Good morning and welcome to Kandi Technologies First Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to the Kewa Luo, IR, Director. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining us on today's conference call to discuss Kandi's results for the first quarter 2023. Earlier today, we issued a press release covering the results. You can find a press release on the conference website as well as from newswire services. On the call with me today are Mr. Xiao Ming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Dr. Dong will deliver prepared remarks in Chinese, which I will then translate. After that, we will have a Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that unless otherwise stated, all figures mentioned during the call are in U.S. dollars. With that, let me now turn the call over to our CEO, Xueqin Dong. Go ahead, Dr. Dong.

Hello everyone. I'm the CEO of Kandi Technologies. My name is Xueqin Dong. Welcome to today's conference call. Our first quarter revenue of 22.9 million was down slightly from one year ago due to the strategic shift in business focus. Over 90% of the revenue was attributed to steadily increasing sales of our off road vehicles and associate parts which nearly doubled year-over-year. The higher margins of off road vehicles boosted overall gross margin thanks to the strong growth process, we achieved positive net income for the quarter, a significant improvement from the loss experienced last year. Incorporating fully electric off road vehicles into our product line not only aligns with our values of environmental sustainability and social responsibility, but also positions us as a leader in the industry. Therefore we are confident that our focus on this market will benefit us in the future. Our strong balance sheet and financial position put us in a unique position to capitalize on opportunities in this market and we are excited about the potential for growth. Looking ahead, we are committed to delivering innovative and sustainable solutions to meet the evolving needs of our customers and the market. Now we will move on to the Q&A session. Chairman, Hu and I will answer your questions. And Ms. Kewa and Mr. Alan will provide translation for English questions. Please go ahead and ask your questions. If you have any questions and asking questions, feel free to ask the operator.

Thank you. [Operator Instructions]. Our first question is from the line of Mark McLaughlin, Private Investor. Please go ahead.

Hi, good morning. I'm Mark McLaughlin. I run a family office in Jacksonville, Florida. A little bit of background. First, thank you Mr. Hu for finally offering at least a partial unit guidance for 2023, unit guidance covering golf carts alone of 20,000 to 25,000 units. While not reported in the preferred press release or announcement, you are at least on record saying that the year end - on the year end 2022 conference call to quote Mr. Hu, “so for the fiscal year 2023, we expect the sales during this year roughly to be 20,000 to 25,000 pieces of golf carts to be sold in the U.S. market because we have more in depth discussions and cooperation with Lowe's directly”, great statement. However, it does beg the question, why haven't we seen this in news or press release, so again to pack -- to unpack your quote, 20,000 to 25,000 units would mean a quadrupling of 2022 golf cart sales which generated revenues of between -- which would generate revenues between $125 million and $150 million? And reviewing Kandi data on import key software for Q1, it appears you've already shipped 6,500 units in Q1 and this is at the high end of your forecast according to your earlier disclosure. So question, do you have a further guidance update for Q2 and for the balance of the year? I have a few other questions as well, if you would answer that.

So thank you for your question. So our estimated sales for the Q2 roughly around 6000 pieces of the golf carts and for the half year 2023 we expect there will be a sales of roughly 10,000 pieces of the golf carts.

How many pieces were sold in Q1 according to your press release today?

So for the first quarter of this 2023, roughly around 3000 pieces of the golf carts was sold.

Another key point that deserves a press release was that Kandi was able to close on a new contract directly with Lowe's and to bypass the middleman, Coleman, few questions looking at Lowe's website for a search of Kandi products, some 16 items show up under golf carts in the Kandi brand, which seemed to be the two seat utility golf cart with dump bed and wench and the six passenger golf carts, which by the way are showing available at Lowe's with both the AGM lead acid for 12,999 and the lithium batteries for $1000 more. The more conventional four passenger Kandi carts still show up under Coleman on the Lowe’s sites with the AGM lead acid batteries. Question, did management give more detail as to how Kandi was able to secure this deal direct and where does this leave Kandi’s relationship with Coleman and what is the likelihood Lowe's will pick up new Kandi products other than golf carts?

So as for your concerning questions at present under the brand of Coleman, there's only one golf cart available in the market, which is a four-seat lead acid battery models. As for the consideration, primarily the price and the gross profit. However, to Lowe's, they hope to become a leader and occupy more market in the field of the outdoor recreation electric vehicles. So Lowe's offset we at Kandi can provide more diversified products to help them to achieve this goal. And because of the highly diversification of our products, we can customize the product for our customer Coleman according to their need. And yes, there is no conflict for us to supply our products to the Lowe's. So in this year, it's likely that you will see more Kandi products at Lowe's market.

Thank you for your answer. To that end, the Kandi America website added a new $13,999 heavy-duty utility vehicle under the EV link called The Cowboy e10K, the husky lithium powered vehicle. It's perfect for the offer -- a perfect offering for the Lowe's demographic but nothing has been mentioned yet. Do you anticipate Lowe's picking up this Cowboy line as well and why aren't we telling the world how great we are?

So Lowe's is well aware of our new product development. So yes, they know about our new model, the Cowboy e10K. And I believe that Lowe's also considering this product. In the meantime, we have the plans to promote this product to other retail and chain stores to increase our sales channels.

And what about more visibility from the company in terms of putting out press releases introducing all this great news to the investing public, which I'm sure would be exceedingly interested in this great company?

Yes, so based on our development and our operations, we will release the news in a timely manner.

But we haven't released anything about Lowe's and the development of selling to them directly, correct? And will we soon so people can realize this development?

So well, actually, at the moment we are in the early stage of the corporation with Lowe's. It's not like we're not going to disclose the news. However, we would like to consolidate and get our fundamental done and wait until the corporations becomes a more massive volume, then will disclose accordingly. Our strategy is always get things done first, then we release the news accordingly when it's fresh and it becomes more mature.

Yes, I appreciate that answer. In any meal, there's always an appetizer. And to that end, perhaps you could put something out there relatively soon.

Thank you for your suggestion.

Very good. Now when we go back to your numbers, the unit guidance for 2023 as given on the year-end 2022 conference call, the unit guidance for golf carts alone was 20,000 to 25,000 pieces. And is that for golf carts alone via Lowe's, I take it, what about all vehicle units from the K32 to golf carts to the Cowboy, what is the total unit projection?

So yes, first of all, for your questions, the estimate of sales 20,000 to 25,000 pieces of the sales only indicate for the model, the golf carts. It doesn't include any other UTV such as the K32 or the e10K. In the meantime, we try to spend our sale channels to consolidate our resources, hopefully, we can have a better sales this year.

And how soon does Kandi expect to get the K32 pickup truck approved for sale under the farm truck rules as mentioned on the last conference call?

So actually, we have taken all the approvals necessary for the sales of the launch of K32 in the U.S. market. We estimate there will be roughly 200 pieces of the K32 in this year, but then it's ready to be launched in the U.S. market.

That's very good news. I have to commend financially to mend your management skills, looking at a huge jump in gross margins from 19.8% in 2021 to -- $30 million in sales to $22.6 million in 2022, and $71 million in sales. The bigger number this year and a bigger gross margin, that's spectacular when one considers a big inflationary jump in the supply chain, shipping and transportation. Most important question, when you add up these other product offerings in addition to the golf carts and things look like they're really going to ramp up here, at low end, what would you expect this year's approximate revenues, gross profits and margins to be on a low end, all in, all the product offerings? Thank you.

So due to our gradual advancement of our strategic adjustments, right, we believe that the revenue of this year definitely increased significantly. And then the gross margin were roughly around the same level of the Q1 of this year.

Well, I really appreciate your patience and I have a great deal of respect for your skills, your management, and I congratulate you.

Thank you very much.

I have no other questions.

Thank you. Operator, next.

Thank you. Our next question is from the line of Kan Nau [ph], Private Investor. Please go ahead. Mr. Kan your line has been unmuted. Please go ahead with your question. Mr. Kan, now your line has been unmuted. You can go ahead with your question. As there is no response from the participant's line, may I request the management that we move to the next question?

Sure.

Our next question is from the line of Mike Pfeffer from Oppenheimer. Please go ahead.

Good morning. Thanks for taking my question, which has to do with Kandi's new emerging lithium battery business. From the 10-K, it seems that this is another hot sector for Kandi. The company reported battery sales in 2021 of only $4.5 million with a 10.8% margin. This impressively jumped fivefold to $24 million in 2022. However, the gross margin went down to 4.6%. From what I can get out of the 10-K, it appears that almost all of last year's battery sales were sold to third parties, which in the current competitive environment in lithium vehicle batteries in China squeezes the margins. However, this year, as can be seen by Lowe's now offering a lithium battery option for Kandi golf carts in the U.S. one would think Kandi's margins would increase significantly as would likely be reflected in total battery sales. If you could just pass that on, and I'll ask three brief questions, please.

Go ahead.

Am I correct in my assumption that last year's battery sales went to third parties?

So for past year 2022, it's true that primarily of lithium ion sales was sold to the third-party customers. We kind of stick to our strategy for this year. We're going to have more demand from our own in the company sales. So of course, in this case, it will not be reflected on the consolidated sales on the financial statements. So you will show a less or decrease of the sales in the lithium ion cells sector because there's more demand from our own in the company transaction.

Thank you. And so is Kandi batteries only lithium and is it the goal to have all the company's vehicles powered by its own lithium batteries?

Yes. So basically, we're going to develop a direction of adopting lithium ion cells.

And then could you give us a forward look at what the company is expecting from the battery division this quarter and full year? And that's all from me. Thank you.

During the past year due to the surge of the raw material price of those ion and other cells materials in our China market, it caused all the uncertainty in the market, of course, it hurts the demand and then our sales. From the fourth quarter of last year until April of this year, our battery sector was in the state of net loss. At present, the domestic market, the China market of the raw material price of the batteries was an increasing trend. So hopefully, it will have a positive impact to the market and then hopefully, our sales will be improved.

Thank you.

Thank you.

Our next question is from the line of Walter Hill from Carty & Co. Please go ahead.

Thank you. My question comes under two topics. The first has to do with the opening comment Mr. Hu made on a prior conference call, specifically he said, "we will constantly launch new products in electric vehicle business to gain share and create more value for our shareholders." I have questions in two related topics. First, while there was no company PR as previously mentioned on the new hefty off-road vehicle, the Kandi Cowboy e10 selling for $13,900, which have recently appeared on the Kandi website with no publicity available to shareholders, are there any other major surprises like the Cowboy on the near horizon?

Okay. Thank you.

So our new model, the e10K UTV is a pure electric model that was developed to tackle a 500cc market. We have started to have mass production of this model since April this year, then it will be sold to the retail store of the Lowe's and other dealer channels. So whether there will be major surprise like we have for the -- depends on the market direction. We believe that this model will be a very competitive model to the market.

My second topic is regarding to the Haiku [ph] 100,000 capacity EV manufacturing facility designed and built by Kandi a few years ago. At that time, it appeared Kandi was going to produce most of its own fleet of EVs. Questions on the topic are, A) what vehicles and/or parts specifically are being manufactured or assembled in this facility? B) How many units of various vehicles were built in this facility in 2022 and what are your expectations in units, do you expect to be built this year? C) Does Kandi also make its chassis and body parts in this facility or is it just a vehicle assembly? And D) do you attribute this facility's close proximity to only a mile or two from the export shipping port of Haiku as being a major reason Kandi was able to have such a great year in China in 2022 while 90% of the China manufacturers have a bad or terrible year due to supply chain and transportation problems?

As for your first question, so basically, the company's electric vehicles including the initial vehicle components and then the off-highway vehicles like low-speed vehicle, the pure electric utility vehicles, those the top cohorts, the ADB, UTVs as well as the component of our electric vehicle K23 all produced and manufacture in -- facilities. So as far as the second question, during the 2022 our Hainan plant mainly produced the golf carts with more than 10,000 pieces. So more over certain parts of the K23 electric vehicle package and then the K33 product has also been manufacturing during last year. This year, we expect that the production for the golf cart product will be roughly 20,000 to 25,000 pieces, and then there will be also 200 pieces for the K32 UTVs. As for the K23 EV package, we expect there will be a small amount to be manufactured as well. So our Hainan plant, the facility, actually is a comprehensive production site that includes all four major processes of the car manufacturing including the standing, the welding, the painting and then the final assembly of the vehicle's components. And as for your last question that export shipping cost in Haikou is close to our facilities. That's not the major reason that we are able to have a great year during 2022. Indeed, the capacity of the exports in Haikou is relatively small, IT doesn't meet our full year needs. During the past year of 2022, roughly 50% of our products were shipped from the Shenzhen port. So hopefully, that can address your question.

Thank you, yeah. That answers my question. Thank you.

Thank you. Our next question is from the line of Arthur Porcari with Corporate Strategies. Please go ahead.

Good morning all. Sorry, I've got a sore throat over here, so I'll do the best I can here. I want to end with some questions on reported Q1 numbers, which we just saw. But first, I want to make a few points to management. For years, Kandi's investors have suffered in the stock market. I know it sounds like a broken record, but I was repeating again, not because of business failure, quite contrary at the NASDAQ EV first mover a dozen years ago and the global EV sector, Kandi survived against all odds where there's a 90% likelihood any undercapitalized will fail or be bought out. However, Kandi not only survived these 14 years but finds itself today in some parallel universe where this debt-free company stock is trading around $3, about $1 off its all-time low and 85% below its $22.50 all-time high, which was I think, 2014. It's also trading at discount to $3.21 cash, a 45% discount to the 5.25 book value. And all of this at a time when Kandi is now rapidly growing with its e-golf cart business at Lowe's and others as well. While 90% is tech stops, particularly in the EV sector are seeing a significant business. Clearly, this has to change. Pass that part on to Mr. Hu, please, or whoever.

Go ahead.

Okay. Well, as we know, Kandi has never had used an actual full-service, sell-side brokerage or investment banking firm to raise any money. But in turn, that just means Kandi has no accredited analysts to applying to give comfort to funds. So they avoid the stocks, what is the company going to do, if anything, to try to attract Wall Street analysts, not putting out press releases is not the solution? That's question one.

What's your question?

That was the question. What is the company -- what is the company doing if anything to attract Wall Street analysts?

Okay.

First of all, thank you very much for your concern and support for our company. Of course we appreciate your suggestions. In recent years, due to the orderly competition in our Chinese -- the China electric vehicle market, right, we have been forced to make some very difficult strategic adjustment in order to survive. Well, in the end, I think the capital market we need data to support, right, we always adopt the model of the [indiscernible] so our goal is always to enhance our fundamentals, ourselves. So you can tell that from this quarter finally we can turn our net deficit, the net income to net -- from net loss to net income in this current quarter. So hopefully, with our stronger fundamentals, better performance in terms of the managed shares, and then our revenue this kind of data can be recognized by the market and also by the analysts. So then they will come back to us and our company. So yes, basically, our goal is to open the momentum stronger and better.

Okay. Lack of breaking news types of press releases. We've already had two in the past 12 months. Kandi used to do 30 or 40 of these when they were doing stuff in just China. Now we've added -- just in the last few months, Kandi's added three new $10,000 to $15,000 vehicles, no press releases on any of these three, Just since the last conference call. By the way, that's how many we've managed. I asked Hu, why none of these U.S. based vehicles will be in press release. Her response was along the lines of the responsibility to announce these products go through Kandi America, not Kandi to parent company. It has its own -- Kandi American referred to as its own PR company. While this sounds totally ridiculous if true, this policy has got to change. Putting PRs out in the U.S. when more than 75% of your product sales are big ticket items in the U.S. should even further increase product sales. Think of where Tesla stock would be if they ignored sharing new product and updates through news releases with its shareholders. They wouldn't exist. They don't advertise. They don't have dealerships. Anyway, pass that on, please.

Thanks again, for your concern and advise. Again, usually we take the strategy and the motto of fewer words and many deeds in terms of our operations and that's our promotion. But then we definitely will take your advice and consideration in our upcoming plan, and yes, we try to fine-tune. Thank you.

Okay. Let me just kind of wrap it up here with a few questions, it has to do with the numbers that just came out today. I just had a chance to take a quick brief look at it. We mentioned on the last conference call about this import key software that's available to I guess those of us who are members of our subscribe to it, and they're pretty good about carrying all the shipments back and forth, what's going through internationally through containers. According to their software that tracks the global movements and international tanker shipping sector, Kandi exported some 6,600 vehicles to include 5,900 golf carts and 700 LSEs in Q1 which would put it on par to reach the high end of Mr. Hu's 25,000 unit guidance for the year.

I'm sorry, can you slow down with the number you said 6,600. Yes, yes.

6,600 vehicles were showing up as being golf carts. Now maybe that's mislabeled when we put them in containers, but I think you have to be pretty honest about that. And some 700 LSEVs. So in Q1, I would put them on par to reach the high end of Mr. Hu's 25,000 guidance for the year and I have more to add?

Keep going.

Okay. And -- let's see here. It would seem that the revenues would be higher and that we only reported $22 million this quarter in total revenues, what we seem to have done about the same according import fee about the same number of vehicles, 14,000 to 15,000 total. Now I guess, what we really need to know is with the company showing such high margins to start with, we've been told that Kandi's goal is to provide almost all the drivetrain parts and batteries, the numbers should increasing overall for total revenues. With even now Kandi batteries appeared in the U.S. vehicles. So if we take an average retail price of say $10,000 per unit, how much is Kandi gross of this? And what is the time frame between shipments to the U.S. and anticipated sales to retailers? Want me to do that again?

Alan, did you get the part?

Yes, that would be great if you can come again to the question, so [Multiple Speakers].

Apparently it appears that we have shipped almost 15,000 units in the two years, according to import key to the United States. And in the last two quarters, I'm sure -- sorry, I think 14,000 to 15,000 in just the last quarter of last year and the first quarter of this year. But we've only booked so far maybe 10,000-or-so or maybe less, I don't know what 22,000 doesn't break that out. But I'm just kind of curious, if the average price is $10,000 in retail, what should that generate per unit to Kandi?

Okay.

So well, when you talk about competitive data of the import and then our sales, of course, there is some kind of the lag time because we recognize ourselves based on the revenue recognition methodologies for the U.S. GAAP. And of course, there will be some kind of a timing difference between the sales and then the import -- I mean the export to the U.S. market.

Can you be more specific, is it's like 90 -- plus 90 days, 60 days? And also basically, bottom line, if it's $10,000 sticker price, what have we actually selling for $3,000, $4,000, $5,000 that we would ultimately book in revenues?

So as for your question, it really depends on the actual sales. There's no really standard timeframe. It depends on how we fulfill our terms and how we can meet the requirement to recognize the revenue. So it depends on how the transaction get closed in the U.S. So that's depending on how like 30 days or 60 days the export and the cells [ph]. So again, we recognize all the sales based on the U.S. GAAP requirement. And so to make sure the numbers are fairly presented. As for the margin, roughly for each piece of the golf carts model, roughly over 30% of the gross margins for each pieces of the golf carts.

That's an incredible number. I mean, that's great. That's an incredible number. If you do 25,000 golf carts alone this year and if you can somehow get $5,000 per cart, that's $125 million with a 30% margin. Anyway, the last question has to do with could you address the drop in lithium battery cells and expectations for this division in the balance of the year?

So as a question, similar answers questions from another investor. So basically, there are two reasons contributed to a decrease of the sales of lithium ion cells. First of all, is the uncertainty in the Chinese market. During the past year of 2022, the raw material price of the batteries has surged significantly. So -- and that caused uncertainty and further demand of the cells in the domestic market of China. Second of all, we have started to absorb more and more of our lithium ion cells to our own products such as the golf carts and other products because that's considered as an intercompany sales, we have not recognized that to have our consolidated financials because they will be eliminated. So basically, we recognize those sales as per U.S. GAAP. And so certain sales with the intercompany transactions will not be presented separately.

Okay. Well, one -- actually, I said that was the last question. I just -- one other comment over here. If you -- is it unreasonable to expect the $150 million to $200 million in revenues this year, I mean just based on just the golf carts alone, not just based on one but overall?

Are you asking, are we expecting $150 million to $200 million revenue forecasting for this whole year?

Right.

Including everything, right?

So for our forecast, we believe that there now will be roughly $150 million, even more the top line with the $200 million of the USD sales for this year. I think we can achieve that goal.

Fantastic. One last thing. It's been nine years since we've had a Shareholders Day in the United States with Mr. Hu and management, I think we're due for another one. What's your thoughts on that?

So our plan is once the transition proceeds [indiscernible] become stronger, then we will come to the U.S. market to meet with all the investors.

Sounds like you're already almost there. If you can do $150 million to $200 million, this should be a record all time for the company and with great margins.

Yes, we'll do our best.

Just an observation. Thank you very much and hey, we did a great job on getting this new product line in. Please, some press releases, let the public know, it will help your dealers, it will help everybody. They'll sell more vehicles. Shareholders want to go buy one maybe, the more shareholders we can bring in. But thank you very much.

Thank you very much.

Thank you. That was the last question for our question-and-answer session. I would like to turn the conference back over to Kewa Luo, IR Director, for any closing remarks.

Thank you again for attending today's conference call. If you have any additional questions, feel free to contact our IR consultant Blueshirt or via e-mail to contact me directly, ir@kandigroup.com. We look forward to updating you on our next earnings call. This concludes our call for today. Thank you. You may now all disconnect.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.