☒ 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

KANDI TECHNOLOGIES GROUP, INC.

(Exact name of registrant as specified in charter)

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

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

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

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

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

As of ~~November~~August 5, ~~2019,~~2020, the registrant had ~~56,243,102~~56,521,702 shares of common stock issued and ~~52,819,441~~54,600,758 shares of common stock outstanding, par value $0.001 per share.

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE ~~SHEET~~SHEETS

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

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

COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

KANDI TECHNOLOGIES GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

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

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

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

In June 2020, Jinhua An Kao Power Technology Co., Ltd. ~~(“Geely”)~~changed its name to ~~transfer certain equity interests in the~~Zhejiang Kandi ~~Electric Vehicles Group~~Smart Battery Swap Technology Co., Ltd. (the “Affiliate Company”, formerly defined as the “JV Company”) to Geely. Pursuant to the Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately $46.7 million) from Geely last year to equity in order to increase its cash flow. As a result, the registered capital of the Affiliate Company became RMB 2.40 billion (approximately $336.3 million), of which Ltd (“Kandi Vehicles then owned 43.47% and Geely owned 56.53%, respectively, upon the conversion of the loan into equity in the Affiliate Company. After that, Kandi Vehicles further agreed to sell 21.47% of its equity interests in the Affiliate Company to Geely for a total amount of RMB 516 million (approximately $72.3 million)Smart Battery Swap”). 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 78% of the equity interests of the Affiliate Company. As now the Company only owns 22% of the JV Company, it was redefined as the Affiliate Company.

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

The Company had a working capital of ~~$80,374,159~~$75,587,762 as of ~~September~~June 30, ~~2019,~~2020, an increase of ~~$77,847,248~~$11,889,065 from athe working capital of ~~$2,526,911~~$63,698,697 as of December 31, ~~2018.~~2019. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s cash and cash equivalents ~~was $14,338,637~~were $3,457,498 and ~~$ 15,662,201, respectively, the~~$5,490,557, respectively. The Company’s restricted cash was ~~$11,713,004~~$3,221,053 and ~~$6,690,870,~~$11,022,078, respectively.

~~During~~After two years of negotiations, on March 10, 2020, a real estate repurchase agreement (the “Repurchase Agreement”) was entered into by and between Kandi Vehicles and Jinhua Economic and Technological Development Zone pursuant to which the local government shall purchase the land use right over the land of 66 acres (400 mu, 265,029 square meters) that is owned by Kandi Vehicles for RMB 525 million ($74 million). Payments to Kandi Vehicles shall be made in three installments as the Company disclosed in a Current Report on Form 8-K filed with the SEC on March 9, 2020. In addition, if Kandi Vehicles achieves certain milestones that contribute to local economic development, the Company will be eligible for tax rebates totaling up to RMB 500 million ($71 million) over the next eight years. On May 22, 2020, the Company received the first ~~quarter~~payment of ~~2019,~~RMB 244 million (approximately $35 million) under the Repurchase Agreement. On July 9, 2020, the Company ~~signed an agreement to sell 21.47% of its equity interests in~~received the ~~Affiliate Company to Geely for a total amount~~second payment of RMB ~~516~~119 million (approximately ~~$72.3~~$17 million)~~. As~~ under the Repurchase Agreement. The final payment of ~~September 29, 2019,~~RMB 162 million ($22.9 million) will be received when the Company ~~has received payments in cash totaling RMB 220 million (approximately $30.9 million)~~vacates the land, factory buildings, and ~~certain commercial acceptance notes~~other real estate and moved to the new facility. Kandi Vehicles intends to use a portion of RMB 296 million (approximately $41.6 million) from Geely, of which RMB 140 million (approximately $19.7 million) shall mature on January 20, 2020 and the remaining RMB 156 million (approximately $21.9 million) shall mature on March 29, 2020. The Company plans to apply the proceeds from the ~~equity transfer~~land repurchase (approximately RMB 130 million, or $18.4 million) to ~~its ongoing operations. The cash flow~~fund the land use acquisition and ~~operating capacity of~~factory construction in the ~~Company will be greatly improved after receiving~~New Energy Automotive Zone, and use the ~~above payments.~~

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

The Company’s primary need for liquidity stems from its need to fund working capital requirements of the Company’s businesses, its capital expenditures and its general operations, including debt repayment. The Company has historically financed its operations through short-term commercial bank loans from Chinese banks, as well as its ongoing operating activities by using funds from operations, external credit or financing arrangements. ~~The~~Although the Company ~~routinely monitors current and expected operational requirements and financial market conditions to evaluate~~has paid off all the ~~use~~short-term bank loans as of ~~available financing sources. Considering~~June 30, 2020, it still retains the ~~existing working capital position and~~credit line, which can be used at any time when the ~~ability to access debt funding sources,~~Company has special needs. In addition, the Company received the remaining RMB186 million (approximately $26.3 million) equity transfer payment from Geely in July, 2020. The management believes that the ~~Company’s operations and borrowing resources are~~Company currently has sufficient ~~to provide for its current and foreseeable~~working capital ~~requirements~~ to support its ongoing operations for the next twelve months.

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

Beginning in 2020, a strain of new coronavirus (“COVID-19”) has spread globally and at this point, the extent to which the COVID-19 may impact operations of the Company is uncertain. The extent of the impact of the COVID-19 on the Company's business and operations will depend on several factors, such as the duration, severity, and geographic spread of the pandemic, development of the testing and treatment and stimulus measures of the government. The Company is monitoring and assessing the evolving situation closely and evaluating its potential exposure. The operating results for the six months ended June 30, 2020 may not be indicative of the future operating results for the fiscal year ending December 31, 2020 or other future periods, particularly in light of the uncertain impact COVID-19 could have on the Company's business.

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:

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

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

The preparation of financial statements in conformity with ~~generally accepted accounting principles in the United States~~U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the 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.

Our significant accounting policies are detailed in “Note 26 - Summary of Significant Accounting Policies” of the Company ~~2018~~2019 Form ~~10-K.~~10-K, excepting the following.

Certain reclassifications have been made to the condensed consolidated statements of cash flows for six months ended June 30, 2019 to conform to the presentation of consolidated financial statement for six months ended June 30, 2020. The Company reclassified the following 1) grouping due from employees into other receivables and other assets; 2) grouping customer deposits and deferred income into other payables and accrued liabilities.

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

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

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

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

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

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

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

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

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

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

For the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2019,~~2020, 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). Due to the average market price of the common stock during the period below the exercise price of the options ~~approximately 3,900,000 options were excluded from the calculation of diluted net loss per share, for the three~~ and ~~nine months ended September 30, 2019, respectively. Due~~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~~three-month and ~~nine months~~six-month period ended ~~September~~June 30, ~~2018, respectively.~~2020.

The following is the calculation of earnings per share for the three-month and six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

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

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

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

As of ~~September~~June 30, 2020, there was $0 notes receivable from unrelated parties. As of December 31, 2019, there was ~~$41,549,888~~$42,487,225 notes receivable from unrelated parties, ~~among~~ which ~~$70,067 were bank acceptance notes from payments for sales and $41,479,821 were~~was commercial acceptance notes from payments for equity transfer of the Affiliate Company , among which $15,562,661 had been collected during first half of 2020 and the rest were considered as other receivables (refer to Note ~~24-summarized~~22-summarized information of equity method investment in the Affiliate Company). ~~As of December 31, 2018, there was $72,712 notes receivable from unrelated parties, among which $72,712 were bank acceptance notes from payments for sales.~~

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

As of ~~September~~June 30, 2020, the Company’s other receivable includes $26,315,045 amount due from unrelated party for equity transfer of the Affiliate Company (refer to Note 22-summarized information of equity method investment in the Affiliate Company). As of June 30, 2020 and December 31, 2019, the Company’s other receivable includes ~~$9.2 million~~$13,726,757 and $3,577,145 short-term loan lent to an unrelated party with a 6% annual interest rate to maximize the use of idled cash. This loan can be redeemed at any time.

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

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

Depreciation expenses for the three months ended ~~September~~June 30, 2020 and 2019 were $1,750,013 and ~~September 30, 2018 were $1,832,83 and $239,434,~~$1,876,569, respectively. Depreciation expenses for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 were $3,530,165 and ~~September 30, 2018 were $5,724,863 and $1,511,018, respectively~~$3,892,028, 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:

	Remaining	September 30,			December 31,			Remaining	June 30,			December 31,
	useful life	2019			2018			useful life	2020			2019
Gross carrying amount:
Trade name	2.25 years	$	492,235		$	492,235		1.5 years	$	492,235		$	492,235
Customer relations	2.25 years		304,086			304,086		1.5 years		304,086			304,086
Patent	5.75-7.42 years		4,456,278			4,624,513		5-6.67 years		4,499,024			4,564,506.00
			5,252,599			5,420,834				5,295,345			5,360,827
Less : Accumulated amortization
Trade name		$	(376,366	)	$	(338,307	)		$	(414,426	)	$	(389,053	)
Customer relations			(232,505	)		(208,993	)			(256,017	)		(240,342	)
Patent			(919,740	)		(545,407	)			(1,326,518	)		(1,076,660	)
			(1,528,611	)		(1,092,707	)			(1,996,961	)		(1,706,055	)
Intangible assets, net		$	3,723,988		$	4,328,127			$	3,298,384		$	3,654,772

The aggregate amortization expenses for those intangible assets ~~that continue to be amortized is reflected in amortization of intangible assets in the Consolidated Statements of Income~~were $ 152,846 and ~~Comprehensive Income and were $154,027 and $157,817~~$157,967 for the three months ended ~~September~~June 30, 2020 and 2019, respectively. The aggregate amortization expenses for those intangible assets were $307,702 and ~~2018, respectively. And $471,497 and $493,405~~$317,470 for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, ~~and 2018,~~ respectively.

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

2019 (Three Months)	$	157,166
2020		628,663
2020 (Six months)			$	307,702
2021		628,663		615,403
2022		549,304		536,044
2023		546,568		533,308
2024				533,308
Thereafter		1,213,624		772,619
Total	$	3,723,988	$	3,298,384

NOTE 16 - LAND USE RIGHTS, NET

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

	June 30,			December 31,
	2020			2019
Cost of land use rights	$	11,531,218		$	14,731,847
Less: Accumulated amortization		(2,766,022	)		(3,459,032	)
Land use rights, net	$	8,765,196		$	11,272,815

During June 2020, $2.2 million of land use rights was returned to the government as the Company began to perform its obligations under the Repurchase Agreement.

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

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

The amortization expenses for the three months ended ~~September~~June 30, 2020 and 2019, were $79,751 and ~~September 30, 2018, were $80,462 and $82,586,~~$82,837, respectively. The amortization expenses for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, were $160,712 and ~~September 30, 2018, were $247,061 and $267,177,~~$166,599, respectively. Amortization expenses for the next five years and thereafter is as follows:

2019 (Three Months)	$	82,354
2020		329,415
2020 (Six months)			$	160,712
2021		329,415		321,424
2022		329,415		321,424
2023		329,415		321,424
2024				321,424
Thereafter		9,684,703		7,318,788
Total	$	11,084,717	$	8,765,196

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

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

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

Short-term loans are summarized as follows:

	June 30,		December 31,
	2020		2019
Bank A

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

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

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

Long-term loans are summarized as follows:

	June 30,		December 31,
	2020		2019
Long term bank loans:	$
Bank C
Interest rate 7% per annum, due on December 12, 2021, guaranteed by the Company’s subsidiaries.		27,446,875		28,133,433
Other long term loans:
Loan under Paycheck Protection Program①		244,116		-
Economic Injury Disaster Loan ②		150,000		-
Long term loans - current and noncurrent portion	$	27,840,991		28,133,433

①

②

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

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

The interest expenses of short-term and long-term ~~bank~~ loans for the three months ended ~~September~~June 30, 2020 and 2019 were $748,269 and ~~2018 were $435,524 and $426,167,~~$429,355, respectively. The interest expenses of short-term and long-term ~~bank~~ loans for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 were $1,590,317 and ~~2018 were $1,304,062 and $1,274,399,~~$868,538, respectively.

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

NOTE ~~19 - NOTES PAYABLE~~

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

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

~~NOTE 20~~18 - TAXES

(a) Corporation Income Tax

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

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of ~~our~~its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the management makes a cumulative adjustment. For 2019, the management estimates that its effective tax rate will be favorably affected by non-taxable income such as the share of income of the Affiliate Company and the gain from the change of fair value of contingent liabilities and certain research and development super-deduction and adversely affected by non-deductible expenses such as part of entertainment expenses. The Company records valuation allowances against the deferred tax assets associated with losses for which weit may not realize a related tax benefit. After combining research and development tax credits of 25% on certain qualified research and development expenses, the Company’s effective tax ~~rates~~rate for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020 and ~~2018~~2019 were a tax ~~benefit~~expense of ~~13.05%~~62.43% on a reported income before taxes of approximately ~~$0.3~~$6.6 million, ~~and an effective income tax rate with~~ a tax benefit of ~~20.70% for the same period of last year~~6.02% on a reported loss before taxes of approximately ~~$1.8~~$12.5 million, respectively.

The quarterly tax provision, and the quarterly estimate of ~~our~~the Company’s annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting ~~our~~the Company’s pre-tax and taxable income and loss, acquisitions (including integrations) and investments, changes in ~~our~~its stock price, changes in ~~our~~its deferred tax assets and liabilities and their valuation, return to provision true-up, foreign currency gains (losses), changes in regulations and interpretations related to tax, accounting, and other areas. Additionally, ~~our~~the Company’s effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. The income tax provision for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 was tax ~~benefit~~expense of ~~$41,780~~$4,122,502 and tax benefit of ~~$370,316,~~$751,193, respectively.

~~Effective January 1, 2007, the Company adopted the guidance in~~

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

The aggregate NOLs in 2019 was $9.6 million deriving from entities in the PRC and Hong Kong. The aggregate NOLs in 2018 was $28.1 million deriving from entities in the PRCand Hong Kong. ~~The aggregate NOLs in 2017 was $22.7 million deriving from entities in the PRC, Hong Kong and U.S.~~ The NOLs will start to expire from 2021 if they are not used. The cumulative net operating loss in the PRC can be carried forward for five years, to offset future net profits for income tax purposes. The Company has $0 cumulative net operating loss ~~Pre-2018~~ in ~~the~~ U.S. ~~can be carried~~to carry forward ~~for twenty years.~~as of June 30, 2020. The cumulative net operating loss in Hong Kong can be carried forward without an expiration date.

(b) Tax Holiday Effect

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

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

	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2019		2018		2020		2019
Tax benefit (holiday) credit	$	377,303	$	1,345,541	$	164,163	$	169,810
Basic net income per share effect	$	0.000	$	0.000	$	0.000	$	0.000

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

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

NOTE 19 - LEASES

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

~~NOTE 21 – LEASES~~

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

As of ~~September~~June 30, ~~2019,~~2020, the Company’s right - of - use asset (grouped in other long term assets on the balance sheet) was ~~$ 42,974~~$115,087 and lease liability (grouped in other current liability on the balance sheet) was ~~$44,121.~~$117,695. For the three months ~~and nine~~ended June 30, 2020, the Company’s operating lease cost was $35,000. For the six months ended ~~September~~June 30, ~~2019,~~2020, the Company’s operating lease ~~expense~~cost was ~~$33,000 and $99,000, respectively.~~$68,000.

Supplemental information related to operating leases was as follows:

		Six months ended June 30, 2020
Cash payments for operating leases		$	68,000

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

Maturity of Lease Liabilities:	Lease payable
2020	$	70,117
2021		47,578
Total	$	117,695

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

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

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

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

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

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

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s contingent consideration liability was ~~$6,562,000~~$2,334,000 and ~~$7,256,000,~~$5,197,000, respectively. The decrease in contingent consideration liability was mainly due to the decrease of the forecast of SC Autosports’ third year net income as of June 30, 2020.

NOTE 2321 - STOCK AWARD

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

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

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

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

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

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

The fair value of stock awards based on 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~~granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On April 30, 2019, the ~~Board authorized the~~ Company ~~to grant~~granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan. On May 9, 2020, the Company granted 238,600 shares of common stock to certain management members and employees as compensation for their past services under the 2008 Plan.

For the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized ~~$22,925~~$824,621 and ~~$31,675~~$1,282,733 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members, management and consultants under General and Administrative Expenses, respectively. For ~~nine~~the six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized ~~$1,337,333~~$847,546 and ~~$1,311,885~~$1,314,408 of employee stock award expenses for stock compensation and annual incentive award under the 2008 Plan paid to Board members, management and consultants under General and Administrative Expenses, respectively.

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

The Company’s condensed consolidated net income (loss) 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~~Vehicles signed an Equity Transfer Agreement with Geely Technologies Group Co., Ltd. (“Geely”) to transfer certain equity interests in the Affiliate Company to Geely. Pursuant to the Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately ~~$46.7~~$44.4 million) from Geely ~~Group~~ last year to equity in order to increase its cash flow. As a result, the registered capital of the Affiliate Company became RMB 2.40 billion (approximately ~~$336.3~~$339.5 million), of which Kandi Vehicles owned 43.47% and Geely owned 56.53%, respectively, upon the conversion of the loan into equity in the Affiliate ~~Company (the “March Affiliate Loan to Equity Conversion”).~~Company. Kandi Vehicles further agree to sell 21.47% of its equity interests in the Affiliate Company to Geely for a total amount of RMB 516 million (approximately ~~$72.3~~$73.0 million) ~~(the “Affiliate Equity Transfer”)~~. Kandi Vehicles shall own 22% of the equity interests of the Affiliate Company as a result of the transfer. As of September 29, 2019, the Company ~~has~~had received payments in cash totaling RMB 220 million (approximately ~~$30.9~~$31.1 million) and certain commercial acceptance notes of RMB 296 million (approximately ~~$41.6~~$41.9 million) from Geely, of which RMB 140 million (approximately ~~$19.7~~$19.8 million) shall mature on January 20, 2020 and the remaining RMB 156 million (approximately ~~$21.9~~$22.1 million) shall mature on March 29, 2020. As of September 30, 2019, the equity transfer ~~has~~had been completed. Therefore, in the third quarter of 2019, the Company ~~has~~ recognized the gain from equity sale of ~~$20,574,217.~~$20,438,986. As of June 30, 2020, RMB 110 million (approximately $15.6 million) of the commercial acceptance notes has been collected. And the remaining RMB186 million (approximately $26.3 million) has been collected on July 27, 2020.

The Company accounted for its investments in the Affiliate Company under the equity method of accounting. ~~Since the March Affiliate Loan to Equity Conversion was completed at the very end of the first quarter, the~~The Company ~~still~~ recorded ~~50%~~22% of the Affiliate Company’s loss for the first ~~quarter~~half of 2019. Starting from the second quarter of the 2019, since the equity interests in the Affiliate Company have been reduced to 43.47% and the Affiliate Equity Transfer was completed at the very end of the third quarter, the Company recorded 43.47% of the Affiliate Company’s loss for the second and third quarter of 2019.2020.

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

	Three Months ended
	June 30,
	2020			2019
Condensed income statement information:
Net sales	$	16,456,551		$	2,828,732
Gross loss		(2,304,516	)		(2,606,809	)
Gross margin		-14.0	%		-92.2	%
Net loss		(13,535,506	)		(10,359,258	)

	Six Months ended
	June 30,
	2020			2019
Condensed income statement information:
Net sales	$	23,083,813		$	4,085,605
Gross loss		(2,642,287	)		(2,628,351	)
Gross margin		-11.4	%		-64.3	%
Net loss		(18,572,368	)		(30,550,572	)

	June 30,		December 31,
	2020		2019
Condensed balance sheet information:
Current assets	$	561,723,436	$	640,688,401
Noncurrent assets		52,287,099		64,589,516
Total assets	$	614,010,535	$	705,277,917
Current liabilities		420,915,948		490,625,640
Equity		193,094,587		214,652,277
Total liabilities and equity	$	614,010,535	$	705,277,917

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

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

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

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

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

	Nine Months ended						Six Months ended
	September 30,						June 30,
	2019			2018			2020				2019
Investment in the Affiliate Company, beginning of the period,	$	128,929,893		$	70,681,013		$	47,228,614			$	128,929,893
Investment in Affiliate Company in 2018		-			79,370,859
Investment decreased in 2019		(72,309,417	)
Gain from equity dilution		4,291,974			-			-				4,341,259.00
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	)
Company’s share in net (loss) income of Affiliate based on 22% ownership for six months ended June 30, 2020 and 50% ownership for three months ended March 31, 2019, 43.47% ownership for three months ended June 30, 2019								(4,086,848	)			(14,591,456	)
Intercompany transaction elimination		(12,557	)		(484,037	)		-				(14,157	)
Year 2018 unrealized profit realized		154,480			448,429
Prior year unrealized profit realized								5,549				156,254
Subtotal		(22,883,126	)		(79,593	)		(4,081,299	)			(14,449,359	)
Exchange difference		(4,766,530	)		(3,699,548	)		(656,867	)	��		323,099
Investment in Affiliate Company, end of the period	$	53,837,011		$	146,272,731		$	42,490,448			$	119,144,892

⁽¹⁾

Represents the rounded result of dividing RMB1,045 million (the Company’s ownership interest in the Affiliate Company) by RMB2,404 million (the Affiliate Company’s total equity interest). We used the actual result and kept full decimals when calculating the Company’s share in net (loss) income of the Affiliate Company.

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

Sales to the Company’s customers, the Affiliate Company and its subsidiaries, for the three months ended ~~September~~June 30, ~~2019,~~2020, were ~~$4,720,159~~$ 956 or ~~14.9%~~0% of the Company’s total revenue, a decrease of ~~79.6%~~100% from ~~$23,135,326~~$4,089,534 of the same quarter last year. Sales to the Company’s customers, the Affiliate Company and its subsidiaries, for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, were ~~$10,543,190~~$ 956 or ~~14.3%~~0% of the Company’s total revenue, a decrease of ~~65.4%~~100% from ~~$30,479,521~~$5,823,031 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.

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the ~~net current and noncurrent~~ net amount due from the Affiliate Company and its subsidiaries, was ~~$25,335,894~~$20,107,347 and ~~$67,683,462,~~$31,330,763, respectively. As of June 30, 2020 and December 31, 2019 the net amount due from the Affiliate Company and its subsidiaries included $2,053,131 and $2,056,564 interest receivable related to the loan lent to the Affiliate Company, but didn’t include any outstanding loan principal.

NOTE 2523 - COMMITMENTS AND CONTINGENCIES

Guarantees and pledged collateral for bank loans to other parties

(1) Guarantees for bank loans

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

On March 15, 2013, the Company entered into a guarantee contract to serve as the guarantor of Nanlong Group Co., Ltd. (“NGCL”) for NGCL’s ~~$2,802,691~~$ 2,829,575 (RMB 20 million) loan from Shanghai Pudong Development Bank Jinhua Branch, with a related loan period offrom March 15, 2013 to March 15, 2016. NGCL is not related to the Company. Under this guarantee contract, the Company agreed to assume joint liability as the loan guarantor. In April 2017, Shanghai Pudong Development Bank filed a lawsuit against NGCL, the Company and ten other parties in Zhejiang Province People’s Court in Yongkang City, alleging NGCL defaulted on a bank loan borrowed from Shanghai Pudong Development Bank for a principal amount of approximately $2.9 million and demanded that the guarantor bear the liability for compensation. On May 27, 2017, a judicial mediation took place in Yongkang City and parties reached a settlement in mediation, in which the plaintiff agreed NGCL would repay the loan principal and interest in installments. ~~So long as~~If there were an event of default that NGCL ~~repays~~could not repay the ~~principal and interest according to the agreement, the plaintiff will not ask~~loan, the Company ~~for recovery. As~~may be obligated to bear the liability of ~~the date of this report, the~~defaulted amount. The Company expects the likelihood of incurring losses in connection with this matter to be remote.

On September 29, 2015, the Company entered into a guarantee contract to serve as the guarantor of Zhejiang Shuguang Industrial Co., Ltd. (“ZSICL”) for a bank loan in the amount of ~~$4,063,901~~$4,102,883 (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~~13.9 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.~~installments. The Company expects the likelihood of incurring losses in connection with this matter to be low.

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

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

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

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

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

~~Construction commitment~~Litigation

~~Litigation~~

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

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

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

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

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

NOTE 2624 - SEGMENT REPORTING

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

The following table sets forth disaggregation of revenue:

	Three Months Ended September 30,				Three Months Ended June 30,
	2019		2018		2020			2019
	Sales Revenue		Sales Revenue		Sales Revenue			Sales Revenue
Primary geographical markets
Overseas	$	5,703,050	$	5,849,353	$	8,571,281		$	5,050,136
China		25,985,494		32,146,007		10,865,795			19,096,094
Total	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230

Major products
EV parts	$	25,847,506	$	32,065,497	$	12,514,548		$	18,988,741
EV products						(1,913	)		-
Off-road vehicles		5,841,038		5,929,863		6,564,415			5,157,489
Electric Scooters and Electric Self-Balancing Scooters						360,026			-
Total	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230

Timing of revenue recognition
Products transferred at a point in time	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230
Total					$	19,437,076		$	24,146,230

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

2328

The negative amount is due to exchange rate difference.

	Six Months Ended June 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	10,702,105	$	10,272,661
China		15,107,395		31,942,029
Total	$	25,809,500	$	42,214,690

Major products
EV parts	$	14,595,883	$	31,760,181
EV products		253,906		-
Off-road vehicles		10,599,685		10,454,509
Electric Scooters and Electric Self-Balancing Scooters		360,026		-
Total	$	25,809,500	$	42,214,690

Timing of revenue recognition
Products transferred at a point in time	$	25,809,500	$	42,214,690
Total	$	25,809,500	$	42,214,690

NOTE 25 - SUBSEQUENT EVENTS

On July 9, 2020, the Company received the second payment of RMB 119 million (approximately $17 million) under the Repurchase Agreement.

In order to construct a new facility in the Jinhua New Energy Automotive Zone, on July 7, 2020, Kandi Vehicles entered in to a construction contract. The total contract amount was RMB 138.2 million (approximately $19.6 million).

On July 27, 2020, the Company received the remaining RMB186 million (approximately $26.3 million) equity transfer payment from Geely.

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

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

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

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

Critical Accounting Policies and Estimates

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

~~Results of Operations~~Overview

~~Overview~~

We are one of the leading manufacturers of EV products (through Kandi Hainan and the Affiliate Company), EV parts and off-road vehicles in China. For the~~three~~ six months ended ~~September~~June 30, ~~2019,~~2020, we recognized total revenue of ~~$31,688,544~~$25,809,500 as compared to ~~$37,995,360~~$42,214,690 for the ~~three months ended September 30, 2018,~~same period of 2019, a decrease of ~~$6,306,816,~~$16,405,190 or ~~16.6%~~38.9%. For the ~~three~~six months ended ~~September~~June 30, ~~2019,~~2020, we recorded ~~$5,276,415~~$4,704,037 of gross ~~profits,~~profit, a decrease of ~~$965,634 or 15.5%~~35.9% from the same period of ~~2018.~~2019. Gross margin for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~16.7%~~18.2%, ~~an increase~~ compared to ~~16.4%~~17.4% for the ~~three months ended September 30, 2018.~~same period of 2019. We recorded a net income of ~~$12,089,441~~$2,480,400 for the ~~three~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to a net loss of ~~$6,521,399~~$11,727,630 in the same period of ~~2018, primarily attributable~~2019, a positive change from net loss to net income by gaining $14,208,030 or 121.2%.

The spread of COVID-19 around China and other parts of the world has caused significant volatility in the markets of China, U.S., and the rest of the world. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in China and elsewhere. Although the Company’s operations in China has fully resumed in early March 2020, the COVID-19 will affect the Company’s business performance in 2020. However, the extent to which the COVID-19 impacts our operations will depend on its future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or minimize its harm, among others.

The COVID outbreak has seriously impacted the EV market in 2020, leading us to explore how to augment our business. As we looked at other market opportunities that leverage our expertise, the management of the Company found potential in a number of ancillary products aimed at intelligent transportation. For example, Electric Scooters and Electric Self-Balancing Vehicles have distinct potential, with tens of millions of units sold each year around the world. The Company is pursuing these opportunities by expanding production of intelligent transportation products that exploit our advantages in the Yongkang Scrou’s power electric motor and Kandi Smart Battery Swap’s power battery pack. Our products aimed at this market combines our motors and battery packs into a dynamic power train system. Through extensive product trials, we are able to meet a leading standard in China, and thus went into production in the second quarter. As this business is developing quickly and progressing, the Company will consider to merge Yongkang Scrou and Kandi Smart Battery Swap into a single company that specialized in both smart battery swap system and powertrain technology.

The Company originally planned to export 2,000 to 5,000 units electric vehicles to the ~~gain from equity sale~~U.S. 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 $361,811 for the nine months ended September 30, 2019, compared to net loss of $1,418,879 in the same period of 2018, largely2020, but due to the ~~increased revenue, decreased research and development expense and the gain from equity sale~~COVID-19 pandemic in the ~~Affiliate Company.~~

~~The current subsidy standard is provided for~~first half of 2020, the plan are being adjusted according to the situation of COVID-19 control in the ~~Circular~~U.S, as well as the virtual pre-sales event on ~~Further Improving~~August 18.

During the ~~Subsidy Policies~~second quarter of 2020, the Company’s revenue increased to $19.4 million from $6.4 million during the first quarter of 2020. However, COVID-19 may eventually affect the Company's 2020 overall business performance. The operating results for the ~~Promotion~~three and ~~Application~~six months ended June 30, 2020 may not be indicative of ~~New Energy Vehicles, which was jointly promulgated by~~ the ~~Ministry~~future operating results for the fiscal year ending December 31, 2020 or other future periods, particularly in light of ~~Finance,~~ the Ministry of Science and Technology, the Ministry of Industry and Information Technology and the National Development and Reform Commission in 2019. The current subsidy standard reduces the amount of national subsidies and cancels local subsidies, resulting in a significant reduction in the total subsidy amount as compared to 2018. We believe the new subsidy standard presents both challenges and opportunities to the Company. In the past few years, although the government had a strong support policy for new energy vehicles, the unstable subsidy policy and the unpredictable timing of receiving such subsidiesuncertain impact COVID-19 could have ~~exerted tremendous pressure~~ on the ~~Company’s cash flow. Currently, in order to adapt to the new subsidy standard, the Affiliate Company is making full use~~Company's business.

Results of Geely’s resources and developing new models with goals to be independent of the government’s subsidies and have strong competitiveness at the same time. The new model are expected to be placed to market by the end of this year or at the beginning of 2020. We believe the Company will have greater opportunities for development at that time.Operations

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

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

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

REVENUES FROM UNRELATED PARTY, NET	$	19,436,120			100.0	%	$	20,056,696			83.1	%		(620,576	)		(3.1	%)
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET		956			0.0	%		4,089,534			16.9	%		(4,088,578	)		(100.0	%)

REVENUES, NET		19,437,076						24,146,230						(4,709,154	)		(19.5	%)

COST OF GOODS SOLD		(15,900,298	)		(81.8	%)		(19,944,076	)		(82.6	%)		4,043,778			(20.3	%)

GROSS PROFIT		3,536,778			18.2	%		4,202,154			17.4	%		(665,376	)		(15.8	%)

OPERATING INCOME (EXPENSES):
Research and development		(1,149,901	)		(5.9	%)		(632,590	)		(2.6	%)		(517,311	)		81.8	%
Selling and marketing		(763,666	)		(3.9	%)		(899,478	)		(3.7	%)		135,812			(15.1	%)
General and administrative		(3,907,191	)		(20.1	%)		(5,623,798	)		(23.3	%)		1,716,607			(30.5	%)
Gain on disposal of long-live asset		13,907,574			71.6	%		-			0.0	%		13,907,574			-
Total Operating Income (Expenses)		8,086,816			41.6	%		(7,155,866	)		(29.6	%)		15,242,682			(213.0	%)

INCOME (LOSS) FROM OPERATIONS		11,623,594			59.8	%		(2,953,712	)		(12.2	%)		14,577,306			(493.5	%)

OTHER INCOME (EXPENSE):
Interest income		221,792			1.1	%		97,814			0.4	%		123,978			126.7	%
Interest expense		(1,123,056	)		(5.8	%)		(429,355	)		(1.8	%)		(693,701	)		161.6	%
Change in fair value of contingent consideration		(929,000	)		(4.8	%)		548,000			2.3	%		(1,477,000	)		(269.5	%)
Government grants		86,799			0.4	%		175,319			0.7	%		(88,520	)		(50.5	%)
Gain from equity dilution in the Affiliate Company		-			0.0	%		(24,131	)		(0.1	%)		24,131			(100.0	%)
Share of loss after tax of the Affiliate Company		(2,978,529	)		(15.3	%)		(4,500,201	)		(18.6	%)		1,521,672			(33.8	%)
Other income (expenses), net		1,043,335			5.4	%		(174,597	)		(0.7	%)		1,217,932			(697.6	%)
Total other expenses, net		(3,678,659	)		(18.9	%)		(4,307,151	)		(17.8	%)		628,492			(14.6	%)

INCOME (LOSS) BEFORE INCOME TAXES		7,944,935			40.9	%		(7,260,863	)		(30.1	%)		15,205,798			(209.4	%)

INCOME TAX (EXPENSE) BENEFIT		(3,889,889	)		(20.0	%)		(57,295	)		(0.2	%)		(3,832,594	)		6689.2	%

NET INCOME (LOSS)		4,055,046			20.9	%		(7,318,158	)		(30.3	%)		11,373,204			(155.4	%)

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

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

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

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

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

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

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

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

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

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

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

(a) Revenue

For the three months ended ~~September~~June 30, ~~2019,~~2020, our revenue was ~~$31,688,544~~$19,437,076 compared to ~~$37,995,360~~$24,146,230 for the same period of ~~2018,~~2019, representing a decrease of ~~$6,306,816~~$4,709,154 or ~~16.6%~~19.5%. The decrease in revenue was mainly due to the decrease in EV parts ~~sales during this quarter. The decrease~~sales. Due to the outbreak of COVID-19 in China, the demand of EV parts ~~sales~~from customers was ~~primarily due to~~significantly affected during the ~~Affiliate Company’s temporary declining sales, which was caused by its product adjustments.~~first half of 2020.

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

	Three Months Ended September 30,				Three Months Ended June 30,
	2019		2018		2020			2019
	Sales		Sales		Sales			Sales
EV parts	$	25,847,506	$	32,065,497	$	12,514,548		$	18,988,741
EV products						(1,913	)		-
Off-road vehicles		5,841,038		5,929,863		6,564,415			5,157,489
Electric Scooters and Electric Self-Balancing Scooters						360,026			-
Total	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230

The negative amount is due to exchange rate difference.

EV Parts

During the three months ended ~~September~~June 30, ~~2019,~~2020, our revenues from the sales of EV parts were ~~$25,847,506,~~$12,514,548, representing a decrease of ~~$6,217,991~~$6,474,193 or ~~19.4%~~34.1% from ~~$32,065,497~~$18,988,741 for the same quarter of ~~2018.~~2019.

Our revenue for the three months ended ~~September~~June 30, ~~2019~~2020 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers, air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for ~~81.6%~~64.4% of total sales.

During the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, our revenue from the sale of EV parts to the Affiliate Company and its subsidiaries accounted for approximately ~~15%~~0% and ~~61%~~17% 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 provided to the Affiliate Company were primarily used for battery upgrade and market maintenance for the EV products that were previously put into the leasing market.~~Products

~~Off-Road Vehicles~~

During the three months ended ~~September~~June 30, ~~2019,~~2020, our revenue from the sale of EV Products was negative $1,913, which was due to exchange rate difference. There were no EV Products sales in the same period of 2020.

Off-Road Vehicles

During the three months ended June 30, 2020, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”) and others, were ~~$5,841,038,~~$6,564,415, representing ~~a decrease~~an increase of ~~$88,825~~$1,406,926 or ~~1.5%~~27.3% from ~~$5,929,863,~~$5,157,489, for the same quarter of ~~2018.~~2019. The increase was mainly due to the increased sales from SC Autosports because of increased demand due to the power sports’ unique form of “socially distant” recreation.

Our off-road vehicles business line accounted for approximately ~~18.4%~~33.8% of our total net revenue for the three months ended ~~September~~June 30, 2020.

Electric Scooters and Electric Self-Balancing Scooters

During the three months ended June 30, 2020, our revenue from the sale of Electric Scooters and Electric Self-Balancing Scooters was $360,026. There were no Electric Scooters and Electric Self-Balancing Scooters sales in the same quarter of 2019.

The following table shows the breakdown of our net revenues:

	Three Months Ended September 30,				Three Months Ended June 30,
	2019		2018		2020			2019
	Sales Revenue		Sales Revenue		Sales Revenue			Sales Revenue
Primary geographical markets
Overseas	$	5,703,050	$	5,849,353	$	8,571,281		$	5,050,136
China		25,985,494		32,146,007		10,865,795			19,096,094
Total	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230

Major products
EV parts	$	25,847,506	$	32,065,497	$	12,514,548		$	18,988,741
EV products						(1,913	)		-
Off-road vehicles		5,841,038		5,929,863		6,564,415			5,157,489
Electric Scooters and Electric Self-Balancing Scooters						360,026			-
Total	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230

Timing of revenue recognition
Products transferred at a point in time	$	31,688,544	$	37,995,360	$	19,437,076		$	24,146,230
Total					$	19,437,076		$	24,146,230

The negative amount is due to exchange rate difference.

(b) Cost of goods sold

Cost of goods sold was ~~$26,412,129~~$15,900,298 during the three months ended ~~September~~June 30, ~~2019,~~2020, representing a decrease of ~~$5,341,182,~~$4,043,778, or ~~16.8%~~20.3%, compared to ~~$31,753,311~~$19,944,076 for the same period of ~~2018.~~2019. The decrease was primarily due to the corresponding decrease in sales. Please refer to the Gross Profit section below for product margin analysis.

(c) Gross profit

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

	Three Months Ended June 30,
	2020											2019
	Sales			Cost			Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %
EV parts	$	12,514,548			10,745,020			1,769,528		14.1	%	$	18,988,741		15,826,401		3,162,340		16.7	%
EV products		(1,913	)		(4,793	)		2,880		-			-		-		-		-
Off-road vehicles		6,564,415			4,827,659			1,736,756		26.5	%		5,157,489		4,117,675		1,039,814		20.2	%
Electric Scooters and Electric Self-Balancing Scooters		360,026			332,412			27,614		7.7	%		-		-		-		-
Total	$	19,437,076			15,900,298			3,536,778		18.2	%	$	24,146,230		19,944,076		4,202,154		17.4	%

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

The negative amount is due to exchange rate difference.

Gross profit for the ~~third~~second quarter of ~~2019~~2020 decreased ~~15.5%~~15.8% to ~~$5,276,415,~~$3,536,778, compared to ~~$6,242,049~~$4,202,154 for the same period last year. This was primarily attributable to the sales ~~decrease.~~decrease of EV Parts, which was primarily due to the outbreak of COVID-19 in 2020. Our gross margin increased to ~~16.7%~~18.2% compared to ~~16.4%~~17.4% for the same period of ~~2018.~~2019. The increase in our gross margin was mainly due to the sales under SC Autosports which has increased ~~selling~~the unit price for the parts since the end of 2019 as well as introducing the ~~charging and exchanging equipment and the increased proportion~~sales of ~~the high-margin battery processing business this year.~~ATVs that brought higher margin than other off-road vehicles such as UTVs since May 2019.

(d) Research and development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled ~~$596,187~~$1,149,901 for the ~~third~~second quarter of ~~2019, a decrease~~2020, an increase of ~~$5,095,462~~$517,311 or ~~89.5%~~81.8% compared to ~~$5,691,649~~$632,590 for the same period of last year. The ~~decrease~~increase was mainly due to the R&D expense related to the ~~development~~technology upgrading of ~~EV Model K23 at Hainan facility in~~ the ~~third quarter of last year. Such R&D work has been completed in year 2018.~~Company’s products.

(e) Sales and marketing

Selling and distribution expenses were ~~$930,810~~$763,666 for the ~~third~~second quarter of ~~2019,~~2020, compared to ~~$898,896~~$899,478 for the same period last year, representing ~~an increase~~a decrease of ~~$31,914~~$135,812 or ~~3.6%~~15.1%. The ~~increase~~decrease was primarily attributable to the ~~increased freight~~reclassification of sales related financial charges to interest expense ~~incurred by SC Autosports.~~since the end of 2019.

(f) General and administrative expenses

General and administrative expenses were ~~$3,432,920~~$3,907,191 for the ~~third~~second quarter of ~~2019,~~2020, compared to ~~$2,070,947~~$5,623,798 for the same period last year, representing ~~an increase~~a decrease of ~~$1,361,973~~$1,716,607 or ~~65.8%~~30.5%. For the three months ended ~~September~~June 30, ~~2019,~~2020, general and administrative expenses included ~~$22,925~~$824,621 as expenses for common stock awards and stock options to employees and Board members, compared to ~~$31,675~~$1,282,733 of common stock awards and stock options expenses for the same period in ~~2018.~~2019. Besides stock compensation expense, our net general and administrative expenses for the three months ended ~~September~~June 30, ~~2019~~2020 were ~~$3,409,995,~~$3,082,570, representing ~~an increase~~a decrease of ~~$1,370,723,~~$1,258,495, from ~~$2,039,272~~$4,341,065 for the same period of ~~2018,~~2019, which was largely due to the ~~increased operation~~implementation of cost cutting strategy and tighter budget control by the management.

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

~~(g)~~Gain on disposal of long-live asset was $13,907,574 for the second quarter of 2020, which was related to the real estate repurchase agreement of our Jinhua Facility’s relocation. In June 2020, 73,333 square meters of land use right was transferred to the local government, and the related gain was recognized.

(h) Interest income

Interest income was ~~$209,736~~$221,792 for the ~~third~~second quarter of ~~2019,~~2020, representing an increase of ~~$156,991~~$123,978 or ~~297.6%~~126.7% compared to ~~$52,745~~$97,814 for the same period of last year. The increase was primarily attributable to increased interest earned on ~~loans~~the loan to a third party.

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

Interest expenses were ~~$435,524~~$1,123,056 in the ~~third~~second quarter of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$47,852~~$693,701 or ~~9.9%~~161.6% compared to ~~$483,376~~$429,355 for the same period of last year. The ~~decrease~~increase was primarily due to ~~decreased interest expenses incurred associated with the note payable to a third party, as well as decreased discounts associated with the settlement of bank acceptance notes. Of~~ the interest ~~expenses, $0 and $24,930 were discounts associated with the settlement~~expense of ~~bank acceptance notes for the three months ended September 30, 2019 and 2018, respectively.~~Hainan factory’s long-term debt.

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

For the ~~third~~second quarter of ~~2019,~~2020, the loss related to changes in the fair value of contingent consideration was $929,000, a decrease of $1,477,000 or 269.5% compared to gain related to changes in the fair value of contingent consideration ~~was $57,000, an increase~~ of ~~$1,609,686 or 103.7% compared to loss related to changes in the fair value of contingent consideration of $1,552,686~~$548,000 for the same period of last year, which was mainly due to the ~~decrease in~~adjustment of the fair value of the contingent consideration liability ~~between December 31, 2018 and September 30, 2019 while there~~associated with the remaining shares of restrictive common stock (Please refer to NOTE 20 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was ~~an increase in~~estimated at each reporting date by using the ~~same period of last year.~~Monte Carlo simulation method, which took into account all possible scenarios.

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

Government grants were ~~$502,146~~$86,799 for the ~~third~~second quarter of ~~2019,~~2020, compared to ~~$607,008~~$175,319 for the same quarter last year, representing a decrease of ~~$104,862,~~$88,520, or ~~17.3%~~50.5%, which was largely attributable to the ~~fact that Kandi Vehicles received the subsidies~~refund of 2018 social security and land use tax ~~in the third quarter of last year while the same kind of subsidies were~~Kandi Vehicles received in the second quarter of ~~2019, instead of in the third quarter.~~2019.

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

Gain from equity dilution was ~~a negative $49,285~~$0 for the ~~third~~second quarter of ~~2019,~~2020, compared to negative $24,131 for the same quarter last year which was due to exchange rate difference. ~~There was no equity dilution in the third quarter of 2019.~~

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

Gain from equity sale was $20,574,217 for the third quarter 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 recognized the gain from equity sale.

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

For the ~~third~~second quarter of ~~2019,~~2020, our share of loss of the Affiliate Company was ~~$8,433,767~~$2,978,529 as compared to share of loss of ~~$3,247,343~~$4,500,201 for the same period of last ~~year. The losses incurred by the Affiliate Company were~~year, representing a decrease of share of loss of $1,521,672, which was largely attributable to the fact that our equity interests of the Affiliate ~~Company’s temporary declining sales, which was caused by its product adjustments.~~Company has been decreased to 22% from 43.47% after the equity dilution and equity transfer in 2019.

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

Net other income was ~~$57,833~~$1,043,335 for the ~~third~~second quarter of ~~2019, representing an increase of $42,098 or 267.5%~~2020, compared to net other ~~income~~expenses of ~~$15,735~~$174,597 for the same period of last year, which was largely due to the ~~disposal~~discount of ~~certain waste materials during the third quarter.~~accounts payable after negotiation with supplier.

(o) Income Taxes

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

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

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

Our actual effective income tax rate for the ~~third~~second quarter of ~~2019~~2020 was a tax expense of ~~5.54%~~48.96% on a reported income before taxes of approximately ~~$12.8~~$7.9 million, compared to a tax ~~benefit~~expense of ~~7.20%~~0.79% on a reported loss before taxes of approximately ~~$7.0~~$7.3 million for the same period of last year.

(p) Net income (loss)

Net income was ~~$12,089,441~~$4,055,046 for the ~~third~~second quarter of ~~2019,~~2020, representing ~~an increase of $18,610,840~~a decrease in net loss by $11,373,204 compared to net loss ~~$6,521,399~~$7,318,158 for the same period of last year. The ~~increase~~decrease in loss was primarily attributable to ~~the~~ gain ~~from equity sale in the Affiliate Company and the decreased research and development expense.~~

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	Six Months Ended
	June 30, 2020			% of Revenue			June 30, 2019			% of Revenue			Change in Amount			Change in %

REVENUES FROM UNRELATED PARTY, NET	$	25,808,544			100.0	%	$	36,391,659			86.2	%		(10,583,115	)		(29.1	%)
REVENUES FROM THE AFFILIATE COMPANY AND RELATED PARTY, NET		956			0.0	%		5,823,031			13.8	%		(5,822,075	)		(100.0	%)

REVENUES, NET		25,809,500			100.0	%		42,214,690			100.0	%		(16,405,190	)		(38.9	%)

COST OF GOODS SOLD		(21,105,463	)		(81.8	%)		(34,876,099	)		(82.6	%)		13,770,636			(39.5	%)

GROSS PROFIT		4,704,037			18.2	%		7,338,591			17.4	%		(2,634,554	)		(35.9	%)

OPERATING INCOME (EXPENSES):
Research and development		(1,790,141	)		(6.9	%)		(1,170,023	)		(2.8	%)		(620,118	)		53.0	%
Selling and marketing		(1,641,972	)		(6.4	%)		(1,517,481	)		(3.6	%)		(124,491	)		8.2	%
General and administrative		(6,973,926	)		(27.0	%)		(7,663,326	)		(18.2	%)		689,400			(9.0	%)
Gain on disposal of long-live asset		13,907,574			53.9	%		-			0.0	%		13,907,574			-
Total Operating Income (Expenses)		3,501,535			13.6	%		(10,350,830	)		(24.5	%)		13,852,365			(133.8	%)

INCOME (LOSS) FROM OPERATIONS		8,205,572			31.8	%		(3,012,239	)		(7.1	%)		11,217,811			(372.4	%)

OTHER INCOME (EXPENSE):
Interest income		560,736			2.2	%		350,218			0.8	%		210,518			60.1	%
Interest expense		(2,105,990	)		(8.2	%)		(868,538	)		(2.1	%)		(1,237,452	)		142.5	%
Change in fair value of contingent consideration		2,863,000			11.1	%		637,000			1.5	%		2,226,000			349.5	%
Government grants		97,898			0.4	%		223,043			0.5	%		(125,145	)		(56.1	%)
Gain from equity dilution in the Affiliate Company		-			0.0	%		4,341,259			10.3	%		(4,341,259	)		(100.0	%)
Share of loss after tax of the Affiliate Company		(4,081,299	)		(15.8	%)		(14,449,359	)		(34.2	%)		10,368,060			(71.8	%)
Other income, net		1,062,985			4.1	%		299,793			0.7	%		763,192			254.6	%
Total other expenses, net		(1,602,670	)		(6.2	%)		(9,466,584	)		(22.4	%)		7,863,914			(83.1	%)

INCOME (LOSS) BEFORE INCOME TAXES		6,602,902			25.6	%		(12,478,823	)		(29.6	%)		19,081,725			(152.9	%)

INCOME TAX (EXPENSE) BENEFIT		(4,122,502	)		(16.0	%)		751,193			1.8	%		(4,873,695	)		(648.8	%)

NET INCOME (LOSS)		2,480,400			9.6	%		(11,727,630	)		(27.8	%)		14,208,030			(121.2	%)

3037

(a) Revenue

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, our revenue was ~~$73,903,234~~$25,809,500 compared to ~~$62,690,873~~$42,214,690 for the same period of ~~2018,~~2019, representing ~~an increase~~a decrease of ~~$11,212,361~~$16,405,190 or ~~17.9%~~38.9%. The ~~increase~~decrease in revenue was mainly due to the ~~increase in both EV parts and off-road vehicles sales during this quarter. The increase~~decrease in EV parts ~~sales was primarily due~~sales. Due to the ~~increased sales volume~~outbreak of ~~battery packs.~~COVID-19 in China, the production of EV parts was interrupted during the first quarter of 2020, and the overall demand of EV parts from customers was significantly affected during the first half of 2020.

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

	Nine Months Ended September 30,				Six Months Ended June 30
	2019		2018		2020		2019
	Sales		Sales		Sales		Sales
EV parts	$	57,607,687	$	53,947,874	$	14,595,883	$	31,760,181
EV products						253,906		-
Off-road vehicles		16,295,547		8,742,999		10,599,685		10,454,509
Electric Scooters and Electric Self-Balancing Scooters						360,026		-
Total	$	73,903,234	$	62,690,873	$	25,809,500	$	42,214,690

EV Parts

During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, our ~~revenue~~revenues from the ~~sale~~sales of EV parts ~~was $57,607,687,~~were $14,595,883, representing ~~an increase~~a decrease of ~~$3,659,813~~$17,164,298 or ~~6.8%~~54.0% from ~~$53,947,874~~$31,760,181 for the same period of ~~2018.~~2019.

Our revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2020 primarily consisted of revenue from the sales of battery packs, body parts, EV controllers, air conditioning units and other auto parts for use in the manufacturing of EV products. These sales accounted for ~~78.0%~~56.6% of ~~the~~ total sales.

During the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, our revenue from the sale of EV parts to the Affiliate Company and its subsidiaries accounted for approximately ~~14%~~0% and ~~49%~~14% of our total net revenue for the ~~period,~~quarter, respectively. ~~The decrease largely attributable~~

EV Products

During the six months ended June 30, 2020, our revenue from the sale of EV Products was $253,906, which was due to the ~~Affiliate Company’s temporary declining~~export 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~~of Hainan factories’ products. There weren’t any EV products ~~that were previously put into~~sales in the ~~leasing market.~~same period of 2019.

Off-Road Vehicles

During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, our revenue from the sales of off-road vehicles, including go karts, all-terrain vehicles (“ATVs”) and others, were ~~$16,295,547,~~$10,599,685, representing an increase of ~~$7,552,548~~$145,176 or ~~86.4%~~1.4% from ~~$8,742,999~~$10,454,509, for the same ~~quarter~~period of ~~2018. The increase in revenue of the off-road vehicles was largely due to the additional sales from SC Autosports, which became our wholly-owned U.S. subsidiary in July 2018.~~2019.

Our off-road vehicles business line accounted for approximately ~~22.0%~~41.1% of our total net revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Electric Scooters and Electric Self-Balancing Scooters

During the six months ended June 30, 2020, our revenue from the sale of Electric Scooters and Electric Self-Balancing Scooters was $360,026. There were no Electric Scooters and Electric Self-Balancing Scooters sales in the same period of 2019.

The following table shows the breakdown of our net revenues:

	Six Months Ended June 30,
	2020		2019
	Sales Revenue		Sales Revenue
Primary geographical markets
Overseas	$	10,702,105	$	10,272,661
China		15,107,395		31,942,029
Total	$	25,809,500	$	42,214,690

Major products
EV parts	$	14,595,883	$	31,760,181
EV products		253,906		-
Off-road vehicles		10,599,685		10,454,509
Electric Scooters and Electric Self-Balancing Scooters		360,026		-
Total	$	25,809,500	$	42,214,690

Timing of revenue recognition
Products transferred at a point in time	$	25,809,500	$	42,214,690
Total	$	25,809,500	$	42,214,690

(b) Cost of goods sold

Cost of goods sold was ~~$61,288,228~~$21,105,463 during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, representing ~~an increase~~a decrease of ~~$8,243,367,~~$13,770,636, or ~~15.5%~~39.5%, compared to ~~$53,044,861~~$34,876,099 for the same period of ~~2018.~~2019. The ~~increase~~decrease was primarily due to the corresponding ~~increase~~decrease in sales. Please refer to the ~~below~~ Gross Profit section below for product margin analysis.

(c) Gross profit

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

	Six Months Ended June 30,
	2020									2019
	Sales		Cost		Gross Profit		Margin %			Sales		Cost		Gross Profit		Margin %
EV parts	$	14,595,883		12,603,150		1,992,733		13.7	%	$	31,760,181		26,635,967		5,124,214		16.1	%
EV products		253,906		236,594		17,312		6.8	%		-		-		-		-
Off-road vehicles		10,599,685		7,933,307		2,666,378		25.2	%		10,454,509		8,240,132		2,214,377		21.2	%
Electric Scooters and Electric Self-Balancing Scooters		360,026		332,412		27,614		7.7	%		-		-		-		-
Total	$	25,809,500		21,105,463		4,704,037		18.2	%	$	42,214,690		34,876,099		7,338,591		17.4	%

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 %

Gross profit for the first ~~three quarters~~half of ~~2019 increased 30.8%~~2020 decreased 35.9% to ~~$12,615,006,~~$ 4,704,037, compared to ~~$9,646,012~~$7,338,591 for the same period last year. This was primarily attributable to the sales ~~increase.~~decrease, which was primarily due to the outbreak of COVID-19 in 2020. Our gross margin increased to ~~17.1%~~18.2% compared to ~~15.4%~~17.4% for the same period of ~~2018.~~2019. The increase in our gross margin was mainly due to the sales under SC which has increased ~~selling~~the unit price for the parts since end of 2019 as well as introducing 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.~~ATVs that brought higher margin than other off-road vehicles such as UTVs since May 2019.

(d) Research and development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses, totaled ~~$1,766,210~~$1,790,141 for the first ~~three quarters~~half of ~~2019, representing a decrease~~2020, an increase of ~~$5,325,626~~$620,118 or ~~75.1%~~53.0% compared to ~~$7,091,836~~$1,170,023 for the same period of last year. The ~~decrease~~increase was ~~primarily~~mainly due to the R&D expense related to the ~~development~~technology upgrading of ~~EV Model K23 at Hainan facility in~~ the ~~third quarter of last year. Such R&D work has been completed in year 2018.~~Company’s products.

(e) Sales and marketing

Selling and distribution expenses were ~~$2,448,291~~$1,641,972 for the first ~~three quarters~~half of ~~2019,~~2020, compared to ~~$1,875,294~~$1,517,481 for the same period last year, representing an increase of ~~$572,997~~$124,491 or ~~30.6%~~8.2%. The increase was primarily attributable to ~~inclusion of~~ the ~~sales~~increasing labor and ~~marketing~~advertising expenses ~~from SC Autosports, which became our wholly-owned~~in connection with the expansion the U.S. ~~subsidiary in July 2018.~~electric vehicle market.

(f) General and administrative expenses

General and administrative expenses were ~~$11,096,246~~$6,973,926 for the first ~~three quarters~~half of ~~2019,~~2020, compared to ~~$5,534,039~~$7,663,326 for the same period of last year, representing ~~an increase~~a decrease of ~~expenses of $5,562,207~~$689,400 or ~~100.5%~~9.0%. For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, general and administrative expenses included ~~$1,337,333~~$847,546 as expenses for common stock awards and stock options to employees and Board members, compared to ~~$253,934 for the same period~~$1,314,408 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~~same period in 2019. Besides stock compensation ~~expenses,~~expense, our net general and administrative expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were ~~$9,758,913, representing an increase of $4,478,808, or 84.8%, from $5,280,105~~$6,126,380 which was comparable to $6,348,918 for the same period of ~~2018,~~2019.

(g) Gain on disposal of long-live asset

Gain on disposal of long-live asset was $13,907,574 for the first half of 2020, which was ~~largely due~~related to the ~~increased operation costs~~real estate repurchase agreement of our Jinhua Facility’s relocation. In June 2020, 73,333 square meters of land use right was transferred to the ~~Company since Hainan facility has been put into production.~~local government, and the related gain was recognized.

~~(g)~~(h) Interest income

Interest income was ~~$559,954~~$560,736 for the first ~~three quarters~~half of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$892,568~~$210,518 or ~~61.4%~~60.1% compared to ~~$1,452,522~~$350,218 for the same period of last year. The ~~decrease~~increase was primarily attributable to ~~the decreased~~ interest earned on ~~loans to~~collateral for bank acceptance notes and increased interest earned on the ~~Affiliate Company since Kandi Vehicles’~~ loan to ~~Affiliate converted to equity in the second quarter of 2018.~~third party.

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

Interest expenses were ~~$1,304,062~~$2,105,990 in the first ~~three quarters~~half of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$201,347~~$1,237,452 or ~~13.4%~~142.5% compared to ~~$1,505,409~~$868,538 for the same period of last year. The ~~decrease~~increase was primarily due to ~~decreased interest expenses incurred associated with the note payable to a third party, as well as decreased discounts associated with the settlement of bank acceptance notes. Of~~ the interest ~~expenses, $0, and $78,272 were discounts associated with the settlement~~expense of ~~bank acceptance notes for the nine months ended September 30, 2019 and 2018, respectively.~~Hainan factory’s long-term debt.

~~(i)~~

(j) Change in fair value of contingent consideration

For the first ~~three quarters~~half of ~~2019,~~2020, the gain related to changes in the fair value of contingent consideration was ~~$694,000, representing a decrease~~$2,863,000, an increase of ~~$1,120,326~~$2,226,000 or ~~61.7%~~349.5% compared to gain related to changes in the fair value of contingent consideration of ~~$1,814,326~~$637,000 for the same period of last year, which was mainly due to the ~~decrease in~~adjustment of the fair value of the contingent consideration liability ~~between December 31, 2018 and September 30, 2019~~associated with the remaining shares of restrictive common stock (Please refer to NOTE 20 – CONTINGENT CONSIDERATION LIABILITY). The fair value of the contingent consideration liability was ~~less than~~estimated at each reporting date by using the ~~decrease in the same period of last year.~~Monte Carlo simulation method, which took into account all possible scenarios.

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

Government grants were ~~$725,189~~$97,898 for the first ~~three quarters~~half of ~~2019,~~2020, compared to ~~$717,821~~$223,043 for the same quarter last year, representing ~~an increase~~a decrease of ~~$7,368,~~$125,145, or ~~1.0%. This increase~~56.1%, which was largely attributable to the refund of 2018 social security and land use tax Kandi Vehicles received in ~~government grants was because~~the second quarter of ~~the government’s implementation of a new policy with the purpose of supporting companies that have no or less layoff of their employees.~~2019.

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

Gain from equity dilution was ~~$4,291,974~~$0 for the first ~~three quarters~~half of ~~2019~~2020, compared to $4,341,259 for the same period of last year, which was primarily due to gain from the conversion of the loan into equity in the Affiliate Company in March ~~Affiliate Loan to Equity Conversion.~~2019. Pursuant to the Equity Transfer Agreement, the Affiliate Company converted a loan of RMB 314 million (approximately ~~$45.7~~$44.3 million) from Geely Group ~~last year~~ to equity in order to increase its cash ~~flow. As a result, our equity interests in the Affiliate Company decreased~~flow (for details please refer to ~~43.47% in March, 2019.~~Note 22 - SUMMARIZED INFORMATION OF EQUITY METHOD INVESTMENT IN THE AFFILIATE COMPANY).

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

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.

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

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

For the first ~~three quarters~~half of ~~2019~~2020, our share of loss of the Affiliate Company was $4,081,299 as compared to share of loss of ~~$79,592 in~~$14,449,359 for the same period of last ~~year. The losses incurred by the Affiliate Company were~~year, representing a decrease of share of loss of $10,368,060, which was largely attributable to the decreased operating expenses of the Affiliate ~~Company’s temporary declining sales decline, which was caused by its product adjustments.~~Company, as well as the fact that our equity interests of the Affiliate Company has been decreased to 22% from 43.47% after the equity dilution and equity transfer in 2019.

(n) Other income, net

Net other income was ~~$357,626~~$1,062,985 for the first ~~three quarters~~half of ~~2019,~~2020, representing ~~a decrease~~an increase of ~~$308,668~~$763,192 or ~~46.3%~~254.6% compared to net other income of ~~$666,294~~$299,793 for the same period of last year, which was largely due to the ~~fees earned on technology development services in the same period~~discount of ~~last year.~~accounts payable after negotiation with supplier.

(o) Income Taxes

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

Our actual effective income tax rate for the first ~~three quarters~~half of ~~2019~~2020 was a tax ~~benefit~~expense of ~~13.05%~~62.43% on a reported income before taxes of approximately ~~$0.3~~$6.6 million, compared to a tax benefit of ~~20.70%~~6.02% on a reported loss before taxes of approximately ~~$1.8 million.~~$12.5 million for the same period of last year.

(p) Net income (loss)

Net income was ~~$361,811~~$2,480,400 for the first ~~three quarters~~half of ~~2019,~~2020, representing ~~an increase of $1,780,690~~a decrease in net loss by $14,208,030 compared to net loss ~~$1,418,879~~$11,727,630 for the same period of last year. The ~~increase~~decrease in loss 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~~Gain on disposal 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 considerationlong-live asset 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 attributablerelated to the ~~increased revenue, decreased research and development expense and the gain from equity sale in the Affiliate Company.~~real estate repurchase agreement of our Jinhua Facility’ relocation.

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

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

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

	Six Months Ended
	June 30, 2020			June 30, 2019
Net cash used in by operating activities	$	(34,327,490	)	$	(33,118,904	)
Net cash provided by investing activities		50,278,763			14,228,076
Net cash (used in) provided by financing activities		(25,628,295	)		1,474,078
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(9,677,022	)		(17,416,750	)
Effect of exchange rate changes on cash		(157,062	)		246,604
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		16,512,635			22,353,071
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		6,678,551			5,182,925

For the first ~~three quarters~~half of ~~2019,~~2020, cash used in operating activities was ~~$25,425,152,~~$34,327,490, as compared to cash used in operating activities of ~~$836,809~~$33,118,904 for the same period last year. Our operating cash inflows include cash received primarily from sales of our EV parts and off-road vehicles. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, employee compensation, and interest expenses of our financings. The major operating activities that provided cash for the first ~~three quarters~~half of ~~2019~~2020 were a decrease of amount due from the Affiliate Company of ~~$30,549,072.~~$4,129,516. The major operating activity that used cash for first ~~three quarters~~half of ~~2019~~2020 was an increase of ~~accounts receivable~~advances to supplier and prepayments and prepaid expenses of ~~$36,822,184.~~$12,586,777.

For the first ~~three quarters~~half of ~~2019,~~2020, cash derived from investing activities was ~~$31,087,397,~~$50,278,763, as compared to cash ~~used in~~derived from investing activities of ~~$682,504~~$14,228,076 for the same period of last year. The major investing activities that provided cash for the first ~~three quarters~~half of ~~2019~~2020 were an increase of ~~cash received~~proceeds from ~~equity sale in Affiliate Company~~disposal of ~~$32,061,558.~~long-lived assets of $34,696,547. The major investing activities that used cash for first ~~three quarters~~half of ~~2019~~2020 were ~~$955,670~~$59,670 used for the purchases of property, plant and equipment.

For the first ~~three quarters~~half of ~~2019, cash used from financing activities was $1,035,235, as compared to~~2020, cash used in financing activities was $ 25,628,295, as compared to cash derived from financing activities of ~~$3,631,969~~$1,474,078 for the same period of last year. The major financing activities that provided cash for the first ~~three quarters~~half of ~~2019~~2020 were proceeds from short-term bank loans of ~~$27,864,409.~~$24,031,625. The major financing activities that used cash for the first ~~three quarters~~half of ~~2019~~2020 were ~~$26,261,331 of repayment~~repayments of short-term bank ~~loans.~~loans of $49,769,638.

Working Capital

We had a working capital of ~~$80,374,159~~$75,587,762 at ~~September~~June 30, ~~2019,~~2020, which reflects an increase of ~~$77,847,248~~$11,889,065 from a working capital of ~~$2,526,911~~$63,698,697 as of December 31, ~~2018.~~2019.

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

~~Capital Requirements and Capital Provided~~

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

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

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

~~The difference between capital provided and capital required is caused by the effect of exchange rate changes~~tax rebates that could total up to RMB 500 million ($71 million) over the ~~past nine months.~~next eight years. On May 22, 2020, the Company received the first payment of RMB 244 million (approximately $35 million) under the Repurchase Agreement. On July 9, 2020, the Company received the second payment of RMB 119 million (approximately $17 million) under the Repurchase Agreement.

Contractual Obligations and Off-balance Sheet Arrangements

Short-term and long-term Loans:

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

~~Notes payable:~~

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

Guarantees and pledged collateral for third party bank loans

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

Recent Development ~~Activities:~~Activities

On ~~September 23, 2019, the Company~~July 13, 2020, we announced that Kandi Vehicles and DGL Group signed a Purchase Framework Agreement (the “Agreement”) on behalf of Kandi Vehicles and DGL Group regarding an initial batch order of 300,000 electric scooters and 500,000 electric self-balancing scooters. The total value of the Agreement is expected to be about RMB 500 million (approximately $70.5 million).The purchased products are expected to be completed and delivered within one year from the date of signing this Agreement.

~~On September 30, 2019, the Company announced that it has completed the transfer of 21.74% of equity interests in~~ the Affiliate Company launched sales of its first pure electric SUV, the Maple 30x. The Maple 30x comes in five styles and five different colors. In addition to ~~Geely on September 29, 2019.~~the four styles offered in pre-sales earlier this year, the Affiliate Company also launched its “mobility version” customized for the urban mobility market.

On ~~October 2, 2019, the Company~~July 22, 2020, we announced that ~~Kandi brand EV model K23, manufactured~~the Maple 60V all-electric MPV (Multi-purpose Vehicle) produced by ~~Kandi Hainan, received eligibility~~the Affiliate Company was approved for uppurchase subsidies by China’s Ministry of Industry and Information Technology (“MIIT”). Subsidy approval is a key milestone as the Affiliate Company brings the 60V to ~~$7,500~~market in ~~tax credits under~~ the ~~New Qualified Plug-in Electric Drive Motor Vehicle Credit (the “Credit”) from~~near future.

On July 30, 2020, we announced the ~~Internal Revenue Service. Therefore, new U.S. buyers who purchase model K23 will qualify for~~formal launch of 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 potentialmost affordable pure electric automobiles in the U.S. market, the Kandi K27 and ~~showed their high interests in distributing model K23. As a result,~~K23 models. The cars will be sold by Kandi ~~Hainan signed a supply contract (the “Contract”) for~~America, the ~~initial 2000 model K23 with~~trade name of Kandi’s wholly owned subsidiary SC Autosports, ~~on October 1, 2019. The value of the Contract is about $32 million. According to the Contract, the first 200 vehicles are expected to be delivered by the end of 2019.~~

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

On November 4, 2019, the Company announced that it has newly developed two new mini pure EV models. The first model is a four-wheeled mini pure EV. The second model is a three-wheeled mini pure EV. These vehicles are intended for use in residential settings to meet U.S. market demand according to DGL Group Inc. (USA) (“DGL Group”)’s market analysis research. After Kandi has undergone several rounds of technical and performance testsLLC. Sales will initially focus on the ~~mini EVs, five~~Dallas-Fort Worth metroplex.

On August 3, 2020, we announced the achievement of ~~each mini EV model prototypes are completed and ready to be shipped to DGL Group~~a key milestone in our commercialization plan for ~~further tests in the beginning of this month.~~

our proprietary battery swap technology. On ~~November 11, 2019, the Company announced that its first~~August 2, 2020, we delivered our fully automatic intelligent battery exchange system ~~passed~~to the ~~inspection on November 10, 2019.~~rideshare operator in Haikou City, Hainan Province. The system ~~features automatic functions~~was developed and is produced by Kandi’s wholly-owned subsidiary, Kandi Smart Battery Swap. Installation is expected to be completed shortly, after which ~~perform an intelligent charging and~~the rideshare operator will use the K23 model’s battery ~~exchange. The battery exchanging time~~swap service for ~~each vehicle is only 90 seconds, which ranks among the current top battery exchange equipment.~~its online car-hailing business in Hainan.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to us.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

~~Issuer Purchases of Equity Securities~~

On May 14, 2019, we announced that our board of directors had authorized the repurchase of up to $20 million worth of our common stock in open market transactions or in privately negotiated transactions. The following table sets forth information regarding shares of our common stock that we repurchased during the three months ended September 30, 2019.

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

~~In summary, the Company had repurchased a total of 487,155 common shares at an average stock price of $5.09 per share as of September 30, 2019.~~

Item 6. Exhibits

Exhibit Number		Description
~~31.1~~10.1		English Translation of the Supplementary Agreement II to the Share Transfer Agreement of Jinhua An Kao Power Technology Co., Ltd. dated July 7, 2020
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.

3946

SIGNATURES

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

Date: ~~November 12, 2019~~August 10, 2020	By:	/s/ Hu Xiaoming
		Hu Xiaoming
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 12, 2019~~August 10, 2020	By:	/s/ ~~Zhu Xiaoying~~Jehn Ming Lim
		~~Zhu Xiaoying~~Jehn Ming Lim
		~~Interim~~ Chief Financial Officer
		(Principal Financial Officer and
		Accounting Officer)

40 47

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses. As of June 30, 2020, we had received $244,116 under the PPP. In addition, Economic Injury Disaster Loans (“EIDL”) through the SBA was also made available under the CARES Act passed by Congress in response to the COVID-19 pandemic. During June 2020, $150,000 of EIDL loan was approved with the term of a 3.75% rate over 30 years, and a 12-month deferment on the first repayment of principal with interest accrued during deferment. false --12-31 Q2 0001316517 2020-05-22 2020-05-22 2020-04-22 2020-04-24 2020-04-26 2021-12-12 The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration ("SBA") to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program ("PPP"). An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly "payroll costs;" or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses. As of June 30, 2020, we had received $244,116 under the PPP. In addition, Economic Injury Disaster Loans ("EIDL") through the SBA was also made available under the CARES Act passed by Congress in response to the COVID-19 pandemic. During June 2020, $150,000 of EIDL loan was approved with the term of a 3.75% rate over 30 years, and a 12-month deferment on the first repayment of principal with interest accrued during deferment.

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 Global Select Market

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(UNAUDITED)						(UNAUDITED)
Current assets
Cash and cash equivalents	$	14,338,637		$	15,662,201		$	3,457,498		$	5,490,557
Restricted cash		11,713,004			6,690,870			3,221,053			11,022,078
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
Accounts receivable (net of allowance for doubtful accounts of $251,012 and $254,665 as of June 30, 2020 and December 31, 2019, respectively)								60,020,455			61,181,849
Inventories		35,447,383			21,997,868			28,245,267			27,736,566
Notes receivable		41,549,888			72,712			-			42,487,225
Notes receivable from the Affiliate Company and related party		-			3,861,032
Other receivables		12,859,304			1,264,323			42,661,342			5,019,971
Prepayments and prepaid expense		9,497,459			11,136,408			10,407,572			10,615,063
Due from employees		5,499			1,001
Advances to suppliers		4,474,104			4,705,183
Amount due from the Affiliate Company, net		25,335,894			67,683,462			20,107,347			31,330,763
Right - of - use asset		42,974			-
Other current assets								13,283,400			688,364
TOTAL CURRENT ASSETS		210,123,947			167,349,788			181,403,934			195,572,436

LONG-TERM ASSETS
Property, plant and equipment, net		74,491,204			82,045,923			69,907,964			74,407,858
Intangible assets								3,298,384			3,654,772
Land use rights, net		11,084,717			11,749,728			8,765,196			11,272,815
Construction in progress		17,781			-
Deferred taxes assets		-			8,204
Investment in the Affiliate Company		53,837,011			128,929,893			42,490,448			47,228,614
Goodwill		27,762,120			28,552,215			27,962,871			28,270,400
Intangible assets		3,723,988			4,328,127
Other long term assets		4,803,349			5,865,386			10,529,348			10,811,501
TOTAL Long-Term Assets		175,720,170			261,479,476			162,954,211			175,645,960

TOTAL ASSETS	$	385,844,117		$	428,829,264		$	344,358,145		$	371,218,396

CURRENT LIABILITIES
Accounts payable	$	79,632,036		$	112,309,683		$	59,656,133		$	72,093,940
Other payables and accrued expenses		4,843,001			4,251,487			4,239,760			6,078,041
Short-term loans		30,969,731			30,539,236			-			25,980,364
Customer deposits		33,535			94,408
Notes payable		11,463,004			12,787,619			2,971,053			10,765,344
Income tax payable		1,519,699			3,471,366			2,901,610			1,796,601
Due to employees		7,105			28,473
Deferred income		1,237,556			1,340,605
Lease liability		44,121			-
Advance receipts								18,497,676			-
Long term loans - current portion								16,128,576			13,779,641
Other current liability								1,421,364			1,379,808
Total Current Liabilities		129,749,788			164,822,877			105,816,172			131,873,739

LONG-TERM LIABILITIES
Long term bank loans		27,606,502			28,794,136
Long term loans								11,712,415			14,353,792
Deferred taxes liability		1,758,643			1,711,343			3,448,922			1,362,786
Contingent consideration liability		6,562,000			7,256,000			2,334,000			5,197,000
Other long-term liability		-			622,034			565,915			574,152
Total Long-Term Liabilities		35,927,145			38,383,513			18,061,252			21,487,730

TOTAL LIABILITIES		165,676,933			203,206,390			123,877,424			153,361,469

STOCKHOLDER’S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,263,102 and 55,992,002 shares issued and 52,839,441 and 51,484,444 outstanding at September 30, 2019 and December 31, 2018, respectively		52,839			51,484
Less: Treasury stock (487,155 shares with average price of $5.09 and 0 shares at September 30, 2019 and December 31, 2018, respectively )		(2,477,965	)		-
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,273,102 and 56,263,102 shares issued and 54,352,158 and 52,839,441 outstanding at June 30,2020 and December 31,2019, respectively								54,352			52,839
Less: Treasury stock (487,155 shares with average price of $5.09 at June 30,2020 and December 31,2019, respectively )								(2,477,965	)		(2,477,965	)
Additional paid-in capital		259,691,370			254,989,657			262,878,585			259,691,370
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 deficit (the restricted portion is $4,422,033 and $4,422,033 at June 30,2020 and December 31,2019, respectively)								(14,205,339	)		(16,685,736	)
Accumulated other comprehensive loss		(27,963,862	)		(19,921,258	)		(25,768,912	)		(22,723,581	)
TOTAL STOCKHOLDERS’ EQUITY		220,167,184			225,622,874			220,480,721			217,856,927

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	385,844,117		$	428,829,264		$	344,358,145		$	371,218,396

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total			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			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			1,096,397		1,097		-		3,387,379		-			-			3,388,476
Net income (loss)		-		-		-			-			(4,409,472	)		-			(4,409,472	)		-		-		-		-		(4,409,472	)		-			(4,409,472	)
Foreign currency translation		-		-		-			-			-			5,404,028			5,404,028			-		-		-		-		-			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			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			238,600		238				1,259,569								1,259,807
Net income (loss)		-		-		-			-			(7,318,158	)		-			(7,318,158	)										(7,318,158	)					(7,318,158	)
Foreign currency translation		-		-		-			-			-			(4,915,589	)		(4,915,589	)													(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			52,819,441		52,819		-		259,636,605		(21,224,639	)		(19,432,819	)		219,031,966
Stock issuance and award		20,000		20		-			69,380			-			-			69,400
Stock buyback		-		-		(2,477,965	)		-			-			-			(2,477,965	)
Commission in stock buyback		-		-		-			(14,615	)		-			-			(14,615	)
Net income (loss)		-		-		-			-			12,089,441			-			12,089,441
Foreign currency translation		-		-		-			-			-			(8,531,043	)		(8,531,043	)

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

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

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

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

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

	Number of Outstanding Shares		Common Stock		Treasury Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income			Total
Balance, December 31, 2019		52,839,441	$	52,839	$	(2,477,965	)	$	259,691,370	$	(16,685,736	)	$	(22,723,581	)	$	217,856,927
Stock issuance and award		10,000		10		-			22,290		-			-			22,300
Net income (loss)		-		-		-			-		(1,574,646	)		-			(1,574,646	)
Foreign currency translation		-		-		-			-		-			(3,523,065	)		(3,523,065	)

Balance, March 31, 2020		52,849,441	$	52,849	$	(2,477,965	)	$	259,713,660	$	(18,260,382	)	$	(26,246,646	)	$	212,781,516
Stock issuance and award		1,502,717		1,503		-			3,164,925		-			-			3,166,428
Net income (loss)		-		-		-			-		4,055,043			-			4,055,043
Foreign currency translation		-		-		-			-		-			477,734			477,734

Balance, June 30, 2020		54,352,158		54,352		(2,477,965	)		262,878,585		(14,205,339	)		(25,768,912	)		220,480,721

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

		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	1

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

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

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

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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2430

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3845

Item 4.	Controls and Procedures	3845

PART II — OTHER INFORMATION

Item 1.	Legal proceedings	3946

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

Item 6.	Exhibits	3946

	Nine Months Ended
	September 30, 2019			September 30, 2018			June 30, 2020			June 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	361,811		$	(1,418,879	)	$	2,480,400		$	(11,727,630	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		6,443,422			2,271,599			4,022,676			4,376,097
Impairments		44,544			24,854			(148,054	)		59,799
Allowance for doubtful accounts		15,366			(7,093	)		-			15,543
Deferred taxes		50,693			-			2,089,505			51,275
Share of loss after tax of the Affiliate Company		22,883,126			79,592			4,081,299			14,449,359
Gain from equity dilution in the Affiliate Company		(4,291,974	)		-			-			(4,341,259	)
Gain from equity sale in the Affiliate Company		(20,574,217	)		-
Gain on disposal of long-live asset								(13,907,574	)		-
Change in fair value of contingent consideration		(694,000	)		(1,814,326	)		(2,863,000	)		(637,000	)
Stock compensation cost		1,337,333			253,934			847,546			1,314,408

Changes in operating assets and liabilities:
(Increase) Decrease In:
Accounts receivable		(36,822,184	)		(52,845,923	)		(1,431,388	)		(16,560,338	)
Deferred taxes assets		-			(52,126	)
Notes receivable		174,881			491,272.00			-			250,593
Notes receivable from the Affiliate Company and related party		437,203			3,196,340			-			442,223
Inventories		(14,813,147	)		1,555,993			(743,483	)		(7,093,904	)
Other receivables and other assets		(17,275,954	)		1,497,230			(11,248,701	)		(6,258,341	)
Due from employee		(25,861	)		945
Advances to supplier and prepayments and prepaid expenses		1,357,001			(4,590,404	)		(12,586,777	)		708,825
Amount due from the Affiliate Company		30,549,072			(81,549,214	)		4,129,516			(4,128,506	)
Amount due from Affiliate Company-Long term		-			15,907,183
Due from related party		-			161,874

Increase (Decrease) In:
Accounts payable		11,383,411			101,684,965			(282,560	)		387,505
Other payables and accrued liabilities		7,791,028			29,845,307			736,715			7,868,402
Notes payable		(11,836,950	)		(12,434,813	)		(10,664,922	)		(10,161,233	)
Customer deposits		(59,734	)		20,350
Income tax payable		(1,803,574	)		(2,353,826	)		1,161,312			(2,134,722	)
Deferred income		(56,448	)		(761,643	)
Net cash used in operating activities	$	(25,425,152	)	$	(836,809	)
Net cash used in by operating activities							$	(34,327,490	)	$	(33,118,904	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net		(955,670	)		(304,745	)		(59,670	)		(512,707	)
Purchases of land use rights and other intangible assets		-			(105,480	)
Acquisition of Jinhua An Kao (net of cash received)		-			(3,610,846	)
Acquisition of SC Autosports		-			486,954
Purchases of construction in progress		(18,491	)		(425,241	)
Reimbursement of capitalize interests for construction in progress		-			1,818,390
Proceeds from disposal of long-live asset								34,696,547			-
Cash received from equity sale in the Affiliate Company		32,061,558			-			15,641,886			-
Long Term Investment		-			1,458,464
Net cash provided by (used in) investing activities	$	31,087,397		$	(682,504	)
Advance receipts of equity transfer								-			14,740,783
Net cash provided by investing activities							$	50,278,763		$	14,228,076

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans		27,864,409			25,515,452
Repayments of short-term bank loans		(26,261,331	)		(26,283,065	)
Repayments of long-term bank loans		(145,734	)		(153,523	)
Proceeds from notes payable		-			40,313,800
Repayment of notes payable		-			(43,024,633	)
Cash used for stock buyback		(2,492,579	)		-
Net cash used in financing activities	$	(1,035,235	)	$	(3,631,969	)
Proceeds from short-term loans								24,031,625			17,541,532
Repayments of short-term loans								(49,769,638	)		(15,920,046	)
Proceeds from long-term loans								394,116			-
Repayments of long-term loans								(284,398	)		(147,408	)
Net cash (used in) provided by financing activities							$	(25,628,295	)	$	1,474,078

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		4,627,010			(5,151,282	)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH								(9,677,022	)		(17,416,750	)
Effect of exchange rate changes on cash		(928,440	)		(512,545	)		(157,062	)		246,604
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		22,353,071			16,110,496			16,512,635			22,353,071

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		26,051,641			10,446,669			6,678,551			5,182,925
-CASH AND CASH EQUIVALENTS AT END OF PERIOD		14,338,637			1,342,085			3,457,498			3,608,933
-RESTRICTED CASH AT END OF PERIOD		11,713,004			9,104,584			3,221,053			1,573,992

SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid		1,711,101			1,981,072			870,082			1,199,807
Interest paid		1,304,062			1,274,399			641,213			868,538

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

	Sales						Trade Receivable
	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,			September 30,			December 31,			Sales						Trade Receivable
Major Customers	2019			2018			2019			2018			Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			June 30, 2020			December 31, 2019
Customer A		30	%		24	%		27	%		22	%		57	%		36	%		66	%		55	%
Customer B		30	%		4	%		12	%		2	%		15	%		27	%		6	%		5	%
Kandi Electric Vehicles Group Co., Ltd. and its subsidiaries (related party)		15	%		61	%		30	%		66	%
Customer D		10	%		-			8	%		7	%

	Sales						Trade Receivable
	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,			September 30,			December 31,			Sales						Trade Receivable
Major Customers	2019			2018			2019			2018			Six Months Ended June 30, 2020			Six Months Ended June 30, 2019			June 30, 2020			December 31, 2019
Customer A		39	%		24	%		27	%		22	%		51	%		47	%		66	%		55	%
Customer B		23	%		6	%		12	%		2	%		15	%		18	%		6	%		5	%
Kandi Electric Vehicles Group Co., Ltd. and its subsidiaries (related party)		14	%		49	%		30	%		66	%

	Purchases						Accounts Payable
Major Suppliers	Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			June 30, 2020			December 31, 2019
Zhejiang Kandi Supply Chain Management Co., Ltd.		59	%		69	%		13	%		8	%
Supplier C		24	%		13	%		-			-

	For three months ended
	June 30,
	2020		2019
Net income (loss)	$	4,055,046	$	(7,318,158	)
Weighted average shares used in basic computation		53,369,602		52,806,331
Dilutive shares		-		-
Weighted average shares used in diluted computation		53,369,602		52,806,331
Income (loss) per share:
Basic	$	0.08	$	(0.14	)
Diluted	$	0.08	$	(0.14	)

	For nine months ended					For six months ended
	September 30,					June 30,
	2019		2018			2020		2019
Net income (loss)	$	361,811	$	(1,418,879	)	$	2,480,400	$	(11,727,630	)
Weighted average shares used in basic computation		52,332,260		51,089,047			52,862,043		52,189,237
Dilutive shares		-		-			-		-
Weighted average shares used in diluted computation		52,332,260		51,089,047			52,862,043		52,189,237

Earnings (Loss) per share:
Basic and diluted	$	0.01	$	(0.03	)
Income (loss) per share:
Basic						$	0.05	$	(0.22	)
Diluted						$	0.05	$	(0.22	)

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

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

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

	June 30,			December 31,
	2020			2019
At cost:
Buildings	$	30,017,395		$	30,447,480
Machinery and equipment		62,128,182			62,973,794
Office equipment		1,041,911			1,048,651
Motor vehicles and other transport equipment		412,260			413,046
Molds and others		25,467,098			25,836,241
		119,066,846			120,719,212
Less : Accumulated depreciation
Buildings	$	(6,396,987	)	$	(5,975,030	)
Machinery and equipment		(16,735,598	)		(14,127,506	)
Office equipment		(611,384	)		(537,829	)
Motor vehicles and other transport equipment		(369,453	)		(360,098	)
Molds and others		(25,045,460	)		(25,310,891	)
		(49,158,882	)		(46,311,354	)
Property, plant and equipment, net	$	69,907,964		$	74,407,858

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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