Greetings and welcome to Kandi Technologies Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kewa Luo, Investor Relations Director. Thank you, you may begin.

Thank you, operator. Hello, everyone. Thank you all for joining us today to on our conference call to discuss Kandi’s results for the second quarter 2023. Earlier today, we issued a press release covering the results. You can find the press release on the company’s 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 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 conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Dr. Dong. Please go ahead.

[Foreign Language] [Interpreted] Hello, everyone, Xueqin Dong CEO of Kandi Technologies. Welcome to our conference call today. I'm pleased to present the key results of our second quarter. During this period, our sales revenue soared to $36 million, showcasing an impressive growth rate of over 70%, compared to the same period last year. This remarkable achievement is a direct result of unwavering efforts and dedication we have put into product transformation over the past few years. Our exciting journey led us to develop a series of cutting-edge or electric off road or carrying vehicles from using auto technology, which played a pivotal role in driving continued sales growth. In the second quarter, our net profit reached a significant $4.4 million, turning losses into gains, demonstrating that we have achieved significant success in overcoming the challenges of the past few years. The achievement is a result of our commitment to optimizing our product mix and targeting higher profits and fast growing categories, while keeping a close eye on our customers' changing demand. Furthermore, as of June 30, 2023, we had a robust cash balance of over $230 million giving us the confidence to tackle challenges and seize the opportunity. Moving forward, we will continue to strive and innovate to meet customer demand, steadily advancing on the path of sustained success. I want to express my gratitude to all of you for your unwavering support and dedication to our shared vision. Thanks again, now we will move on to the Q&A session. Chairman Hu Xiaoming, and I will answer your questions and Ms. Kewa and then Mr. Alan will provide translation for English questions. Please go ahead and ask your questions.

Operator, please go ahead.

At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Frank Blatterman. Please proceed with your question.

Yes and a good evening to those of you in China, and a good morning to those of you in the United States and Europe. I actually have two very short questions. The last authorization to buy back shares expired at the end of December past. Has the company submitted the paperwork for another buyback? And if not, is it under active consideration? Go ahead, Kewa.

[Foreign Language]

[Foreign Language] [Interpreted] So, thank you for your questions. The company currently has no further plan for the buyback transactions. Our goal ultimately is to strengthen the fundamental of the company and create the largest value for the shareholders. As for the stock price, we believe that once the company's performance improves financially, it will organically bring up the tension and attract the investment from the market.

Thank you. My second question, and this is a little bit different than what I initially was going to submit. With Kandi’s cash on hand, apparently above the company's present market capitalization and a half dozen new products. I have been only two press releases this year, once you announced the CEO transition on January 11th, and once you announced the acquisition of Northern Group on June 26. Was not at all announcing the new products. Go ahead.

What's your question?

I'm sorry. I thought I was on. With Kandi’s cash, my question is a little bit different than what I was initially going.

Sorry I got it to that part. And what’s the second part…

With Kandi’s cash on hand, apparently above the company's market capitalization, and a half dozen new products, there have only been two press releases this year. Is the company planning on having additional press releases since we are now a very good profit making company. And is it time to start touting our newer products?

Okay. [Foreign Language]

[Foreign Language] [Interpreted] So the company has been adjusting our product mix strategy in last few years. Indeed, we encounter certain difficulties from time-to-time and sometimes it may not go well as we expected. So it will end up adopting the strategy of refining, optimizing our products before we disclose too much. Unfortunately, the transfer made specially for our production has achieved successful results and the company has turned losses into gains in the first-half of this year. Ongoing, we will consider to refining our disclosure approach to the public.

Thank you very much and congratulations on excellent results. Thank you, Kewa.

Thank you, Frank.

Our next question comes from Joel Kramer. Please proceed with your question.

Thank you. The very quick extremely quick pace, Kandi is now growing. How long does Mr. Hu feel it will take before Kandi catches up or beats Polaris at least in the EV sector of the off-road vehicle space. And then I have a question after that.

[Foreign Language]

[Foreign Language] [Interpreted] We strive to improve and strengthen our fundamental on -- in a foreseeable future and we strive to build the company into one of the leading manufacturers in the pure electric ATV field within the next two or three years.

What new off-road vehicles of all types and sizes do Kandi expect to release this year? And is there one or two that Mr. Hu favors as particular winner? And secondly, also, what percent of sales in this year's first-half were sold outside the U.S. and what were the top three markets outside the U.S.? Thank you.

[Foreign Language]

[Foreign Language] [Interpreted] Thanks for your question. We have recently launched the model called 10K, it’s a pure electric dual motor forward drive UTV in the U. S. market. We believe this model will be favored by the customers in the U.S. market. In the second-half of this year, we will also launch a pure electric mini golf carts. We hope that this will be another popular model as well. At present our products are mainly sold in the U.S., market then we also have some sales in Europe and Mexico region to our channel distributors. Thank you.

Hello?

[Operator Instructions] Our next question comes from Mark [Indiscernible]. Please proceed with your question.

Yes. Hello, good evening. Good morning to everybody here on the line. I have a question about Kandi’s recently announced acquisition of the 20-year marketing and analytics company Northern Group. Looking back to Northern's website, it is easy to see why Kandi would embrace this company based on its blue chip existing clientele in business that have obviously connections to currently manufacturing expertise. Lowe's and fleer RAM already carry Kandi golf carts, home depot, managed tractor supply, and mixed state, while similar demographic of Lowe’s. And now would -- with this acquisition have a straight line relationships to? Walmart target and Best Buy carry the HUGO One board and the scooter line. Either sharper image and [Indiscernible] Schlemmer carry HUGO board, e-bikes and scooters. However, HUGO 1 connects to Kandi, its power transmission, which has provided over 100 million in batteries of electric motors in recent years. I can see all of the above using various products or having Kandi design custom or private label vehicles from Kandi conglomerate of various divisions that already manufacture parts in-house for 95% of its complex, golf carts and duty. However, Northern also has existing clients such as Walgreens with WT and other nation brand in unrelated industries. My questions are Kewa, would you go ahead with the introduction, or should I come back to…

Sure, sure. [Foreign Language] Go ahead.

So my questions are, could this deal have been done for $30 million cash or was it required to be done for stock by the seller. Does Northern at a Kandi division keep all the above out of the industry clients like Ultra, Walgreens, even in the revenues, even if the revenues are derived from totally unrelated business. Also [Indiscernible] its marketing team continue to solicit this unrelated business?

[Foreign Language]

[Foreign Language] [Interpreted] So first of all, the acquisition transaction of Northern Group will be closed with Kandi’s restricted shares with certain escrow restrictions. For specific agreement terms, please refer to the equity transfer agreement attached to this quarterly report of 10-Q. As for the business and the goal of the company, of course, the main goal of the Northern Group is to promote and operate the company's products, that's our main focus. But definitely they we will keep those profitable operations and businesses. Thank you.

Okay. I understand, and just a couple of more questions. The acquisition terms filed with the SEC seems unique, if not confusing. Please explain the earnout terms of [Indiscernible] 3.9 million shares. And under what circumstances the deal could be unwind? And second, for only less than 5% of Kandi, this deal looks excellent. Where does management see this taking Kandi in the future?

[Foreign Language]

[Foreign Language] [Interpreted] So as for the questions about the agreement firms kindly refer to the equity transfer agreement attached to the 10-Q for this period. And in the future, of course, we would like to utilize the sales resources to expand our sales channel and subsequently boost up the company's sales revenue. Thank you.

Thank you for taking my questions and have a nice day.

Thank you.

Our next question comes from Michael Pfeffer with Oppenheimer. Please proceed with your question.

Hi. I have two related questions requiring some context. The first concerns a Kandi long promised guidance trend, while not yet included in the company's earnings press release, I'm happy to see the almost mandatory requirement to ever get Wall Street Analyst coverage. Guidance or forecast has now started to partially appear in each of the last two Kandi conference calls in response to investor questions. In the year end 2022 conference call, Mr. Hu forecasted 20,000 to 25,000 units for ’23 on the Q1 ’23 conference call management reconfirmed the 25,000 full-year unit sales and added three more forecasts, including 6,000 to 7,000 unit sales forecast in Q2, up from 3,000 in Q1, full-year revenues and gross margin forecast. The revenues forecast came as an affirmative response to a question of whether $150 million to $200 million was realistic for ‘23 full-year, and was guided to the high-end of $200 million by this “so far, 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 year, I think we can achieve that goal”. Maybe you can translate that and I'll get to the question, please.

Okay, thank you. [Foreign Language] Go ahead.

Thanks. If achieved, this would be an impressive 80% year-over-year increase from ‘22. Also, from a management response to gross margin question for the entire year, the response was equal and excellent 35% achieved in Q1 or 16.6% in 2022. If achieved by putting those two together, we could see a gross profit of some $70 million or more than $0.90 a share for ’23. My first questions are do you stand by these full-year numbers higher or lower? And how about expectations for Q3 at the current pace is a doubling to $400 million plus ’24 realistic. And if so, does Kandi have a current capacity to deliver?

[Foreign Language]

[Foreign Language] [Interpreted] So in the first-half of this year, we sold more than 7,000 pieces of the pure electric golf carts in the U.S. market, excluding the 6,000 plus in the whole year of 2022. And of course, it comes with a higher and significant increase if the gross margin. For the details of our financial figures, please refer the quarterly report. In the second-half of this year, we believe that the sales revenue was increased to a certain extent. As for next year 2024, we are confident we can continue to grow based on the momentum of this year. Of course, it depends on the stability of the international market and then the user acceptance of our new products. As for production capacity, we have been adjusting in the last few years, as long as there's a need and demand from the market, we believe that our production capacity is to supply us with suffice to meet the needs. Thank you.

Thank you. Okay, onto my second related part, in hindsight on May 10th, right after the excellent last Q1 conference call, the stock price had been going up for prior week, but closed that day down around 3% to $3.08. The next day, it started moving up and over the following 25 trading days reached a 52-week high of $4.28. Noteworthy, during this period, the overall market and China stocks were generally weak. Also, there was no published news from Kandi to account for the rise. The only logical reason for the move up was the publication and circulation of the conference call transcript led by its four excellent guidance comments. My point is that guidance does make a huge difference. At the time of the conference call, there was no guidance in the actual earnings press release, only some mediocre numbers. The live conference call likely had a small audience of long time investors and due to only 5% fund ownership and no analysts, little if any Wall Street professionals attending. These likely the reason it initially dropped. However, once the third-party transcript started circulating the next day, the move up started. Maybe you can translate that and I have one question and then I'm done. Thank you.

Okay. [Foreign Language] Go ahead, please.

Thank you. In my opinion, if the company would follow typical successful public company trends, which incorporate forecast in the actual earnings release, which carries a much more extensive distribution profile and stickiness than a transcript. This Kandi best kept secret will finally have a chance to be discovered by Wall Street, particularly now in light of Kandi, having a few quarters track record with its new predictable market of products. So my last question is, in the future, will management assure shareholders they will seriously consider making this necessary step to significantly increase investor awareness. Thank you.

[Foreign Language]

[Foreign Language] [Interpreted] First of all, thank you for your great opinion. The company has been adjusting our product structures in recent years and indeed encounter some difficulties and sometimes it may not go at what we expected. So we end up adopting the strategy of few words and many beats, we try to strengthen our fundamentals. Fortunately, the strategic product transformation leads to turnaround in profitability. And that's why we have more the income generated and net income generated in the first-half of this year. Upcoming we’ll definitely take your opinion into consideration and try to explore and optimize our strategy of communication to the public. Thank you.

Our next question comes from Arthur Porcari with Corporate Strategies. Please proceed with your question.

Hello? Can you all hear me? [Multiple Speakers]

Okay, great. Hi, well it was a very good quarter, excellent quarter. I don't know how you cut it, but let me cover just an area. I won't take near as much time as I have in the past, because everybody depreciated me, I think, did an excellent job. So and my question is a bit bizarre, maybe, but certainly my question is, who is Jascal Zhejiang [Kuka] (ph) Sports Technology Company Limited and how does it relate to Kandi. But let me give you some background for this questions first. I was browsing the Kandi products in Alibaba, I discovered a very impressive marketing sub website on Alibaba for a company founded in 2001 called Jascal Zhejiang Kuka Sports Technology Company. At first glance, it looks like an international wholesaling site specializing in a lot of off-road vehicles in several different variations. It has thumbnails showing some 246 different off-road vehicles, both electric and ICE that can be bought in bulk at wholesale prices. Its impressive homepage features some very familiar looking vehicles, six to be sure. If you look closely, you see that the front plate, which is Kandi on about three of those vehicles. But the rest of them all have letters that start with KD, which we all know that's been around for a while KD as Kandi’s designator. So interesting that this is a shows up, almost as if we're a Kandi site. Go ahead and tell that to them first, I'm a little bit more. I'm going to ask some questions.

Okay. [Foreign Language] Go ahead.

Okay. And at the bottom of this first page had pictures of a vast beautiful, new manufacturing facility, looked exactly like Kandi’s new Haiku Hengrun 100,000 vehicle facility, but was missing just a few things. At the center guard gate, which normally would have a large ground sign. And on that side, it would show Kandi’s name with a shield logo on it. Instead, it had a brown redaction patch over those pictures. And in the upper levels, as I know, that facility has also the Kandi name and this shield type of logo that we have is normally up there on the [Indiscernible]. Well, and there was also a redaction patch on the picture there. So, got a little confusing. Go ahead and tell them that much right now. And then I’ll…

[Foreign Language]

Okay. Moving on to the company's profile page, under company's certification, to my surprise, they had a single document for download for the CE Mark, which we all know is the authorization to do business in Europe, which I have no idea they can't even have the CE Mark. Anyway, it went on to say the actual document that Zhejiang Kandi Technologies was listed as the manufacturer on this certificate. Also on that page are some video and VR virtual reality clips of the same facility as the homepage, except this time, the reductions were not there. And now the page clearly shows the Kandi and the Kandi logo in that same -- in those two locations, actually. So after further internet search of their name, I've found a second, [Jazz Call] (ph) website with a beautiful aerial portrait of Kandi’s old gym law facility on the banner. On that side, it broke down its international sales statistics with 70% to North America and the rest detailed out to some 15 additional countries. The page has actually had this feature to re-translate each page into some 80 different languages. This company at least currently appears to be an independent global wholesaler with long-term very close ties to Kandi. Finding that CE Mark, which it says mandatory for Eurozone, is also encouraging. So I'm going to have a few questions to follow. Read back to him and get him with questions.

[Foreign Language]

Okay. First question, what is Kandi's current relationship with this company Jazz Call? Or is it like perhaps something like the Northern Group is a company that maybe Kandi is looking to buy because they seem to be very proud of the Kandi name.

[Foreign Language]

[Foreign Language] [Interpreted] [Indiscernible] is a long-term customer of the company, and now they would still purchase certain kinds of ATV products from us. According to the demands from the market. We have no plans to acquire [Indiscernible].

Okay. Well, does Kandi have any other international wholesale relationships? And what percent of Kandi’s business you expect will be done outside the U.S. And also, question for a friend, is can you have any dealerships in Canada?

[Foreign Language]

[Foreign Language] [Interpreted] Currently, we do not have other wholesalers, although sometimes there are some small scale customers, who will come to us directly and purchase certain items. As for the wholesale plan in Canada, we are currently working on it to set up the wholesale channel. Thank you.

Okay. Just a little follow-up there from what I've noticed. The -- this particular company again, seems to have changed from just over within the past year or so to really put a lot of stress on Kandi. And of those 240-odd price products, which by the way also includes lithium batteries, which could be bought there in bulk. So I guess my question is, is the lithium batteries, Kandi batteries? And on the other hand is why are they seem to be stressing the whole front page as Kandi? I mean, I'm very happy to see that. But are they just focusing a lot more on Kandi now than they have in the past? I guess that's my question.

[Foreign Language]

Thank you. Our next question comes from Francis Forte. Please proceed with your question.

Thank you. In May, the company entered into a consulting agreement on business growth and financial advisory services, a $1.1 million contract. Is that a follow-up on the arrangement they had with CITIC before COVID for a possible spin-off or listing on the Chinese exchange?

[Foreign Language] Oh, okay operator. And Francis, can you hold on for a second? Management says they still need time to answer the previous question, then we'll come back to you. Okay, please?

Sure, sure.

Just hold on and wait online.

[Foreign Language]

Okay, okay. So right now we're answering the last question of the previous caller, then we'll go to -- go back to the question.

Sure.

[Foreign Language]

[Foreign Language] Sorry, there are some interruptions for our answer for the previous question. As for the question, so first of all, Zhejiang Kuka is one of our long-term customers. And they also would like to promote our products, that's why we will see such information on their website. Currently, we do not supply any lithium ion sales to Zhejiang Kuka. Thank you.

So, Kewa, we can resume the questions.

Hi, Francis, can you -- you can proceed with your question one more time.

[Technical Difficulty] agreement on business growth and financial advisory services for $1.1 million. Is this a follow-up with CITIC on the agreement they had before COVID to possibly do a spin-off or take part of the -- list part of the company on the Star exchange in China?

[Foreign Language]

[Foreign Language] [Interpreted] So as for the consulting agreement, it's not related to our potential listing in China market with the CITIC. Indeed is for our separate plan to our U.S. subsidiary as the other sports to explore the possibility be separately listed in the U.S. main board.

That’s very interesting.

Thank you for your observation.

Okay. And, another question for you, Mr. Lim, when Kandi’s sold its Jinhua facilities, a couple of years ago, as I recall, there a large part of the compensation for that, over $70 million, I think, was a tax benefit, a potential tax benefit on our profits. And I think it was for eight years. Have we ever been able to take advantage of that until now? And do now that we are profitable, could that tax benefit really come into play and could we recoup a large part of that in the future?

[Foreign Language]

[Foreign Language] [Interpreted] So thank you for your question. As for the tax benefit utilization, we believe we can utilize in the upcoming future. First of all, the golf carts are currently manufactured from our high net facilities. Ongoing, we will try to expand our production in Jinhua as well. But since we have those net loss carry forward that we can able to utilize. So, yes, as for your questions, we can utilize those tax benefits in the upcoming future. Thank you.

Thank you very much. Thank you and congratulations.

Thank you.

There are no further questions at this time. I would now like to turn the floor back over to Kewa Luo for closing comments.

Thank you. Thank you again for attending today's conference call. If you have any more questions, feel free to contact us or contact our IR agency, Blueshirt. We look forward to updating you on our next earnings call. This concludes our call for today. You may now all disconnect. Good-bye.