AGM Group Holdings Inc.

Good day, ladies and gentlemen. Thank you for standing by, and welcome to AGM Group Holdings Inc.' 's third quarter 2021 earnings conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at the time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Ms. Tracy Gao, Investor Relations Director of AGM Group.

Ms.

Gao, please proceed.

Thank you, operator, and hello, everyone. Welcome to AGM Group's third quarter 2021 earnings conference call. Joining us today are Mr. Wenjie Tang, AGM Group's co-CEO, Mr. Chen Junli, the company's chairman and co-CEO, and Mr. Stephen Sim, the company's chief financial officer. We released results earlier today. The press release is available from Newswire Services. A replay of this call will also be available in a few hours on our website. First, Mr. Tang and Mr. Li will brief you on the company's key highlights, and then Mr. Sim will review the company's financial results 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 Security 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 those and other risks and uncertainties is included in company's public filings with the SEC. The company doesn't assume any obligation to update any forward-looking statement, except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars. With that, let me now turn the call over to our co-CEO, Mr. Wenjie Tang. Go ahead, Mr. Tang.

Thank you, operator, and good morning, everyone. Thanks for joining our third quarter 2021 earnings conference call today. I am very excited to share with you the remarkable progress we've made in all fronts since the announcement of our new business launch in August. Our unwavering mission is to become an integrated technology company that focuses on the development of blockchain-oriented ASIC chips, the production of advanced crypto mining equipment, and the fintech software service. We were off to a great start financially with revenue of $5.34 million generated in the third quarter. Notably, our first ASIC crypto mining machine, Koi Miner C16, garnered widespread attention and interest over a very short period, thanks to its cutting-edge technologies and top industry performance metrics. We've already secured a purchase order for 16,7500 cryptocurrency mining machines, which exceeded our expectation and is evidence that our strategies and efforts in transforming and upgrading our business are yielding very positive outcomes. Specifically, only 880 machines, approximately 1.3% out of our current total orders, Our total computing power of 79,200 TH per second were recognizing revenues for the third quarter. The remaining orders will be reflected in the future revenues with their deliveries to be fulfilled. We are confident that the current favorable market trend will continue to spur robust demands for our mining machines, which makes very optimistic about our potential growth in the cryptocurrency mining sector. Meanwhile, we also worked hard to promote the development of our legacy think tank business as planned. Regarding our partnership with an Australian licensed broker for social trading and educational website service, we maintain our expectation that we will enter into a definitive agreement with this broker by the end of fourth quarter of 2021. In addition, We said earlier this year that we have established wholly owned subsidiaries in Singapore and Hong Kong. We are actively looking for candidates to expand our team in these regions for the preparation of new blockchain and fintech software development and a consulting service in Asia area. By leveraging advantages of a solid infrastructure and technology stresses as well as a strong team we are well positioned to address this burgeoning customer needs and generate sustainable value for shareholders while we strive for us to become a key supplier and a contributor in a global blockchain ecosystem with that i will turn the call over to our chairman and the co-ceo mr chengjun lee to provide some more details on strategic initiatives.

Thanks, Wenjie. Good morning, everyone, and thank you for joining us today. I'm very delighted with the positive market response we gained in our cryptocurrency mining equipment. Within just three months after our new strategic initiatives, we already secured substantial orders from well-known companies in the industry. The ever-growing orders signify that the quality of our product is recognized in the industry and further establish our leading position in the cryptocurrency mining world. In the third quarter, not only did we cease to join orders and demands, but also we built new strategic partnerships Now, let me summarize key partnerships we have announced so far. In September, we partnered with HiShop Electronic Technology to expertise growth for both companies in the rapidly growing cryptocurrency market. Pursuant to the partnership, the top priority is HiShop will provide the latest ASIC chip technology and design service to us. while we will engage in client development. Subject to meeting certain sales targets, the two parties also plan to set up a joint venture where we will hold a 60% stake. Combined with HiShop's key R&D team members, the upcoming joint venture will deliver advanced semiconductor solutions for supercomputing hardware. The strategic partnership mentioned above was a very significant milestone for us, laying a solid foundation of our future growth and success. Next, I'd like to share some colors in our supply chain capabilities against the backdrop of global semiconductor shortage. It is true that production of semiconductor wafers is not meeting demands right now, and any ASIC mining machine manufacturer must prove itself as a key market player in order to secure adequate supplies. The manufacturer must demonstrate its ability to design the chip specifically for mining and order from one of the few fabs in the market. For example, Samsung, SMIC, and TSMC. These top firms will not sell to anyone except the purchasers with proven research and development ability and the excess of sufficient capital to deploy for large prepayments of wafer orders, designs and capabilities to build chips and mining machines in the first place. Despite being a relatively new player in the market, AGM, through our partnership with Hyshop, can tap into their previous and future orders from these critical suppliers to secure semiconductor wafer resources. Meanwhile, as production is ramping up, we believe this supply crunch will ease in mid-2022. Let me dive into our strategy move into the US due to the relatively stable environment in the US. We believe that North America is a key region for both Bitcoin mining and our business. We are setting up a manufacturing base will be strategically important to bring us closer to our customers. And we decided to seek appropriate opportunities to establish a production operation in the United States or Canada, which will not only simplify capacities in global supply chain, but also overcome logistic challenges. We will be able to serve and support our partners and end customers, as well as reach a broader client group in the region. Most of our customers today are US or Canada based, so production from this planned manufacturing base will supply the mainly to them. Our resellers and the end customers are very supportive of this action as it enables them to have more control over production and the logistical issues as well as delivery timetables. We are currently actively in discussion with potential partners in the US and we will communicate with the market once we have more concrete progress in this initiative. Given a large number of orders we have already received, the fourth quarter will be mostly geared towards fully failing deliverance of these mining machines. Looking ahead, we will continue to build up our order book and establish sustainable long-term relationship with our clients and enhance supply chain capabilities. In the short and the medium term, We will work with HiShop to get the joint venture set up and be able to gradually design and produce chips. With these ongoing efforts, we are confident we will distinguish ourselves with our technical capabilities and became a market-leading company to produce high-performance ASIC mining machines. Now, I will turn the call over to our CFO, Mr. Steven Sim. who we will review and comment on our financial results.

Thank you, Chen Jun, and thanks everyone for being on the call. I will summarize some key financial results for the third quarter of 2021. In my comments on the quarterly results, I'll refer to the third quarter of 2021 as the three months ended on September 30, 2021. All comparisons are to The prior year's third quarter ended September 30, 2020, unless otherwise stated. Our solid performance in the third quarter reflects the success and profitability of our transition and engagement into the ASIC chip design and cryptocurrency mining equipment manufacturing space. We generated $5.34 million of revenue, mainly due to sales of crypto mining machines and computing hardware. Our total computing power sold rose to 79,200 THB per second compared to new in the same period of 2020. After the company announced in August to initiate a new growth strategy to become a key participant and contributor in the global blockchain ecosystem. We are still in the process of further upgrading the company's business, but we have already gained a considerable amount of order number for our mining equipment. As aforementioned, most of the orders weren't reflected in the third quarter's revenue, but will be taken into account in the future as we deliver the equipment to our clients. Cost of revenues was $4.62 million as compared to $10,123 in the same period of 2020. Gross profit rose to $0.71 million from $21,138 in the prior year primarily because of the substantial increase in revenues. Our gross margin was 13.4% in the third quarter of 2021. Once our joint venture with HiShop is set up, we should be fully capable in designing and building at the AGMH joint venture level, which means we should embrace a higher margin business. Total operating expenses was $0.34 million, up 17.1% from the previous year. In particular, selling, general, and administrative expenses increased by 20.2% to $0.33 million in the third quarter of 2021, mainly due to expenses resulting from an establishment of a new wholly foreign-owned enterprise. As we cut investment in FinTech R&D, research and development expenses were $10,304, a decrease of 35.6% from $16,007 in the same period of 2020. It is worth noting that we had not invested in the cryptocurrency mining machine R&D until September 30, 2021, and we will only expect to do so once the joint venture is set up. Fueled by the increase in revenue, Income from operations was $0.37 million compared to a loss from operation of $0.27 million in the same period of 2020. Net income was $0.2 million compared to a net loss of $0.32 million in the same period of 2020. As of September 30, 2021 and June 30, 2021, we had working capital of $3.23 million and $3.02 million, including cash and cash equivalents of $1.4 million and $0.4 million, respectively. As we have now turned to a profit, our healthy financial position enables us to meet our net working capital needs for the near to mid-term. Next, let me share some long-term perspective and thoughts regarding our business. Going into Q4 2021 and 2022, our imperatives will be delivering the substantial number of mining machine audit and ramping up our production capacity and securing more purchase orders. This will form the basis of our financial growth and stability in the mid to long term, maximizing shareholders' value to the company. As we seek to sustain our future growth trajectory, we will keep investing into and improving our R&D, cutting-edge technologies and manufacturing capacity to drive further development in our core crypto mining equipment manufacturing business and other initiatives as well as capitalize on the vast opportunities in the cryptocurrency mining sector. This concludes our prepared remarks. Let's now move the call for questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. So once again, it's star 1 questions. 我想提醒大家,如果您想提问,请按新字键再按数字。 议会主持人会接受您的发问申请。 Our first question comes from the line of Heather Teng from Long Run Asset Management. Please ask the question. 各位好,我是Long Run Asset Management的Hether Teng。 我想了解一下公司明年的大概战略是什么, 然后商业模式是不是还是以卖矿机为主呢? 另外我们的

Thank you. Okay. I'm Li Shengjun. Let me answer this question. Next year, we will, because this year, from our announcement and Hyshapt's

Taiwan Taiwan Taiwan Taiwan uh, uh, uh, uh, uh, the best products among the current mass-produced mining machines. Therefore, we are very optimistic about the sales performance and other indicators for next year. We should achieve a sales performance of about 1 billion US dollars. Our mining machine is a industrial products, it is not a consumer product. So its indicator is very simple, which is the profit. So how much profit can the customer get from the profit? So its evaluation standard or its product model is very simple. It depends on such a simple indicator. And the 113T unit profit we have done so far is the best number among all the mining machines that have been mass-produced. Thank you. Thank you.

Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1 on your tablet and keypad. Your next question comes from the line of Dawei Chen from RightTime Funds. Please ask your question.

Hello, everyone. I'm Dawei Chen, the investment director of Rishi Capital. I saw that your company recently released a lot of mining orders. For example, the $15 million order with the US dollar on October 27 and the $65 million order with the US dollar on October 3. Please introduce the delivery time table of the company. Okay. This year, from the announcement of strategic cooperation

to the end of the year. So we don't have a lot of delivery this year. As you mentioned, the order will be delivered within a week. This order has been delivered. The order for Malian New Mainland will be delivered next year. This year, we will deliver more than 10,000 devices. This year, we will deliver The main reason is that in addition to the time we started to sell, it has entered the fourth quarter, the end of the third quarter to the fourth quarter. In addition to the relatively short time, it has also been affected by a series of factors such as the power line in the factory in Dongguan, China, and then these influences will be eliminated soon because we In North America, we are also looking for partners to set up a new production base. So in the North American production base and next year, there will be a considerable number of products in China. With the joint efforts of the mainland, our delivery next year should be very smooth.

I would like to know more from your company. What is the progress schedule of the North American base? When can it be officially put into production?

Our first batch of production materials has been shipped to North America two weeks ago. Now it has been made into semi-finished products, and the finished products have not come out yet. Because there are some uh, uh, uh, uh, uh, uh, OK, thank you.

謝謝。 Thank you. Once again, ladies and gentlemen, to ask a question, please press dial 1 on your telephone. 在此提醒您,如果想提問,請按心意。 As a reminder, ladies and gentlemen, to ask a question, please press star 1 on your telephone keypad. All right, thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Wenjie Tang for closing remarks.

Thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

Thank you all again. This concludes the call. You may now connect.