Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto, included elsewhere in this annual report. The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed elsewhere in this annual report. See "Cautionary Statement Regarding Forward-Looking Statements" and "Item 3. Key Information-D. Risk Factors." We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

Overview

Kandi Technologies Group, Inc. ("Kandi Technologies") was originally a Delaware holding company. Effective on April 17, 2024, Kandi Technologies merged with and into Kandi BVI, with Kandi BVI as the surviving company (the "Reincorporation"). Kandi BVI is trading on the NASDAQ Global Select Market, the same market as Kandi Technologies, or its predecessor. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our wholly-owned subsidiaries established in the People's Republic of China, or the PRC, including Zhejiang Kandi Technologies Group, Co. Ltd. ("Zhejiang Kandi Technologies") and U.S. wholly-owned subsidiary SC Autosports, LLC ("SC Autosports") and its subsidiaries, as well as Rawrr, which is newly acquired by Kandi Technologies in the first quarter of 2026.

With the emerging global trend of "fuel to electrification" of off-road vehicles, we have successfully developed a series of pure electric off-road vehicles and rolled them out to the market in batches, which have been favored by users. Next, we plan to successively launch various electric off-road vehicles, including electric crossover golf carts and electric UTVs. As new products are introduced in succession, we are confident to achieve sustained growth in the field of the pure electric off-road vehicles. Regarding our EV business, given that the Chinese EV market has yet to enter a healthy and orderly phase of development, currently the Company will continue to operate in small-scale, and join back as appropriate when the EV market of China entered a healthy and orderly development stage.

For the years ended December 31, 2025, 2024 and 2023, we recognized total revenue of $87,439,981, $127,569,613 and $123,599,232, respectively. Gross margin for the years ended December 31, 2025, 2024 and 2023, was 42.6%, 30.8% and 33.5%, respectively. We recorded a net loss of $95,569,942, a net loss of $50,950,346 and a net income of $1,669,767 for the years ended December 31, 2025, 2024 and 2023, respectively.

A. Operating Results

The following table sets forth the amounts and percentage to revenue of certain items in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023:

		Years Ended
		December 31, 2025				% of Revenue				December 31, 2024				% of Revenue				December 31, 2023				% of Revenue
REVENUES, NET		$	87,439,981				100.0	%			127,569,613				100.0	%			123,599,232				100.0	%
COST OF GOODS SOLD			(50,148,318	)			(57.4	)%			(88,299,242	)			(69.2	)%			(82,229,209	)			(66.5	)%
GROSS PROFIT			37,291,663				42.6	%			39,270,371				30.8	%			41,370,023				33.5	%
OPERATING EXPENSE:
Research and development			(7,621,559	)			(8.7	)%			(4,995,940	)			(3.9	)%			(4,265,176	)			(3.5	)%
Selling and marketing			(16,674,434	)			(19.1	)%			(21,237,864	)			(16.6	)%			(13,335,950	)			(10.8	)%
General and administrative			(54,392,589	)			(62.2	)%			(57,683,262	)			(45.2	)%			(35,381,496	)			(28.6	)%
Impairment of goodwill			(9,716,799	)			(11.1	)%			-				0.0	%			(496,981	)			(0.4	)%
Impairment of long-lived assets			(6,061,289	)			(6.9	)%			(24,135,226	)			(18.9	)%			(942,591	)			(0.8	)%
TOTAL OPERATING EXPENSE			(94,466,670	)			(108.0	)%			(108,052,292	)			(84.7	)%			(54,422,194	)			(44.0	)%
LOSS FROM OPERATIONS			(57,175,007	)			(65.4	)%			(68,781,921	)			(53.9	)%			(13,052,171	)			(10.6	)%
OTHER INCOME (EXPENSE):
Interest income			8,690,914				9.9	%			10,046,204				7.9	%			9,984,558				8.1	%
Interest expense			(1,886,319	)			(2.2	)%			(2,195,618	)			(1.7	)%			(1,327,341	)			(1.1	)%
Change in fair value of contingent consideration			-				0.0	%			2,693,000				2.1	%			1,803,000				1.5	%
Government grants			1,873,209				2.1	%			1,620,632				1.3	%			2,017,551				1.6	%
Other (loss) income, net			(43,135,872	)			(49.3	)%			537,966				0.4	%			4,047,074				3.3	%
TOTAL OTHER (EXPENSE) INCOME , NET			(34,458,068	)			(39.4	)%			12,702,184				10.0	%			16,524,842				13.4	%
(LOSS) INCOME BEFORE INCOME TAXES			(91,633,075	)			(104.8	)%			(56,079,737	)			(44.0	)%			3,472,671				2.8	%
INCOME TAX (EXPENSE) BENEFIT			(3,936,867	)			(4.5	)%			5,129,391				4.0	%			(1,802,904	)			(1.5	)%
NET (LOSS) INCOME			(95,569,942	)			(109.3	)%			(50,950,346	)			(39.9	)%			1,669,767				1.4	%

Comparison of Years Ended December 31, 2025 and 2024

The following table sets forth the amounts and percentage to revenue of certain items in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025 and 2024:

		Years Ended
		December 31, 2025				% of Revenue				December 31, 2024				% of Revenue				Change in Amount				Change in %
REVENUES, NET		$	87,439,981				100.0	%			127,569,613				100.0	%			(40,129,632	)			(31.5	)%
COST OF GOODS SOLD			(50,148,318	)			(57.4	)%			(88,299,242	)			(69.2	)%			38,150,924				(43.2	)%
GROSS PROFIT			37,291,663				42.6	%			39,270,371				30.8	%			(1,978,708	)			(5.0	)%
OPERATING EXPENSE:
Research and development			(7,621,559	)			(8.7	)%			(4,995,940	)			(3.9	)%			(2,625,619	)			52.6	%
Selling and marketing			(16,674,434	)			(19.1	)%			(21,237,864	)			(16.6	)%			4,563,430				(21.5	)%
General and administrative			(54,392,589	)			(62.2	)%			(57,683,262	)			(45.2	)%			3,290,673				(5.7	)%
Impairment of goodwill			(9,716,799	)			(11.1	)%			-				0.0	%			(9,716,799	)			-
Impairment of long-lived assets			(6,061,289	)			(6.9	)%			(24,135,226	)			(18.9	)%			18,073,937				(74.9	)%
TOTAL OPERATING EXPENSE			(94,466,670	)			(108.0	)%			(108,052,292	)			(84.7	)%			13,585,622				(12.6	)%
LOSS FROM OPERATIONS			(57,175,007	)			(65.4	)%			(68,781,921	)			(53.9	)%			11,606,914				(16.9	)%
OTHER INCOME (EXPENSE):
Interest income			8,690,914				9.9	%			10,046,204				7.9	%			(1,355,290	)			(13.5	)%
Interest expense			(1,886,319	)			(2.2	)%			(2,195,618	)			(1.7	)%			309,299				(14.1	)%
Change in fair value of contingent consideration			-				0.0	%			2,693,000				2.1	%			(2,693,000	)			(100.0	)%
Government grants			1,873,209				2.1	%			1,620,632				1.3	%			252,577				15.6	%
Other (loss) income, net			(43,135,872	)			(49.3	)%			537,966				0.4	%			(43,673,838	)			(8118.3	)%
TOTAL OTHER (EXPENSE) INCOME , NET			(34,458,068	)			(39.4	)%			12,702,184				10.0	%			(47,160,252	)			(371.3	)%
(LOSS) INCOME BEFORE INCOME TAXES			(91,633,075	)			(104.8	)%			(56,079,737	)			(44.0	)%			(35,553,338	)			63.4	%
INCOME TAX (EXPENSE) BENEFIT			(3,936,867	)			(4.5	)%			5,129,391				4.0	%			(9,066,258	)			(176.8	)%
NET (LOSS) INCOME			(95,569,942	)			(109.3	)%			(50,950,346	)			(39.9	)%			(44,619,596	)			87.6	%

Revenues

For the year ended December 31, 2025, our net revenue was $87,439,981, compared to net revenue of $127,569,613 for the year ended December 31, 2024, representing a decrease of $40,129,632, or 31.5%. The decrease in net revenue was primarily attributable to reduced demand for EV products in the PRC market and fewer sales of crossover golf carts and other vehicle models. In addition, ongoing trade uncertainties, including potential tariffs and trade restrictions, as well as persistent inflation and elevated interest rates, adversely affected consumer demand for higher-priced recreational vehicles and negatively impacted sales to our major retail customers and distributors.

The following table shows the breakdown of our net revenues by market for the years ended December 31, 2025 and 2024:

		Year Ended December 31
		2025				2024
		Sales Revenue				Sales Revenue
Primary geographical markets
U.S. and other countries/areas		$	64,226,506			$	74,242,060
China			23,213,475				53,327,553
Total		$	87,439,981			$	127,569,613

The following table summarizes our net revenues by product types for the years ended December 31, 2025 and 2024:

		Year Ended December 31
		2025				2024
		Sales				Sales
EV parts		$	10,547			$	5,948
EV products			51,398				2,286,093
Off-road vehicles and associated parts			82,848,291				116,556,517
Electric Scooters, Electric Self-Balancing Scooters and associated parts			1,362,903				1,351,331
Lithium-ion cells			3,156,288				3,857,535
Commission income			-				3,512,189
Others			10,554				-
Total		$	87,439,981			$	127,569,613

EV Parts

During the year ended December 31, 2025, our revenue from the sale of EV parts was $10,547, representing an increase of $4,599 or 77.3% from $5,948 for the year ended December 31, 2024.

EV Products

During the year ended December 31, 2025, our revenue from the sale of EV Products was $51,398, representing a decrease of $2,234,695 or 97.8% from $2,286,093 for the year ended December 31, 2024. The decrease was primarily attributable to a decline in EV product sales in our PRC market during the year ended December 31, 2025 due to reduced demand. Our EV products remain a relatively small business line, accounting for approximately 0.1% of the total net revenue for the year ended December 31, 2025.

Off-Road Vehicles and Associated Parts

During the year ended December 31, 2025, our revenue from the sale of off-road vehicles including go-karts, ATVs, and others, was $82,848,291, representing a decrease of $33,708,226 or 28.9% from $116,556,517 for the year ended December 31, 2024. The decrease was primarily attributable to the decrease in the sales of crossover golf carts as well as other vehicle models during the year ended December 31, 2025. Throughout the year, uncertainty over future tariffs, trade restrictions, and other potential trade barriers linked to U.S. government policies were further intensified since January 2025. At the same time, persistent inflation and the prolonged impact of high interest rates placed significant pressure on consumer spending for discretionary, higher-priced recreational vehicles. These factors have negatively impacted the sales to our major retail customers and distributors.

Our off-road vehicles business accounted for approximately 94.7% of our total net revenue for the year ended December 31, 2025.

Electric Scooters, Electric Self-Balancing Scooters and Associated Parts

During the year ended December 31, 2025, our revenue from the sale of electric scooters and electric self-balancing scooters and associated parts was $1,362,903, representing an increase of $11,572 or 0.9% from $1,351,331 for the year ended December 31, 2024, which was comparable.

Our electric scooters, electric self-balancing scooters and associated parts business accounted for approximately 1.6% of the total net revenue for the year ended December 31, 2025.

Lithium-ion cells

During the year ended December 31, 2025, our revenue from the sale of Lithium-ion cells was $3,156,288, representing a decrease of $701,247 or 18.2% from $3,857,535 for the year ended December 31, 2024. The decrease was primarily due to less demand from the market.

Our lithium-ion cell business accounted for approximately 3.6% of the total net revenue for the year ended December 31, 2025.

Commission income

During the year ended December 31, 2025, we generated commission income of $0, representing a decrease of $3,512,189 or 100% from $3,512,189 for the same period of 2024. The commission income in 2024 was generated by NGI, which was acquired on November 30, 2023. The equity transfer agreement with NGI was subsequently terminated on October 31, 2024, and NGI was deconsolidated on October 31, 2024. Hence, no commission income was generated during 2025.

Others

During the year ended December 31, 2025, our revenue from the others was $10,554 that primarily consisted of the revenue from intelligent delivery robot dog solution on a preliminary basis. There was no such revenue generated in the same period of 2024.

Cost of Goods Sold

Cost of goods sold for the year ended December 31, 2025 was $50,148,318, representing a decrease of $38,150,924, or 43.2%, from $88,299,242 for the year ended December 31, 2024. The decrease was primarily due to the corresponding decrease in sales. Please refer to the Gross Profit section below for product margin analysis.

Gross Profit

Our operating entities' margins by product for the past two years are as set forth below:

		Year Ended December 31
		2025																2024
		Sales				Cost				Gross Profit				Margin %				Sales				Cost				Gross Profit				Margin %
EV parts		$	10,547				10,072				475				4.5	%		$	5,948				5,439				509				8.6	%
EV products			51,398				117,464				(66,066	)			(128.5)	%			2,286,093				2,169,792				116,301				5.1	%
Off-road vehicles and associated parts			82,848,291				45,755,825				37,092,466				44.8	%			116,556,517				79,648,871				36,907,646				31.7	%
Electric Scooters, Electric Self-Balancing Scooters and associated parts			1,362,903				1,233,177				129,726				9.5	%			1,351,331				1,238,279				113,052				8.4	%
Lithium-ion cells			3,156,288				3,025,537				130,751				4.1	%			3,857,535				3,028,997				828,538				21.5	%
Commission income			-				-				-				-				3,512,189				2,207,864				1,304,325				37.1	%
Others			10,554				6,243				4,311				40.8	%			-				-				-				-
Total		$	87,439,981				50,148,318				37,291,663				42.6	%		$	127,569,613				88,299,242				39,270,371				30.8	%

Gross profit for the year ended December 31, 2025 was $37,291,663, as compared to $39,270,371 for the year ended December 31, 2024, representing a decrease of $1,978,708 or 5.0%. The overall gross margin for the year ended December 31, 2025 was 42.6%, up from 30.8%in the same period of 2024, reflecting the impact from the sales of inventory that were previously impaired with our inventory obsolescence reserve.

Research and Development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses totaled $7,621,559 for the year ended December 31, 2025, compared to $4,995,940 for the year ended December 31, 2024, representing an increase of $2,625,619, or 52.6%. The increase was mainly due to the completion of research and development projects during the current period.

Sales and Marketing

Selling and marketing expenses were $16,674,434 for the year ended December 31, 2025, compared to $21,237,864 for the year ended December 31, 2024, representing a decrease of $4,563,430, or 21.5% from 2024. The decrease was mainly due to decrease in the freight expenses and commission expenses which are in line with decrease in our revenue.

General and Administrative Expenses

General and administrative expenses were $54,392,589 for the year ended December 31, 2025, compared to $57,683,262 for the year ended December 31, 2024, representing a decrease of $3,290,673 or 5.7% from 2024. For the year ended December 31, 2025, general and administrative expenses included $7,121,078 as expenses for ordinary shares awards and stock options to employees and Board members, compared to $7,114,524 as expenses for ordinary shares awards and stock options to employees and Board members for the years ended December 31, 2024. Excluding stock compensation expenses, our net general and administrative expenses for the year ended December 31, 2025 were $47,271,511, a decrease of $3,297,227, or 6.5%, compared to $50,568,738 for the year ended December 31, 2024. The decrease compared to 2024 was primarily due to less depreciation and amortization during 2025 after the material impairment of long-lived assets provisioned during 2024.

Impairment of goodwill

Impairment of goodwill was $9,716,799 for the year ended December 31, 2025, compared to $0 for the year ended December 31, 2024, representing an increase of $9,716,799 or 100% from 2024. The impairment of goodwill is due to the adverse operating environment of Jiangxi Huiyi and SC Autosports.

Impairment of long-lived assets

Impairment of long-lived assets were $6,061,289 for the year ended December 31, 2025, compared to $24,135,226 for the year ended December 31, 2024, representing a decrease of $18,073,937 or 74.9% from 2024. The impairment of long-lived assets is mainly due to the adverse operating environment of Jiangxi Huiyi.

Interest Income

Interest income was $8,690,914 for the year ended December 31, 2025, compared to $10,046,204 for the year ended December 31, 2024, representing a decrease of $1,355,290, or 13.5% from 2024. The decrease was primarily due to decline in interest income from a loan to a third party.

Interest Expense

Interest expense was $1,886,319 for the year ended December 31, 2025, compared to $2,195,618 for the year ended December 31, 2024, representing a decrease of $309,299, or 14.1% from 2024.

Change in fair value of contingent consideration

For the year ended December 31, 2025, the gain related to changes in the fair value of contingent consideration was $0 compared to the gain related to changes in the fair value of contingent consideration of $2,693,000 for the year ended December 31, 2024, which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with remaining shares of restrictive ordinary shares. For more details, see "Note 18 - Contingent Consideration Liability" under the Notes to the Company's Consolidated Financial Statements. The fair value of the contingent consideration liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all possible scenarios.

Government Grants

Government grants totaled $1,873,209 for the year ended December 31, 2025, compared to $1,620,632 for the year ended December 31, 2024, representing an increase of $252,577, or 15.6% from 2024, which was largely attributable to the increased grants received from Hainan local government compared to the same period in 2024.

Other Income (Loss), Net

Net other loss was $43,135,872 for the year ended December 31, 2025, compared to net other income of $537,966 for the year ended December 31, 2024, representing an increase of loss of $43,673,838 or 8118.3% from 2024, which was largely due to accrual for the lawsuit filed against SC with claims of breach of contract, defamation and tortious interference with final judgement entered during 2025, as well as antidumping duty determined by the United States Department of Commerce and the United States International Trade Commission during 2025.

Income Taxes

In accordance with the relevant Chinese tax laws and regulations, the applicable corporate income tax rate of our Chinese subsidiaries is 25%. However, four of our subsidiaries, including Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Kandi Hainan and Jiangxi Huiyi are qualified as high technology companies in China and are therefore entitled to a reduced corporate income tax rate of 15%. Additionally, Hainan Kandi Holding also has an income tax rate of 15% due to its preferred local tax rate in Hainan Free Trade Port.

Each of our other subsidiaries, Kandi New Energy, Yongkang Scrou, China Battery Exchange and its subsidiaries, LiaoWangTa and Ruiyan Technology has an applicable corporate income tax rate of 25%.

Kandi Canada is subject to Canada's statutory federal income tax rate of 15%, and also the applicable provincial income tax rate of 12%.

Our actual effective income tax rate for 2025 was a tax expense of 4.30% on a reported loss before taxes of approximately $91.6 million, compared to a tax benefit of 9.15% on a reported loss before taxes of approximately $56.1 million for 2024.

Net Loss

We recorded a net loss of $95,569,942 for the year ended December 31, 2025, compared to a net loss of $50,950,346 for the year ended December 31, 2024. The increase in net loss was primarily attributable to the increased other expenses generated from the accrual of loss contingencies associated with the legal matters compared to the prior period.

Comparison of Years Ended December 31, 2024 and 2023

The following table sets forth the amounts and percentage to revenue of certain items in our consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024 and 2023:

		Year Ended
		December 31, 2024				% of Revenue				December 31, 2023				% of Revenue				Change in Amount				Change in %
REVENUES, NET		$	127,569,613				100.0	%			123,599,232				100.0	%			3,970,381				3.2	%
COST OF GOODS SOLD			(88,299,242	)			(69.2	)%			(82,229,209	)			(66.5	)%			(6,070,033	)			7.4	%
GROSS PROFIT			39,270,371				30.8	%			41,370,023				33.5	%			(2,099,652	)			(5.1	)%
OPERATING EXPENSE:
Research and development			(4,995,940	)			(3.9	)%			(4,265,176	)			(3.5	)%			(730,764	)			17.1	%
Selling and marketing			(21,237,864	)			(16.6	)%			(13,335,950	)			(10.8	)%			(7,901,914	)			59.3	%
General and administrative			(57,683,262	)			(45.2	)%			(35,381,496	)			(28.6	)%			(22,301,766	)			63.0	%
Impairment of goodwill			-				0.0	%			(496,981	)			(0.4	)%			496,981				(100.0	)%
Impairment of long-lived assets			(24,135,226	)			(18.9	)%			(942,591	)			(0.8	)%			(23,192,635	)			2460.5	%
TOTAL OPERATING EXPENSE			(108,052,292	)			(84.7	)%			(54,422,194	)			(44.0	)%			(53,630,098	)			98.5	%
LOSS FROM OPERATIONS			(68,781,921	)			(53.9	)%			(13,052,171	)			(10.6	)%			(55,729,750	)			427.0	%
OTHER INCOME (EXPENSE):
Interest income			10,046,204				7.9	%			9,984,558				8.1	%			61,646				0.6	%
Interest expense			(2,195,618	)			(1.7	)%			(1,327,341	)			(1.1	)%			(868,277	)			65.4	%
Change in fair value of contingent consideration			2,693,000				2.1	%			1,803,000				1.5	%			890,000				49.4	%
Government grants			1,620,632				1.3	%			2,017,551				1.6	%			(396,919	)			(19.7	)%
Other income, net			537,966				0.4	%			4,047,074				3.3	%			(3,509,108	)			(86.7	)%
TOTAL OTHER INCOME, NET			12,702,184				10.0	%			16,524,842				13.4	%			(3,822,658	)			(23.1	)%
(LOSS) INCOME BEFORE INCOME TAXES			(56,079,737	)			(44.0	)%			3,472,671				2.8	%			(59,552,408	)			(1714.9	)%
INCOME TAX BENEFIT (EXPENSE)			5,129,391				4.0	%			(1,802,904	)			(1.5	)%			6,932,295				(384.5	)%
NET (LOSS) INCOME			(50,950,346	)			(39.9	)%			1,669,767				1.4	%			(52,620,113	)			(3151.3	)%

Revenues

For the year ended December 31, 2024, our net revenue was $127,569,613, compared to net revenue of $123,599,232 for the year ended December 31, 2023, representing an increase of $3,970,381, or 3.2%.

The following table shows the breakdown of our net revenues by market for the years ended December 31, 2024 and 2023:

		Year Ended December 31
		2024				2023
		Sales Revenue				Sales Revenue
Primary geographical markets
U.S. and other countries/areas		$	74,242,060			$	93,979,363
China			53,327,553				29,619,869
Total		$	127,569,613			$	123,599,232

The following table summarizes our net revenues by product types for the years ended December 31, 2024 and 2023:

		Year Ended December 31
		2024				2023
		Sales				Sales
EV parts		$	5,948			$	5,807,973
EV products			2,286,093				1,214,786
Off-road vehicles and associated parts			116,556,517				106,983,891
Electric Scooters, Electric Self-Balancing Scooters and associated parts			1,351,331				683,952
Battery exchange equipment and Battery exchange service			-				674,927
Lithium-ion cells			3,857,535				7,994,227
Commission income			3,512,189				239,476
Total		$	127,569,613			$	123,599,232

EV Parts

During the year ended December 31, 2024, our revenue from the sale of EV parts was $5,948, representing a decrease of $5,802,025 or 99.9% from $5,807,973 for the year ended December 31, 2023. The decrease was primarily due to the strategic switch to focus on the production of off-road vehicles, especially crossover golf carts, with larger profit margin during the year ended December 31, 2024.

EV Products

During the year ended December 31, 2024, our revenue from the sale of EV Products was $2,286,093, representing an increase of $1,071,307 or 88.2% from $1,214,786 for the year ended December 31, 2023. The increase was primarily due to increase of the sales of EV products in our PRC market during the year ended December 31, 2024. Our EV products remain a relatively small business line, accounting for approximately 1.8% of the total net revenue for the year ended December 31, 2024.

Off-Road Vehicles and Associated Parts

During the year ended December 31, 2024, our revenue from the sale of off-road vehicles including go-karts, ATVs, and others, was $116,556,517, representing an increase of $9,572,626 or 8.9% from $106,983,891 for the year ended December 31, 2023. The increase was primarily attributable to the increase of sales of crossover golf carts during the year ended December 31, 2024.

Our off-road vehicles business accounted for approximately 91.4% of our total net revenue for the year ended December 31, 2024.

Electric Scooters, Electric Self-Balancing Scooters and Associated Parts

During the year ended December 31, 2024, our revenue from the sale of electric scooters and electric self-balancing scooters and associated parts was $1,351,331, representing an increase of $667,379 or 97.6% from $683,952 for the year ended December 31, 2023. The increase was primarily due to an increase of sales of electric scooters associated parts in our PRC market during the year ended December 31, 2024.

Our electric scooters, electric self-balancing scooters and associated parts business accounted for approximately 1.1% of the total net revenue for the year ended December 31, 2024.

Battery Exchange Equipment and Battery Exchange Service

During the year ended December 31, 2024, we did not generate any revenue from the sale of battery exchange equipment and battery exchange service. We generated a revenue of $ 674,927 in 2023.

Lithium-ion cells

During the year ended December 31, 2024, our revenue from the sale of Lithium-ion cells was $3,857,535, representing a decrease of $4,136,692 or 51.7% from $7,994,227 for the same period of 2023. The decrease was primarily due to less demand from the market.

Our lithium-ion cell business accounted for approximately 3.0% of the total net revenue for the year ended December 31, 2024.

Commission income

During the year ended December 31, 2024, we generated commission income of $3,512,189, representing an increase of $3,272,713 or 1,366.6% from $239,476 for the same period of 2023, which was generated by NGI that was acquired on November 30, 2023. We do not anticipate generating such income in the future as we returned all shares, rights, and interests in NGI to its original owner pursuant to a termination agreement.

Such commission income accounted for approximately 2.8% of the total net revenue for the year ended December 31, 2024.

Cost of Goods Sold

Cost of goods sold for the year ended December 31, 2024 was $88,299,242, representing an increase of $6,070,033, or 7.4%, from $82,229,209 for the year ended December 31, 2023. The increase was primarily due to the corresponding increase in sales. Please refer to the Gross Profit section below for product margin analysis.

Gross Profit

Our operating entities' margins by product for the past two years are as set forth below:

		Year Ended December 31
		2024																2023
		Sales				Cost				Gross Profit				Margin				Sales				Cost				Gross Profit				Margin
		in US$												%				$												%
EV parts			5,948				5,439				509				8.6				5,807,973				5,477,843				330,130				5.7
EV products			2,286,093				2,169,792				116,301				5.1				1,214,786				1,109,288				105,498				8.7
Off-road vehicles and associated parts			116,556,517				79,648,871				36,907,646				31.7				106,983,891				65,574,158				41,409,733				38.7
Electric Scooters, Electric Self-Balancing Scooters and associated parts			1,351,331				1,238,279				113,052				8.4				683,952				696,102				(12,150	)			(1.8	)
Battery exchange equipment and Battery exchange service			-				-				-				-				674,927				594,633				80,294				11.9
Lithium-ion cells			3,857,535				3,028,997				828,538				21.5				7,994,227				8,595,058				(600,831	)			(7.5	)
Commission income			3,512,189				2,207,864				1,304,325				37.1				239,476				182,127				57,349				23.9
Total			127,569,613				88,299,242				39,270,371				30.8				123,599,232				82,229,209				41,370,023				33.5

Gross profit for the year ended December 31, 2024 was $39,270,371, as compared to $41,370,023 for the year ended December 31, 2023, representing a decrease of $2,099,652 or 5.1%. The overall gross margin for the year ended December 31, 2024 was 30.8%, down from 33.5% in the same period of 2023, reflecting the impact of the product mix and the regional revenue shift.

Research and Development

Research and development expenses, including materials, labor, equipment depreciation, design, testing, inspection, and other related expenses totaled $4,995,940 for the year ended December 31, 2024, compared to $4,265,176 for the year ended December 31, 2023, representing an increase of $730,764, or 17.1%. The increase was mainly due to the research and development project for battery products conducted in the current period.

Sales and Marketing

Selling and marketing expenses were $21,237,864 for the year ended December 31, 2024, compared to $13,335,950 for the year ended December 31, 2023, representing an increase of $7,901,914, or 59.3% from 2023. The increase was mainly due to increasing promotion fees as well as increased freight expenses, incurred by the Company's efforts to cover more retails stores in the current period.

General and Administrative Expenses

General and administrative expenses were $57,683,262 for the year ended December 31, 2024, compared to $35,381,496 for the year ended December 31, 2023, representing an increase of $22,301,766 or 63.0% from 2023. For the year ended December 31, 2024, general and administrative expenses included $7,114,524 as expenses for ordinary shares awards and stock options to employees and Board members, compared to $11,059,801 as expenses for ordinary shares awards and stock options to employees and Board members, and for stock issuance to the consultant which the Company recruited pursuant to certain consulting agreement dated May 25, 2023 ("Consultant Agreement") for the years ended December 31 2023. Excluding stock compensation expenses, our net general and administrative expenses for the year ended December 31, 2024 were $50,568,738, an increase of $26,247,043, or 107.9%, compared to $24,321,695 for the year ended December 31, 2023. The increase compared to 2023 was primarily due to higher inventory obsolescence reserve incurred in the current period.

Interest Income

Our interest income stayed relatively stable at $10,046,204 for the year ended December 31, 2024 and $9,984,558 for the year ended December 31, 2023.

Interest Expense

Interest expense was $2,195,618 for the year ended December 31, 2024, compared to $1,327,341 for the year ended December 31, 2023, representing an increase of $868,277, or 65.4% from 2023. The increase was primarily due to interest expenses related to increased short-term and long-term debt of the Company compared to the same period in 2023.

Change in fair value of contingent consideration

For the year ended December 31, 2024, the gain related to changes in the fair value of contingent consideration was $2,693,000 compared to the gain related to changes in the fair value of contingent consideration of $1,803,000 for the year ended December 31, 2023, which was mainly due to the adjustment of the fair value of the contingent consideration liability associated with remaining shares of restrictive ordinary shares. For more details, see "Note 18 - Contingent Consideration Liability" under the Notes to the Company's Consolidated Financial Statements. The fair value of the contingent consideration liability was estimated at each reporting date by using the Monte Carlo simulation method, which took into account all possible scenarios.

Government Grants

Government grants totaled $1,620,632 for the year ended December 31, 2024, compared to $2,017,551 for the year ended December 31, 2023, representing a decrease of $396,919, or 19.7% from 2023, which was largely attributable to the decreased grants received from Jinhua and Jiangxi local government compared to the same period in 2023.

Other Income, Net

Net other income was $537,966 for the year ended December 31, 2024, compared to net other income of $4,047,074 for the year ended December 31, 2023, representing a decrease of $3,509,108 or 86.7% from 2023, which was largely due to the income generated from the research service project the Company provided to a third party customer during the year ended December 31, 2023.

Income Taxes

In accordance with the relevant Chinese tax laws and regulations, the applicable corporate income tax rate of our Chinese subsidiaries is 25%. However, four of our subsidiaries, including Zhejiang Kandi Technologies, Kandi Smart Battery Swap, Kandi Hainan and Jiangxi Huiyi are qualified as high technology companies in China and are therefore entitled to a reduced corporate income tax rate of 15%. Additionally, Hainan Kandi Holding also has an income tax rate of 15% due to its preferred local tax rate in Hainan Free Trade Port.

Each of our other subsidiaries, Kandi New Energy, Yongkang Scrou, China Battery Exchange and its subsidiaries have an applicable corporate income tax rate of 25%.

Kandi Canada is subject to Canada's statutory federal income tax rate of 15%, and the applicable provincial income tax rate of 12%.

Our actual effective income tax rate for 2024 was a tax benefit of 9.15% on a reported loss before taxes of approximately $56.1 million, compared to a tax expense of 51.92% on a reported income before taxes of approximately $3.5 million for 2023.

Net Income (Loss)

We recorded a net loss of $50,950,346 for the year ended December 31, 2024, compared to net income of $1,669,767 for the year ended December 31, 2023. The decrease of net income was primarily attributable to the decrease in gross profit and other income, along with increased operating expenses compared to the prior period.

B. Liquidity and Capital Resources

Cash Flow

		Years Ended
		December 31, 2025				December 31, 2024				December 31, 2023
Net cash provided by (used in) operating activities		$	96,807,342			$	(17,820,412	)		$	(101,160,636	)
Net cash (used in) provided by investing activities		$	(77,468,506	)		$	25,723,089			$	32,278,828
Net cash (used in) provided by financing activities		$	(14,553,104	)		$	22,509,246			$	14,828,688
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		$	4,785,732			$	30,411,923			$	(54,053,120	)
Effect of exchange rate changes		$	3,402,331			$	(3,203,681	)		$	(3,357,083	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR		$	120,838,310			$	93,630,068			$	151,040,271
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		$	129,026,373			$	120,838,310			$	93,630,068

For the year ended December 31, 2025, net cash provided by operating activities was $96,807,342, as compared to net cash used in operating activities of $17,820,412 for year ended December 31, 2024, and net cash used in operating activities of $101,160,636 for year ended December 31, 2023. Our operating cash inflows include cash received primarily from sales of our EV parts, off-road vehicles, electric Scooters, electric self-balancing scooters and associated parts and lithium-ion cells. 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 year ended December 31, 2025 were a decrease of other receivables and other assets of $115,160,725 and an increase of accounts payable of $54,279,618. The major operating activity that used cash for year ended December 31, 2025 was a decrease of notes payable of $79,804,260.

For the year ended December 31, 2025, net cash used in investing activities was $77,468,506, as compared to net cash provided by investing activities of $25,723,089 for the year ended December 31, 2024, and net cash provided by investing activities of $32,278,828 for the year ended December 31, 2023. The major investing activity that used cash for the year ended December 31, 2025 was an increase of certificate of deposit of $75,138,798.

For the year ended December 31, 2025, net cash used in financing activities was $14,553,104, as compared to net cash provided by financing activities of $22,509,246 for the year ended December 31, 2024, and net cash provided by financing activities of $14,828,688 for the year ended December 31, 2023. The major financing activities that provided cash for the year ended December 31, 2025 were proceeds from short-term bank loans of $21,371,060. The major financing activities that used cash for the year ended December 31, 2025 were repayments of short-term bank loans of $29,508,010.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments, excluding interest, as of December 31, 2025.

Lease obligations as of December 31, 2025 were as follow:

Maturity of Lease Liabilities:		Lease payable
Years ended December 31,
2026		$	450,135
2027			328,373

Off-balance Sheets Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders' equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us.

C. Research and Development, Patents and Licenses, etc.

For the years ended December 31, 2025, 2024 and 2023, our research and development expenses were $7,621,559, $4,995,940 and $4,265,176, respectively. The research and development expenses consist primarily of payroll and employee benefit for research and development, employees, rental expense, utilities and other related expenses related to the development of new products and processes, including improvements to existing products as well as research and development and consulting work performed by third parties.

D. Trend Information.

Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Critical Accounting Estimates.

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

Estimates affecting accounts receivable and inventories

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect our reporting of assets and liabilities (and contingent assets and liabilities). These estimates are particularly significant where they affect the reported net realizable value of our accounts receivable and inventories.

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

As of December 31, 2025 and December 31, 2024, credit terms with the Company's customers were typically 60 to 180 days after delivery. As of December 31, 2025 and 2024, the Company had an allowance of for doubtful accounts of $2,991,001 and $3,680,803, respectively, as per the Company management's judgment based on their best knowledge. The Company conducts quarterly assessments on its outstanding receivables and reserves any allowance for doubtful accounts if it becomes necessary.

Inventories are stated at the lower of cost or net realizable value (market value). The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the basis of weighted average and comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less selling expenses and any further costs expected to be incurred for completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances.

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

Policy affecting recognition of revenue

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

The Company adopted ASC Topic 606 Revenue from Contracts with Customers with a date of the initial application of January 1, 2018 using the modified retrospective method. The impact of the adoption of ASC Topic 606 on the Company's consolidated financial statements is not material.

The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company generates revenue through the sales of EV parts and off-road vehicles, as well as commission income. The revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product, or control of the promised services. Control is typically deemed to have been transferred to the customer when the performance obligation is fulfilled, usually at the time of delivery, at the net sales price (transaction price). Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods are accounted for as fulfillment costs rather than separate performance obligations and recorded as sales and marketing expenses.

Estimate affecting impairment of long-lived assets

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

The Company recognized impairment losses of $6,061,289, $24,135,226 and $942,591 for finite-lived tangible and intangible assets for the years ended December 31, 2025, 2024 and 2023, respectively.

Estimate affecting impairment of goodwill

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

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

The Company applies the reporting unit criteria in ASC 350-20 to the components to determine if the reporting unit should be identified one level below the operating segment. Each component will be evaluated to determine if: (a) it is a business (as defined in ASC 805), (b) discrete financial information is available and (c) the operating results are regularly reviewed by the segment manager(s). If the components of a specific operating segment meet these criteria, they might be deemed to be separate reporting units. However, if they have similar economic characteristics (which is a matter of judgment based on individual facts and circumstances), these components must be aggregated into one reporting unit. There are three reporting units under the goodwill impairment analysis, namely 1) SC Autosports, 2) Jinhua An Kao and Yongkang Scrou, and 3) Jiangxi Huiyi.

For the years ended December 31, 2025, 2024 and 2023, the Company performed goodwill impairment testing at the reporting unit level and recognized impairment loss of $9,716,799, $0 and $496,981, respectively.

Estimate affecting contingent consideration liability

The Company recorded contingent consideration liability of the estimated fair value of the contingent consideration the Company currently expects to pay to the Jiangxi Huiyi and NGI's former members upon the achievement of certain milestones. The fair value of the contingent consideration liability associated with remaining shares of restrictive ordinary shares 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 Operations and Comprehensive Income (Loss).

As of December 31, 2025 and December 31, 2024, the Company's contingent consideration liability was $0 and $0, respectively.

Policy affecting options, warrants and convertible notes

Our stock option cost is recorded in accordance with ASC 718 and ASC 505. The fair value of stock options is estimated using the Binomial Tree Model. Our expected volatility assumption is based on the historical volatility of our stock. The expected life assumption is primarily based on the expiration date of the option. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Stock option expense recognition is based on awards expected to vest. There were no estimated forfeitures. ASC standards require forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

The stock-based option expenses for the years ended December 31, 2025, 2024 and 2023 were $1,025,646, $1,584,443 and $3,476,058, respectively. There were no forfeitures estimated during the reporting period.

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

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

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

U.S. Corporate Income Tax

Based on Financial Accounting Standards Board ("FASB") staff Q&A Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income (GILTI), the FASB staff noted that 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 GILTI as a current-period expense when incurred.