ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On June 17, 2023 (the “Signing Date”),
SC Autosports, LLC (“SC Autosports”, or the “Transferee”), a company formed under the laws of the
State of Texas, a wholly-owned subsidiary of Kandi Technologies Group, Inc., a Delaware corporation (“Kandi Technologies”,
or the “Company”) entered into an Equity Transfer Agreement (the “Equity Transfer Agreement”) with
Olen Rice (the “Transferor”), who owns 100% equity interests of Northern Group, Inc. (“NGI”), a
Wisconsin incorporated company, pursuant to which the Transferor agreed to transfer, and SC Autosports agreed to accept all the equity
interests (100%) of NGI and its related rights and obligations, which includes but are not limited to general shareholder rights, the
right to receive dividends, and the right to accept or subscribe for bonus shares or newly issued shares, but excluding any claims or
impediments of the Transferor arising from events occurring prior to the date of the closing of the acquisition. The acquisition is for
the purpose of expanding the SC Autosports’ and the Company’s sales pipelines through vertical integration.
NGI was founded in 2000. It has extensive sales experience
and sales channels in the United States rooted in wholesale, retail, supply chain and analytics solutions, including more than 20 team
members, 16 major retailers and 20 suppliers and brands.
Pursuant to the terms of the Equity Transfer Agreement,
SC Autosports will acquire all the equity interests of NGI for a purchase price of $13 million (the “Transfer Value”).
Kandi Technologies, the parent company of SC Autosports, shall issue a total of 3,951,368 restricted shares (which is calculated as the
Transfer Value divided by the average closing price of the Company’s stock for the twenty trading days prior to June 1, 2023, i.e.,
$3.29 per share) of common stock, par value $0.001 (the “KNDI Stock”) of the Company to the Transferor, holding in
escrow pending the satisfaction of the Profit Targets described below. SC Autosports is obligated to deliver to the Transferor the abovementioned
KNDI Stock no later than 60 business days after the Signing Date. Within ten business days after receiving the KNDI Stock, the Transferor
shall assist the Transferee in completing the procedure for the transfer and the change of shareholders in accordance with the law, among
other formalities.
Pursuant to the terms of the Equity Transfer Agreement,
the escrow restrictions on the KNDI Stock shall be removed sequentially based on the following conditions: 1) when NGI achieves pretax
income of $4.6 million or more (“Profit Target I”) during the period from June 1, 2023 to May 31, 2024, 2,431,612 shares
of KNDI Stock Transferor holds shall be fully vested by removing the escrow restriction. Notwithstanding the above, the Transferor, on
December 31, 2023, can apply for vesting certain number of shares, but no more than 1,418,440 shares, with its value equal to the actual
amount of pre-tax income achieved hereinunder (for example: if the pre-tax income is $3.5 million, 1,063,830 shares (3,500,000/3.29=1,063,830)
shall be fully vested and without escrow restriction); 2) when NGI achieves pretax income of $5.25 million or more (“Profit Target
II”) during the period from June 1, 2024 to May 31, 2025, 759,878 shares of KNDI Stock Transferor holds shall be fully vested
by removing its escrow restriction; and 3) when NGI achieves pretax income of $6 million or more (“Profit Target III”,
collectively with Profit Target I, and Profit Target II, “Profit Targets”) during the period from June 1, 2025 to May
31, 2026, 759,878 shares of KNDI Stock Transferor holds shall be fully vested by removing the escrow restriction. If NGI fails to reach
any of the Profit Targets in any period as mentioned above, the number of KNDI Stock to be removed escrow restriction in that period shall
be adjusted based on the percentage of the actual achieved pretax income. If there is any loss incurred in that period, the Transferor
shall assume the loss.
The Transferor shall have the voting rights of the
KNDI Stock during the afore-mentioned escrow period. In the event NGI’s pretax income during the period from June 1, 2023 to May
31, 2024 resulting in Transferor receiving less than 2,431,612 shares of vested stock, both parties shall have the option to terminate
(“Termination Right”) the Equity Transfer Agreement. Transferor shall return the received KNDI Stock to the Company
and SC Autosports shall return the ownership of NGI back to Transferor. Such Termination Right will expire automatically on August 1,
2024.
All the Profit Targets referenced above shall follow
the United States Generally Accepted Accounting Principles and shall be confirmed by a third-party auditor engaged then by the Company
upon its respective annual report audit.
On November 21, 2022, the Transferee has signed a
certain master agency agreement (“Master Agency Agreement”) with AOA Shores, LLC (“AOA”), of which the Transferor
is President. Pursuant to the Master Agency Agreement, AOA will represent SC Autosports to connect and sell the products to chain stores,
which will be covered by separate products agreements. Other than that, the Transferor has no further relationship with the Company or
the Transferee.