Unassociated Document
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PROSPECTUS
SUPPLEMENT NO.1
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Filed
Pursuant to Rule 424(b)(5)
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(To
the prospectus dated December 24, 2009)
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Registration
No. 333-163222
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CALCULATION
OF REGISTRATION FEE
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Title of securities
to be registered (1)
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Amount to
be
registered
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Proposed
maximum
offering
price
per share(2)
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Proposed
maximum
aggregate
offering
price
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Amount of
registration
fee
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Common
Stock, par value $0.001 per share
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3,027,272 |
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$ |
5.50 |
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$ |
16,649,996 |
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$ |
1,187.14 |
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Warrants
to purchase shares of Common Stock, par value $0.001 per share(2)
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Common
Stock, par value $.001 per share, issuable upon exercise of
Warrants
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1,210,912 |
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$ |
6.30 |
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$ |
7,628,745.60 |
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$ |
543.93 |
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Total
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4,238,184 |
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$ |
24,278,741.60 |
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$ |
1,731.07 |
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(1)
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The Company is offering for
sale 3,027,272 shares the Company’s common stock at $5.50 per
share, and warrants to purchase 1,210,912 shares of the Company’s
common stock at an exercise price of $6.30. The Company is also
registering warrants to purchase common stock to be issued to the
placement agent in this
offering.
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(2)
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Pursuant to Rule 457(i) under the
Securities Act, the registration fee for the warrants included in this
offering is to be calculated on the basis of the offering price of the
shares of Common Stock into which the Warrants may be converted (the
“Exercise Shares”). No separate filing fee is required for the
warrants. The registration fee corresponding to the Warrants is therefore
shown in the columns of the fee table across from the title “Exercise
Shares.”
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3,027,272 Shares
Warrants
to Purchase 1,210,912 Shares
1,210,912 Shares
Underlying the Warrants
We are offering for sale up
to 3,027,272 shares of our common stock, at $5.50 per share, and warrants
to purchase 1,210,912 shares of our common stock for an exercise price of
$6.30, exercisable for a period of three years. The shares of common stock issuable
from time to time upon exercise of the warrants are also being offered pursuant
to this prospectus supplement and the accompanying
prospectus.
Our
common stock is listed on the NASDAQ Capital Market under the symbol “KNDI.” On
December 20, 2010, the last reported sale price of our common stock was $6.70
per share. There is no established public trading market for the warrants
and we do not expect a market to develop. In addition, we do not intend to apply
for listing of the warrants on any national securities exchange.
As of
December 20, 2010, 24,366,829 shares of our common stock were issued and
outstanding, with an aggregate market value of approximately $134,017,559.50
million based on the offering price. The securities being
offered by this prospectus supplement and the accompanying prospectus are being
offered pursuant to General Instruction I.B.1 of Form S-3. The
securities being offered have an aggregate market value, based upon the offering
price, of $16,649,996.
Purchase
of our securities involves a degree of risk. Please see the sections
entitled “Risk Factors” beginning on, respectively, page S-7 of this prospectus
supplement and page 2 of the accompanying prospectus.
FT Global
Capital, Inc. will act as placement agent for the offering. The placement agent
will not purchase or sell any of the securities offered pursuant to this
prospectus supplement and the accompanying prospectus, nor is it required to
sell any specific number or dollar amount of the securities. The placement agent
is required to use its best efforts to sell the common stock and Warrants being
offered hereby. Delivery of the securities offered pursuant to this prospectus
supplement is expected to be made on December 23, 2010.
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Per Unit
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Total
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Offering
price
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$ |
5.50 |
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$ |
16,649,996 |
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Placement
agent fees*
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$ |
0.33 |
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$ |
998,999.76 |
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Proceeds,
before expenses, to us
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$ |
5.17 |
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$ |
15,650,996.24 |
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________________
* Placement agent
fees amount does not include a non-accountable reimbursement amount of up to
0.5% for expenses incurred by the placement agent in connection with this
offering.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
The date
of this prospectus supplement is December 21, 2010
TABLE
OF CONTENTS
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Page
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PROSPECTUS
SUPPLEMENT
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ABOUT
THIS PROSPECTUS SUPPLEMENT
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S-1
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PROSPECTUS
SUPPLEMENT SUMMARY
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S-2
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THE
OFFERING
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S-6
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RISK
FACTORS
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S-7
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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S-13
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USE
OF PROCEEDS
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S-14
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DILUTION
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S-14
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DESCRIPTION
OF THE SECURITIES BEING OFFERED
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S-15
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PLAN
OF DISTRIBUTION
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S-18
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LEGAL
MATTERS
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S-20
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EXPERTS
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S-20
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WHERE
YOU CAN FIND MORE INFORMATION
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S-20
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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S-20
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PROSPECTUS
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Page
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ABOUT
THIS PROSPECTUS
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1
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INFORMATION
WE INCORPORATE BY REFERENCE
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1
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THE
COMPANY
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2
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RISK
FACTORS
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2
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
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2
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USE
OF PROCEEDS
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3
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RATIO
OF EARNINGS TO FIXED CHARGES
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3
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DESCRIPTION
OF COMMON STOCK
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4
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DESCRIPTION
OF PREFERRED STOCK
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6
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DESCRIPTION
OF WARRANTS
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6
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DESCRIPTION
OF SUBSCRIPTION RIGHTS
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7
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DESCRIPTION
OF DEBT SECURITIES
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7
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PLAN
OF DISTRIBUTION
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10
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DESCRIPTION
OF SHARE CAPITAL
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12
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CERTAIN
ERISA CONSIDERATIONS
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12
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LEGAL
MATTERS
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12
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EXPERTS
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12
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You
should rely only on information contained in or incorporated by reference into
this prospectus supplement and the accompanying prospectus and any free writing
prospectuses prepared by us or on our behalf. We have not authorized anyone to
provide you with information that is different, and if anyone provides you with
different or inconsistent information, you should not rely on it. You should not
assume that the information in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of this
prospectus supplement or the accompanying prospectus or that any document
incorporated by reference into this prospectus supplement or the accompanying
prospectus is accurate as of any date other than its filing date. You should not
consider this prospectus supplement or the accompanying prospectus to be an
offer or solicitation relating to the securities in any jurisdiction in which
such an offer or solicitation relating to the securities is not authorized.
Furthermore, you should not consider this prospectus supplement or the
accompanying prospectus to be an offer or solicitation relating to the
securities if the person making the offer or solicitation is not qualified to do
so, or if it is unlawful for you to receive such an offer or
solicitation.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying base prospectus are part of a
registration statement on Form S-3 (No. 333-163222) that we filed with the
Securities and Exchange Commission, or SEC, using a shelf registration process.
Under the shelf registration process, we may offer and sell any combination of
securities described in the accompanying base prospectus in one or more
offerings, up to a total dollar amount of $30,000,000. The accompanying base
prospectus, dated December 15, 2009, provides you with a general description of
the securities we may offer. Each time we use the accompanying base prospectus
to offer securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. A prospectus supplement
may also add, update or change information contained in the base prospectus.
Generally, when we refer to this “prospectus,” we are referring to both
documents combined.
This
prospectus supplement provides the specific details of this offering. Some of
the information in the base prospectus may not apply to this offering. This
prospectus supplement, the accompanying base prospectus and the documents
incorporated by reference herein and therein include important information about
us, our common stock and warrants being offered and other information you should
know before investing.
In this
prospectus supplement, unless the context otherwise requires, “Kandi” “we,”
“us,” “our”, the “Company,” or the “company” refer to Kandi Technologies, Corp.,
a Delaware corporation. “FT Global Capital” or the “placement agent”
refer to FT Global Capital, Inc., the placement agent for this
offering. Unless otherwise noted, references to “our securities”
refer to securities issued by us generally, references to “common stock” refer
to shares of our common stock, par value $0.001 per share, and references to
“the securities” are to the shares of common stock and Investor Warrants being
offered by us pursuant to this prospectus supplement and the accompanying
prospectus.
You
should also read and consider the information in the documents that we have
referred you to in “Where You Can Find More Information” on page S-20 of this
prospectus supplement and the information described under “Information We
Incorporate By Reference” on page 1 of the accompanying prospectus before
investing in our common stock. The information incorporated by reference is
considered to be part of this prospectus supplement, and information that we
file later with the SEC will automatically update and supersede this
information.
If
information in this prospectus supplement is inconsistent with the base
prospectus, you should rely on this prospectus supplement. We have not
authorized anyone to provide information different from that contained or
incorporated in this prospectus supplement and the accompanying prospectus. We
are offering the securities only in jurisdictions where offers and sales are
permitted. The information contained or incorporated in this prospectus
supplement and the accompanying prospectus is accurate only as of the date of
such information, regardless of the time of delivery of this prospectus
supplement and the accompanying prospectus or of any sale of the
securities.
This
prospectus supplement, the accompanying prospectus and the documents we
incorporate by reference into this prospectus supplement and the accompanying
prospectus contain trademarks, trade names and service marks of ours, including
our company logo.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights selected information about the Company, this offering and
information appearing elsewhere in this prospectus supplement, in the
accompanying prospectus and in the documents we incorporate by reference. This
summary is not complete and does not contain all of the information that you
should consider before investing in our securities. To fully understand this
offering and its consequences to you, you should read this entire prospectus
supplement and the accompanying prospectus carefully, including the information
under the heading “Risk Factors” in this prospectus supplement beginning on page
S-7, and the financial statements and other information incorporated by
reference in this prospectus supplement and the accompanying prospectus when
making an investment decision.
About
Kandi Technologies, Inc.
Our
Business
Kandi
Technologies, Corp., founded in 2003 and headquartered in Zhejiang Province, The
Peoples Republic of China, (the PRC), achieved a listing on NASDAQ in March,
2008 with the symbol: KNDI. Kandi is one of China’s leading producers
of all terrain recreational vehicles, go-karts,
and specialized automobile related products for the PRC and global export
markets. Kandi has increased its focus on fuel efficient vehicles,
including the all-electric mini-car, the Kandi COCO. The Company has
also begun to shift its sales away from the export market to the growing
domestic Chinese market. Kandi believes that its mini-cars will
become the Company’s largest revenue and profit generators. The Company’s
products can be viewed at http://www.chinakandi.com.
General
Kandi’s
products include off-road vehicles (which includes ATVs, UTVs, and go-karts),
motorcycles and mini-cars. The following table lists the number of
vehicles sold and sales revenues, categorized by vehicle type, within the year
ended December 31, 2009 and December 31, 2008.
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The
year ended December 31
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2009
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2008
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Units
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Revenue
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Units
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Revenue
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All-terrain
Vehicles (ATVs)
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6,194 |
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$ |
3,021,352 |
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6,022 |
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$ |
4,981,792 |
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Super-mini
car (CoCo) (1)
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2,110 |
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8,508,451 |
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2,125 |
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9,140,919 |
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Go-Kart
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13,673 |
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13,487,087 |
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38,644 |
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20,818,651 |
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Mini
Pick-up
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1 |
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4,365 |
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25 |
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45,974 |
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Utility
vehicles (UTVs)
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3,509 |
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8,478,679 |
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2,759 |
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4,741,704 |
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Three-wheeled
motorcycle (TT)
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458 |
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327,828 |
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481 |
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784,748 |
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Total
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25,945 |
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$ |
33,827,762 |
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50,056 |
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$ |
40,513,788 |
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(1) The Company had
previously categorized the predecessor generation CoCo as a UTV in the 2008 Form
10-K, but has adjusted the categorization in this report to clarify year over
year comparisons.
The
following table lists the number of vehicles sold and sales revenues,
categorized by vehicle type, within the nine monts ended September 30, 2010 and
September 30, 2009.
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Nine Months Ended September 30
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2010
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2009
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Unit
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Sales
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Unit
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Sales
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ATV
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2,756 |
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$ |
1,985,008 |
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2,598 |
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$ |
1,623,635 |
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CoCo
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1,592 |
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6,635,008 |
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896 |
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3,563,550 |
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GoKart
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14,943 |
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15,064,736 |
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6,098 |
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5,650,243 |
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Utility
vehicles (“UTVs”)
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1,397 |
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2,970,300 |
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2,582 |
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6,468,654 |
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Three-wheeled
motorcycle (“TT”)
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862 |
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1,982,811 |
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896 |
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1,803,603 |
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Pick
- up
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- |
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- |
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1 |
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4,364 |
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The
following table shows the breakdown of Kandi’s revenues from its customers by
geographical markets based on the location of the customer during the fiscal
years ended December 31, 2009 and 2008:
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The Years Ended of December 31
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2009
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2008
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Sales Revenue
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Percentage
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Sales Revenue
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Percentage
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North
America
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3,967,536 |
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12
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% |
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7,292,482 |
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18
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% |
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Europe
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660,476 |
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2
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% |
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- |
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- |
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China
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29,199,750 |
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|
86
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% |
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32,816,168 |
|
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|
81
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% |
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Other
Regions
|
|
|
— |
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|
— |
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405,138 |
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|
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1
|
% |
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Total
|
|
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33,827,762 |
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|
|
100
|
% |
|
|
40,513,788 |
|
|
|
100
|
% |
For the
year ended December 31, 2009, sales to North America dropped significantly due
to the financial crisis. The Company expanded its sales to Europe, which began
producing revenue in 2009. We expect continued sales growth in this region in
the future. For the year ended December 31, 2009, about 95% of sales
to China are sales to Chinese export agents, who resell the Company’s products
to North America, Europe, and other regions.
The
following table shows the breakdown of Kandi’s revenues from its customers by
geographical markets based on the location of the customer during the nine
months ended September 30, 2010 and 2009.
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Nine Months Ended September 30
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|
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2010
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2009
|
|
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Sales
|
|
|
Percentage
|
|
Sales
|
|
|
Percentage
|
|
|
North
America
|
|
$ |
3,391,508 |
|
|
|
12
|
% |
|
$ |
2,321,372 |
|
|
|
12
|
% |
|
China
|
|
|
24,908,400 |
|
|
|
87
|
% |
|
|
16,518,443 |
|
|
|
86
|
% |
|
Europe
|
|
|
337,955 |
|
|
|
1
|
% |
|
|
274,234 |
|
|
|
2
|
% |
|
Total
|
|
$ |
28,637,863 |
|
|
|
100
|
% |
|
$ |
19,114,049 |
|
|
|
100
|
% |
Off-Road
Vehicles
In 2003
Kandi began mass production of go-karts. The Company is now one of the leading
manufacturers of go-karts in the People’s Republic of China (PRC). Kandi
produces a wide range of go-karts, from the 90cc class to the 1,000cc class in
cylinder displacement. Kandi also produces four-wheeled all-terrain vehicles
(ATVs) and specialized utility vehicles (UTVs), which are ATVs special-fitted
for agricultural and industrial use.
For the
year ended December 31, 2009, sales of ATVs dropped 61% from $4,981,793 in 2008
to $3,021,352. UTV sales also decreased from $13,026,428 to $8,478,679,
representing a 65% drop. Go-kart sales decreased 65% from $20,818,650 in 2008 to
$13,487,087 for 2009. The decreases are mainly attributable to the
decreased demand from the U.S market as a result of the financial
crisis.
The
Company had a strong fourth quarter in 2009, resulting in a 46% increase in
revenues and a 73% increase in gross profits compared to the fourth quarter
results of 2008, signaling a recovery in the sales of our products corresponding
with the broader global economic recovery.
Sales of
ATVs and go-karts in the first nine months of 2010 have improved by 6% and 145%,
respectively, as compared to the same period of 2009. This was
primarily due to the continued strengthening of the Company’s traditional
recreational vehicle market.
Mini-Car
Products
Kandi
began sales of its gas-powered Super-mini car, CoCo, in August 2008. The first
generation CoCo was designed for local neighborhood driving, with a 250cc single
cylinder, 4-stroke water-cooled engine with a top speed of 25 mph, achieving 60
mpg. In 2009, the Company launched the battery powered all-electric CoCo. The
electric CoCo is designed to achieve a top speed of 25 mph, and will have a
driving range of 80 miles on a single full charge. The Company expects
significant growth in the sales of the CoCo and expects to expand the product
line in the near term.
In
November, 2009, the Company sold 30 specially designed low speed EVs to the
Postal Service in Jinhua, and in July, 2010, the Company announced that it
received an order from the Postal Service in Hangzhou, Zhejiang Province, for 60
all electric vehicles.
On
January 4, 2010, the Company announced that it formed an alliance with major
Chinese energy, IT and battery companies to help launch a new business model for
the mass commercialization of EVs to be expanded on a city by city basis,
addressing key concerns relating to EVs, including high purchase costs, limited
driving ranges and convenience and safety matters with respect to the charging,
maintenance and disposal of batteries. Under this new business model,
consumer costs will be reduced as a result of government cooperation and
subsidies, and driving ranges will be extended through the construction of
“battery farms” which will allocate power to a network of “express change”
battery stations where batteries may be rented and exchanged utilizing Kandi
technology. Central to the new business strategy, batteries will be
made available on a rental basis separate from the sale of each
vehicle. An initial goal of the Alliance is the establishment of a
revolutionary comprehensive model EV city in Jinhua to be followed by other
model cities in Zhejiang Province with the assistance and participation of the
local and regional governments. The core members of the alliance with
the Company are China Potevio/CNOOC New Energy and Power Ltd. (a joint venture
between China National Offshore Oil Corporation and China Potevio Co.) and
Tianneng Power International, Ltd. In
April, 2010, the Company announced that it anticipated that local and regional
government funded subsidies for up to 50% of the purchase price of EVs would be
made available to the first 3,000 purchasers of the Company’s EVs in the Jinhua
EV model city.
Most
significantly, on April 30, 2010, China’s Ministry of Industry and Information
and Technology qualified the Company’s low speed vehicle (KD5020X) for China’s
energy conserving and new energy projects. The vehicle was
placed on its list of vehicles in its 10th catalogue of recommended car types
which meet requirements for sales to the public. On June 1, 2010, the
Chinese Ministry of Finance (MOF) announced planned trial subsidies for China’s
EV and hybrid car manufacturers of up to RMB 60,000 and RMB 50,000,
respectively, as part of an effort to stimulate purchases of these vehicles to
help reduce emissions and gasoline consumption. Additionally, the
announcement indicated there will be government investment and policy support
for EV infrastructure, such as battery charging stations. The
announcement noted that the trial will be initiated in five Chinese cities:
Shanghai, Hangzhou, Changchun, Shenzen and Hefei. On June 21, 2010,
the Company announced that another EV product, Model KD 5010XXYEV, was also
approved for sale in China, and this will likely be the primary model available
to the EV buyers in China.
On July
16, 2010, the Company announced that construction of the first battery charging
station was underway in Jinhua. The State Grid Corporation of China,
China’s largest electric power and transmission company, is funding the project
and is responsible for construction, which is expected to be completed before
the end of 2010.
Most
recently, the Company announced a joint venture with a subsidiary of China’s
largest power transmission company, State Grid Power Corporation, and China’s
leading lead motive battery maker, Tianneng Power International, Inc., to
establish the first China EV battery replacement services
Company. Kandi’s 30% share of this Company is expected to provide an
additional new revenue stream for Kandi’s EVand recreational vehicles
product lines. Kandi’s initial EV sales under its new business model
will start in Jinhua and is anticipated to launch in the final quarter of this
year.
Sales
and Distribution
Kandi’s
sales are made through third-party distributors, which distribute Kandi’s
products to local wholesalers and retail dealers. Worldwide, Kandi sells its
products through seven main independent distributors for off-road
vehicles.
Components
and Parts, Raw Materials and Sources of Supply
Kandi
manufactures the frames of its vehicles and assembles the vehicles in its
factory in Jinhua, China. Other components and parts, such as
engines, shock absorbers, electrical equipment and tires, are purchased from
numerous suppliers. The principal raw materials used by Kandi are
steel plate, aluminum, special steels, steel tubes, paints, and plastics, which
are purchased from several local suppliers. The most important raw
material purchased is steel plate. There is only one supplier who accounted for
more than 5% of the Company’s purchases of major components and parts and
principal raw materials during the fiscal year ended December 31, 2009. Kandi
does not have and does not anticipate having any difficulty in obtaining its
required materials from suppliers and considers its contracts and business
relations with the suppliers to be satisfactory.
Seasonality
Kandi’s
motorcycle and off-road vehicle businesses have historically experienced some
seasonality. However, this seasonality has not generally been
material to our financial results.
Competition
The
global small vehicle markets and new energy vehicle markets are highly
competitive. Competition in such markets is based upon a number of factors,
including price, quality, reliability, styling, product features and warranties.
As a relatively new entrant into the market, many of our competitors are more
diversified and have financial and marketing resources that are substantially
greater than those of Kandi.
Employees
As of
December 31, 2009, Kandi had a total of 329 full time employees. None of our
employees are represented by any collective bargaining agreements.
Environmental
and Safety Regulation
Emissions
The
United States Environmental Protection Agency (“EPA”) and the California Air
Resources Board (“CARB”) have adopted emissions regulations applicable to
Kandi’s products. CARB has emissions regulations for ATVs and off-road vehicles
which the Company already meets. In October 2002, the EPA established new
corporate average emission standards effective for model years 2006 through 2012
for non-road recreational vehicles, including ATVs and off-road
vehicles.
Kandi’s
motorcycles are also subject to EPA and CARB emission standards. Kandi believes
that its motorcycles have always complied with these standards. The CARB
regulations required additional motorcycle emission reductions in model year
2008 which the Company met. The EPA adopted the CARB emission limits in a
January 2004 rulemaking that allows an additional two model years to meet these
new CARB emission requirements on a nationwide basis.
Kandi’s
products are also subject to international laws and regulations related to
emissions in places where it sells its products outside the United States.
Europe currently regulates emissions from certain of the Company’s ATV-based
products, motorcycles, and mini-cars and the Company meets these requirements.
Canada’s emission regulations for motorcycles are similar to those in the U.S.
In December 2006 Canada proposed a new regulation that would essentially adopt
the U.S. emission standards for ATVs and off-road vehicles. These regulations
became effective in 2009 and the Company meets this standard.
Kandi
believes that its off-road vehicles, motorcycles and mini-cars have always
complied with applicable emission standards and related regulations in the
United States and internationally. Kandi is unable to predict the ultimate
impact of the adopted or proposed regulations on Kandi and its
business.
Use
regulation
State and
federal laws and regulations have been promulgated or are under consideration
relating to the use or manner of use of Kandi’s products. Some states and
localities have adopted, or are considering the adoption of, legislation and
local ordinances which restrict the use of ATVs and off-road vehicles to
specified hours and locations. The federal government also has restricted the
use of ATVs and off-road vehicles in some national parks and federal lands. In
several instances this restriction has been a ban on the recreational use of
these vehicles. Kandi is unable to predict the outcome of such actions or the
possible effect on its business. Kandi believes that its business would be no
more adversely affected than those of its competitors by the adoption of any
pending laws or regulations.
Product
Safety and Regulation
Safety
Regulation
The
federal government and individual states have promulgated or are considering
promulgating laws and regulations relating to the use and safety of Kandi’s
products. The federal government is the primary regulator of product safety. The
Consumer Product Safety Commission (“CPSC”) has federal oversight over product
safety issues related to ATVs and off-road vehicles. The National Highway
Transportation Safety Administration (“NHTSA”) has federal oversight over
product safety issues related to on-road motorcycles.
In August
2008, the Consumer Product Safety Improvement Act (the “Act”) was passed. The
Act includes a provision that requires all manufacturers and distributors who
import into or distribute ATVs in the United States to comply with the ANSI/SVIA
safety standards which were previously voluntary. The Act also requires the same
manufacturers and distributors to have ATV action plans filed with the CPSC that
are substantially similar to the voluntary action plans that were previously in
effect. Kandi currently complies with the ANSI/SVIA standard.
Kandi’s
motorcycles are subject to federal vehicle safety standards administered by
NHTSA. Kandi’s motorcycles are also subject to various state vehicle safety
standards. Kandi believes that its motorcycles have always complied with safety
standards relevant to motorcycles.
Kandi’s
products are also subject to international standards related to safety in places
where it sells its products outside the United States. Kandi believes that its
motorcycles and mini-cars have always complied with applicable safety standards
in the United States and internationally.
Principal
Executive Offices
We
maintain our principal executive offices at Jinhua City Industrial Zone, Jinhua,
Zhejiang Province, People’s Republic of China, Post Code 321016. Our
telephone number is (86-0579) 82239856. Our corporate website is
http://www.chinakandi.com. The information contained on our website
is not part of this prospectus.
Company
Information
The
Company’s internet address is http://www.chinakandi.com. Copies of our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports are available, without charge, from
our principal executive office at Jinhua City Industrial Zone, Jinhua, Zhejiang
Province, People’s Republic of China, Post Code 321016.
Reports
filed with the SEC may be viewed at www.sec.gov or
obtained at the SEC Public Reference Room located at 100 F Street, N.E., Room
1580, Washington, D.C. 20549. Information regarding the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
References to our website addressed in this prospectus are provided as a
convenience and do not constitute, and should not be viewed as, an incorporation
by reference of the information contained on, or available through, the
website. Therefore, such information should not be considered part of this
prospectus.
THE
OFFERING
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Common
stock offered
|
|
3,027,272
shares
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|
|
|
|
|
Warrants
offered
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Warrants
to purchase 1,210,912 shares of common stock, exercisable for a
period of three years at an exercise price of $6.30. The Warrants are
immediately exercisable. This prospectus also relates to the offering of
the shares of common stock issuable upon exercise of the Warrants. For
additional information regarding the Warrants, see “Description of the
Securities Being Offered – Warrants” below.
|
|
|
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Common
stock to be outstanding immediately after this offering
|
|
27,394,101 shares
(assuming
none of the Warrants are immediately
exercised)
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|
Offering
price
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$5.50.
|
|
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Use
of Proceeds
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|
We
intend to use the net proceeds from this offering for general corporate
purposes, including for research and development, general and
administrative expenses, working capital needs and potential ordinary
course acquisitions of technologies that complement our business, subject
to certain restrictions we have agreed to in the purchase agreement with
the investors in this offering.
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|
|
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Risk
Factors
|
|
See
“Risk Factors” beginning on page S-7 of this prospectus supplement,
page 2 of the accompanying prospectus and the risk factors set forth
in our annual report on Form 10-K for the year ended December 31, 2009 and
our quarterly report on Form 10-Q for the quarter ended September 30, 2010
for a discussion of factors you should carefully consider before deciding
to invest in our securities.
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|
|
|
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Listing
|
|
Our
common stock is listed on the NASDAQ Capital Market under the symbol
“KNDI.” There is no established public trading market for the offered
warrants and we do not expect a market to develop. In addition, we do not
intend to apply for listing of the offered warrants on any national
securities exchange.
|
The
number of shares of common stock to be outstanding immediately after this
offering is based on 24,366,829 shares outstanding as of December 20, 2010.
Unless we specifically state otherwise, the share information in this prospectus
supplement excludes (i) shares of our common stock issuable upon exercise or
conversion of our warrants and/or options outstanding as of December 20, 2010,
and (ii) shares of our common stock available for future issuance under our 2008
Omnibus Long Term Incentive Plan, if any.
RISK
FACTORS
You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained herein that
are not historic facts are forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those set forth in or implied by forward-looking statements. If any
of the following risks actually occur, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
Common Stock could decline, and you may lose all or part of your
investment.
Risks
Relating to Our Overall Business Operations
Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.
We have a
limited operating history because we have only been in operation since
2003. This limited operating history, and the unpredictability of the
machinery production industry, makes it difficult for investors to evaluate our
businesses and predict future operating results. An investor in our securities
must consider the risks, uncertainties and difficulties frequently encountered
by companies in new and rapidly evolving markets. The risks and
difficulties we face include challenges in accurate financial planning as a
result of limited historical data and the uncertainties resulting from having
had a relatively limited time period in which to implement and evaluate our
business strategies as compared to older companies with longer operating
histories.
We
may not be able to comply with all applicable government
regulations.
We are
subject to extensive governmental regulation by the central, regional and local
authorities in the PRC, where our business operations take place. We believe
that we are currently in substantial compliance with all laws and governmental
regulations and that we have all material permits and licenses required for our
operations. Nevertheless, we cannot assure investors that we will continue to be
in substantial compliance with current laws and regulations, or that we will be
able to comply with any future laws and regulations. To the extent that new
regulations are adopted, we will be required to conform our activities in order
to comply with such regulations. Failure to comply with applicable laws and
regulations could subject us to civil remedies, including fines, injunctions,
recalls or seizures, as well as potential criminal sanctions, which could have a
material adverse effect on its business, operations and
finances.
Compliance
with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary
damages and fines.
We use,
generate and discharge toxic, volatile and otherwise hazardous chemicals and
wastes in our research and development and manufacturing activities, and our
business operations generate noise, waste water, and gaseous and other
industrial wastes. We are therefore required to comply with all national and
local regulations regarding protection of the environment. We are in compliance
with current environmental protection requirements and have all necessary
environmental permits to conduct our business. However, if more stringent
regulations are adopted in the future, the costs of compliance with these new
regulations could be substantial. Additionally, if we fail to comply with
present or future environmental regulations, we may be required to pay
substantial fines, suspend production or cease operations. Any failure by us to
control the use of, or to restrict adequately the discharge of, hazardous
substances could subject us to potentially significant monetary damages and
fines or suspensions in our business operations. Certain laws, ordinances and
regulations could limit our ability to develop, use, or sell our
products.
Our
business depends substantially on the continuing efforts of our executive
officers, and our business may be severely disrupted if we lose their
services.
Our
future success depends substantially on the continued services of our executive
officers, especially our CEO and President, Mr. Hu Xiaoming. We do not maintain
key man life insurance on any of our executive officers. If any of
our executive officers are unable or unwilling to continue in their present
positions, we may not be able to replace them readily, if at
all. Therefore, our business may be severely disrupted, and we may
incur additional expenses to recruit and retain new officers. In
addition, if any of our executives joins a competitor or forms a competing
company, we may lose some of our customers.
We
may be subject to product liability claims, recalls or warranty claims, which
could be expensive, damage our reputation and result in a diversion of
management resources.
The
Company may be subject to lawsuits resulting from injuries associated with the
use of the vehicles that it sells. The Company may incur losses relating to
these claims or the defense of these claims. There is a risk that claims or
liabilities will exceed our insurance coverage. In addition, the Company may be
unable to retain adequate liability insurance in the future.
The
Company may also be required to participate in recalls involving our vehicles if
any prove to be defective, or we may voluntarily initiate a recall or make
payments related to such claims as a result of various industry or business
practices or the need to maintain good customer relationships. Such a recall
would result in a diversion of resources. While we do maintain product liability
insurance, we cannot assure you that it will be sufficient to cover all product
liability claims, that such claims will not exceed our insurance coverage limits
or that such insurance will continue to be available on commercially reasonable
terms, if at all. Any product liability claim brought against us could have a
material adverse effect on our results of operations.
Risks
Relating to Our Vehicle Machinery Production Operations
We
may be subject to significant potential liabilities as a result of defects in
production and product liability.
Through
our machinery production operations, we may be subject to production defect and
product liability arising in the ordinary course of business. These claims are
common to the machinery production industry and can be costly.
With
respect to certain general liability exposures, including manufacturing defect
and product liability, interpretation of underlying current and future trends,
assessment of claims and the related liability and reserve estimation process is
highly subjective due to the complex nature of these exposures, with each
exposure exhibiting unique circumstances. Furthermore, once claims are asserted
for construction defects, it is difficult to determine the extent to which the
assertion of these claims will expand geographically. We may not have sufficient
funds available to cover any liability for damages, the cost of repairs, and/or
the expense of litigation surrounding such claims, and future claims may arise
out of events or circumstances not covered by insurance and not subject to
effective indemnification agreements with our subcontractors.
The
vehicle machinery industry is highly competitive and we are subject to risks
relating to competition that may adversely affect our performance.
The
vehicle machinery industry is highly competitive, and our continued success
depends upon our ability to compete effectively in markets that contain numerous
competitors, some of which have significantly greater financial, marketing and
other resources than we have. Competition may reduce fee structures, potentially
causing us to lower our fees or prices, which may adversely impact our profits.
New or existing competition that uses a business model that is different from
our business model may put pressure on us to change our model so that we can
remain competitive.
Our
business is subject to the risk of supplier concentrations.
We depend
on a limited number of suppliers for the sourcing of major components and parts
and principal raw materials. As a result of this concentration in our supply
chain, our business and operations would be negatively affected if any of our
key suppliers were to experience significant disruption affecting the price,
quality, availability or timely delivery of their products. The partial or
complete loss of one of these suppliers, or a significant adverse change in our
relationship with any of these suppliers, could result in lost revenue, added
costs and distribution delays that could harm our business and customer
relationships. In addition, concentration in our supply chain can exacerbate our
exposure to risks associated with the termination by key suppliers of our
distribution agreements or any adverse change in the terms of such agreements,
which could have a negative impact on our revenues and
profitability.
General
economic conditions may negatively impact our results.
The
consumption of entertainment products such as go-karts and mini-cars is
dependant on continued economic growth, and the duration, pace and full extent
of the current growth environment remains unclear. Moderate or severe economic
downturns or adverse conditions may negatively affect our operations. These
conditions may be widespread or isolated to one or more geographic regions. A
tightening of the labor markets in one or more geographic regions may result in
fewer qualified applicants for job openings in our facilities. Higher wages,
related labor costs and other increasing cost trends may negatively impact our
results as wages and related labor costs.
Risks
Related to Doing Business in China
Change
in political and economic conditions may affect our business operations and
profitability.
Since our
business operations are primarily located in China, our business operations and
financial position are subject, to a significant degree, to the economic,
political and legal developments in China.
China's
government started implementing its economic reform policy in 1978, which
enabled China’s economy to gradually transform from a "planned economy" to a
"socialist market economy." In 1993, the concept of the socialist market economy
was introduced into the Constitution of China, and the country has since
experienced accelerated development of a market economy. A noteworthy recent
phenomenon is that non-state owned enterprises, such as private enterprises,
play an increasingly important role in the Chinese economy and the degree of
direct control by the PRC government over the economy is gradually
declining.
While the
Chinese government has not halted its economic reform policy since 1978, any
significant adverse changes in the social, political and economic conditions of
China may fundamentally impact China’s economic reform policies, and thus the
Company's operations and profits may be adversely affected.
Change
in tax laws and regulations in China may affect our business
operations.
Various
tax reform policies have been implemented in the PRC in recent years. Businesses
are still awaiting guidance from the government in interpreting certain PRC tax
policies. Moreover, there can be no assurance that the existing tax laws and
regulations will not be revised or amended in the future.
Uncertainties
with respect to the Chinese legal system could have a material adverse effect on
us and may restrict the level of legal protections to foreign
investors.
China's
legal system is based on statutory law. Unlike the common law system, statutory
law is based primarily on written statutes. Previous court decisions may be
cited as persuasive authority but do not have a binding effect. Since 1979, the
PRC government has been promulgating and amending the laws and regulations
regarding economic matters, such as corporate organization and governance,
foreign investment, commerce, taxation and trade. However, since
these laws and regulations are relatively new, and the PRC legal system
continues to rapidly evolve, the interpretation of many laws, regulations and
rules is not always uniform and enforcement of these laws, regulations and rules
involves uncertainties, which may limit legal protections available to
us.
In
addition, any litigation in China may be protracted and may result in
substantial costs and diversion of resources and management attention. The legal
system in the China cannot provide the investors with the same level of
protection as in the U.S. The Company is governed by the law and regulations
generally applicable to local enterprises in China. Many of these laws and
regulations were recently introduced and remain experimental in nature and
subject to changes and refinements. Interpretation, implementation and
enforcement of the existing laws and regulations can be uncertain and
unpredictable and therefore may restrict the legal protections of foreign
investors.
Changes
in Currency Conversion Policies in China may have an material adverse effect on
us.
Renminbi
(“RMB”) is not a freely exchangeable currency. Since 1998, the State
Administration of Foreign Exchange of China has promulgated a series of
circulars and rules in order to enhance verification of foreign exchange
payments under a Chinese entity’s current account items, and has imposed strict
requirements on borrowing and repayments of foreign exchange debts from and to
foreign creditors under the capital account items and on the creation of foreign
security in favor of foreign creditors.
This may
complicate foreign exchange payments to foreign creditors under the current
account items and thus will affect the ability to borrow under international
commercial loans, the creation of foreign security, and the borrowing of RMB
under guarantees in foreign currencies. Furthermore, the value of RMB may become
subject to supply and demand, which could be largely impacted by international
economic and political environments. Any fluctuations in the exchange
rate of RMB could have an adverse effect on the operational and financial
condition of the Company and its subsidiaries in China.
You
may experience difficulties in effecting service of legal process, enforcing
foreign judgments or bringing original actions based on United States or other
foreign laws against us, our management or the experts named in the
prospectus.
We
conduct substantially all of our operations in China and substantially all of
our assets are located in China. In addition, all of our senior executive
officers reside in China. As a result, it may not be possible to effect service
of process within the United States or elsewhere outside China upon our senior
executive officers, including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Moreover, our PRC counsel
has advised us that the PRC does not have treaties with the United States or
many other countries providing for the reciprocal recognition and enforcement of
judgment of courts.
Risks
Relating to Ownership of Our Securities
Our
stock price may be volatile, which may result in losses to our
stockholders.
The stock
markets have experienced significant price and trading volume fluctuations, and
the market prices of companies listed on the NASDAQ Capital Market, the stock
market in which shares of our Common Stock are listed, have been volatile in the
past and have experienced sharp share price and trading volume changes. The
trading price of our Common Stock is likely to be volatile and could fluctuate
widely in response to many factors, including the following, some of which are
beyond our control:
·
variations in our operating results;
·
changes in expectations of our future financial performance, including financial
estimates by securities analysts and investors;
·
changes in operating and stock price performance of other companies in our
industry;
·
additions or departures of key personnel; and
·
future sales of our Common Stock.
Domestic
and international stock markets often experience significant price and volume
fluctuations. These fluctuations, as well as general economic and political
conditions unrelated to our performance, may adversely affect the price of our
Common Stock.
One
stockholder owns a substantial portion of our outstanding Common Stock, which
may enable this stockholder to influence many significant corporate actions and
in certain circumstances may prevent a change in control that would otherwise be
beneficial to our other stockholders.
Excelvantage
Group Limited controls approximately 49.31% of our outstanding shares of Common
Stock. As a result, Excelvantage Group Limited could have a substantial impact
on matters requiring the vote of the stockholders, including the election of our
directors and most corporate actions. This control could delay, defer or prevent
others from initiating a potential merger, takeover or other change in our
control, even if these actions would benefit our other stockholders and the
Company. This control could adversely affect the voting and other rights of our
other stockholders and could depress the market price of our Common
Stock.
Our
common shares are thinly traded and you may be unable to sell at or near ask
prices, or at all.
We cannot
predict the extent to which an active public market for trading our Common Stock
will be sustained. Our common shares have historically been sporadically or
“thinly-traded,” meaning that the number of persons interested in purchasing our
common shares at or near bid prices at any given time may be relatively small or
non-existent.
This
situation is attributable to a number of factors, including the fact that we are
a small company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community who generate or
influence sales volume. Even if we came to the attention of such
persons, those persons tend to be risk-averse and may be reluctant to follow,
purchase, or recommend the purchase of shares of an unproven company such as
ours until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our Common Stock will
develop or be sustained, or that current trading levels will be
sustained.
The
market price for our Common Stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” and lack of
current revenues which could lead to wide fluctuations in our share price. You
may be unable to sell your Common Stock at or above your purchase price if at
all, which may result in substantial losses to you.
Stockholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
Substantial
sales of the shares of our Common Stock issuable upon exercise of warrants could
adversely affect our stock price or our ability to raise additional financing in
the public capital markets.
We issued
$10,000,000 2-year senior secured convertible notes and warrants to purchase an
aggregate of 800,000 shares of Common Stock to certain institutional investors
on January 21, 2010. The notes have been almost entirely
converted. However, if the institutional investors exercise the
warrants and a substantial number of shares of our Common Stock are sold in the
future, or if investors perceive that these sales may occur, the market price of
our Common Stock could decline or market demand for our Common Stock could be
sharply reduced. This could adversely affect our ability to raise additional
financing by issuing equity or equity-based securities in the public capital
markets.
Antidilution
and other provisions in the senior secured convertible notes and the warrants
issued to the note holders may also adversely affect our stock price or our
ability to raise additional financing.
The
senior secured convertible notes and the warrants issued to the institutional
holders described above contain antidilution provisions that provide for
adjustment of the note conversion price and the warrant exercise price, and the
number of shares issuable under the warrants, upon the occurrence of certain
events. If we issue shares of our Common Stock, or securities convertible into
our Common Stock, at prices below the conversion price or exercise price, as
applicable, the conversion price of the notes will be reduced and the warrant
exercise price will be reduced and the number of shares issuable under the
warrant will be increased. The amount of such adjustment if any, will be
determined pursuant to a formula specified in the note and the warrant and will
depend on the number of shares issued and the offering price of the subsequent
issuance of securities. Adjustments to the warrant pursuant to these
antidilution provisions may result in significant dilution to the interests of
our existing stockholders and may adversely affect the market price of our
Common Stock. The antidilution provisions may also limit our ability to obtain
additional financing on terms favorable to us.
Moreover,
we may not realize any cash proceeds from the exercise of the warrants. A holder
of the warrant may opt for a cashless exercise of all or part of the warrant
under certain circumstances. In a cashless exercise, the holder of the warrant
would make no cash payment to us, and would receive a number of shares of our
common stock having an aggregate value equal to the excess of the then-current
market price of the shares of our common stock issuable upon exercise of the
warrant over the exercise price of the warrant. Such an issuance of common stock
would be immediately dilutive to the interests of other
stockholders.
We
do not anticipate paying any cash dividends.
We
presently do not anticipate that we will pay dividends on any of our capital
stock in the foreseeable future. If payment of dividends does occur at some
point in the future, it would be contingent upon our revenues and earnings, if
any, capital requirements, and general financial condition. The payment of any
dividends will be within the discretion of our Board of Directors. We presently
intend to retain all earnings, if any, to implement our business plan;
accordingly, we do not anticipate the declaration of any dividends in the
foreseeable future.
Fluctuation
in the value of the RMB may have a material adverse effect on your
investment.
The
change in value of the RMB against the U.S. dollar, the Euro and other
currencies is affected by changes in China’s political and economic conditions,
among other things. On July 21, 2005, the PRC government changed its decade-old
policy of pegging the value of the RMB to the U.S. dollar. Under the new policy,
the RMB is permitted to fluctuate within a narrow and managed band against a
basket of certain foreign currencies. This change in policy has resulted in
approximately 2.1% appreciation of RMB against the U.S. dollar. While the
international reaction to the RMB revaluation has generally been positive, there
remains significant international pressure on the PRC government to adopt an
even more flexible currency policy, which could result in a further and more
significant appreciation of the RMB against the U.S. dollar. As a portion of our
costs and expenses is denominated in RMB, the revaluation in July 2005 and
potential future revaluation has and could further increase our costs. In
addition, as we rely entirely on dividends paid to us by our operating
subsidiaries, any significant revaluation of the RMB may have a material adverse
effect on our revenues and financial condition. For example, to the extent that
we need to convert U.S. dollars we receive from this offering into RMB for our
operations, appreciation of the RMB against the U.S. dollar would have an
adverse effect on the RMB amount we receive from the conversion. Conversely, if
we decide to convert our RMB into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or for other business purposes,
appreciation of the U.S. dollar against the RMB would have a negative effect on
the U.S. dollar amount available to us.
If
the Company were to be delisted from NASDAQ, our Common Stock could be subject
to “penny stock” rules which could negatively impact our liquidity and our
stockholders’ ability to sell their shares.
Our
Common Stock is currently listed on the NASDAQ Capital Market. We must comply
with numerous NASDAQ MarketPlace rules in order to maintain the listing of our
Common Stock on NASDAQ. There can be no assurance that we can continue to meet
the requirements to maintain the NASDAQ listing of our Common Stock. If we are
unable to maintain our listing on NASDAQ, the market liquidity of our Common
Stock may be severely limited.
Volatility
in Our Common Share Price May Subject Us to Securities Litigation.
The
market for our Common Stock is characterized by significant price volatility as
compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. In the
past, plaintiffs have often initiated securities class action litigation against
a company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management's attention and resources.
The
Elimination of Monetary Liability Against our Directors, Officers and Employees
under Delaware law and the Existence of Indemnification Rights of our Directors,
Officers and Employees May Result in Substantial Expenditures by our Company and
may Discourage Lawsuits Against our Directors, Officers and
Employees.
Our
articles of incorporation do not contain any specific provisions that eliminate
the liability of our directors for monetary damages to our company and
stockholders; however, we are prepared to give such indemnification to our
directors and officers to the extent provided for by Delaware law. We may also
have contractual indemnification obligations under our employment agreements
with our officers. The foregoing indemnification obligations could result in our
company incurring substantial expenditures to cover the cost of settlement or
damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our company from
bringing a lawsuit against directors and officers for breaches of their
fiduciary duties, and may similarly discourage the filing of derivative
litigation by our stockholders against our directors and officers even though
such actions, if successful, might otherwise benefit our company and
stockholders.
Past
Activities Of Stone Mountain and Our Affiliates May Lead to Future
Liability.
Prior to
Stone Mountain entering into the share exchange agreement with Continental on
June 29, 2007, Stone Mountain engaged in businesses unrelated to our current
operations. Any liabilities relating to such prior business against which we are
not completely indemnified may have a material adverse effect on
us.
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our stockholders.
We
believe that our current cash, cash equivalents, and anticipated cash flow from
operations will be sufficient to meet our anticipated cash needs for the near
future. We may, however, require additional cash resources due to changed
business conditions or other future developments, including any investments or
acquisitions we may decide to pursue. If our resources are insufficient to
satisfy our cash requirements, we may seek to sell additional equity or debt
securities or obtain a credit facility. The sale of additional equity securities
could result in dilution to our stockholders. The incurrence of indebtedness
would result in increased debt service obligations and could result in operating
and financing covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all.
Our
business is subject to changing regulations related to corporate governance and
public disclosure that have increased both our costs and the risk of
noncompliance.
Because
our Common Stock is publicly traded, we are subject to certain rules and
regulations of federal, state and financial market exchange entities charged
with the protection of investors and the oversight of companies whose securities
are publicly traded. These entities, including the Public Company Accounting
Oversight Board, the SEC and NASDAQ, have issued requirements and regulations
and continue to develop additional regulations and requirements in response to
corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley
Act of 2002. Our efforts to comply with these regulations have resulted in, and
are likely to continue resulting in, increased general and administrative
expenses and diversion of management time and attention from revenue-generating
activities to compliance activities. Because new and modified laws, regulations
and standards are subject to varying interpretations in many cases due to their
lack of specificity, their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. This evolution may
result in continuing uncertainty regarding compliance matters and additional
costs necessitated by ongoing revisions to our disclosure and governance
practices.
Other Risk
Factors; Risks Related to Our Business and Financial Condition. Information about other
risk factors which may affect our business or financial condition, and, by
extension, the price or value of our securities, can be found under Item 1A
“Risk Factors” of our annual report for the year ended December 31, 2009, which
was filed with the SEC on March 31, 2010 and is incorporated into this
prospectus supplement by reference.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein, contain forward-looking
statements, within the meaning of the federal securities laws, that relate to
future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology, such as “may,” “will,”
“should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“project,” “predict,” “intend,” “potential” or “continue” or the negative of
such terms or other comparable terminology, although not all forward-looking
statements contain such terms.
In
addition, these forward-looking statements include, but are not limited to,
statements regarding implementing our business strategy; development,
commercialization and marketing of our products; our intellectual property; our
estimates of future revenue and profitability; our estimates or expectations of
continued losses; 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 identified in the “Risk Factors” section contained herein, as
well as the risk factors and those set forth from time to time in our filings
with the SEC. These documents are available through the SEC’s
Electronic Data Gathering and Analysis Retrieval System (“EDGAR”) at
http://www.sec.gov. We assume no obligation to update forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements, except if we otherwise are required
by law.
USE
OF PROCEEDS
We
estimate that the net proceeds we will receive from this offering will be
approximately $15,462,747, after deducting estimated offering expenses of
approximately $1,187,249. We will not receive any proceeds from the sale of
common stock issuable upon exercise of the Warrants that we are offering unless
and until such Warrants are exercised. If the Warrants are fully exercised for
cash, we will receive additional proceeds of approximately
$7,628,745.60.
We intend
to use the net proceeds from this offering for general corporate purposes and
working capital, including for research and development, general and
administrative expenses, and potential ordinary course acquisitions of
technologies that complement our business. In the purchase agreement
we have entered into with the purchasers in this offering, we have specifically
agreed not to use the proceeds of this offering to satisfy any existing debt
(other than ordinary course trade payables), to redeem any of our outstanding
securities or to settle any outstanding litigation.
We have
not specifically identified the precise amounts we will spend on each of these
areas or the timing of these expenditures. The amounts actually expended for
each purpose may vary significantly depending upon numerous factors, including
assessments of potential market opportunities and competitive developments. In
addition, expenditures may also depend on the establishment of new collaborative
arrangements with other companies, the availability of other financing, and
other factors. Subject to any agreed upon contractual restrictions
under the terms of the purchase agreement, our management will have some
discretion in the application of the net proceeds from this
offering. Our stockholders may not agree with the manner in which our
management chooses to allocated and spend the net proceeds. Moreover,
our management may use the net proceeds for purposes that may not result in our
being profitable or increase our market value.
DESCRIPTION
OF THE SECURITIES WE ARE OFFERING
We are
offering for sale up to 3,027,272 shares of our common stock and three-year
warrants to purchase 1,210,912 shares of our common stock at an exercise
price of $6.30, at an aggregate offering price of $16,649,996.
Common
Stock
The
following description is a general summary of the terms of the common stock that
we may issue. The description below and in any prospectus supplement does not
include all of the terms of the common stock and should be read together with
our Certificate of Incorporation and bylaws, copies of which have been filed
previously with the SEC. For more information on how you can obtain
copies of our Certificate of Incorporation and bylaws, see “Where You Can Find
More Information.”
General
Under our Certificate of
Incorporation, we are authorized to issue up to 100,000,000 shares of common
stock, par value $.001 per share. Holders of common stock have no
preemptive rights to subscribe for any of our securities, nor do they have any
preference, conversion, exchange, sinking fund, redemption or appraisal
rights.
Our
common stock is listed on NASDAQ under the symbol “KNDI.”
Voting
Rights
Each
stockholder of record of our common stock is entitled to one vote for each share
held on every matter properly submitted to such stockholders for a vote. Holders
of our common stock do not have cumulative voting rights.
Dividends
Subject
to the rights of holders of any preferred stock, if any, each record holder of
common stock on the applicable record date is entitled to receive dividends on
common stock to the extent authorized by our board of directors out of assets
legally available for the payment of dividends. In addition, subject to the
rights of holders of any preferred stock, holders of common stock are entitled
to share ratably in our assets legally available for distribution to our
shareholders in the event of our liquidation, dissolution or winding up after
payment of or adequate provision for all our known debts and
liabilities.
Transfer
Agent
Corporate
Stock Transfer is the registrar and transfer agent for our common
stock.
Anti-takeover
Provisions
Delaware
Anti-Takeover Law
Section 203
of the Delaware General Corporation Law, or DGCL, provides that, subject to
exceptions specified therein, an “interested stockholder” of a Delaware
corporation shall not engage in any “business combination,” including general
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the time
that such stockholder becomes an interested stockholder unless:
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prior to such time, the board of
directors of the corporation approved either the business combination or
the transaction which resulted in the stockholder becoming an interested
stockholder;
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upon consummation of the
transaction which resulted in the stockholder becoming an “interested
stockholder,” the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced
(excluding specified
shares); or
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on or subsequent to such time,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock not owned by the interested
stockholder.
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Under
Section 203, the restrictions described above also do not apply to
specified business combinations proposed by an interested stockholder following
the announcement or notification of specified transactions involving the
corporation and a person who had not been an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of a majority of the corporation’s directors, if such transaction is approved or
not opposed by a majority of the directors who were directors prior to any
person becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.
Except as
otherwise specified in Section 203, an “interested stockholder” is defined
to include:
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any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within
three years immediately prior to the date of
determination; and
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the affiliates and associates of
any such person.
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Under
some circumstances, Section 203 makes it more difficult for a person who is
an interested stockholder to effect various business combinations with us for a
three-year period. Section 203 may also have the effect of preventing
changes in our management and could make it more difficult to accomplish
transactions that our stockholders may deem to be in their best interests. We
have not elected to be exempt from the restrictions imposed under
Section 203.
Certificate
of Incorporation and Bylaw Provisions
Our
bylaws provide that the authorized number of our directors is fixed by our board
of directors, provided that the number of directors shall be at least two. Each
director will serve a one-year term.
Our
bylaws provide that special meetings of our stockholders may be called by our
President whenever directed in writing by a majority of our Board of Directors
or by the request of the holders of one-third of the number of outstanding
voting shares.
Our
certificate of incorporation and bylaws provide that vacancies in our board of
directors may be filled by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum or by the sole remaining
director. In addition, our bylaws provide that any director or the entire Board
of Directors may be removed, with or without cause, by majority vote of the
stockholders.
Our
bylaws provide that our bylaws may be amended at any annual meeting of
stockholders or at any special meeting by holders of a majority of voting shares
or by a majority of the Board of Directors at any Board meeting.
Warrants
The
material terms and provisions of the warrants being offered pursuant to this
prospectus supplement and the accompanying prospectus are summarized
below. The summary is subject to, and qualified in its entirety by,
the form of warrant which will be provided to each purchaser in this offering
and will be filed as an exhibit to a Current Report on Form 8-K with the SEC in
connection with this offering.
The
warrants are exercisable for an aggregate of 1,210,912 shares of common
stock at an initial exercise price of $6.30 per share of common
stock.
Exercise
and Duration
The
warrants will be immediately exercisable and will terminate on the third
anniversary of the date the warrants become exercisable. The exercise
price and the number of shares for which each warrant may be exercised is
subject to appropriate adjustment in the event of stock dividends, stock splits,
reorganizations or similar events affecting our common stock and the exercise
price of warrants held by a purchaser (or such purchaser’s direct or indirect
transferee) is subject to appropriate adjustment in the event of cash dividends
or other distributions to holders of shares of our common stock.
Holders
of the warrants may exercise their warrants to purchase shares of our common
stock by delivering an exercise notice, appropriately completed and duly
signed. Payment of the exercise price for the number of shares for
which the warrant is being exercised is required to be delivered within one
trading day after exercise of the warrant. In the event that the
registration statement relating to the warrant shares is not effective, a holder
of warrants will have the right to exercise its warrants for a net number of
warrant shares pursuant to the cashless exercise procedures specified in the
warrants. Warrants may be exercised in whole or in part, and any
portion of a warrant not exercised prior to the termination date shall be and
become void and of no value. The absence of an effective registration
statement or applicable exemption from registration does not alleviate our
obligation to deliver common stock issuable upon exercise of a
warrant.
Upon the
holder’s exercise of a warrant, we will issue the shares of common stock
issuable upon exercise of the warrant within three trading days of our receipt
of notice of exercise.
Underlying
Shares
The
shares of common stock issuable on exercise of the warrants will be, when issued
in accordance with the warrants, duly and validly authorized, issued and fully
paid and non-assessable. We will authorize and reserve at least that
number of shares of common stock equal to the number of shares of common stock
issuable upon exercise of all outstanding warrants.
Mandatory
Exercise
If, at
any time, the price of the Company’s common stock is greater than or equal to
$12.60 for a period of fifteen (15) consecutive trading days, and if certain
other conditions are met relating to trade volume, the Company shall have the
right to require the warrant holders to exercise all of the remaining
unexercised portion of the warrants.
Fundamental
Transaction
If, at
any time warrants are outstanding, we consummate any fundamental transaction, as
described in the warrants and generally including any consolidation or merger
into another corporation, the consummation of a transaction whereby another
entity acquires more than 50% of our outstanding voting stock, or the sale of
all or substantially all of our assets, the successor entity must assume in
writing all of our obligations to the warrant holders.
Additionally,
in the event of a fundamental transaction, each warrant holder will have the
right to require us, or our successor, to repurchase its warrant for an amount
of cash equal to the Black-Scholes value of the remaining unexercised portion of
the warrant.
Limitations
on Exercise
The
exercisability of the warrants may be limited in certain circumstances if, upon
exercise, the holder or any of its affiliates would beneficially own more than
4.9% of our common stock.
No
Stockholder Rights
The
holder of a warrant will not possess any rights as a stockholder under the
warrant until the holder exercises the warrant.
No
Market for Warrants
There is
no established public trading market for the warrants, and we do not expect a
market to develop. We do not intend to apply to list the warrants on
any securities exchange. Without an active market, the liquidity of
the warrants will be limited. In addition, in the event our common
stock price does not exceed the per share exercise price of the warrants during
the period when the warrants are exercisable, the warrants will not have any
value.
PLAN
OF DISTRIBUTION
We have
entered into a placement agency agreement (the “Placement Agency Agreement”),
dated as of December 13, 2010, with FT Global Capital, pursuant to which FT
Global Capital agreed to act as our placement agent in connection with this
offering.
The
placement agent is not purchasing or selling any securities offered by this
prospectus supplement and the accompanying prospectus, nor is the placement
agent required to arrange the purchase or sale of any specific number or dollar
amount of the securities, but the placement agent has agreed to use its best
efforts to arrange for the direct sale of all of the securities in this offering
pursuant to this prospectus supplement and the accompanying prospectus. There is
no requirement that any minimum number of securities or dollar amount of
securities be sold in this offering and there can be no assurance that we will
sell all or any of the securities being offered.
We
negotiated the offering price for the shares of common stock and the warrants
offered in this offering with the investors. The factors considered in
determining the price included the recent market price of our common stock, the
general condition of the securities market at the time of this offering, the
history of, and the prospects for the industry in which we compete, our past and
present operations and our prospects for future revenues.
We
have also entered into a Securities Purchase Agreement, dated as of December 20,
2010 with the investors purchasing the securities being issued pursuant to this
offering. The closing of this offering will take place on or before
December 23, 2010, and the following will occur:
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we
will receive funds in the amount of the aggregate purchase
price;
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the
placement agent will receive the placement agent fees in accordance with
the terms of the Placement Agency Agreement;
and
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we
will deliver the shares of common stock and the warrants to the
investors.
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In
connection with this offering, the Placement Agent may distribute this
prospectus supplement and the accompanying prospectus
electronically.
We will
pay the Placement Agent an aggregate cash fee of 6% of the aggregate offering
price of the total amount of capital received by the Company from the sale of
the common stock and warrants being issued pursuant to this offering, and a cash
fee payable within forty-eight (48) hours in the event of receipt by the Company
of any cash proceeds from the exercise of the warrants. The following table
shows the aggregate offering price and aggregate fees we will pay in cash to the
placement agent in connection with the sale of the securities pursuant to this
prospectus supplement and the accompanying prospectus:
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Aggregate
offering price
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16,649,996 |
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Placement
agent fees (6%)
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$ |
998,999.76 |
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We also
will reimburse the placement agent for legal, accounting, consulting and other
expenses incurred by it in connection with this offering, up to an aggregate
amount of 0.5%. The Placement Agent has also been granted the right to act
as placement agent until December 13, 2011.
In
accordance with rules promulgated by the Financial Industry Regulatory Authority
(“FINRA”), in no event will the maximum or total commission to be received by
any FINRA member or independent broker/dealer in connection with this offering
and with the sale of any securities being registered herein pursuant to
Securities and Exchange Commission Rule 415 be greater than eight percent (8%)
of the gross proceeds thereof.
We
estimate the total expenses of this offering (not including the fees payable to
the Placement Agent) will be approximately $105,000, which includes legal,
accounting and filing fees and various other fees and expenses associated with
registering the securities and listing the common stock on the NASDAQ Capital
Market. After deducting the fees due to the Placement Agent and our estimated
offering expenses, we expect the net proceeds from this offering to be
approximately $15,462,747, assuming the maximum number of securities are
sold.
Pending
the completion of the offering pursuant to this prospectus supplement and the
accompanying prospectus, or its termination in accordance with the terms of the
Placement Agency Agreement, we have agreed, subject to certain exceptions, to a
180-day “lock-up” period with respect to sales of our securities or the
consummation of any other transaction which would prevent the consummation of
the offering pursuant to this prospectus supplement and the accompanying
prospectus.
We have
agreed to indemnify the Placement Agent and certain other persons against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. We also have agreed to contribute to payments the Placement Agent may
be required to make in respect of such liabilities.
The
Placement Agent will not engage in passive market making transactions,
stabilizing transactions or syndicate covering transactions in connection with
this offering.
The
Placement Agent may be deemed to be an underwriter within the meaning of
Section 2(a)(11) of the Securities Act, and any fees or commissions
received by it and any profit realized on the resale of securities sold by it
while acting as principal might be deemed to be underwriting discounts or
commissions under the Securities Act. As an underwriter, the
Placement Agent is required to comply with the requirements of the Securities
Act and the Exchange Act, including, without limitation, Rule 415(a)(4)
under the Securities Act and Rule 10b-5 and Regulation M under the Exchange
Act. These rules and regulations may limit the timing of purchases
and sales of shares of common stock and warrants by the placement
agent. Under these rules and regulations, the placement
agent:
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may
not engage in any stabilization activity in connection with our
securities; and
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may
not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities, other than as permitted under
the Exchange Act, until it has completed its participation in the
distribution.
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From time to time
in the ordinary course of their respective businesses, the Placement Agent or
its affiliates have in the past or may in the future engage in investment
banking and/or other services with us and our affiliates for which it has or may
in the future receive customary fees and expenses.
LEGAL
MATTERS
The
validity of the securities offered hereby will be passed upon for us by K&L
Gates LLP, New York, NY.
EXPERTS
The
financial statements and management’s assessment of the effectiveness of
internal control over financial reporting (which is included in Management’s
Report on Internal Control over Financial Reporting) incorporated in this
prospectus supplement by reference to our annual report on Form 10-K for the
year ended December 31, 2009, have been so incorporated in reliance on the
report of Albert Wong & Co., an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any document we file at the SEC’s public
reference rooms located at 100 F Street, N.E., Room 1580, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our filings with the SEC are also available to the
public on the SEC’s Internet web site at http://www.sec.gov.
Our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports are available, without charge, at our
principal offices:
Jinhua
City Industrial Zone, Jinhua, Zhejiang Province, People’s Republic of China,
Post Code 321016
References
to our website addressed in this prospectus supplement are provided as a
convenience and do not constitute, and should not be viewed as, an incorporation
by reference of the information contained on, or available through, the
website. Therefore, none of the information on our website is part of this
prospectus supplement or the accompanying prospectus.
This
prospectus supplement and the accompanying prospectus are part of a registration
statement on Form S-3 that we filed with the SEC registering the securities that
may be offered and sold hereunder. The registration statement, including
exhibits thereto, contains additional relevant information about us and these
securities that, as permitted by the rules and regulations of the SEC, we have
not included in this prospectus supplement or the accompanying prospectus. A
copy of this prospectus supplement, the prospectus and a copy of any or all of
the information that has been incorporated by reference herein or therein can be
obtained at no cost to the requester upon an oral or written request made to us
at the address listed above or by telephone at (86-0579) 82239856.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” the information we file with it, which
means that we can disclose important information to you by referring you to
those documents. The information in the documents incorporated by reference is
considered to be part of this prospectus supplement. Information in
documents that we file with the SEC after the date of this prospectus supplement
will automatically update and supersede information in this prospectus
supplement. We incorporate by reference herein the documents previously
referenced in this prospectus supplement, the prospectus included below as filed
with the SEC as part of the Company’s 2009 shelf registration and any future
filings we may make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus supplement and before the
termination of the offering.
We are
not, however, incorporating by reference any documents or portions of documents
that are not deemed “filed” with the SEC.
Information
contained in this prospectus supplement supplements, modifies or supersedes, as
applicable, the information contained in earlier-dated documents incorporated by
reference. Information contained in later-dated documents incorporated by
reference supplements, modifies or supersedes, as applicable, the information
contained in this prospectus supplement or in earlier-dated documents
incorporated by reference.
You
should rely only on the information contained in this prospectus supplement and
the accompanying prospectus, including information incorporated by reference as
described above. We have not authorized anyone else to provide you with
different information. You should not assume that the information in this any
prospectus supplement or the accompanying prospectus is accurate as of any date
other than the date on the front of those documents or that any document
incorporated by reference is accurate as of any date other than its filing date.
You should not consider this prospectus supplement to be an offer or
solicitation relating to the securities in any jurisdiction in which such an
offer or solicitation relating to the securities is not authorized. Furthermore,
you should not consider this prospectus supplement to be an offer or
solicitation relating to the securities if the person making the offer or
solicitation is not qualified to do so, or if it is unlawful for you to receive
such an offer or solicitation.
PROSPECTUS
SUBJECT
TO COMPLETION, DATED November 19, 2009
$30,000,000
KANDI
TECHNOLOGIES, CORP.
Common
Stock
Preferred
Stock
Warrants
Subscription
Rights
Debt
Securities
We may
offer and sell from time to time our common stock, preferred stock, warrants,
subscription rights and debt securities. We may sell any combination of these
securities in one or more offerings with an aggregate initial offering price of
$30,000,000 or the equivalent amount in other currencies or currency
units.
We will
provide the specific terms of the securities to be offered in one or more
supplements to this prospectus. You should read this prospectus and the
applicable prospectus supplement carefully before you invest in our securities.
This prospectus may not be used to offer and sell our securities unless
accompanied by a prospectus supplement describing the method and terms of the
offering of those offered securities.
We may
sell the securities directly or to or through underwriters or dealers, and also
to other purchasers or through agents. The names of any underwriters or agents
that are included in a sale of securities to you, and any applicable commissions
or discounts, will be stated in an accompanying prospectus supplement. In
addition, the underwriters, if any, may over-allot a portion of the
securities.
The
aggregate market value of our outstanding common stock held by non-affiliates is
$45,457,310, based on 19,961,000 shares of outstanding common stock, of which
7,961,000 shares are held by non-affiliates, at a per share price of $5.71 based
on the average of the bid and asked prices of our common stock on December 4,
2009. As of the date of this prospectus, we have not offered any
securities during the past twelve months pursuant to General Instruction I.B.6
of Form S-3.
Investing
in our securities involves risks. See ‘‘Risk Factors’’ beginning on page 2.
The prospectus supplement applicable to each type or series of securities we
offer may contain a discussion of additional risks applicable to an investment
in us and the particular type of securities we are offering under that
prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of the prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is December 15, 2009
TABLE
OF CONTENTS
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Page
No.
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ABOUT
THIS PROSPECTUS
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INFORMATION
WE INCORPORATE BY REFERENCE
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THE
COMPANY
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RISK
FACTORS
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FORWARD-LOOKING
STATEMENTS
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USE
OF PROCEEDS
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RATIO
OF EARNINGS TO FIXED CHARGES
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DESCRIPTION
OF COMMON STOCK
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4 |
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DESCRIPTION
OF PREFERRED STOCK
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DESCRIPTION
OF WARRANTS
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DESCRIPTION
OF SUBSCRIPTION RIGHTS
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DESCRIPTION
OF DEBT SECURITIES
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PLAN
OF DISTRIBUTION
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DESCRIPTION
OF SHARE CAPITAL
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12 |
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CERTAIN
ERISA CONSIDERATIONS
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LEGAL
MATTERS
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EXPERTS
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About
this Prospectus
This
prospectus is part of a registration statement that we filed with the SEC
utilizing a “shelf” registration process. Under this shelf process, we may sell
any combination of the securities described in this prospectus. This prospectus
provides you with a general description of the securities we may offer. When we
sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading “Where You Can Find More
Information” and “Information We Incorporate By Reference.”
You
should rely only on the information contained or incorporated by reference in
this prospectus and in any prospectus supplement or in any free writing
prospectus that we may provide you. We have not authorized anyone to provide you
with different information. You should not assume that the information contained
in this prospectus, any prospectus supplement, any document incorporated by
reference or any free writing prospectus is accurate as of any date, other than
the date mentioned on the cover page of these documents. We are not making
offers to sell the securities in any jurisdiction in which an offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make an offer or solicitation.
References
in this prospectus to the terms “we,” “us” or “the Company” or other similar
terms mean Kandi Technologies, Corp., unless we state otherwise or the context
indicates otherwise.
INFORMATION
WE INCORPORATE BY REFERENCE
The SEC
allows us to incorporate by reference the information we file with them, which
means:
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incorporated documents are
considered part of the
prospectus;
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we can disclose important
information to you by referring you to those documents;
and
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information that we file with the
SEC after the date of this prospectus will automatically update and
supersede the information contained in this prospectus and incorporated
filings.
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We
incorporate by reference the documents listed below that we filed with the SEC
under the Exchange Act:
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our Annual Report on Form 10-K
for the year ended December 31,
2008;
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our Quarterly Reports on Form
10-Q for the quarters ended March 31, 2009, June 30, 2009 and September
30, 2009;
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our Current Report on Form 8-K
filed on July 2, 2009; and
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the description of our common
stock contained in the registration statement on Form S-8 (Registration
No. 333-156582) filed with the SEC on January 6, 2009, and all amendments
and reports filed for the purpose of updating that
description.
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We also
incorporate by reference each of the documents that we file with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (1) after the date of the
initial filing of this registration statement, of which this prospectus forms a
part, prior to the effectiveness of this registration statement and (2) after
the date of this prospectus until the offering of the securities terminates. We
will not, however, incorporate by reference in this prospectus any documents or
portions thereof that are not deemed “filed” with the SEC, including any
information furnished pursuant to Item 2.02 or Item 7.01 of our current reports
on Form 8-K after the date of this prospectus unless, and except to the extent,
specified in such current reports.
We will
provide you with a copy of any of these filings (other than an exhibit to these
filings, unless the exhibit is specifically incorporated by reference into the
filing requested) at no cost, if you submit a request to us by writing or
telephoning us at the following address and telephone number:
Kandi
Technologies, Corp.
Jinhua
City Industrial Zone
Jinhua,
Zhejiang Province
People’s
Republic of China
Post Code
321016
Tel:
(86-579) 83906856
Any
statement contained or incorporated by reference in this prospectus shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein, or in any subsequently filed document
which also is incorporated herein by reference, modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
Any statement made in this prospectus concerning the contents of any contract,
agreement or other document is only a summary of the actual contract, agreement
or other document. If we have filed or incorporated by reference any contract,
agreement or other document as an exhibit to the registration statement, you
should read the exhibit for a more complete understanding of the document or
matter involved. Each statement regarding a contract, agreement or other
document is qualified by reference to the actual document.
The
Company
Kandi
Technologies, Corp. (“Kandi” or the “Company”) founded in 2003 and headquartered
in Zhejiang Province, The Peoples Republic of China, (the PRC), achieved a
listing on NASDAQ in March, 2008 with the symbol: KNDI. Kandi is one
of China’s leading producers of All Terrain Recreational Vehicles, including
Go-karts, where it has been China’s number one exporter. Kandi has
increased its focus on fuel efficient vehicles, including the all-electric
mini-car, the Kandi COCO. The Company has also begun to shift its
sales away from the export market to the growing domestic Chinese
market. Kandi believes that its mini-cars will become the Company’s
largest revenue and profit generators. The Company’s products can be viewed at
http://www.chinakandi.com
..
RISK
FACTORS
Investing
in our securities involves risk. Prior to making a decision about investing in
our securities, you should carefully consider the specific factors discussed
under the heading “Risk Factors” in our most recent Annual Report on Form 10-K
and in our most recent Quarterly Reports on Form 10-Q, which are incorporated
herein by reference and may be amended, supplemented or superseded from time to
time by other reports we file with the SEC in the future. The risks and
uncertainties we have described are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may also affect our operations. If any of these risks actually occurs, our
business, results of operations and financial condition could suffer. In that
case, the trading price of our securities could decline, and you could lose all
or a part of your investment.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains forward-looking statements within the meaning of the federal
securities laws that relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology, such as “may,” “will,” “should,” “could,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential”
or “continue” or the negative of such terms or other comparable terminology,
although not all forward-looking statements contain such terms. In addition,
these forward-looking statements include, but are not limited to, statements
regarding:
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implementing our business
strategy;
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development, commercialization
and marketing of our
products;
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our intellectual
property;
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our estimates of future revenue
and profitability;
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our estimates or expectations of
continued losses;
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our expectations regarding future
expenses, including research and development, sales and marketing,
manufacturing and general and administrative
expenses;
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difficulty or inability to raise
additional financing, if needed, on terms acceptable to
us;
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our estimates regarding our
capital requirements and our needs for additional
financing;
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attracting and retaining
customers and employees;
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sources of revenue and
anticipated revenue; and
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competition in our
market.
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These
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. We
are not required to and do not intend to update any of the forward-looking
statements after the date of this prospectus or to conform these statements to
actual results. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur. Actual
results, levels of activity, performance, achievements and events may vary
significantly from those implied by the forward-looking statements. A
description of risks that could cause our results to vary appears under “Risk
Factors” and elsewhere in this prospectus.
In this
prospectus, we refer to information regarding our potential markets and other
industry data. We believe that we have obtained this information from reliable
sources that customarily are relied upon by companies in our industry, but we
have not independently verified any of this information.
USE OF
PROCEEDS
Unless we
inform you otherwise in the applicable prospectus supplement, we expect to use
the net proceeds from the sale of securities for general corporate purposes.
These purposes may include, but are not limited to:
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reduction or refinancing of
outstanding indebtedness or other corporate
obligations;
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additions to working
capital;
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capital expenditures;
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Pending
any specific application, we may initially invest funds in short-term marketable
securities or apply them to the reduction of short-term
indebtedness.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our ratio of earnings to fixed charges for each of
the years ended December 31, 2008, 2007 and the nine months ended September 30,
2009. The table also includes the ratio of earnings to fixed charges
for our predecessor, Stone Mountain Resources, Inc., for the years ended 2006,
2005 and 2004.
For
purposes of calculating the ratios of earnings to fixed
charges:
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Earnings is the amount of income
before income taxes, discontinued operations, cumulative effect of change
in accounting principle charges, and fixed
charges.
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Fixed charges is the sum of (i)
interest expense and (ii) a portion of rental expense which we believe is
representative of the interest component of rental
expense.
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Year ended December 31,
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Nine Months
Ended September
30,
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2004
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2005
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2006
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2007
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2008
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2009
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Ratio
of earnings to fixed charges
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— |
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— |
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— |
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5.50 |
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3.15 |
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1.30 |
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Ratio
of earnings to combined fixed charges and preferred stock
dividends
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5.50 |
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3.15 |
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1.30 |
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For
the periods indicated above, we had no outstanding shares of preferred stock
with required dividend payments. Therefore, our ratios of earnings to combined
fixed charges and preferred stock dividends for the periods indicated are
identical to the ratios presented in the table above.
DESCRIPTION
OF COMMON STOCK
The
following description is a general summary of the terms of the common stock that
we may issue. The description below and in any prospectus supplement does not
include all of the terms of the common stock and should be read together with
our Certificate of Incorporation and bylaws, copies of which have been filed
previously with the SEC. For more information on how you can obtain
copies of our Certificate of Incorporation and bylaws, see “Where You Can Find
More Information.”
General
Under
our Certificate of Incorporation, we are authorized to issue up to 100,000,000
shares of common stock, par value $.001 per share.
The
shares of common stock offered by this prospectus and any applicable prospectus
supplement will be, when issued and paid for as described in the applicable
prospectus supplement, validly issued, fully paid and nonassessable. Holders of
common stock have no preemptive rights to subscribe for any of our securities,
nor do they have any preference, conversion, exchange, sinking fund, redemption
or appraisal rights.
Our
common stock is listed on NASDAQ under the symbol “KNDI.”
Voting
Rights
Each
stockholder of record of our common stock is entitled to one vote for each share
held on every matter properly submitted to such stockholders for a vote. Holders
of our common stock do not have cumulative voting rights.
Dividends
Subject
to the rights of holders of any preferred stock, if any, each record holder of
common stock on the applicable record date is entitled to receive dividends on
common stock to the extent authorized by our board of directors out of assets
legally available for the payment of dividends. In addition, subject to the
rights of holders of any preferred stock, holders of common stock are entitled
to share ratably in our assets legally available for distribution to our
shareholders in the event of our liquidation, dissolution or winding up after
payment of or adequate provision for all our known debts and
liabilities.
Transfer
Agent
Corporate
Stock Transfer is the registrar and transfer agent for our common
stock.
Anti-takeover
Provisions
Delaware
Anti-Takeover Law
Section 203
of the Delaware General Corporation Law, or DGCL, provides that, subject to
exceptions specified therein, an “interested stockholder” of a Delaware
corporation shall not engage in any “business combination,” including general
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the time
that such stockholder becomes an interested stockholder unless:
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prior to such time, the board of
directors of the corporation approved either the business combination or
the transaction which resulted in the stockholder becoming an interested
stockholder;
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upon consummation of the
transaction which resulted in the stockholder becoming an “interested
stockholder,” the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced
(excluding specified
shares); or
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on or subsequent to such time,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock not owned by the interested
stockholder.
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Under
Section 203, the restrictions described above also do not apply to
specified business combinations proposed by an interested stockholder following
the announcement or notification of specified transactions involving the
corporation and a person who had not been an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of a majority of the corporation’s directors, if such transaction is approved or
not opposed by a majority of the directors who were directors prior to any
person becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.
Except as
otherwise specified in Section 203, an “interested stockholder” is defined
to include:
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any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within
three years immediately prior to the date of
determination; and
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the affiliates and associates of
any such person.
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Under
some circumstances, Section 203 makes it more difficult for a person who is
an interested stockholder to effect various business combinations with us for a
three-year period. Section 203 may also have the effect of preventing
changes in our management and could make it more difficult to accomplish
transactions that our stockholders may deem to be in their best interests. We
have not elected to be exempt from the restrictions imposed under
Section 203.
Certificate
of Incorporation and Bylaw Provisions
Our
bylaws provide that the authorized number of our directors is fixed by our board
of directors, provided that the number of directors shall be at least two. Each
director will serve a one-year term.
Our
bylaws provide that special meetings of our stockholders may be called by our
President whenever directed in writing by a majority of our Board of Directors
or by the request of the holders of one-third of the number of outstanding
voting shares.
Our
certificate of incorporation and bylaws provide that vacancies in our board of
directors may be filled by the affirmative vote of a majority of the remaining
directors then in office, even if less than a quorum or by the sole remaining
director. In addition, our bylaws provide that any director or the entire Board
of Directors may be removed, with or without cause, by majority vote of the
stockholders.
Our
bylaws provide that our bylaws may be amended at any annual meeting of
stockholders or at any special meeting by holders of a majority of voting shares
or by a majority of the Board of Directors at any Board meeting.
DESCRIPTION
OF PREFERRED STOCK
We
believe that the availability of the preferred stock under our certificate of
incorporation will provide us with flexibility in structuring possible future
financings and acquisitions and in meeting other corporate needs which might
arise. Having these authorized shares available for issuance will allow us to
issue shares of preferred stock without the expense and delay of a special
stockholders’ meeting. The authorized shares of preferred stock, as well as
shares of common stock, will be available for issuance without further action by
our stockholders, unless action is required by applicable law or the rules of
any stock exchange on which our securities may be listed. The board of directors
has the power, subject to applicable law, to issue series of preferred stock
that could, depending on the terms of the series, impede the completion of a
merger, tender offer or other takeover attempt. For instance, subject to
applicable law, series of preferred stock might impede a business combination by
including class voting rights which would enable the holder or holders of such
series to block a proposed transaction. Our board of directors will make any
determination to issue shares based on its judgment as to our and our
stockholders’ best interests. Our board of directors, in so acting, could issue
preferred stock having terms which could discourage an acquisition attempt or
other transaction that some, or a majority, of the stockholders might believe to
be in their best interests or in which stockholders might receive a premium for
their stock over the then prevailing market price of the stock.
DESCRIPTION
OF WARRANTS
We may
issue warrants for the purchase of common stock, preferred stock, or any
combination thereof. We may issue warrants independently or together with any
other securities offered by any prospectus supplement. Warrants may be attached
to or separate from the other offered securities. Further terms of the warrants
and the applicable warrant agreements will be set forth in the applicable
prospectus supplement.
The
applicable prospectus supplement will describe the terms of the warrants in
respect of which this prospectus is being delivered, including, where
applicable, the following:
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the title of the
warrants;
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the aggregate number of the
warrants;
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the price or prices at which the
warrants will be issued;
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the designation, number or
principal amount and terms of the common stock and/or preferred stock
purchasable upon exercise of the
warrants;
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the designation and terms of the
offered securities, if any, with which the warrants are issued and the
number of the warrants issued with each offered
security;
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the date, if any, on and after
which the warrants and the related underlying securities will be
separately transferable;
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the price at which each
underlying security purchasable upon exercise of the warrants may be
purchased;
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the date on which the right to
exercise the warrants shall commence and the date on which that right
shall expire;
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the minimum or maximum amount of
the warrants which may be exercised at any one
time;
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information with respect to
book-entry procedures, if
any;
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a discussion of certain federal
income tax
considerations; and
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any other terms of the warrants,
including terms, procedures and limitations relating to the exchange and
exercise of the warrants.
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DESCRIPTION
OF SUBSCRIPTION RIGHTS
We
may issue to our shareholders subscription rights to purchase our common stock,
preferred stock, or debt securities. The following description sets forth
certain general terms and provisions of the subscription rights that we may
offer pursuant to this prospectus. The particular terms of the subscription
rights and the extent, if any, to which the general terms and provisions may
apply to the subscription rights so offered will be described in the applicable
prospectus supplement.
Subscription
rights may be issued independently or together with any other security offered
by this prospectus and may or may not be transferable by the shareholder
receiving the rights in the rights offering. In connection with any rights
offering, we may enter into a standby underwriting agreement with one or more
underwriters pursuant to which the underwriter will purchase any securities that
remain unsubscribed for upon completion of the rights offering, or offer these
securities to other parties who are not our shareholders. A copy of the form of
subscription rights certificate will filed with the SEC each time we issue
subscription rights, and you should read that document for provisions that may
be important to you. For more information on how you can obtain a copy of any
subscription rights certificate, see “Where You Can Find More
Information.”
The
applicable prospectus supplement relating to any subscription rights will
describe the terms of the offered subscription rights, including, where
applicable, the following:
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the exercise price for the
subscription rights;
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the number of subscription rights
issued to each shareholder;
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the extent to which the
subscription rights are
transferable;
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any other terms of the
subscription rights, including terms, procedures and limitations relating
to the exchange and exercise of the subscription
rights;
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the date on which the right to
exercise the subscription rights will commence and the date on which the
right will expire;
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the extent to which the
subscription rights include an over-subscription privilege with respect to
unsubscribed securities; and
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the material terms of any standby
underwriting arrangement entered into by us in connection with the
subscription rights
offering.
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DESCRIPTION
OF DEBT SECURITIES
We may
offer secured or unsecured debt securities, which may be senior, subordinated or
junior subordinated, and which may be convertible or exchangeable. We may issue
debt securities in one or more series. As of the date of this prospectus, we
have no debt securities issued and outstanding.
The
following description briefly sets forth certain general terms and provisions of
the debt securities. The particular terms of the debt securities
offered by any prospectus supplement and the extent, if any, to which these
general provisions may apply to the debt securities, will be described in the
applicable prospectus supplement. If we offer senior debt securities, we will
issue them under a senior indenture. If we issue subordinated debt securities,
we will issue them under a subordinated indenture. If we offer junior
subordinated securities, we will issue them under a junior subordinated
indenture. A form of each indenture will be filed as an exhibit to the
registration statement of which this prospectus forms a part. The terms of the
debt securities will include those set forth in the applicable indenture, any
related securities documents and those made a part of the applicable indenture
by the Trust Indenture Act of 1939. You should read the summary below, the
applicable prospectus supplement and the provisions of the applicable indenture
and any related security documents, if any, in their entirety before investing
in our debt securities.
The
prospectus supplement relating to any series of debt securities that we may
offer will contain the specific terms of the debt securities. These terms may
include the following:
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the title and aggregate principal
amount of the debt
securities;
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whether the debt securities will
be senior, subordinated or junior
subordinated;
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whether the obligations evidenced
by such debt securities will be secured or
unsecured;
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the specific indenture under
which the debt securities will be
issued;
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applicable subordination
provisions, if any;
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whether the debt securities are
convertible or exchangeable into other
securities;
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the percentage or percentages of
principal amount at which such debt securities will be
issued;
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the interest rate(s) or the
method for determining the interest
rate(s);
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the dates on which interest will
accrue or the method for determining dates on which interest will accrue
and dates on which interest will be
payable;
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redemption or early repayment
provisions;
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authorized
denominations;
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amount of discount or premium, if
any, with which such debt securities will be
issued;
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whether such debt securities will
be issued in whole or in part in the form of one or more global
securities;
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the identity of the depositary
for global securities;
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whether a temporary security is
to be issued with respect to such series and whether any interest payable
prior to the issuance of definitive securities of the series will be
credited to the account of the persons entitled
thereto;
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the terms upon which beneficial
interests in a temporary global security may be exchanged in whole or in
part for beneficial interests in a definitive global security or for
individual definitive
securities;
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any covenants applicable to the
particular debt securities being
issued;
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any defaults and events of
default applicable to the particular debt securities being
issued;
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the guarantors of each series, if
any, and the extent of the guarantees (including provisions relating to
seniority, subordination, security and release of the guarantees), if
any;
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any applicable subordination
provisions for any subordinated debt
securities;
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any restriction or condition on
the transferability of the debt
securities;
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the currency, currencies or
currency units in which the purchase price for, the principal of and any
premium and any interest on, such debt securities will be
payable;
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the time period within which, the
manner in which and the terms and conditions upon which the purchaser of
the debt securities can select the payment
currency;
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the securities exchange(s) on
which the securities will be listed, if
any;
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whether any underwriter(s) will
act as market maker(s) for the
securities;
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the extent to which a secondary
market for the securities is expected to
develop;
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our obligation or right to
redeem, purchase or repay debt securities under a sinking fund,
amortization or analogous
provision;
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provisions relating to covenant
defeasance and legal
defeasance;
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provisions relating to
satisfaction and discharge of the
indenture;
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provisions relating to the
modification of the indenture both with and without the consent of holders
of debt securities issued under the indenture;
and
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additional terms not inconsistent
with the provisions of the
indenture.
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General
We may
sell the debt securities, including original issue discount securities, at par
or at a substantial discount below their stated principal amount. Unless we
inform you otherwise in a prospectus supplement, we may issue additional debt
securities of a particular series without the consent of the holders of the debt
securities of such series outstanding at the time of issuance. Any such
additional debt securities, together with all other outstanding debt securities
of that series, will constitute a single series of securities under the
applicable indenture. In addition, we will describe in the applicable prospectus
supplement, material U.S. federal income tax considerations and any other
special considerations for any debt securities we sell which are denominated in
a currency or currency unit other than U.S. dollars. Unless we inform you
otherwise in the applicable prospectus supplement, the debt securities will not
be listed on any securities exchange.
We expect
most debt securities to be issued in fully registered form without coupons and
in denominations of $1,000 and any integral multiples thereof. Subject to the
limitations provided in the indenture and in the prospectus supplement, debt
securities that are issued in registered form may be transferred or exchanged at
the corporate office of the trustee or the principal corporate trust office of
the trustee, without the payment of any service charge, other than any tax or
other governmental charge payable in connection therewith.
Governing Law
The
indentures will be governed by, and construed in accordance with, the laws of
the State of New York.
Global
Securities
Unless we
inform you otherwise in the applicable prospectus supplement, the debt
securities of a series may be issued in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf of, a
depositary identified in the applicable prospectus supplement. Global securities
will be issued in registered form and in either temporary or definitive form.
Unless and until it is exchanged in whole or in part for the individual debt
securities, a global security may not be transferred except as a whole by the
depositary for such global security to a nominee of such depositary or by a
nominee of such depositary to such depositary or another nominee of such
depositary or by such depositary or any such nominee to a successor of such
depositary or a nominee of such successor. The specific terms of the depositary
arrangement with respect to any debt securities of a series and the rights of
and limitations upon owners of beneficial interests in a global security will be
described in the applicable prospectus supplement.
PLAN
OF DISTRIBUTION
We may
sell the offered securities in and outside the United States:
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through underwriters or
dealers;
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directly to
purchasers;
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in “at the market” offerings,
within the meaning of Rule 415(a)(4) of the Securities Act, to or
through a market maker or into an existing trading market on an exchange
or otherwise;
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through a combination of any of
these methods.
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The
prospectus supplement will include the following information:
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the terms of the
offering;
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the names of any underwriters or
agents;
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the name or names of any managing
underwriter or underwriters;
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the purchase price or initial
public offering price of the
securities;
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the net proceeds from the sale of
the securities;
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any delayed delivery
arrangements;
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any underwriting discounts,
commissions and other items constituting underwriters’
compensation;
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any discounts or concessions
allowed or reallowed or paid to dealers;
and
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any commissions paid to
agents.
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Sale
through Underwriters or Dealers
If
underwriters are used in the sale, the underwriters will acquire the securities
for their own account. The underwriters may resell the securities from time to
time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may offer securities to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. Unless we inform you otherwise in the
prospectus supplement, the obligations of the underwriters to purchase the
securities will be subject to certain conditions, and the underwriters will be
obligated to purchase all the offered securities if they purchase any of them.
The underwriters may change from time to time any initial public offering price
and any discounts or concessions allowed or reallowed or paid to
dealers.
If we
offer securities in a subscription rights offering to our existing security
holders, we may enter into a standby underwriting agreement with dealers, acting
as standby underwriters. We may pay the standby underwriters a commitment fee
for the securities they commit to purchase on a standby basis. If we do not
enter into a standby underwriting agreement, we may retain a dealer-manager to
manage a subscription rights offering for us.
During
and after an offering through underwriters, the underwriters may purchase and
sell the securities in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. The underwriters may
also impose a penalty bid, which means that selling concessions allowed to
syndicate members or other broker-dealers for the offered securities sold for
their account may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, the underwriters may discontinue these
activities at any time.
Some or
all of the securities that we offer though this prospectus may be new issues of
securities with no established trading market. Any underwriters to whom we sell
our securities for public offering and sale may make a market in those
securities, but they will not be obligated to do so and they may discontinue any
market making at any time without notice. Accordingly, we cannot assure you of
the liquidity of, or continued trading markets for, any securities that we
offer.
If
dealers are used in the sale of securities, we will sell the securities to them
as principals. They may then resell those securities to the public at varying
prices determined by the dealers at the time of resale. We will include in the
prospectus supplement the names of the dealers and the terms of the
transaction.
Direct
Sales and Sales through Agents
We may
sell the securities directly. In this case, no underwriters or agents would be
involved. We may also sell the securities through agents designated from time to
time. In the prospectus supplement, we will name any agent involved in the offer
or sale of the offered securities, and we will describe any commissions payable
to the agent. Unless we inform you otherwise in the prospectus supplement, any
agent will agree to use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may
sell the securities directly to institutional investors or others who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any sale of those securities. We will describe the terms of any sales of
these securities in the prospectus supplement.
Remarketing
Arrangements
Offered
securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more remarketing firms, acting as principals for their own accounts or
as agents for us. Any remarketing firm will be identified and the terms of its
agreements, if any, with us and its compensation will be described in the
applicable prospectus supplement.
Delayed
Delivery Contracts
If we so
indicate in the prospectus supplement, we may authorize agents, underwriters or
dealers to solicit offers from certain types of institutions to purchase
securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus supplement will describe
the commission payable for solicitation of those contracts.
General
Information
We may
have agreements with the agents, dealers, underwriters and remarketing firms to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments that the agents,
dealers, underwriters or remarketing firms may be required to make. Agents,
dealers, underwriters and remarketing firms may be customers of, engage in
transactions with or perform services for us in the ordinary course of their
businesses.
DESCRIPTION
OF SHARE CAPITAL
Our
authorized share capital consists of 100,000,000 common shares, par value $0.001
per share, and 10,000,000 preferred shares, par value $0.001 per share. As of
November 11, 2009, we had outstanding (i) 19,961,000 common shares,
(ii) warrants to purchase an additional 200,000 common shares,
(iii) options to purchase an additional 2,600,000 common shares, and
(iv) no preferred shares.
CERTAIN
ERISA CONSIDERATIONS
We and
our affiliates may each be considered a party in interest within the meaning of
the Employee Retirement Income Security Act of 1974 (ERISA), or a disqualified
person under corresponding provisions of the Internal Revenue Code of 1986 (the
Code), relating to an employee benefit plan. Prohibited transactions within the
meaning of ERISA and the Code may result if any securities offered by this
prospectus are acquired by or with the assets of a pension or other employee
benefit plan relating to which we or any of our affiliates is a service
provider, unless those securities are acquired under an exemption for
transactions effected on behalf of that plan by a ‘‘qualified professional asset
manager’’ or an ‘‘in-house asset manager’’ or under any other available
exemption. Additional special considerations may arise in connection with the
acquisition of capital securities by or with the assets of a pension or other
employee benefit plan. The assets of a pension or other employee benefit plan
may include assets held in the general account of an insurance company that are
deemed to be ‘‘plan assets’’ under ERISA. Any employee benefit plan or other
entity subject to such provisions of ERISA or the Code proposing to acquire the
offered securities should consult with its legal counsel.
LEGAL
MATTERS
K&L
Gates LLP will pass upon the validity of the securities being offered
hereby.
EXPERTS
The
consolidated financial statements of Kandi Technologies, Corp. as of December
31, 2008 and 2007, and for the years then ended, have been incorporated by
reference herein in reliance upon the report of Weinberg & Company, P.A., an
independent registered public accounting firm incorporated by reference herein,
and upon the authority of said firm as experts in accounting and
auditing.