instead included equity income from the JV Company during such periods.

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

The Company’s equity method investments in the JVAffiliate Company for ~~three~~the nine months ended ~~March 31,~~September 30, 2019 and 2018 are as follows:

	Three Months ended						Nine Months ended
	March 31,						September 30,
	2019			2018			2019			2018
Investment in the JV Company, beginning of the period,	$	128,929,893		$	70,681,013
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		4,365,390			-			4,291,974			-
Company’s share in net (loss) income of JV based on 50% ownership		(10,095,657	)		510,819
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		(10,624	)		(175,274	)		(12,557	)		(484,037	)
Year 2018 unrealized profit realized		157,123			459,510			154,480			448,429
Subtotal		(9,949,158	)		795,055			(22,883,126	)		(79,593	)
Exchange difference		3,146,280			2,559,427			(4,766,530	)		(3,699,548	)
Investment in JV Company, end of the period	$	126,492,405		$	74,035,495
Investment in Affiliate Company, end of the period							$	53,837,011		$	146,272,731

The gain from equity dilution for ~~three~~nine months ended ~~March 31,~~September 30, 2019 resulted from the JVAffiliate Company issuing shares to the JVAffiliate 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 JVAffiliate Company.

Sales to the Company’s customers, the JVAffiliate Company and its subsidiaries, for the three months ended ~~March 31,~~September 30, 2019, were ~~$1,733,497~~$4,720,159 or ~~10%~~14.9% of the Company’s total revenue, ~~for the year,~~ a decrease of ~~33.4%~~79.6% from $23,135,326 of the ~~sales to the JV Company from the~~ same ~~period of~~quarter last year. Sales to the JVCompany’s customers, the Affiliate Company and its subsidiaries, for the nine months ended September 30, 2019, were $10,543,190 or 14.3% of the Company’s total revenue, a decrease of 65.4% from $30,479,521 of the same quarter 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.

~~There were no EV products sold in the first quarter of 2019 due to the national subsidy policy adjustment during the first quarter and pending restructuring of the JV Company.~~

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the net current and noncurrent net amount due from the JVAffiliate Company and its subsidiaries, was ~~$61,145,985~~$25,335,894 and ~~$67,801,735,~~$67,683,462, respectively. ~~The breakdown is as below:~~

~~As of March 31, 2019 and December 31, 2018, the current and noncurrent amount due to the JV Company and its subsidiaries, was $85,757 and $118,273, respectively. The breakdown is as below:~~

	March 31,		December 31,
	2019		2018		September 30,		December 31,
Guarantee provided to					2019		2018
Kandi Electric Vehicles Group Co., Ltd.		-		7,271,247		-		7,271,247
Kandi Electric Vehicles Jiangsu Co., Ltd.		7,450,343		7,271,247		-		7,271,247
Total	$	7,450,343	$	14,542,494	$	-	$	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 ~~$2,980,137~~$2,802,691 (RMB 20 million) loan from Shanghai Pudong Development Bank Jinhua Branch, with a related loan period of 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 NGCL repays the principal and interest according to the agreement, the plaintiff will not ask the Company for recovery. As of ~~March 31, 2019,~~the date of this report, 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 ~~$4,321,199~~$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 JVAffiliate Company for bank acceptance notes in the aggregate amount of ~~$3,129,144~~$2,942,825 (RMB ~~21million)~~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. Under this guarantee contract,~~2019 by the ~~Company agreed to perform all the obligations of the JV Company under the loan contract if the JV Company fails to perform its obligations as set forth therein.~~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 ~~$7,450,343~~$7,006,726 (RMB50 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. Under this guarantee contract, the Company agreed to perform all the obligations of the JV Company under the contract if the~~2019 and was paid off on July 31, 2019 by Kandi ~~Jiangsu fails to perform its obligations as set forth therein.~~Jiangsu.

On September 3, 2018, the Company entered into a guarantee contract to serve as the guarantor for the JVAffiliate Company for bank acceptance notes in the aggregate amount of ~~$4,321,199~~$4,063,901 (RMB29 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. Under this guarantee contract,~~2019 by the ~~Company agreed to perform all the obligations of the JV Company under the contract if the JV Company fails to perform its obligations as set forth therein.~~Affiliate Company.

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

~~Litigation~~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.

Beginning in March 2017, putative shareholder class actions were filed against Kandi ~~Technologies Group, Inc.~~ 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 ~~allege~~alleged violations of the federal securities laws based on 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 damages on behalf of putative classes of shareholders who purchased or acquired Kandi’s securities prior to March 13, 2017. ~~All of~~Kandi moved to dismiss the remaining cases, ~~are~~all of which were pending in the New York federal court, and ~~lead plaintiff and lead counsel have been appointed. Kandi has moved to dismiss the remaining cases and~~ that motion ~~remains pending.~~was granted by an order entered on September 30, 2019, and the time to appeal has run.

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. ~~Lead plaintiff and lead counsel have been appointed.~~ 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.

Separately, ~~other~~in connection with allegations of misconduct identified in pre-suit demands made by putative shareholders of Kandi, ~~have made pre-suit demands based on, among other things, the restatements described above. The Board of Directors approved the formation of~~Kandi formed a Special Litigation Committee (“SLC”) and ~~the retention of a~~retained Delaware law firm as independent counsel to the ~~SLC. The~~ SLC ~~and independent counsel are~~to aid in the ~~process of conducting an~~SLC’s investigation of, and to ultimately report on, the allegations of misconduct set forth in the pre-suit demands. The investigation remains ongoing.

~~The Company believes that although its financial statements for the years 2014, 2015 and the first three quarters of 2016 were restated, the restatements had no effect on its net income.~~ While the Company ~~further~~ believes that the claims in ~~the~~these litigations are without merit and will defend itself vigorously, ~~Kandi~~the Company is unable to estimate the possible loss, if any, associated with ~~the~~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 ~~Kandi’s~~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~~litigations could result in substantial monetary judgments. No assurance can be made that litigation will not have a material adverse effect on ~~Kandi’s~~the Company’s future financial position.

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

	Three Months Ended March 31,				Three Months Ended September 30,
	2019		2018		2019		2018
	Sales Revenue		Sales Revenue		Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	5,222,525	$	1,825,262	$	5,703,050	$	5,849,353
China		12,845,935		6,510,645		25,985,494		32,146,007
Total	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

Major products
EV parts	$	12,771,440	$	6,372,597	$	25,847,506	$	32,065,497
Off-road vehicles		5,297,020		1,963,310		5,841,038		5,929,863
Total	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

Timing of revenue recognition
Products transferred at a point in time	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

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, 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, 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 ~~our Annual Report on~~the 2018 Form 10-K ~~for the year ended December 31, 2018~~ and those set forth from time to time in our other filings with the ~~Securities and Exchange Commission (“SEC”).~~SEC. These documents are available on the SEC’s Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov.

~~This section should be read together with the Summary of Significant Accounting Policies in the attached consolidated financial statements included in this report.~~

The preparation of ~~our~~condensed consolidated financial statements in conformity with U.S. GAAP requires ~~management~~us to make estimates and assumptions that affect ~~our reporting~~the reported amounts of assets and liabilities ~~(and~~and disclosure of contingent assets and ~~liabilities). These estimates are particularly significant where they affect the reported net realizable value of our accounts receivable and inventories.~~

Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts is recorded in the period when a loss is probable based on an assessment of specific factors, such as troubled collection, historical experience, accounts aging, ongoing business relations and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they will be recognized in the consolidated statement of operations within operating expenses. We had allowances for doubtful accounts of $138,678 and $120,010liabilities, as of ~~March 31, 2019 and December 31, 2018, in accordance with our management’s judgment based on their best knowledge.~~

~~Inventory is stated at~~ the lower of cost, determined on a weighted average basis, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances. When inventories are sold, their carrying amount is charged to expense in the year in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized as an expense in the year the impairment or loss occurs. There were $829,523 and $840,701 of decline in net realizable value of inventory as of March 31, 2019 and December 31, 2018, respectively, due to our provision for slow moving inventory.

Although we believe that there is little likelihood that actual results will differ materially from our current estimates, if customer demand for our products decreases significantly in the near future, or if the financial condition of our customers deteriorates in the near future, we could realize significant write downs for slow-moving inventories or uncollectible accounts receivable.

~~Our revenue recognition policy plays a key role in our consolidated financial statements.~~

In determining when and how revenue is recognized from contracts with customers, we perform the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

We generate revenue through the sale of EV products, EV parts and off-road vehicles. Our revenue recognition policies are the same for our EV products, EV parts and off-road. The revenue is recognized at a point in time once we have determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the performance obligation is fulfilled, usually at the time of delivery, at the net sales price (transaction price). Estimates of variable consideration, such as volume discounts and rebates, are determined, reviewed and revised periodically by management. Revenue is recognized net of any taxes collected from customers. Such taxes are subsequently remitted to governmental authorities. Shipping and handling costs for product shipments occurring prior to the customer obtaining control of the goods are accounted for as fulfillment costs rather than separate performance obligations and recorded as sales and marketing expenses.

Our stock option cost is recorded in accordance with ASC 718 and ASC 505. The fair value of stock options is estimated using the Black-Scholes-Merton model. Our expected volatility assumption is based on the historical volatility of our stock. The expected life assumption is primarily based on the expiration date of the ~~option. The risk-free interest rate for~~financial statements, and the ~~expected term~~reported amounts of revenue and expenses during the ~~option is based~~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 ~~U.S. Treasury yield curve in effect at the time~~2018 Form 10-K. Please refer to Part II, Item 7 of ~~grant. Stock option expense recognition is based on awards expected to vest. There were no estimated forfeitures. ASC standards require forfeitures to be estimated at the time~~such a report for a discussion of ~~grant~~our critical accounting policies and ~~revised in subsequent periods, if necessary, if actual forfeitures differ from those~~ estimates.

~~Our warrant costs are recorded in liabilities and equities, respectively, in accordance with ASC 480, ASC 505 and ASC 815. The fair value~~Results of a warrant, which is classified as a liability, is estimated using the Binomial Tree model and the lattice valuation model. Our expected volatility assumption is based on the historical volatility of our common stock. The expected life assumption is primarily based on the expiration date of the warrant. The risk-free interest rate for the expected term of the warrant is based on the U.S. Treasury yield curve in effect at the time of measurement. Our warrants, which are freestanding derivatives classified as liabilities on the balance sheet, are measured at fair value on each reporting date, with decreases in fair value recognized in earnings and increases in fair values recognized in expenses.Operations

The fair value of equity-based warrants, which are not considered derivatives under ASC 815, is estimated using the Black-Scholes -Merton model. Our expected volatility assumption is based on the historical volatility of our common stock. The expected life assumption is primarily based on the expiration date of the warrant. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

In accordance with ASC 815, the conversion feature of the convertible notes is separated from the debt instrument and accounted for separately as a derivative instrument. On the date the convertible notes are issued, the conversion feature is recorded as a liability at its fair value, and future decreases in fair value are recognized in earnings while increases in fair values are recognized in expenses. We used the Black-Scholes -Merton option-pricing model to obtain the fair value of the conversion feature. The expected volatility assumption is based on the historical volatility of our common stock. The expected life assumption is primarily based on the expiration date of the conversion features. The risk-free interest rate for the expected term of the conversion features is based on the U.S. Treasury yield curve in effect at the time of measurement.

Most of our non-EV products (“Legacy Products”) are exported out of China to foreign countries that have legal and regulatory requirements with which we are not familiar. The development of warranty policies for our Legacy Products in each of these countries would be virtually impossible and prohibitively expensive. Therefore, we provide price incentives and free parts to our customers and in exchange, our customers establish appropriate warranty policies and assume warranty responsibilities.

Consequently, warranty issues are taken into consideration during price negotiations for our products. Free parts are delivered along with the products, and when products are sold, the related parts are recorded as cost of goods sold. Due to the reliability of our products, we have been able to maintain this warranty policy and we have not had any product liability issues attributed to our products.

The aforementioned warranty procedures are in place with the exception of SC Autosports, our wholly-owned U.S. subsidiary. SC Autosports offers warranties for sale for products manufactured by Bennche, LLC (“Bennche”) and Massimo Motor Sports, LLC (“Massimo”), which cover ATVs, UTVs, electric vehicles (EVs), etc. sold in the United States, subject to certain coverage limitations. Based on different products and models, warranties last for a term of twelve (12) months, six (6) months or 90 days, effective from the date of purchase by the original owner. As an authorized dealer, SC Autosports is responsible for making repairs and replacements covered by the warranties at no charge for parts and labor.

For the EV products that we sell in China, we provide a three year or 50,000 kilometer manufacturer warranty. This warranty affects the Company through our participation and investment in the JV Company, which manufactures the EV products.

We are one of the leading manufacturers of EV products (through the JVAffiliate Company), EV parts and ~~off road~~off-road vehicles in China. For thethree months ended ~~March 31,~~September 30, 2019, we recognized total revenue of ~~$18,068,460~~$31,688,544 as compared to ~~$8,335,907~~$37,995,360 for the three months ended ~~March 31,~~September 30, 2018, ~~an increase~~a decrease of ~~$9,732,553,~~$6,306,816, or ~~116.8%, primarily due to the increased revenue of EV parts sales.~~16.6%. For the three months ended ~~March 31,~~September 30, 2019, we recorded ~~$3,136,437~~$5,276,415 of gross profits, ~~an increase~~a decrease of ~~$1,790,486~~$965,634 or ~~133.0%~~15.5% from the same period of ~~2018, primarily due to the increase of revenue from the sale of EV parts.~~2018. Gross margin for the three months ended ~~March 31,~~September 30, 2019 was ~~17.4%~~16.7%, an increase ~~compare~~compared to ~~16.1%~~16.4% for the three months ended ~~March 31,~~September 30, 2018. We recorded a net ~~loss~~income of ~~$4,409,472~~$12,089,441 for the three months ended ~~March 31,~~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, or 17.9%. For the nine months ended September 30, 2019, we recorded $12,615,006 of gross profits, an increase of $2,968,994 or 30.8% from the same period of 2018. Gross margin for the nine months ended September 30, 2019 was 17.1%, an increase compared to 15.4% for the nine months ended September 30, 2018. We recorded a net income of ~~$3,727,995~~$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 due to the increased ~~share~~revenue, decreased research and development expense and the gain from equity sale in the Affiliate Company.

The current subsidy standard is provided for in the Circular on Further Improving the Subsidy Policies for the Promotion and Application of ~~loss~~New Energy Vehicles, which was jointly promulgated by the Ministry of Finance, the ~~JV Company~~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 reduction in the total subsidy amount as compared to 2018. We believe the ~~same period of last year,~~new subsidy standard presents both challenges and opportunities to the Company. In the past few years, although the government had a ~~result of the national subsidy~~strong support policy ~~adjustment during the first quarter and pending restructuring of the JV Company.~~

Over the following months of 2019, we plan to continue marketing and selling our current products and developing new products to meet market demand and further penetrate domestic and international markets. 2019 will be the implementation year for a decline in subsidies from the Chinese government for new energy vehicles. The Chinese government’s subsidy for new energy vehicles, ~~has continued to decline compared to past years. However, as~~the unstable subsidy policy and the unpredictable timing of ~~the date of this report, the new government policy regarding state~~receiving such subsidies for new energy vehicles has not yet been released. The Chinese government has not made clear the extent to which new energy vehicle subsidies will decline. The Company cannot predict in the coming year whether the declining levels of national new energy vehicle subsidies will be made up by the scale effect of production, a reduction of the purchase price of key parts, or tightened controls over manufacturing costs. This may also present greater challenges to the JV Company’s operations. Therefore, changes in government support policies may have ~~a significant adverse impact~~exerted tremendous pressure on the Company’s ~~business prospects, operating results,~~ cash ~~flow~~flow. Currently, in order to adapt to the new subsidy standard, the Affiliate Company is making full use of Geely’s resources and ~~profitability in~~developing new models with goals to be independent of the ~~coming years. To weather~~government’s subsidies and have strong competitiveness at the ~~challenging~~same time. The new model are expected to be placed to market ~~situation, we intend to continue to strengthen our technical abilities, improve our core competitiveness, and enhance our brand image to broaden our customer base and increase our market share.~~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.

The following table sets forth the amounts and percentage ~~relationship~~ to revenue of certain items in our condensed consolidated statements of income (loss) and comprehensive income (loss) for the three months ended ~~March 31,~~September 30, 2019 and 2018.

	Three Months Ended																		Three Months Ended
	March 31, 2019			% of Revenue			March 31, 2018			% of Revenue			Change in Amount			Change in %			September 30, 2019			% of Revenue			September 30, 2018			% of Revenue			Change in Amount			Change in %

REVENUES FROM UNRELATED PARTY, NET		16,334,963			90.4	%		5,732,463			68.8	%		10,602,500			185.0	%	$	26,968,385			85.1	%	$	14,860,034			39.1	%		12,108,351			81.5	%
REVENUES FROM THE JV COMPANY AND RELATED PARTY, NET		1,733,497			9.6	%		2,603,444			31.2	%		(869,947	)		(33.4	%)
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		18,068,460						8,335,907						9,732,553			116.8	%		31,688,544						37,995,360						(6,306,816	)		(16.6	)%

COST OF GOODS SOLD		(14,932,023	)		(82.6	%)		(6,989,956	)		(83.9	%)		(7,942,067	)		113.6	%		(26,412,129	)		(83.3	)%		(31,753,311	)		(83.6	)%		5,341,182			(16.8	)%

GROSS PROFIT		3,136,437			17.4	%		1,345,951			16.1	%		1,790,486			133.0	%		5,276,415			16.7	%		6,242,049			16.4	%		(965,634	)		(15.5	)%

OPERATING EXPENSES:
Research and development		(537,433	)		(3.0	%)		(757,298	)		(9.1	%)		219,865			(29.0	%)		(596,187	)		(1.9	)%		(5,691,649	)		(15.0	)%		5,095,462			(89.5	)%
Selling and marketing		(618,003	)		(3.4	%)		(748,225	)		(9.0	%)		130,222			(17.4	%)		(930,810	)		(2.9	)%		(898,896	)		(2.4	)%		(31,914	)		3.6	%
General and administrative		(2,039,528	)		(11.3	%)		398,171			4.8	%		(2,437,699	)		(612.2	%)		(3,432,920	)		(10.8	)%		(2,070,947	)		(5.5	)%		(1,361,973	)		65.8	%
Total Operating Expenses		(3,194,964	)		(17.7	%)		(1,107,352	)		(13.3	%)		(2,087,612	)		188.5	%		(4,959,917	)		(15.7	)%		(8,661,492	)		(22.8	)%		3,701,575			(42.7	)%

(LOSS) INCOME FROM OPERATIONS		(58,527	)		(0.3	%)		238,599			2.9	%		(297,126	)		(124.5	%)
LOSS FROM OPERATIONS																				316,498			1.0	%		(2,419,443	)		(6.4	)%		2,735,941			(113.1	)%

OTHER INCOME (EXPENSE):
Interest income		252,404			1.4	%		942,993			11.3	%		(690,589	)		(73.2	%)		209,736			0.7	%		52,745			0.1	%		156,991			297.6	%
Interest expense		(439,183	)		(2.4	%)		(550,417	)		(6.6	%)		111,234			(20.2	%)		(435,524	)		(1.4	)%		(483,376	)		(1.3	)%		47,852			(9.9	)%
Change in fair value of contingent consideration		89,000			0.5	%		2,680,179			32.2	%		(2,591,179	)		(96.7	%)		57,000			0.2	%		(1,552,686	)		(4.1	)%		1,609,686			(103.7	)%
Government grants		47,724			0.3	%		95,255			1.1	%		(47,531	)		(49.9	%)		502,146			1.6	%		607,008			1.6	%		(104,862	)		(17.3	)%
Gain from equity dilution in JV		4,365,390			24.2	%		-			0.0	%		4,365,390			-
Share of (loss) income after tax of the JV Company		(9,949,158	)		(55.1	%)		795,055			9.5	%		(10,744,213	)		(1351.4	%)
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		474,390			2.6	%		22,977			0.3	%		451,413			1964.6	%		57,833			0.2	%		15,735			0.0	%		42,098			267.5	%
Total other (expense) income, net		(5,159,433	)		(28.6	%)		3,986,042			47.8	%		(9,145,475	)		(229.4	%)
Total other income (expense), net																				12,482,356			39.4	%		(4,607,917	)		(12.1	)%		17,090,273			(370.9	)%

(LOSS) INCOME BEFORE INCOME TAXES		(5,217,960	)		(28.9	%)		4,224,641			50.7	%		(9,442,601	)		(223.5	%)
INCOME(LOSS) BEFORE INCOME TAXES																				12,798,854			40.4	%		(7,027,360	)		(18.5	)%		19,826,214			(282.1	)%

INCOME TAX BENEFIT (EXPENSE)		808,488			4.5	%		(496,646	)		(6.0	%)		1,305,134			(262.8	%)
INCOME TAX (EXPENSE) BENEFIT																				(709,413	)		(2.2	)%		505,961			1.3	%		(1,215,374	)		(240.2	)%

NET (LOSS) INCOME		(4,409,472	)		(24.4	%)		3,727,995			44.7	%		(8,137,467	)		(218.3	%)
NET INCOME (LOSS)																				12,089,441			38.2	%		(6,521,399	)		(17.2	)%		18,610,840			(285.4	)%

For the three months ended ~~March 31,~~September 30, 2019, our revenue was ~~$18,068,460~~$31,688,544 compared to ~~$8,335,907~~$37,995,360 for the same period of 2018, ~~an increase~~representing a decrease of ~~$9,732,553~~$6,306,816 or ~~116.8%~~16.6%. The ~~increase~~decrease in revenue was mainly due to the ~~increase~~decrease in ~~sales of both~~ EV parts ~~and off-road vehicles~~sales during this quarter. The ~~increase~~decrease in EV parts sales was primarily due to the ~~increased~~Affiliate Company’s temporary declining sales, ~~volume of battery packs.~~which was caused by its product adjustments.

The following table summarizes our revenues by product types for the three months ended ~~March 31,~~September 30, 2019 and 2018:

During the three months ended ~~March 31,~~September 30, 2019, our revenues from the ~~sale~~sales of EV parts were ~~$12,771,440,~~$25,847,506, representing ~~an increase~~a decrease of ~~$6,398,843~~$6,217,991 or ~~100.4%~~19.4% from ~~$6,372,597~~$32,065,497 for the ~~first~~same quarter of 2018.

Our revenue for the three months ended ~~March 31, 2018~~September 30, 2019 primarily consisted of revenue from the ~~sale~~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 ~~70.7%~~81.6% of total sales.

During the three months ended ~~March 31,~~September 30, 2019 and 2018, our ~~revenues~~revenue from the sale of EV parts to the JVAffiliate Company and its subsidiaries accounted for approximately ~~10%~~15% and ~~31%~~61% of our total net revenue for the 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 ~~sold~~provided to the JVAffiliate Company were primarily used ~~in manufacturing pure~~for battery upgrade and market maintenance for the EV products bythat were previously put into the ~~JV Company’s subsidiaries.~~leasing market.

During the three months ended ~~March 31,~~September 30, 2019, our revenue from the ~~sale~~sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”), and others, ~~totaled $5,297,020,~~were $5,841,038, representing ~~an increase~~a decrease of ~~$3,333,710~~$88,825 or ~~169.8%~~1.5% from ~~$1,963,310~~$5,929,863, for the ~~first~~same quarter of 2018. ~~The increase in revenue of off-road vehicles was largely due to additional sales from SC Autosports, which became our wholly-owned U.S. subsidiary in July 2018.~~

Our off-road vehicles business line accounted for approximately ~~29.3%~~18.4% of our total net revenue for the three months ended ~~March 31,~~September 30, 2019.

	Three Months Ended March 31,				Three Months Ended September 30,
	2019		2018		2019		2018
	Sales Revenue		Sales Revenue		Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	5,222,525	$	1,825,262	$	5,703,050	$	5,849,353
China		12,845,935		6,510,645		25,985,494		32,146,007
Total	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

Major products
EV parts	$	12,771,440	$	6,372,597	$	25,847,506	$	32,065,497
Off-road vehicles		5,297,020		1,963,310		5,841,038		5,929,863
Total	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

Timing of revenue recognition
Products transferred at a point in time	$	18,068,460	$	8,335,907	$	31,688,544	$	37,995,360

Cost of goods sold was ~~$14,932,023~~$26,412,129 during the three months ended ~~March 31,~~September 30, 2019, representing ~~an increase~~a decrease of ~~$7,942,067,~~$5,341,182, or ~~113.6%~~16.8%, compared to ~~$6,989,956~~$31,753,311 for the same period of 2018. The ~~increase~~decrease was primarily due to the corresponding ~~increase~~decrease in sales. Please refer to the Gross Profit section below for product margin analysis.

Our margins by product for the three months ended ~~March 31,~~September 30, 2019 and 2018 are as set forth below:

	Three Months Ended March 31,																		Three Months Ended September 30,
	2019									2018									2019									2018
	Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %
EV parts	$	12,771,440		10,809,566		1,961,874		15.4	%	$	6,372,597		5,240,791		1,131,806		17.8	%	$	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		5,297,020		4,122,457		1,174,563		22.2	%		1,963,310		1,749,165		214,145		10.9	%		5,841,038		4,482,709		1,358,329		23.3	%		5,929,863		4,484,979		1,444,884		24.4	%
Total	$	18,068,460		14,932,023		3,136,437		17.4	%	$	8,335,907		6,989,956		1,345,951		16.1	%	$	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 ~~first~~third quarter of 2019 ~~increased 133.0%~~decreased 15.5% to ~~$3,136,437,~~$5,276,415, compared to ~~$1,345,951~~$6,242,049 for the same period last year. This was primarily attributable to the sales ~~increase.~~decrease. Our gross margin increased to ~~17.4%~~16.7% compared to ~~16.1%~~16.4% for the same period of 2018. The increase in our gross margin was mainly due to the ~~higher gross margin from off-road vehicle sales~~increased selling price of ~~SC Autosports, which became our U.S. subsidiary in July 2018, a result~~the charging and exchanging equipment and the increased proportion of ~~its effective procurement of inventory at discounted prices.~~the high-margin battery processing business this year.

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled ~~$537,433~~$596,187 for the ~~first~~third quarter of 2019, a decrease of ~~$219,865~~$5,095,462 or ~~29.0%~~89.5% compared to ~~$757,298~~$5,691,649 for the same period of last year. ~~This~~The decrease was ~~primarily~~mainly due to ~~decreased material procurement~~the R&D expense related to the development of ~~research and development from~~EV Model K23 at Hainan facility in the ~~same period~~third quarter of last year. Such R&D work has been completed in year 2018.

Selling and distribution expenses were ~~$618,003~~$930,810 for the ~~first~~third quarter of 2019, compared to ~~$748,225~~$898,896 for the same period last year, ~~a decrease~~representing an increase of ~~$130,222~~$31,914 or ~~17.4%~~3.6%. ~~This decrease~~The increase was primarily attributable to the ~~decrease in maintenance expenses for our products.~~increased freight expense incurred by SC Autosports.

General and administrative expenses were ~~$2,039,528~~$3,432,920 for the ~~first~~third quarter of 2019, compared to ~~negative $398,171~~$2,070,947 for the same period of last year, representing an increase ~~in such expenses~~ of ~~$2,437,699~~$1,361,973 or ~~612.2%~~65.8%. For the three months ended ~~March 31,~~September 30, 2019, general and administrative expenses included ~~$31,675 in~~$22,925 as expenses for common stock awards and stock options to employees and Board members, compared to ~~$1,029,171 in expenses for~~$31,675 of 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 options~~ for the same period in 2018. ~~Excluding~~Besides stock compensation expense, our net general and administrative expenses for the three months ended ~~March 31,~~September 30, 2019 were ~~$2,007,853,~~$3,409,995, representing an increase of ~~$790,318, or 64.9%,~~$1,370,723, from ~~$1,217,535~~$2,039,272 for the same period of 2018, which was largely due to the increased operation cost of the Company since Hainan facility has been put into ~~production. The additional general and administrative expenses from SC Autosports which became our U.S. subsidiary in July 2018 also contributed to this increase.~~operation.

Interest income was ~~$252,404~~$209,736 for the ~~first~~third quarter of 2019, ~~a decrease~~representing an increase of ~~$690,589~~$156,991 or ~~73.2%~~297.6% compared to ~~$942,993~~$52,745 for the same period of last year. ~~This decrease~~The increase was primarily attributable to ~~decreased interest earned on bank deposits, as well as decreased~~increased interest earned on loans to ~~the JV Company since Kandi Vehicles’ loan to JV converted to equity in the second quarter of 2018.~~

Interest expenses were ~~$439,183~~$435,524 in the ~~first~~third quarter of 2019, representing a decrease of ~~$111,234~~$47,852 or ~~20.2%~~9.9% compared to ~~$550,417~~$483,376 for the same period of last year. ~~This~~The decrease was primarily due to ~~lower~~decreased interest expenses incurred associated with the note payable to a third party, ~~and the~~as well as decreased discounts associated with the settlement of bank acceptance notes. Of the interest expenses, $0 and ~~$53,426~~$24,930 were discounts associated with the settlement of bank acceptance notes for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

For the ~~first~~third quarter of 2019, the gain related to changes in the fair value of contingent consideration was ~~$89,000, a decrease~~$57,000, an increase of ~~$2,591,179~~$1,609,686 or ~~96.7%~~103.7% compared to ~~gain~~loss related to changes in the fair value of contingent consideration of ~~$2,680,179~~$1,552,686 for the same period of last year, which was mainly ~~the result of~~due to the decrease in fair value of contingent consideration liability between December 31, 2018 and ~~March 31,~~September 30, 2019 while there was ~~less than the decrease~~an increase in the same period of last year.

Government grants were ~~$47,724~~$502,146 for the ~~first~~third quarter of 2019, compared to ~~$95,255~~$607,008 for the same quarter last year, representing a decrease of ~~$47,531,~~$104,862, or ~~49.9%. This decrease in government grants~~17.3%, which was ~~primarily because~~largely attributable to the fact that Kandi Vehicles received the subsidies ~~totaling $44,468 for awards from~~of land use tax in the ~~government based on projects (“Government Project Awards”). For Government Project Awards, there is no comparability between different years.~~third quarter of last year while the same kind of subsidies were received in the second quarter of 2019, instead of in the third quarter.

Gain from equity dilution was ~~$4,365,390~~a negative $49,285 for the ~~first~~third quarter of 2019, which was ~~primarily~~ due to ~~gain~~exchange rate difference. There was no equity dilution in the third quarter of 2019.

(l) Gain from equity sale in the ~~March JV Loan to Equity Conversion. Pursuant~~Affiliate Company

Gain from equity sale was $20,574,217 for the third quarter of 2019, which was due to the ~~Transfer Agreement, the JV Company converted a loan~~Affiliate Equity Transfer. In March 2019, Kandi Vehicles agreed to sell 21.47% of ~~RMB 314 million (approximately $46.7 million) from Geely Group last year to equity in order to increase~~ its ~~cash flow. As a result, our~~ equity interests in the JVAffiliate Company ~~decreased~~ to ~~43.47% as~~Geely for a total amount of ~~March 31,~~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 Company recognized the gain from equity sale.

For the ~~first~~third quarter of 2019, the JV Company’s net sales were $1,256,873, gross loss was $21,542, and net loss was $20,191,314. We accounted for our investments in the JV Company under the equity method of accounting. Since the March JV Loan to Equity Conversion was completed at end of this quarter and the JV Equity Transfer has not been completed as of March 31, 2019, we recorded 50% of the JV Company’s loss of $10,095,657 for the first quarter of 2019. After eliminating intra-entity profits and losses, our share of loss of the JVAffiliate Company was $9,949,158 for the first quarter of 2019. The losses incurred by the JV Company was largely attributable to the fact that there were no EV products sold in the first quarter of 2019 due to the national subsidy policy adjustment during the first quarter and pending restructuring of the JV Company,$8,433,767 as ~~well as an increase in R&D expenses compared with same period of last year.~~

~~Other income (net) was $474,390 for the first quarter of 2019, an increase of $451,413 or 1964.6%~~ compared to ~~other income (net)~~share of ~~$22,977~~loss of $3,247,343 for the same period of last year. ~~This~~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.

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 for the same period of last year, which was ~~primarily~~largely due to the ~~reversal~~disposal of ~~$0.5 million accrued after-sale service fees of Jinhua Ankao, which has been evaluated by management, which subsequently concluded that this accrued liability will not be incurred.~~certain waste materials during the third quarter.

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 are qualified as a high technology ~~company~~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 ~~43.47%~~22% ownership interest in the JVAffiliate Company, which has an applicable corporate income tax rate of 25%. Each of the JVAffiliate Company’s subsidiaries has an applicable corporate income tax rate of 25% ~~as well.~~.

Our actual effective income tax rate for the ~~first~~third quarter of 2019 was a tax expense of 5.54% on a reported income before taxes of approximately $12.8 million, compared to a tax benefit of~~15.49%~~ 7.20% on a reported loss before taxes of approximately ~~$5.2~~$7.0 million ~~compared to an effective income tax rate with a tax expense of 11.76%~~ for the same period of last ~~year on a reported income before taxes of approximately $4.2 million.~~year.

Net ~~loss~~income was ~~$4,409,472~~$12,089,441 for the ~~first~~third quarter of 2019, ~~a decrease~~representing an increase of ~~$8,137,467~~$18,610,840 compared to net ~~income $3,727,995~~loss $6,521,399 for the same period of last year. The ~~decrease in net income~~increase was primarily attributable to the ~~increased share of loss of~~gain from equity sale in the JVAffiliate Company ~~compared to~~and the ~~same period of last year, a result of the national subsidy policy adjustment during the first quarter~~decreased research and ~~pending restructuring of the JV Company.~~development expense.

Excluding (i) the effects of stock compensation expenses, which were ~~$31,675~~$22,925 and ~~$1,029,171 net of a reversal for forfeited stock options of $2,644,877~~$31,675 for the ~~first~~third quarter of 2019 and 2018, respectively, and (ii) the change in fair value of contingent consideration which was a gain of ~~$89,000~~$57,000 and a ~~gain~~loss of ~~$2,680,179~~$1,552,686 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, our non-GAAP net ~~loss~~income was ~~$4,466,797~~$12,055,366 for the three months ended ~~March 31,~~September 30, 2019 as compared to non-GAAP net loss ~~$567,890~~$4,937,038 for the same period of 2018, ~~a decrease in income~~an increase of ~~$3,898,907,~~$16,992,404, or 6~~86.6%~~344.2%. The ~~decrease~~increase in net income (non-GAAP) was primarily attributable to ~~an increased share of loss of~~ the JVgain from equity sale in the Affiliate Company ~~compared to~~and the ~~same period of last year, since the national subsidy policy adjustment during the first quarter~~decreased research and ~~pending restructuring of the JV Company.~~development expense.

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 ~~March 31,~~September 30, 2019 and 2018:

~~LIQUIDITY AND CAPITAL RESOURCES~~Comparison of the Nine Months Ended September 30, 2019 and 2018

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

During the nine months ended September 30, 2019, our revenue from the sale of EV parts was $57,607,687, representing an increase of $3,659,813 or 6.8% from $53,947,874 for the same period of 2018.

Our revenue for the nine months ended September 30, 2018 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% of the total sales.

During the nine months ended September 30, 2019 and 2018, our revenue from the sale of EV parts to the Affiliate Company and its subsidiaries accounted for approximately 14% and 49% of our total net revenue for the period, 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.

During the nine months ended September 30, 2019, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”) and others, were $16,295,547, representing an increase of $7,552,548 or 86.4% from $8,742,999 for the same quarter 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.

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

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

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

Gross profit for the first three quarters of 2019 increased 30.8% to $12,615,006, compared to $9,646,012 for the same period last year. This was primarily attributable to the sales increase. Our gross margin increased to 17.1% compared to 15.4% for the same period of 2018. The increase in our gross margin was mainly due to increased selling price 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.

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses totaled $1,766,210 for the first three quarters of 2019, representing a decrease of $5,325,626 or 75.1% compared to $7,091,836 for the same period of last year. The decrease was primarily due to the R&D expense related to the development of EV Model K23 at Hainan facility in the third quarter of last year. Such R&D work has been completed in year 2018.

Selling and distribution expenses were $2,448,291 for the first three quarters of 2019, compared to $1,875,294 for the same period last year, representing an increase of $572,997 or 30.6%. The increase was primarily attributable to inclusion of the sales and marketing expenses from SC Autosports, which became our wholly-owned U.S. subsidiary in July 2018.

General and administrative expenses were $11,096,246 for the first three quarters of 2019, compared to $5,534,039 for the same period of last year, representing an increase of expenses of $5,562,207 or 100.5%. For the nine months ended September 30, 2019, general and administrative expenses included $1,337,333 as expenses for common stock awards and stock options to employees and Board members, compared to $253,934 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. Excluding stock compensation expenses, our net general and administrative expenses for the nine months ended September 30, 2019 were $9,758,913, representing an increase of $4,478,808, or 84.8%, from $5,280,105 for the same period of 2018, which was largely due to the increased operation costs of the Company since Hainan facility has been put into production.

Interest income was $559,954 for the first three quarters of 2019, representing a decrease of $892,568 or 61.4% compared to $1,452,522 for the same period of last year. The decrease was primarily attributable to the decreased interest earned on loans to the Affiliate Company since Kandi Vehicles’ loan to Affiliate converted to equity in the second quarter of 2018.

Interest expenses were $1,304,062 in the first three quarters of 2019, representing a decrease of $201,347 or 13.4% compared to $1,505,409 for the same period of last year. The decrease 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 of bank acceptance notes for the nine months ended September 30, 2019 and 2018, respectively.

For the first three quarters of 2019, the gain related to changes in the fair value of contingent consideration was $694,000, representing a decrease of $1,120,326 or 61.7% compared to gain related to changes in the fair value of contingent consideration of $1,814,326 for the same period of last year, which was mainly due to the decrease in fair value of contingent consideration liability between December 31, 2018 and September 30, 2019 was less than the decrease in the same period of last year.

Government grants were $725,189 for the first three quarters of 2019, compared to $717,821 for the same quarter last year, representing an increase of $7,368, or 1.0%. This increase in government grants was because of the government’s implementation of a new policy with the purpose of supporting companies that have no or less layoff of their employees.

Gain from equity dilution was $4,291,974 for the first three quarters of 2019 which was primarily due to gain from the March Affiliate Loan to Equity Conversion. Pursuant to the Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately $45.7 million) from Geely Group last year to equity in order to increase its cash flow. As a result, our equity interests in the Affiliate Company decreased to 43.47% in March, 2019.

Gain from equity sale was $20,574,217 for first three quarters of 2019, 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 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 Company has recognized the gain from equity sale.

For the first ~~quarter~~three quarters of 2019, our share of loss after tax of the Affiliate Company was $22,883,126 for the first three quarters of 2019 as compared to share of loss of $79,592 in the same period of last year. The losses incurred by the Affiliate Company were largely attributable to the Affiliate Company’s temporary declining sales decline, which was caused by its product adjustments.

Net other income was $357,626 for the first three quarters of 2019, representing a decrease of $308,668 or 46.3% compared to net other income of $666,294 for the same period of last year, which was largely due the fees earned on technology development services in the same period of last year.

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 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% as well.

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

Net income was $361,811 for the first three quarters of 2019, representing an increase of $1,780,690 compared to net loss $1,418,879 for the same period of last year. The increase was primarily attributable to the increased revenue, decreased research and development expense and the gain from equity sale in the Affiliate 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:

For the first three quarters of 2019, cash used in operating activities was ~~$14,037,64~~1,$25,425,152, as compared to cash used in operating activities of ~~$1,087,133~~$836,809 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 onof our financings. The major operating activities that provided cash for the first ~~quarter~~three quarters of 2019 were ~~an increase~~a decrease of ~~accounts payable of $22,593,966, (net of assignment of notes receivable from unrelated parties to supplier to settle accounts payable of $5,751,215, assignment of notes receivable~~amount due from the JVAffiliate Company ~~and related parties to supplier to settle accounts payable~~ of ~~$15,277,778, settlement of accounts payable with notes payables of $2,488,735 and replacement of notes payables with accounts payable of $3,631,566).~~$30,549,072. The major operating activity that used cash for first ~~quarter~~three quarters of 2019 was ~~an increase in other receivables and other assets of $14,256,807 (net of settlement of other receivables with notes receivable from unrelated parties of $2,001,067), and~~ an increase of accounts receivable of ~~$17,991,854 (net of settlement of accounts receivables with notes receivable from unrelated parties of $3,750,148).~~$36,822,184.

For the first ~~quarter~~three quarters of 2019, cash ~~used in~~derived from investing activities was ~~$300,704,~~$31,087,397, as compared to cash used in investing activities of ~~$3,991,157~~$682,504 for the same period of last year. The major investing activities that provided cash for the first three quarters of 2019 were an increase of cash received from equity sale in Affiliate Company of $32,061,558. The major investing activities that used cash for first ~~quarter~~three quarters of 2019 were ~~$300,704 in Purchases~~$955,670 used for the purchases of property, plant and equipment.

For the first ~~quarter~~three quarters of 2019, cash used infrom financing activities was ~~$0,~~$1,035,235, as compared to cash used in financing activities of ~~$3,068,066~~$3,631,969 for the same period of last year. The major financing activities that provided cash for the first ~~quarter~~three quarters of 2019 were proceeds from short-term bank loans of ~~$2,816,317.~~$27,864,409. The major financing activities that used cash for first ~~quarter~~three quarters of 2019 were ~~$2,816,317~~$26,261,331 of ~~repayments~~repayment of short-term bank loans.

We had a working capital ~~surplus~~ of ~~$8,522,962~~$80,374,159 at ~~March 31,~~September 30, 2019, which ~~reflected~~reflects an increase of ~~$5,996,051~~$77,847,248 from a working capital of $2,526,911 as of December 31, 2018.

During the first quarter of 2019, the Company signed an agreement 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). As of September 29, 2019, the Company had received payments in cash totaling RMB 220 million (approximately $30.9 million) and certain commercial acceptance notes 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 to its ongoing operations.

We ~~have historically financed our operations through short-term commercial bank loans from Chinese banks. These loans typically have one year terms, and upon~~believe the ~~payment~~working capital of ~~all outstanding principal and interest on a particular loan,~~ the banks have typically rolled over the loans for an additional one-year term, with adjustments made to the interest rate to reflect prevailing market rates. This practice has been ongoing year after year. As such, we believe these short-term bank loansCompany will be ~~available under normal trade terms, if necessary.~~greatly improved after we receive the above payments.

Capital requirements and capital provided for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 were as follows:

	Three Months Ended		Nine Months Ended
	March 31, 2019		September 30, 2019
		(In Thousands)	(In Thousands)
Capital requirements
Purchase of plant and equipment	$	301	$	956
Purchase of construction in progress				18
Repayments of short-term bank loans		2,816		26,261
Repayments of long-term bank loans				146
Cash used for stock buyback				2,493
Internal cash used in operations		14,038		25,425
Increase in cash				3,699
Total capital Requirements	$	17,155	$	58,998

Capital provided
Proceeds from short-term bank loan		2,816		27,864
Decrease in cash		13,891
Cash received from equity sale in the Affiliate Company				32,062
Total capital provided	$	16,707	$	59,926

The difference between capital provided and capital required is caused by the effect of exchange rate changes over the past ~~three~~nine months.

For the discussion of short-term and long-term loans, please refer to Note 1518 - Short-term and Long-term Loans under Notes to Condensed Consolidated Financial Statements.

For the discussion of notes payable, please refer to Note 1619 - Notes Payable under Notes to Condensed Consolidated Financial Statements.

For the discussion of guarantees and pledged collateral for third party bank loans, please refer to Note ~~22 –Commitments~~25 – Commitments and Contingencies under Notes to Condensed Consolidated Financial Statements.

~~As disclosed on March 21,~~On September 23, 2019, wethe Company announced that Kandi Vehicles and DGL Group signed a Purchase Framework Agreement (the “Agreement”) on behalf of Kandi Vehicles and DGL Group regarding an ~~Equity Transfer~~initial batch order of 300,000 electric scooters and 500,000 electric self-balancing scooters. The total value of the Agreement ~~with Geely Technologies Group Co., Ltd.~~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 from the date of signing this Agreement.

On September 30, 2019, the Company announced that it has completed the transfer ~~certain~~of 21.74% of equity interests in the JVAffiliate Company to ~~Geely. Given Geely’s competitive strength and recognition~~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 global automotive industry, this deal could help significantly accelerate the growth of the JV Company. Pursuant to the Transfer Agreement, the parties have agreed to some of the key terms: (1) The JV Company converted a loan of RMB 314 million (approximately $46.7 million) from Geely Group last year to equityU.S. and showed their high interests in ~~order to increase its cash flow.~~distributing model K23. As a result, Kandi Hainan signed a supply contract (the “Contract”) for the ~~registered capital~~initial 2000 model K23 with SC Autosports on October 1, 2019. The value of the ~~JV Company became RMB 2.44 billion (approximately $363.2 million) Kandi Vehicles owned 43.47% and Geely owned 56.53%,~~Contract is about $32 million. According to the Contract, the first 200 vehicles are expected to be delivered by the end of the equity interests in the JV Company, respectively, upon the conversion of the loan into equity in the JV Company; (2) Kandi Vehicles agreed to sell 21.47% of its equity interests in the JV Company to Geely for a total amount of RMB 516 million (approximately $76.9 million). Kandi Vehicles will own 22% of the equity interests of the JV Company after the transfer; (3) Both parties further agreed that within next two years, Kandi may purchase a portion of the assets of the JV Company using the Company’s shares as consideration, resulting in Geely becoming a significant shareholder of the Company.2019.

On ~~April 9,~~October 14, 2019, wethe Company announced that ~~pure EV SMA7001BEV77 (“Model K23”) has been included in~~according to the ~~Ministry~~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 ~~Industry~~1,232 electric scooters and Information Technology’s (the “MIIT”) Directory of New Products (the “318th Directory”) and Recommended Models for Energy Saving and New Energy Vehicle Demonstration and Promotion (“2019’s 3rd Annual Directory of New Energy Vehicles”) in the People’s Republic of China. The new model meets the new energy vehicle promotion subsidy program and product technical requirements set forth in the “Notice37,755 electric self-balancing scooters on Further Improving the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles” issued by the Four Ministries on March 26, 2019. As a result, purchasers of the model K23 will be qualified to receive government subsidies inOctober 11, 2019.

On ~~April 11,~~November 4, 2019, wethe Company announced that ~~Didi Chuxing Technology Co.,~~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) (“~~Didi Chuxing”~~DGL Group”)’s ~~primary auto solutions platform, Xiaoju Auto Leasing Division~~market analysis research. After Kandi has undergone several rounds of technical and performance tests on the ~~JV Company, including its affiliates, took~~mini EVs, five of each mini EV model prototypes are completed and ready to be shipped to DGL Group for further tests in the ~~next step in their collaboration by establishing a strategic partnership in order to take advantage~~beginning of ~~shared resources and opportunities. As a result of a series of key discussions, the JV Company and Didi Chuxing signed a major customer cooperative framework contract on April 9, 2019.~~this month.

On ~~May 9,~~November 11, 2019, wethe Company announced that ~~we signed a Strategic Cooperative Agreement (the “Agreement”) with Northpoint Commercial Finance LLC (“Northpoint”)~~its first automatic intelligent battery exchange system passed the inspection on ~~May 8th 2019, a leader in commercial finance, supplying flexible inventory financing~~November 10, 2019. The system features automatic functions which perform an intelligent charging and battery exchange. The battery exchanging time for ~~clients in a variety of industries. We are planning on bringing several models of pure electric vehicles from China to~~each vehicle is only 90 seconds, which ranks among the North American market. Kandi EVs’ cutting-edge technology, trendy designs, affordable price points, and tax-advantaged benefits for USA consumers pursuant to IRS Section 30D create an exciting sales opportunity for Kandi’s new dealership network. Northpoint specializes in inventory financing programs and is a subsidiary of Laurentian Bank of Canada. Northpoint has offices in Alpharetta, Georgia, and Burlington, Ontario. Laurentian Bank has been in business for over 170 years and has over $45 billion in assets. Northpoint’s inventory finance programs will help Kandi develop its distribution network by helping its dealers to grow sales revenues; enhance cash flows; and improve profitability.current top battery exchange equipment.

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 ~~March 31,~~September 30, 2019. 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.

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.

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Except as set forth in Note 2225 - 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, 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 2225 - COMMITMENTS AND CONTINGENCIES under Notes to Condensed Consolidated Financial Statements, which is incorporated by reference herein.

~~Changes~~Unregistered Sales of Equity Securities and ~~further delays in subsidy payments may have negative impacts on our operations.~~Use of Proceeds

On May 14, 2019, we announced that our board of directors had authorized the repurchase of up to $20 million worth of our common stock in open market transactions or in privately negotiated transactions. The ~~change in subsidy payment methods in 2017 from paid in advance to paid post-sale and any further delay in releasing subsidy payments for~~following table sets forth information regarding shares of our common stock that we repurchased during the ~~EVs manufactured and sold in~~three months ended September 30, 2019.

In summary, the ~~prior years might cause delays in collection~~Company had repurchased a total of ~~accounts receivable from our business partners, which will temporarily increase the pressure on our working capital for continuing operations. The unavailability, reduction or elimination~~487,155 common shares at an average stock price of ~~government and economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.~~$5.09 per share as of September 30, 2019.

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.

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)

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

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

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

		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	1

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

	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited) – Three Months and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three Months and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018	3

	Condensed Consolidated Statements of Cash Flows (unaudited) ~~–Three~~– Nine Months Ended ~~March 31,~~September 30, 2019 and 2018	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3924

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5038

Item 4.	Controls and Procedures	5038

PART II — OTHER INFORMATION

Item 1.	Legal ~~Proceedings~~proceedings	5139

Item ~~1A.~~2.	~~Risk Factors~~Unregistered Sales of Equity Securities and Use of Proceeds	5139

Item 6.	Exhibits	5139

	Common Stock				Additional		Accumulated Other
	Shares		Par Value		Paid-in Capital		Retained Earnings			Comprehensive Income			Total
BALANCE AT JANUARY 1, 2018		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
Foreign currency translation											7,465,240			7,465,240
Net income								3,727,995						3,727,995

BALANCE AT MARCH 31, 2018		51,008,875	$	51,009	$	252,154,904	$	(74,315	)	$	1,154,477		$	253,286,075

BALANCE AT JANUARY 1, 2019		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
Foreign currency translation											5,404,028			5,404,028
Net loss								(4,409,472	)					(4,409,472	)

BALANCE AT MARCH 31, 2019		52,580,841	$	52,581	$	258,377,036	$	(13,906,481	)	$	(14,517,230	)	$	230,005,906

	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

(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;


(5)	Kandi ~~Hainan,~~Electric Vehicles (Hainan) Co., Ltd. (“Kandi Hainan”), a subsidiary in China, 10% owned by Kandi New Energy and 90% owned by Kandi Vehicles;


(6)	Jinhua An Kao Power Technology Co., Ltd. (“Jinhua An Kao”), a wholly-owned subsidiary of Kandi ~~Vehicles;~~Vehicles in China; and


(7)	SC Autosports, a wholly-owned subsidiary of the ~~Company.~~Company in the U.S.

~~(1)~~ The Affiliate Company, a 22% owned subsidiary of Kandi Vehicles and its subsidiaries	~~The JV Company, a 43.47% owned subsidiary of Kandi Vehicles;~~

~~(2)~~	~~KandiChangxing, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in KandiChangxing;~~

~~(3)~~	KandiJinhua, a wholly-owned direct subsidiary of Kandi Jiangsu, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in KandiJinhua;

~~(4)~~	JiHeKang, a wholly-owned direct subsidiary of Kandi Jiangsu, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in JiHeKang;

~~(5)~~	~~Kandi Shanghai, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Kandi Shanghai;~~

~~(6)~~	~~Kandi Jiangsu, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Kandi Jiangsu;~~

~~(7)~~	The JiHeKang Service Company, a wholly-owned direct subsidiary of Kandi Jiangsu, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in the JiHeKang Service Company.

~~(8)~~	Tianjin BoHaiWan, a wholly-owned direct subsidiary of JiHeKang, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Tianjin BoHaiWan;

~~(9)~~	Liuchuang, a wholly-owned direct subsidiary of Kandi Jiangsu, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Liuchuang;

~~(10)~~	~~Jiangsu JiDian, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Jiangsu JiDian;~~

~~(11)~~	Guangdong JiHeKang, a wholly-owned direct subsidiary of JiHeKang, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Guangdong JiHeKang; and

~~(12)~~	Zhejiang Chang Dian, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Zhejiang Chang Dian.

~~(13)~~	Chang Dian Tonglu, branch of Zhejiang Chang Dian, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Chang Dian Tonglu.

~~(14)~~	Jiangsu Gu Xiang, a wholly-owned subsidiary of Zhejiang Chang Dian, a wholly-owned subsidiary of the JV Company. The Company, indirectly through its 43.47% ownership interest in the JV Company, has a 43.47% economic interest in Jiangsu Gu Xiang.

~~Buildings~~			~~30 years~~
~~Machinery and equipment~~			~~10 years~~
~~Office equipment~~			~~5 years~~
~~Motor vehicles~~			~~5 years~~
~~Molds~~			~~5 years~~

	Sales						Trade Receivable
	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,			March 31,			December 31,
Major Customers	2019			2018			2019			2018
Jinhua Chaoneng Automobile Sales Co. Ltd.		61	%		-			33	%		22	%
Kandi Electric Vehicles Group Co., Ltd. and its subsidiaries		10	%		31	%⁽¹⁾		54	%		66	%

	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	%

	Purchases					Accounts Payable
	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,		March 31,			December 31,
Major Suppliers	2019			2018		2019			2018
Jiangsu Tian Peng power supply Co., Ltd.		22	%		-		9	%		23	%
Massimo Motor Sports, LLC		20	%		-		-			-
Zhejiang Kandi Supply Chain Management Co., Ltd.		12	%		-		2	%		-

	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	)

	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

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

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

	Number of Shares			Weighted Average Exercise Price
Outstanding as of December 31, 2017		4,233,334		$	9.72
Granted		-			-
Exercised		-			-
Cancelled		-			-
Forfeited		(333,334	)		9.72
Outstanding as of December 31, 2018		3,900,000		$	9.72
Granted		-			-
Exercised		-			-
Cancelled		-			-
Forfeited		-			9.72
Outstanding as of March 31, 2019		3,900,000		$	9.72

2019 (Nine Months)	$	478,510
2020		638,012
2021		638,012
2022		558,652
2023		555,917
Thereafter		1,399,262
Total	$	4,268,365

	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 March 31,
	2019		2018
	Sales		Sales
EV parts	$	12,771,440	$	6,372,597
Off-road vehicles		5,297,020		1,963,310
Total	$	18,068,460	$	8,335,907

	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	%

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

Exhibit Number ~~Number~~		Description
~~10.1~~		~~English translation of the Equity Transfer Agreement by and between Zhejiang Kandi Vehicles Co., Ltd. and Geely Technologies Group Co., Ltd. dated March 21, 2019.~~
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.

Date: ~~May 10,~~November 12, 2019	By:	/s/ Hu Xiaoming
		Hu Xiaoming
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~May 10,~~November 12, 2019	By:	/s/ Zhu Xiaoying
		Zhu Xiaoying
		Interim Chief Financial Officer
		(Principal Financial Officer and
		Accounting Officer)