AGM Group Holdings Inc.

Good day, ladies and gentlemen. Thank you for staying by, and welcome to AGM Group Holdings Incorporation's fourth quarter and full year 2021 earnings conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. Please note, this call is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the call over to Tracy Gao, Investor Relations Director for AGM Group. And Ms. Gao, please proceed.

Okay, thank you, operator. And hello, everyone. Welcome to AGM Group's fourth quarter and the four-year 2021 earnings conference call. Joining us today are Mr. Lin Xieta, AGM Group's co-CEO, Mr. Chen Qingli, the company's co-CEO, and Mr. Steven Sim, the company's chief financial officer. We released the results earlier today with the press release available from the 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 civil harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Communist Act's results may be materially different from the expectations expressed today. Further information regarding those and other risks and uncertainties is included in the 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. And also please note that, unless otherwise stated, all figures mentioned during the conference call are in the U.S. dollars. With that, let me now turn the call over to our co-CEO, Mr. Vindhyakant. Go ahead, Mr. Tom.

Thank you, operators. Thank you, Tracy, and good morning, everyone. Welcome to our fourth quarter and four-year 2021 earnings conference call today. 2021 was a unique year for AGMH as we smoothly transitioned our business into a technology company. that develops and produces blockchain-oriented assets and advanced cryptocurrency mining machines. We are happy with our progress in the second half of 2021, from developing strategic plans, cultivating key customer relationships, establishing critical cooperation partnerships, and to scaling up sales and production. We are very delighted to announce that 2021's four-year revenues were $36.71 million, out of which $31.37 million were from the fourth quarter. We achieved strong deliveries of cryptocurrency mining equipment. A demonstration of our solid execution capabilities in navigating worldwide financial logistics, congestions, and a semiconductor shortage. The delivery of mining machines was 4,896 in the last three months. And still, the delivery is a small part of a purchase order from our ASIC cryptocurrency mining machines. With our industry-leading technology and superior performance, receiving excellent feedback across a growing client base, As we continue to upscale our efforts to meet considerable number of outstanding orders, more shipments will be recognized in revenues. 2021's performance laid out a great foundation for our future development towards a leading integrated technology company that emphasizes on blockchain-oriented ASIC chip R&D advanced crypto mining machine production, and fintech software services. For us, 2021 was just the beginning of a new journey. With our cutting-edge technologies and a team of industry veterans, we will further increase our supplies and strengthen our presence in the global blockchain ecosystem while creating long-term and lasting value for our shareholders. With that, I will turn the call over to our chairman and co-CEO, Mr. Chengjun Li, who will provide more details on our strategic initiatives.

Thanks, Wenjie. Good morning, everyone, and thank you all for joining us today. This was a strong year and a strong quarter for our business. Although the prices of Bitcoin and other digital assets are likely to remain volatile over the near term, the significant amount this industry over recent years and increasing institutional participation should support sentiments and reduce the loss and the magnitude of any potential bear markets we have seen growth in participants and market demands in crypto mining it has also been encouraging to see increasing efficiency in delivering our crypto currency mining machines which follows vigorous demands. The results are a testament to the triumph of our shift into designing ASIC chips and manufacturing cryptocurrency mining equipment. The accumulated deliveries of mining machines were 4,896 in 2021, in presenting computer power of 440,000 THB per second. The solid performance was within our expectation, as we have been enhancing supply chain capabilities and investing in advanced products, as well as leaning towards a strategic move to North America. Next, please allow me to go deeper into these aspects. In order to establish the best-in-class technical know-how and supply chain, We have fostered closer strategy partnership with the blockchain ecosystem. For instance, we are deepening the cooperation with strategy partner Hyshop Electronic Technology Company, which ensures successful deliveries by optimizing the integrated raw material purchase system, mining equipment production, and assembly along with logistic and the transportation. Such a relationship is extremely critical as global logistics and supply disruption have made it tougher to purchase and process raw materials such as semiconductor wafers and other mining machine components additionally we are planning to set a joint venture with high shop in the u.s before setting up the jv AGMH has effectively developed a global client base and met a respective precondition of gaining 100 million US dollar mining equipment orders ahead of March 22 deadline. The remarkable progress has significantly magnified our position and the brand influence in the space. With that, we will follow our plans for establishing the JV, which will aim to fully integrate Hyshop's experience and assets, including all our capability, personnel, past and future chip design capabilities, and the future Bitcoin mining machine patents into HMH. This JV will enable us to lock in Hyshop's current and historical values in their R&D capabilities as well as supply chain outsourcing, which will be a significant step forward from the original strategic partnership and allow us to leapfrog our peers. Although specific terms and conditions are still in discussion, we expect 60% of the JV will be owned by AGMH and 40% by HACCP. with a potential full integration app for future consideration. Once the JV is in place, we will broaden production and the design capabilities to take more orders, which will be significant in future boosting our competitive advantages. In the coming quarters, we expect to upgrade our advanced cryptocurrency mining equipment to raise its hash rate as we believe hash power is the core element driving the entire industry the hash rate of our coin miner c16 is 113 tickers per second among the highest in the industry by leveraging the first class technologies we are very optimistic about the demands for the upgraded product next Let me share some updates on our strategic move into North America. We are in the planning stage of relocating our headquarters, research center, and manufacturing facilities into North America. We have identified several local manufacturers that are willing to cooperate with us and have asked them to make the best figure components so that we can evaluate the capability and the quality of the products. Meanwhile, we are also considering a possibility of building our own factory for which we will make a full evaluation process spanning from site selection, factory construction, production equipment purchase, local government policy, and environment protection requirements. We are expecting to complete cost and benefit analysis in Q2 2022 and choose the best option that can get us closer to our customers on the cryptocurrency mining sites with the most reasonable labor and production costs. while elevating possible external impacts on business operations. In terms of our research and development terms, we began shifting our focus on North America as well. We were set post of hiring talents and relevant policies in the region. Thanks to the talents at AGMH and the dedicated support from our partners, we are able to accelerate the process of our business transformation. 2022 is the next chapter for our company. In the first quarter, our first and foremost task remains on delivering mining machines. As we continue to acquire new customers and receive new orders, we will actively source more sizable clients. For our top-tier partners who can pay for larger orders, or have recurring demands. We will provide a degree of customization for their specific needs. Looking ahead towards the rest of 2022, we will also continue to build up supply chain capability while seeking new growth avenue in the cryptocurrency ecosystem with our endeavors to expand business and swift response and adaption to new technologies. We are very positive over the emergence of more advanced products and more diversified offerings, which will help us thrive in this dynamic market. Now, I will turn the call over to our CFO, Mr. Tim Singh, who will review and comment on our financial results.

Thank you, Chen-Chin, and thanks, everyone, for being on the call. I'll summarize some key financial results for the fourth quarter and full year 2021. In my comments on the quarterly results, I'll refer to the fourth quarter 2021 as the three months that ended on December 31 All comparisons are to the same period of the prior year, unless otherwise stated. We delivered stellar results in the fourth quarter, ending a strong year for our business as 2021 total revenues reached an all-time high. Fueled by our new growth strategies, full-year revenues were $36.71 million, an increase of about $36.66 million from 2020. We also turned to profitability with net income of 3.53 million in 2021, compared to net loss of 1.07 million in 2020. In the fourth quarter, our revenues increased by 31.36 million year over year to 31.37 million, primarily driven by the increase in sales of cryptocurrency mining machine and standardized computing equipment. Our total computing power delivered totaled 440,000 terahash per second in the fourth quarter compared to new in the same period of 2020. So far, we still have a substantial number of orders outstanding, which will be reflected on future revenues as we deliver the machines. Along with the increase in procurement costs of the equipment, Cost of revenues was $25.49 million in the fourth quarter, compared with $8,662 in the same period of 2020. Gross profit surged to $5.88 million from $4,933 in the prior year due to substantial increase in revenue. Our gross margin was 18.8% in the fourth quarter, up 5.4 percentage points from the prior quarter. Total operating expenses were $0.82 million, more than triple the previous year, specifically selling general and administrative expenses quadruple to about $0.82 million in the fourth quarter of 2021, mainly due to the expenses related to increased business activities. Due to the increase in revenues, income from operation was $5.06 million in the fourth quarter, compared with loss from operations of $0.21 million in the same period of 2020. Net income was $3.84 million in the last three months, compared to a net loss of $92,664 in the same period of 2020. Meanwhile, we closed a registered direct offering and concurrent private placement with certain investors, raising $20 million in gross profits in December. This will supplement our cash flow and liquidity, which supports our business development. As of December 31, 2021 and September 30, 2021, we have working capital of $24.48 million and $3.23 million, including cash and crash equivalents of $18.41 million and $1.4 million, respectively. Next, let me share some upcoming plans regarding our business. As 2022 evolves, We will streamline our management over procurement and deliveries for further growth. We are aiming to build a joint venture with Hyshop, where we will leverage Hyshop's R&D and supply chain strengths to support this growth. Importantly, by leveraging our experience in the blockchain ecosystem and the company's additional financing, the management team is currently actively focusing on exploring new areas in the space where the company can expand into. We believe these efforts can help us unleash new opportunities to drive the company's next phase of growth. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

Thank you, management. So ladies and gentlemen, if you'd like to ask any questions, please press 01 on your telephone keypad. To cancel, please press 02. So once again, ladies and gentlemen, if you'd like to ask a question to the management, please press 01 on your telephone keypad. 好的,再次提醒各位参会者, 如果你想提问的话, 可以在电话机上按01, 取消发问按02。 To ask a question, please press 01 on your telephone keypad. To cancel, please press 02. Okay, our first question is from Hong Yu at TradeMaster Capital Fund. Please go ahead.

管理层好。 TradeMaster Capital Fund 有两个问题。 第一个是公司在财报中提到正在将总部和研发团队前往北美。 那么是否会影响公司当前的一个业务进展呢? Where is the difference between Jialan and Bitcoin continent? Please answer. Hello, Hongyu.

We are currently planning to send the headquarters and development team to North America. This is positive and positive for the company's business, because as you all know, the virtual currency mining industry around the world and focus more on the North American region. The fact that the General Directorate and the R&D team will move to the North America will make us closer to our customers, closer to the mining sites, and understand more about the needs of our customers. This will have a positive impact on our current business and the R&D and market positioning of our next-generation products. Compared to the same industry, We believe that as a technology company, there may be a greater difference in terms of technical level. As far as Bitcoin mining is concerned, Thank you for your answer. My second question is that the company's transformation time is shorter.

But in the previous industry, other companies have a relatively long shelf life. Where is the foundation for the company to move forward? What are your advantages in technology? Thank you for the question, Hongyu.

Our transition to the production field of virtual currency is indeed shorter, but our transition method is through cooperation with partners. HiSharp Electronics Company to carry out strategic cooperation and to establish JV to transform. HiSharp Electronics entered this industry in 2013 at the same time as Bitdao's Jannan. So we have a lot of time and a lot of time in the corresponding industry We are still able to develop and create the 113T highest computing mining machine that I just mentioned. We are still able to develop and create the 113T highest computing mining machine

So to all the participants, we will not do a direct translation of the question and answer, but after the call, a transcript translation will be provided online. and will be provided to the participants as well, so to make it easier and smoother to save time. So operator, please open up for the next question.

Thank you, management. Our next question is from Xiaoming at Fumi Securities. Please go ahead.

Hello, Xiao-min. I am a researcher with a negative identity. I would like to ask whether the current global shortage problem has an impact on the company's production.

Will it affect the supply and demand of orders? Hello, Xiao-min. I am Mr. Chen. The shortage on the supply chain has indeed affected the company's production, and the delivery of our orders is indeed lower than our previous expectations. And it's not just about the shortage, but also the shortage of all raw materials in the entire electronic industry and the current production in mainland China has been affected to a certain extent by the epidemic. So we are facing the challenge of supply chain and we are also in the supply chain section and cooperation with strategic partners through their already rich industry experience and the various solutions accumulated in this industry and cooperation partners will Thank you. I understand. There is another question here.

How does the company view the amount of orders in hand? Can it support a sustainable sales growth in the future? I see in the speech that you mentioned the establishment of a joint venture company with Gao Rui. Is there a relevant income goal for this joint venture company?

Thank you, Xiaomi. We can definitely deliver the orders that are currently in hand. We are also continuing to get bigger and more orders, so we are optimistic about the ongoing growth of future sales. We and Hyshap's joint venture company will be established in the near future. We do not set the goal of income for the joint venture company, but as we turn from strategic cooperation to joint establishment of JV, we will completely to collect resources from our partners in the field of R&D and industry technology accumulation. This will allow our core values to be transferred more to HMH, allowing us to have complete R&D, complete technology, and complete patent. These will have a positive impact on the company's future value and sales growth.

Thank you.

Your next question is from Carl Birkenfield from American Trust Investment. Please go ahead.

Thank you very much. Three questions I have. One is for United States investors. How does the China lockdown affect your business in 2022? What's your projection of revenue for 2022?

Uh, thank you, Carl. This is Steven. Uh, I'll take a question. The media has already widely reported the lockdown situation in China. And realistically, it's difficult for us from a supply chain and manufacturing perspective to really forecast what's going to happen next. And in that environment and context, it's nearly impossible to really plan on a going forward basis. Having said that, because the COVID-19 situation has been ongoing for the past two to three years, we have already made sufficient contingency plans, including moving part of the operations to the U.S. and potentially, as we mentioned in our prepared remarks, opening factories in the US to essentially alleviate this type of situation in the future. In terms of the short-term effects, I think unfortunately we just have to deal with not just the lockdown in specific cities, but also the supply chain being massively disrupted And these are completely out of the company's control. Take, for example, when we fulfill a certain order, our upstream suppliers are facing the same issues in terms of manufacturing, gathering of raw material, having their staff workers in the factories, and resolving logistics issues. So in a nutshell, it's not just what we can or we cannot control. Essentially, we also cannot control our upstream suppliers. In that context, we will do our best to diversify our solutions, including the above-mentioned moving into North America, and we are also seeking other solutions. And for the projection of revenue, I think, you know, in that backdrop, it's almost impossible to project what we're going to do for the whole year. But on a quarter-to-quarter basis, we are still largely positive because we believe that we are transitioning well into the new business as evidenced by the fourth quarter. And even though I can't really provide any guidance, but we think that as we move towards Q1, Q2, we should more or less be able to come up with a steadily improving and growing business, presenting that to the market. Thank you.

Thank you. My second question is, who are your peers in China and the U.S. And what is your technical advantage versus your key competitors?

It has been mentioned from the previous Q&A by our CEO. And let me repeat that because his answer was in Chinese. So our peers specifically are well known in the market. Tenant, which is a fellow listed company in the U.S., and also Bitmain. And having Hyshop as our JV partner and strategic partner and Hyshop having been in the industry at the same time as our key peers in the same industry is highly beneficial to us because of the of high shafts experience and ability and R&D capability throughout the years. On a going forward basis, I think Mr. Lee has also mentioned that we are one of the first to mass produce our C60 machine, which at 113 terahash per second is one of the machines with the highest spec. And we feel that as we go forward, we are continuing to improve the specs of this machine as well as investing in the next generation of chips. Now, in terms of comparing with our peers and what's our technical advantage, I feel that we each have our own key customers. And also we feel that we are able to come up with continuously improving products on the cutting edge of this industry. Plus, I think being in such an uncertain environment, we are a very nimble team. We do not have, for example, a huge cost on manufacturing base. We rely a lot on our partners to fulfill the manufacturing. and holding on to the key value proposition of the supply chain, of the value chain, we believe it can be nimble and act accordingly to the changes in the market.

Thank you. Now, my third question and final, what's your view of the other miners that use clean energy or produce energy-efficient chips? Any plan of producing energy-efficient chips yourselves?

Carl, let me put this question to Mr. Li, and then I will do a translation. Thank you, Carl.

We are optimistic and positive about the use of clean energy in production. We also encourage and support our customers to use more clean energy.

Our views on miners using clean energy is very positive and optimistic. We fully support our mining customers to use clean energy. In terms of producing energy-efficient chips, this is a common goal that is shared by ourselves and our peers. At the moment, we are actively investing and finding ways to come up with the best optimized energy-efficient chips.

At the same time, our current coin miner C16's power consumption can be down to 30

At the same time, our coin miner C16 at 130 terahash per second with 30J per terahash is one of the most energy efficient machines out there that is mass produced in the market right now. And we believe that in the future, this will be continuously improved.

In the mining industry, using clean and efficient energy should be a common goal and should be something that should be pursued.

by ourselves and our peers, and it's a goal we strive to achieve. Thank you.

Thank you for answering my questions. It seems like you have a great company here, and you guys are on top of the chain. Thank you very much.

Thank you, Carl.

Thank you. Our next question is from Cam screw at HC wind ride. Please go ahead.

Good morning everyone. Um, I wanted to ask, how do you think the shift to North America is going to affect a current supply chain concerns and order fulfillment?

Okay. Do you mind repeating the question? Uh, the what to North America?

Sure. How do you think the shift to North America is going to affect current supply chain concerns and order fulfillment?

The current shipment to North America affecting our delivery?

Is that the question? So you guys announced a shift of operations to North America. I'm just curious how you think that's going to affect.

supply chain right right okay sorry apologies so the shift essentially is to bring ourselves closer to our key customers and I think from a strategic level we view the different options on a worldwide basis for mining companies and consistently when we speak to our customers North America comes up tops in terms of the best destination for mining companies. One of the many reasons is the relatively efficient and clean energy available and obviously a very stable political and regulated environment and it's closer obviously to also the the capital markets there, which a lot of the mining companies are listed in the U.S. So from that perspective, shifting to the U.S., being closer to the customers is a no-brainer. It will resolve a lot of logistics issue. And then you obviously bring the complexity to the upstream in terms of having to shift raw materials there to be assembled or pre-semi-assembled machines to be finished in the factories. And those various options are being considered at the moment. The relative consideration is that there might be a somewhat increase in cost, which we think, you know, looking at all the potential benefits can be largely offset. And I think that in the long run has to be the right reason for us.

Excellent. Thank you. And do you expect a similar amount of R&D costs in 2022, or do you expect that number to increase over time?

So from an AGM company level, the actual R&D cost is not reflected at the AGM company level because our strategic partnership with, this is a great question by the way, our strategic partnership with HiShop is such that we license their technology. But in the long run, as we mentioned, the idea is to integrate ourselves with HiShop and such integration will allow us to tap into their historical expertise, which also means that future development and R&D will then increase in tandem with such an action, meaning to say all R&D activity will take place in the future, and maybe it's not comparable to previous levels, but we feel that this is positive in light of how the value chain is is further optimized by the JV, we will then, you know, we invest this increase in profit margin into R&D to further invest into future iterations of our products.

Great. Thank you for answering my questions this morning. We're very excited about the growth of the company.

Thank you, Ken.

Thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Chen Junli for the closing remarks. Please go ahead.

Thank you, operator, and 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.

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