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Kandi Technologies Reports Full Year 2010 Financial Results

^{Published on 2011-03-31 07:00:13 - Market Wire}
 

JINHUA, CHINA--(Marketwire - March 31, 2011) - Kandi Technologies, Corp. (NASDAQ: [ KNDI ]), a leading Chinese exporter of off-road vehicles and developer of the "COCO" all-electric vehicle, today reported financial results for the fourth quarter and full year ended Dec. 31, 2010.

Selected 2010 Financial Highlights:

• Full year revenues increased 26.8% to $42.9 million (compared with guidance of $40 million) due to continued strength in ATV and Go-kart sales
• On a non-GAAP basis, which excludes certain warrants, options and convertible notes related charges (see table below), the Company reported 2010 adjusted net income of $5.0 million, up 76% from adjusted net income of $2.8 million, in the same period last year
• Operating income increased 41.5% to $3.2 million in 2010, from $2.3 million in 2009
• Working capital surplus of $18.5 million at the end of 2010, an improvement from a working capital deficit of $12.1 million at the end of 2009
• Cash and cash equivalents (including restricted cash) totaled $25.1 million at year-end, a significant increase from $5.9 million in 2009
• Net cash provided by operations was $4.4 million, compared to $(8.5) million in cash used in operations in 2009

"We are very pleased to announce increased revenues this past year, especially from our traditional off-road products, as our legacy business returned to more normal conditions with revenues approaching record 2008 levels," said Mr. Xiaoming Hu, CEO and Chairman of the Board of Kandi Technologies. "This past year marked an exciting time for Kandi as we cultivated our previously announced strategic alliances and joint ventures with some of China's largest energy and battery companies, we received government approval and sold our first EVs in China, while developing pure EV technology and infrastructure that will ultimately change the automotive landscape in China and beyond."

Full Year 2010 Financial Results
Full year revenues increased by 26.8% to $42.9 million from $33.8 million in 2009. Improved results reflected the strong recovery of the Company's traditional off-road vehicle market, led by year-over-year increases of 120% in Go-kart sales and a 23% increase in ATV sales, primarily in the U.S.

Gross profit increased to $9.6 million in 2010, up from $8.2 million in the prior year. With carefully managed expenses, operating income rose 41.5% to $3.2 million in 2010, compared to operating income of $2.3 million in 2009.

Government grants, investment income and other income increased to $1.1 million, compared to $0.5 million in 2009. Interest expense increased to $2.2 million from $1.5 million in 2009 due primarily to the interest expense and amortization of debt discount related to the Company's convertible notes. In 2010, the Company also incurred a $2.7 million non-cash charge caused by the change in the fair value of financial instruments resulting from changes in fair value of warrants as well as the change in the conversion features embedded in convertible notes.

Excluding the effects of option-related expenses, the convertible notes interest expense, the effect caused by amortization of discount on convertible notes, and the change of the fair value of financial derivatives for the fiscal year ended December 31, 2010, the Company's net income was $5.0 million, up 76% as compared with net income of $2.8 million for the same period of 2009 excluding the same effects.

At the end of 2010, the Company had a working capital surplus of $18.5 million, a major improvement from a working capital deficit of $12.1 million at year-end 2009. The dramatic change in working capital was primarily due to the Company's issuance of $10.0 million in long-term convertible notes in January 2010 and an additional equity offering which raised $16.6 million in December 2010. In addition, for the year ended December 31, 2010, cash provided by operating activities was $4.4 million compared with cash used by operating activities of $8.5 million in 2009.

Selected 2010 Operational Highlights

• Forged Strategic Alliances with major energy and battery companies to launch the new Electric Vehicle era in China
• Received government approval to sell KD5010 (lead-acid battery) and KD5011 (lithium-ion battery) pure Electric Vehicles in China
• Introduced a new all-electric hardtop COCO model in the U.S.
• Unveiled an exciting two-seater 250cc Tricycle to the U.S. and European product lineup
• Announced completion of the first "Battery Charging Farm" and "Express Change" station in Jinhua City
• Kandi's first consumer sales of pure Electric Vehicles in China
• New Kandi EV models approved for national subsidy of up to RMB 60,000 per vehicle in all EV "pilot" cities throughout China
• Announced first steps to expand consumer pure EV sales to neighboring provincial capital city of Hangzhou

Fourth Quarter 2010 Financial Results
Revenues for the fourth quarter were $14.3 million, compared to $14.7 million in the same period in 2009, and up 36% from sales of $10.5 million in the third quarter of 2010. The Company expects significant sales growth of the pure Electric Vehicles in China and further expansion of the product line in the future. Revenues for the quarter were aided by increases in the ATV and Go-kart segments, which grew 25.5% and 77.3% respectively over fourth quarter 2009, while also increasing sequentially from sales in the third quarter of 2010.

Operating income was $1.2 million in the fourth quarter of 2010, compared to operating income of $1.5 million in the fourth quarter of 2009.

Excluding the effects of option-related expenses, convertible notes' interest expense, the effects caused by the amortization of discount on convertible notes, and the change of the fair value of financial derivative, for the three months ended December 31, 2010, the Company recorded adjusted net income of $1.9 million, a slight increase from $1.8 million for the same period of 2009 excluding the same effects.

During the fourth quarter of 2010, efforts to further develop the battery "Express Change" business model and EV sales continued as the Company announced expansion of consumer pure EV sales to the neighboring provincial capital city of Hangzhou. Ongoing discussions with government officials in Hangzhou allow further expansion of the EV infrastructure network and will help overcome key impediments to the widespread adoption of EV technology. In December 2010, the New Kandi EV model 5011 was approved for a national subsidy of up to RMB 60,000 per vehicle in all EV "pilot" cities throughout China, which includes Hangzhou. The government subsidies in each "pilot" city allow the Company to expand its patent-protected and proven technology across geographic end markets. These subsidies also improve the attractiveness of Kandi's pure EVs and consumers' ability to reduce their reliance on fossil fuels while improving air quality.

In the first quarter of 2011, the Company announced further developments in the European adoption of its pure EV products with a purchase order for 1,000 pure Electric Vehicles for the Italian market. Kandi expects that deliveries to Italy will be concentrated in the Rome market, which will also provide a platform for further expansion throughout Europe. The energy savings, environmental friendliness and convenience of Kandi's pure EVs are bringing the Company closer to realizing its global expansion ambitions.

"We remain very optimistic about achieving a leading role in China EV development," said Mr. Hu. "Our electric-powered super-mini vehicles continue to be our top priority as we expand our global sales of our super-mini car to meet emerging demand. We expect to see growing sales in Jinhua and other cities in China. We have recently made efforts to increase the sales of our EVs to Europe, and are optimistic that 2011 will be a year of growth and strong development for Kandi Technologies."

About Kandi Technologies, Corp.
Kandi Technologies, Corp. (NASDAQ: [ KNDI ]) is a manufacturer and exporter of a variety of vehicles in China, making it a world leader in the production of popular off-road vehicles (ORVs). It ranks among the leading manufacturers in China of all-terrain vehicles (ATVs), specialized utility vehicles (UTVs), and a recently introduced second generation high mileage, two-seat three-wheeled motorcycle. Another major company focus has been on the manufacture and sale of the COCO, a highly economical, beautifully designed, all-electric super mini car for neighborhood driving and commuting. The convertible and hardtop models of the COCO electric vehicle (EV) are available in the United States and other countries, while the Chinese government has approved the sale of Kandi EVs in China since 2010. The Company's products can be viewed at [ http://www.kandivehicle.com ] and its corporate website is [ http://www.chinakandi.com ].

Information Regarding Forward-Looking Statements
Except for historical information contained herein, the statements in this Press Release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the Securities and Exchange Commission.