Kandi Technologies Group, Inc.

Greetings. Welcome to Candy Technologies' full year 2021 financial results call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Ki-Hwa Liu, Investor Relations Manager. Ki-Hwa, you may now begin.

Thank you. Good day, ladies and gentlemen. Thank you for standing by, and welcome to Candidate Technology's full year 2021 and new content call. All participants are in listening and remote. Later, we will conduct a question and answer session, and the instructions will follow at that time. As a reminder, we are recording today. If you have objections, you may disconnect at this time. Hello, everyone. Thank you all for joining us today to discuss financial results for the full year of 2021. Earlier today, we issued press release covering the results. You can find the press release on the company's website, as well as some of the mutual services. On the call with me today are Mr. Hu Xiaoming, Chief Executive Officer, and Mr. Alan Lin, Chief Financial Officer. Mr. Ku will deliver a 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 Reference of 1995. Forward-looking statements involve inherent risks and identities As such, the company's actual results may be materially different from the expectations set today. Further information regarding these and other risks and uncertainties is included in the company's public filing with SEC. The company does not assume any authorization to update any forward-looking statements, except as required under Office for Law. Please note that unless Otherwise, all favors mentioned during the conference call are in your service. With that, let me now turn the call over to our CEO and chairman, Hu Xiaoming, for having me today.

Hello, thank you, Ke Wang. Hello, everyone. Welcome to today's conference. I am very happy to share and report on the performance of Condi Group in 2021. We will definitely be able to return to a meaningful sales growth in 2021. Such a change is the strategic behavior result that we took in response to the changes in the market pattern after the outbreak of the epidemic in 2020. In 2021, it is most worth mentioning that the electric bulldozer, electric balance car, bulldozer equipment related parts are gone. In recent years, our business mainly focuses on the development, manufacturing, and sales of electric vehicles and electric vehicles. Due to the fact that some domestic companies We must make strategic adjustments. For this, the company believes that At this stage, we cannot participate in competition in the form of a huge loss. We decided to take the initiative and move forward along the supply chain, using our special field of tool technology and operating advantages to catch up with more feasible business opportunities. We always believe that only with the maturity of the electronic mode, pure electric vehicles can be truly popularized. Because we have advanced pure electric car smart charging equipment, pure electric car production capability and a number of charging technology, so we will continue to improve and improve in the charging mode network technology field. When the pure electric car market enters a healthy and interesting stage, we will make full use of it. Currently, as the global all-terrain, all-terrain vehicles are becoming more and more energy-saving, the market demand is very high. In 2022, we will apply the pure electric vehicle technology to all-terrain vehicle products, and will launch multiple pure electric UTV low-speed vehicles, golf ball cars, and all-terrain wide-angle vehicles. We will make full use of the high-end technology that Kangdi has accumulated in the field of electric vehicles for many years to enter the non-roadway car market and strive to become the leader in the field in China in three years. In general, looking back at 2021, we have achieved initial success in business transformation and Due to the support of the relevant government of our factory class, the cost has been replenished, and due to the retirement of the previous joint venture, we have more business flexibility. In the future, we will do our best to develop and integrate our electric vehicle technology into the electric vehicle product, and enter the market with full horsepower. In addition, we are also looking forward to a new opportunity for China's pure electric vehicle market to enter a better and healthier stage of development. We believe that there will be many opportunities in the future for the development of electric vehicles and the industry of electric vehicles.

Hello everyone and welcome to our conference call today. I'm happy to share our business and financial results for the full year 2021. Candy was able to get back on track with meaningful sales growth in 2021. This turnaround was the result of strategic actions we took to respond to a changing market landscape after the pandemic broke out in 2020. The most important highlight of 2021 was the remarkable growth of revenue in the electric scooter, electric cell balancing scooter, and associated parts line of business. This segment accounted for nearly 33% of total annual sales, growing approximately 420% versus last year. Originally, our primary business operations were composed of designing, developing, manufacturing, and commercializing EV products and EV parts. However, in recent years, as the market got more crowded, some Chinese EV companies decided to chase market share with aggressive pricing. running huge losses. While China's EV market took off early compared to other major economies, we believe that its EV market has not reached a healthy and orderly stage of development. Therefore, considering our financial conditions and the interests of shareholders and other stakeholders, we think it's unwise for us to participate in this lost competition or risk to the bottom. Hence, we decided to take the initiative and move along the supply chain to find more viable business opportunities by leveraging our unique technological and operational strengths in specific areas. We firmly believe the battery swap is a prerequisite to universal adoption of EVs By leveraging our advanced EV intelligent battery swap equipment, manufacturing capacity of EVs with intelligent battery swap mode and dozens of patented technologies in battery swap, we will continue to build our position in the field of online car healing with battery swap mode and will make full effort when China's EV market enters a more healthy development stage. Looking at the off-road vehicle business, the industry is gradually shifting its focus to electrification. In 2022, we will apply EV technology to off-road vehicle products and launch a variety of pure electric utility terrain vehicles, neighborhood EVs, golf carts, and off-road crossover vehicles. Our plan is to fully utilize our expertise and know-how in making electric vehicles by expanding to off-road vehicles. We will strive to become the market leader in this field in China within three years. To sum up, we ended 2021 with initial success in our business transformation. With sufficient capital from the government's payment related to our facility relocation and with more business flexibility after exit the joint venture, looking forward, we are making full effort to develop products to enter the market for pure electric off-road vehicles, incorporating our EV technology. We expect more opportunities ahead in the EV market in China once it enters a more stable growth mode. We believe there are plenty of opportunities to benefit from the industry's development of EVs and electric off-road vehicles in the future. Thank you. Now let's start the Q&A session. QA will take any English questions and translate for me. Operator, please go ahead.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, that is star one to ask a question. Thank you. As a reminder, as we assemble the queue, it is star one to ask a question. Thank you. Our first question is from the line of Frank Blatterman, a private investor. Please proceed with your question.

Well, good morning, Mr. Hu. I have two questions prepared for today's conference call, one involving the status of the Hunan Hangman Battery Swap and the other involving the status of the K23 and K27 in the United States. In light of your statement to today's P.R., I am assuming that these are dead in the water at this time. Is that correct?

Hello, hi, Frank.

Yes.

Can you hear me? Yes, I can hear you. Your last part is getting in the water?

The status of the K-23 and K-27 also the status of the Hoonan Hangren Battery Squad. Okay. It looks as though we're no longer going to be in that line of business at the present time. And I'm looking for clarification if that is my understanding and it's correct. And then I have one other short question.

He has two questions. The first is about the contract we signed with Hunan Hangren. He wants to know the details

The first one is our cooperation with Henglun. Because Henglun has the production rights of cars and so on. In Hainan, we have already started producing special electric cars. Now this car is on the national notice. This notice is estimated to be K23 and K27 are two models. At that time, because the US government's requirement was that the EPA certification could be sold. The security certification was self-certified. At that time, it was said that the certification in China could be transferred to the US. But later it was found that its security was completely different from that of China. China and Europe have the same outbreak point. So the technology here is very difficult to meet this requirement. We need to do a lot of perfect work and a lot of investment. Now we are still working hard on this. But when we can complete this self-proclaim, it's hard to say. So we put these two cars on the road. One, we will further improve. The second, these two low-speed cars, we are now in the American market, the market is gradually interacting with users. That's the current progress.

Hello, Frank. Good morning. So there are two questions. First of all, related to our cooperation with Henan Henren. As you may know, Henan Henren is an R&D company with qualifications and license to manufacture EV in the China market. We are working with them right now, at the moment, at the Hainan Production Factory. And we are working with them together to file the production filings. Once the filing is done with the government authority, which we expect around quarter two of this year, we can then pick up the orders and start to sell our EV products of K23, which have the battery swap features. As for our K23 and K27 cell channel in the US, Problem we encounter is the requirement from the DOT safety requirement on the airbag. Originally, we need to have the approval from the EPA in order to sell our EV for the highway usage in U.S. And then we noticed that for the safety requirement, it's like a self-fouling routine. And then we noticed that later on, the requirement for the airbag It's different between U.S. and China. There's one standard requirement within China and European countries. However, we noticed that it's different in U.S. Primarily is the airbag, you need to fit different size of the driver, which is different requirement from the China standards. And that takes up a long time and a lot of investment to refine in order to meet the requirements of the airbag safety per DOT. We are working on that very hard and, however, the time to complete such a refinement in order to meet the requirements in U.S. is uncertain at the moment. We are trying very hard. So in order to proceed with our productions, we are doing the parallel pathway approach. First is we are going to refine our airbag requirements at the meantime. and also we are selling the K23 and K27 NEV version in the U.S. We just already started in the market, and we have gradually delivered our products to the customers in the U.S.

Thank you very much. And then I have one further question, which you may have already answered. Is the company going to pursue an electric vehicle manufacturing license in China, or by affiliation, or preferably on its own in the future.

Are you asking whether we're going to apply our own production license?

I'm asking if we're going to. Well, the answer I just received apparently gave me the answer to the first part. We're going to operate utilizing the license of Okay. Now, in the future, are we going to pursue a stand-alone license or is that undecided at this time?

Okay. This question is very good. A few years ago, this production quality was very valuable. This is also very scarce. But as China's electric vehicles gradually developed,

As for your questions, as you may know, in past few years, a few years ago, the license of manufacturing EV is highly sought and was difficult to apply. And when the market started to develop, many smaller companies get phased out in the market. And so, currently, it's easier to acquire those licenses through the acquisition of the companies. From our approach, we plan to, at the right moment in the future, to acquire those companies with the license alone to consolidate them into our listing structures. instead of applying the license from the local government, because application may be more difficult to go through. So our approach is to look for the suitable target and complete our acquisition in the future for those companies holding the license of manufacturing EV.

Okay, thank you very much. Thank you, Kiwa.

Thank you.

Thank you. Our next question is coming from the line of Arthur Porcari with Corporate Strategies. Please proceed with your question.

Yes, good morning. And by the way, I'm having a hard time. I had a call through to get the operator to put me through on the queue for the call. And also, Keith, when you opened up the opening, he couldn't even understand you. But later on, it came clear. Anyway, yes, well, I guess it's been a pretty good year compared to what everybody else seems to be coming up with in the industry over in China. But yes, the stock is just ridiculous. Yesterday, the stock closed at 252, a market cap of only 194 million. Stunningly, this puts this virtually debt-free company at a significant discount to its reported total cash of around 223 million, or just under $3 a share. Now, I'm counting all categories, including restricted cash and CDs. I don't know why you don't count 59 million in CDs in your number when you reported it you know, in the press release. And at this level, it was also trading at almost a 60% discount to book value. Also, it's reported total assets at $520 million with only $77 million in liabilities and 7 to 1 positive ratio. And from a quick value point of view, current assets at $343 million compared to current liabilities of only $64 million gives it a current ratio of 6 to 1 and positive working capital of $274 million or $3.70 a share. Yeah, trading at $2.50. And to top all this off, three months ago, December 6th, when the stock closed at $3.86, well over a dollar higher, the company announced a $20 million share buyback. Yet Friday, actually today, the stock is still down over 30% since that announcement. And finally, the insider buy-to-sell ratio in this company over the last 14 years has been a very bullish 98 to 2. Now, I've been a market pro for 48 years since the Dow was trading at 586 in 1974. In all those years, until candy, I've never seen such a pervasive individual equity market disconnect, particularly on a NASDAQ global national market security in a hot industry, relatively hot anyway, such as EVs. With that said, I have a couple of questions.

Okay, let me translate first so far. There are more than 200 million in the deposit. In this case, the price of this transaction is 50% more profitable than the price of the account. And our assets are 49.3 billion, and the debt is only 49 million, which is 10 to 1. If you look at it directly from the value point of view, the current capital is 33.8 billion, and the current debt is 49 million, and the current ratio is only 7 to 1. um um um um The second day, on Friday, the announcement came out that the stock price still fell by 30%. Since the company launched these 14 years of transactions, the proportion of internal sales has also risen very much, about 98 to 2. I am a person with 48 years of experience in the market. I think the case of Condi is a very Go ahead, Art. Okay. Going back to a couple of conference calls, the Q221 conference calls,

but the stock traded almost double the current price in response to a similar undervaluation question. The CFO also felt the stock was quite undervalued at that time and told shareholders he would personally take responsibility to work on improving Candy's perception in the stock market. Can you give us an update how that's coming along?

In 2021, the stock price added to the second quarter of 2021 was also quite high. It's quite bad. It's almost twice the current price. To answer a similar question, why was the price at that time underestimated? Our chief financial officer said he would mainly be responsible for improving Condi's performance in the stock market. I would like to ask if CFO can tell me if you are concerned about this matter. 有什么新的进展可以给我们说? 这个事情有Alan来回答吧,Alan.

他问的是CFO.

Yeah, and I can answer the question from Art directly. So we and our team and also the IRL firm has been reaching out to the analysts and then different investors on a routine basis to let them understand the plan and then operation status of the company in order to improve our company's perception in the stock market. We believe that if they can understand us better, it can help them to understand better in our company and have more confidence in investing in our stocks.

Why is it you can't seem to get their attention? I mean, it seems like you've got Invesco's attention. I mean, they've been adding more and more recently, and I think it's number two on their list in their special fund that they've got over there. We're up to number two from number eight about a month ago in the consumer discretionary area, so at least they like us. But it seems like it's such a no-brainer on this stock. I mean, you're trading at less than Half a book value and now even a discounted net cash in the bank. Anyway, let me go on. Can you tell us how many shares of stock the company has bought back today through the stock purchase program?

So we are sticking with our plan for the shares buyback at the moment. And as a matter of fact, the company has bought back the shares back in end of last year. And beginning of this year, we have over $4 million to acquire and buy back more than 1.1 million of shares. And we'll stick with the plan and proceed with our share buyback transactions in the future at the right timing.

1.1 million shares. And you're trading under, for the last three months, you've been trading right at basically cash. You know, a couple of years ago, the company bought back probably about that many, just under that many shares, and they paid as high as $5.50 a share. Anyway, why doesn't the company just take a third of the cash, including the CDs? I mean, it's irritating to see $139 million in cash, too, as you can tell from my opening there. Realistically, if you count all the real things that are cash, it's like $59 million in CDs. You don't even count that. Why don't you take a third of the cash, make a Dutch tender offer, let's say $4 a share. I could even do it cheaper. buy back about 18 million shares, which is about the same amount you sold a year and a half ago, and raised $160 million at $8.80 average price. If you don't do something quick, as one of the soon-to-be-remaining left PCAOB-certified Chinese companies that are safe from delisting, some smart private equity raider might just do it first.

He wants to say there are so many cash in the bank. Why can't we take out the money? Last year, we sold 1.6 billion yuan. Take out one-third of it and buy back 18 million shares at a price of 4 yuan. These 18 million shares were sold when we sold 1.6 billion yuan. But if we buy back with 4 yuan, the two shares at that time He said if we don't do this, there will be a lot of private equity funds that will take a step forward to buy the company at this price.

Thank you for your advice and suggestions. At your companies,

And both directors will stick with our own share buyback plan, and we'll definitely buy an additional portion of the shares in the future at the right timing. So right now, we are still considering all the conditions, and we will proceed with further buyback in the future.

At the rate you're buying back right now, you've allocated $20 million through the end of this year, to my understanding. At the rate you're buying back, you better accelerate your plan. If you plan on getting near $20 million, you might have deceived the shareholders. I don't think you want to do that. So it seems to me you've got to pick up the pace a bit. Why wouldn't you want to do it under cash in a bank? It's just insane to me. But either way, I've been here 14 years. I guess I'll be here another couple of years. Anyway, you had a great – don't get me wrong. I think you did great this past year considering what everybody else has had to come up against. And, you know, even your analysts thought you were going to lose 19 cents a share for the year, you know, a gap loss of 19 cents, and then you ended up making 30 cents. I guess that's why she's probably not around anymore. But anyway, good luck to you.

Thank you. Hu Zong, he said it's hard to understand why the company has so much cash. Why don't you take cash and buy the stock at a low price? He said, of course, this is your decision. He said, don't misunderstand me. I think the company is operating very well. In such an environment last year, especially compared to our competitors, the company operated quite well. In our analysis room, it is expected that this year we will, that is, last year, the whole year will lose losses, that is, every stock will lose losses. Now we are still winning.

First again, for your support and consideration, of course, we would like to have the better use of our cash on hand.

in order to improve our fundamental R&D expenditure is key to us. So I guess at the moment, we try to plan ahead and have the better use of these proceeds in order to spend on our new products because we believe that with new products on the market, that can improve our financial position and hence improve our company's stock value and market. It definitely gets undervalued at the moment, but then We believe that the market is somehow irrational at the moment, and hopefully it will back to normal trend in the future. Thank you.

It's the irrational market you should be taking advantage of. Thank you. That's it for my questions.

Our next question comes from the line of Walter Hill with Guardian Company. Please receive your question.

Recently, the perennial hot topic concerning U.S. trading China stocks being forced delisted due to refusal by either the company or the China government to allow these companies' books open to audits by the PCAOB for certification is back in the news. However, this time it seems for real in that the companies like Didi, NIO, Alibaba, JD, NetEase, and several hundred others It is mostly ADRs specifically under attack and are already arranging for China or Hong Kong listings. This was really highlighted last Friday when the average China stock, big or small, saw their share price drop 10% to 40% or more and followed through severely yesterday and is even following through again this morning in the pre-markets. On conference calls, Candy shareholders have been told, but not in writing, that Candy does not have the same risk. Aside from the fact Candy is a CCARP, not an ADR, and it clearly states in Candy's annual 10K audit opinions going back three years to 2019 that Candy is PCAOB certified, fully compliant with a U.S. SEC and Stock Exchange audit requirements for continued listing. But that does not seem to stop the stock market from punishing Candy severely as the rest over this situation yesterday and down another 11% to the mid twos. Can both Mr. Hu and the CFO once and for all clearly explain for the record all the preparations Candy's management wisely has been going back to 2019 to specifically shield candy shareholders from the same fate of forced delisting that some 90% of U.S. trading China stocks of all sizes are now worrying about. And you need to put out some form of a press release stating that candy is a C-Corp, not an ADR, and is fully compliant, PCAOB certified, fully compliant with all SEC requirements and stock exchanges, the average investor does not read a 10-Q. The average investor gets their information from looking at press releases. Most people that look at candy do not know this. So you guys need to get off your butts and put this out so that the average investor will know this and let's get this done.

Thank you for your question. Thank you for your question. And this has always been a hot topic and has recently become the headline news. It seems that this time it seems to be true. Like Didi, Wei Lai, Alibaba and many other companies, there may be hundreds of companies. Of course, most of these are ADR companies, which are foreign companies listed in the United States. They are particularly under attack. And some are saying that they may be arranged to be listed in China or Hong Kong. Last Friday, Chinese stocks, whether they are big or small companies, their average price dropped by 10% to 40%. This is very surprising. Condi, in the previous phone conference, did not use a very formal form. But we have said that we do not have the same risk as these companies. Because our company is an American company, uh, uh, Although so, it still did not stop the stock market from our company's extension. Everyone will treat us as all these ADRs. He said, although we mentioned it in the annual report, but as many ordinary investors, they will not look at our annual report. Everyone will know the company's information through our news at the fastest speed. He thinks the company should take the initiative to through the simplest and most detailed way of reporting to the market. It is clear that the Condi management has been doing a lot of necessary preparation work since 2019 to protect our Condi shareholders from the same fate as other Chinese and American stocks in the U.S. trading. And we are an American company, 我们的审计也是符合PCLB的规定的。 好的,非常感谢你的提议。 这个烂不合规的中概股被强制退市, 源自于美国的外国公司问责法。 其中一点是针对那些偏用不受PCLB监管的审计师,

In order for our auditors to be able to accept PCI-OB supervision, our company hired the headquarters in the United States in 2019 and accepted PCI-OB supervision auditors. So we think that our company is in the second position in the United States and can be supervised by ADCB in the United States. So we don't have this risk. But we Thank you for your consideration of this topic and your advice.

As you may know, those non-compliant companies from the Chinese-based stocks who get or maybe get the list from the stock exchange is based on the holding foreign companies' account of ad, the HFCAA. One of the key point is they're hiring the auditor that cannot have any work papers inspected by the PCAOB. So in order to meet that requirement, our company, starting from 2019, has already hired audit firm with headquarter based in US, and they can be inspected by the PCAOB routine inspection. This can mitigate our risk and we can believe that we are not having the same relevant risk of being delisted. And, of course, such disclosure was included in our upcoming 10-K in the risk factor disclosure. Apart from that, we will assess what's the best way under the compliance or the requirements of the disclosure that we can circulate such news to the investment other than our 10-K. Thank you.

Well, all I can say is that needs to be done, and it needs to be done now. Don't give me all this garbage that we're going to do this or that. You guys do not ever follow through on anything, and people are getting sick and tired of having their stock go down. And if you don't think now is the time to buy this stock, then you all need to be fired. We need to get rid of you all and get somebody else in there in your place.

He said the company gave too many expectations and promises to the market, but it has never been realized. He said we don't want to hear what the company will do in the future, but now. If he can't carry out the company's promises now, then this is a responsible behavior.

We understand your concern and frustration, and we definitely work harder to do that.

Thank you.

Thank you. Our next question is from the line of Harold Cadbury, a private investor. Please receive your questions.

Hello, Mr. Hu. Hello, everyone. My question is this. What is the status of Candy's special products, like manufacturing of third-party parts, such as for the hoverboard, or other third-party EV parts and product sales, like EV motors, batteries? Because it's clear in past filings that Candy is making third-party sales of parts and products, but other than the hoverboard motors and batteries, we never hear about the other parts and products. Can Mr. Hugh tell us what is going on in this segment, both future and present? Thank you.

Thank you. He said, um, he asked about some of the special products of Condi. For example, we make balance skateboards, motorbikes, and so on. These third-party parts or third-party parts for electric vehicles. Um, the sales of parts and products provided. In his previous SEC documents, he made it clear that Condi is conducting third-party sales of parts and products. But in addition to OK, thank you for your concern. Our business was originally electric vehicles,

In recent years, some electric vehicle companies in China have used huge losses as a price to increase the market share. We have gradually realized that the Chinese electric vehicle market has not yet reached a healthy and sustainable stage of development. Therefore, at this stage, it is not clear that our financial strength to participate in this competitive competition is low. Then we always believe that as long as the replacement technology is mature, pure electric vehicles can be truly popularized. Given that we have advanced pure electric vehicles, smart replacement equipment, and the ability to manufacture electric vehicles in the replacement mode, and a number of patents, so we will continue to improve and improve in the field of replacement network vehicles. When China's pure electric vehicle market reaches a healthy and interesting stage of development, we will make an effort. Currently, with the global In 2022, we will apply the technology of pure electric vehicles to non-high-speed road products and will launch many UTV, low-speed vehicles, high-speed SUVs, and cross-border vehicles. We will fully utilize the high-end technology of Condi in pure electric vehicles for many years to enter the non-high-speed road vehicle market.

我们相信在三年内我们会成为该领域的领军者。 谢谢。 So thank you for your concern. So as a matter of fact, we are aware of the market that, as you may know, in the Chinese market, the EV companies, they're trying to chase the market share, the occupancy with very aggressive pricing and even running huge losses. with their aggressive approach. While the China EV market took off early compared to other major economies like U.S. and European countries, we believe that the EV market has not reached a very healthy and orderly stage of development. Therefore, considering our financial conditions and the interest of shareholders, we think that it's unwise for us to participate in this lost competition at the moment. we firmly believe that the battery swap is definitely a prerequisite to universal adoption of EVs in the future. So by leveraging our advanced EV intelligent battery swap equipment, this technology, and then the manufacturing capacities of the EVs that enables the battery swap features, as well as our adoption of the patent technologies in such category of the battery swap, We believe that we'll continue to build our positions and enhance our fundamentals in the field of the online car hauling industries and the market with our battery swap mode. And we'll definitely make a full effort when the EV market in China enters a more healthy development stage. Apart from that, we are aware that in the whole major markets like U.S., European countries, those off-road vehicles, ATVs, UTVs, they tend to become more electric than the gas running in the past. So our plan is based on our technology in 2022, we will launch a few more UTVs, off-road vehicles, the golf cart, with the pure electric models. With our technology accumulated in the past, we definitely believe that we can be a leading position in the three years in both China and in the world. That's our plan and our goal. Thank you.

One little question. Hello? Hello? Yes. One little question.

Sure.

Are we supplying other companies with EV products or batteries, or are we involved with other companies for our sales?

I'm sorry, say one more time. Are we selling the EV parts for other companies? Is that what you asked?

Yeah, do we supply products and parts and that to other companies that are either competition or in the same line that we are in, in the EV, for example?

He asked us if there are other companies like us that also sell parts to third parties. Is there a lot of competition in this market? I didn't hear it clearly. He said that there are other companies like us that provide third-party parts to electric vehicles. Can you elaborate your question? Are you asking whether there's other competitors also in the same business that offering the EV parts as a supplier to other companies?

Yeah, I'm just trying to find out if we're supplying parts to third parties, to other people. For example, are we selling batteries to other companies?

He said he wanted to know, he said we are providing our parts to other third parties, right? Yes, because we...

Yes, addressing your question, we do. With our more events,

technology and experience in manufacturing different parts and batteries, we do and have an edge to provide such the electric vehicle parts and the batteries to other manufacturers. And that's part of our business.

Thank you. Thank you very much for everything.

Thank you.

Our next question. in the line of Paul King with PK Capital Partners. Pleased to see you with your question.

Hello, good morning. Our research indicates that NIO is leading the way in the battery swap technology stations throughout China. And now they are going global. And in the Scandinavian countries, they will be installing their battery swap stations. So it seems that their technology is recognized today. we have also discovered that NIO is working closely with the Chinese government in Beijing on becoming the sole or would like to be the sole battery swap station in China. What's Candy's opinion or perspective on that? And how does Candy swap technology or how do they plan to catch up to NIO? Thank you.

As far as I know, uh, uh, From your point of view, how do you see this problem? How will Kangji pursue the coverage of the Chinese market?

As I said before, the electric car market in China has not yet reached a healthy and sustainable stage. For example, in the future, he can only change his own car when he builds a new electric station. Other people's cars can't be changed. There is a standard problem in this. So there must be an electric mode in this. Any type of car can be changed. And there must be a power supply. Everyone uses his battery to design a car. At that time, the power exchange will really form a scale. And everyone can use it. But now this stage is far from that time. So we have to wait. But our power exchange equipment is able to

As for the China EV market, as we mentioned earlier, it's still not in a very healthy and orderly stage development. And as for NIO that you mentioned, the battery swap features, the offer only works for their own brand. Our goal and our vision is that as soon as all the standard is set, meaning the battery swap will be universal adopted by different brands, that will make the battery swap market and the whole field be more prominent and adopted by the regular users. We don't see that stage has been reached yet. But our own technology, however, enables the adoption, utilization by different other brands with some minor auto and tailor-made features. So I guess we are different than NIO because we try to offer our battery shop services to different other brands. And we'll wait until the time is right, and then we will enhance our market occupancy. Thank you.

Okay. So you mentioned earlier that producing EV cars in China is not profitable at the moment. So can you talk about the profitability of producing EVs for the car hailing industry that you mentioned?

Okay. Can you tell us about Condi, which produces and sells electric vehicles for online car projects? What is the profit rate in this?

Now, because the competition is very intense, we have reduced the scale. In this regard, we are improving and improving. It's not a big scale. Because now everyone sells electric vehicles at a low price. So we can only reduce the scale. We can only reduce the scale. As for your question, that's exactly our thought because in current market in China EV field,

is very saturated. However, it's not becoming healthy and orderly developed. So it's not very profitable or even having a huge loss to enter this market. So we try to scale down our EV market share at the moment. And in the meantime, we try to enhance our own battery swap equipment and the technology until the moment is right. Then we can go in the market. At the moment, we try to focus on the more profitable products, such as the electric off-road vehicles, the EDVs and ATVs, golf carts, those products. That's our focus for this coming year.

I'm sorry. My question was regards to car hailing. If it's not profitable to produce cars for the EV market, how is it profitable to produce EVs for the car hailing business that you're focusing on?

He said, I'm sorry, I didn't answer your question. I want to ask, if a production sales car doesn't make money, then I would like to know, if a production sales car gives an online car, how does it make money?

At this stage, it doesn't make money either. And as for your question, as a matter of fact, it's not profitable neither for the car-hailing products because they have the similar situation

and the conditions as other regular EV markets. That's why we mentioned that we have scaled down our production volume in the car-hailing vehicles and focused on the more profitable sector, such as the off-road vehicles and UDVs, etc. However, we try to keep our share in the market and keep our name in it, but we try to not spend too much to have the larger market share. We just try to have our position in the market and let people be aware of our assistance, and that's our major goal for now.

Thank you so much. Have a great day.

Thank you.

The next question comes in the line of Mike Pfeffer with Oppenheimer. Please receive your questions.

Hi. Thanks for taking my question. I'm going to make like one or two comments, and it leads up to my question, so that's okay. About six months ago, the company announced an acquisition in China's very hot lithium battery manufacturing sector of China-based Yiwashi Weihi, a seven-year-old award-winning lithium battery producer with over 300 employees to include 40-plus researchers and and holding some 50 related patents, already producing some 90 million batteries per year. This seemed a perfect fit for Candy's already noteworthy battery division, and that it brings Candy a coveted full China battery manufacturer's license to allow its passenger EV sales in China. Maybe you can translate that, and I'll go to the next part, please.

Okay. um um Okay, and then one more part.

The deal called for Candy to make an initial cash acquisition, which also called for a three-year share earn out for up to two and a half million Candy shares. To earn shares requires way he to have a minimum annual net profit of $2.3 million each year, including this year, or it loses a third of the 2.5 million shares each year it misses. Maybe you can translate that, and then I'll get to the question, please. Thank you.

Okay. 然后其中一个条款呢,就是现金收购要求这家公司呢, On the call right after the purchase, when asked if that $2.3 million profit should be reached this year, Mr. Hu projected yes.

And also shareholders were told Weihi should also begin producing batteries for EVs by the end of 21. So a few questions. Did Weihi reach its expected 2.3 million profits to earn its first tranche of stock last year?

And then after that, we had a meeting where Mr. Hu was asked if the meeting would reach $2.3 million this year. Mr. Hu was very confident that it would definitely reach it. And the shareholders also told the shareholders that they should start producing electric vehicles by the end of 2021. I want to know if the meeting actually completed the promised 2.3 million net profit and obtained its first part of the stock. This question is like this. It may not be clear.

As a matter of fact, their three years will evaluate the net income, the margin for each year.

The first period under our evaluation is from July 1, 2021 to June 30, 2022. So the first period is not completed yet, so that's why the company has not reached the state whether they can earn the first tranche of the stock or not. And we will keep you posted in the upcoming following.

Okay, just a few more quick questions. In December, Candy put out a PR about Weihi's new revolutionary lithium-ion phosphate battery, IFR18650-2200MAH. The release called this one of the most advanced on the global market, now entering mass production. Is this battery the new battery for EVs?

Okay, I understand your answer. My second question is, in December, Convy released the latest This is a new battery, 0.3 Li battery. And when it comes to this battery, it is one of the most advanced batteries in the world, and it will enter a large scale of production. Then I want to ask if this battery is a new battery made specifically for electric vehicles?

This is 0.3 Li battery, it can be used in all areas. It can be used in the gas station, it can be used in other vehicles, cars, etc. It can be used.

Actually, it's not solely for the EVs, and yet, however, it's rather more universally adopted, like EVs, different other electric, like the Hooverboards, scooters, they can utilize the same battery as well. It's just the battery with a higher power capacity.

Could Mr. Hu explain why this new battery is so much different or better than its competitors? Is it related to this high capacity you're talking about? 那您能不能再详细地给我们用白话解释一下,这款电池对于我们性能对手的这些产品,电池产品有什么不同,为什么更好呢?

The battery is like this. Li battery's energy density is the key indicator of the performance of Li battery products. So its high and low reflect the company's energy generation capability and technical level. Huiyi first launched 3C power in China in 2019. What is 18650 2000 amps of 0.3T Li battery. The product is better than the 1,800 Li battery The average capacity has to be increased. It is mainly higher than energy. It has increased by 11%. It will continue to improve itself and improve its technology. In November last year, it produced 2,200 ounces of 0.3TL of 18650. Successful production. It has increased by 10% compared to the 2000 produced in 2019. It is 22% higher than the level of the same industry. So I guess the CRUS is the power capacity that we can...

compare with other competitors. As you may know, energy density is one of the key indicators to measure the performance of the lithium ion battery product. And this level reflects our R&D capacity and our technical level of one entity. And Huiyi actually talks the least to launching such lithium-ion phosphate batteries back in 2019 in our China domestic market. At that time, the product is 11% higher than the average in terms of the capacity. And then with their continued self-improvement enhancements, Huiyi then developed a new set of batteries in 2021 November. The new product has been successfully mass-produced, and then the new product compared with the product we launched back in 2019, it enhanced a further 10 percent of the capacity with a higher energy density level. With these more new products launched, it makes us either having the leading position in the domestic market in China and also one of the most advanced position manufacturer in the whole country, in the world.

Okay, thank you. And the last question is, how does this tie into Candy's existing multi-year operating battery division? Thanks. 我的最后的问题就是,我们康义其实已经有一个

How will the membership of the conference be integrated into our current battery department?

Our original battery department is Pike, which is to buy electricity to make components and install them in the car. The conference is dedicated to producing electricity. This is a top-down relationship. We are currently

As you may know, we used to purchase the origin and then the roads of the batteries from other manufacturers in the market. With the acquisitions of Hui Yi, we can now consolidate is battery production features and apply that in our different parts, different divisions in our EV manufacturing. That we can enhance our whole production chain and make the whole different divisions developed altogether. So basically, there's a good synergy between Huiyi and our original EV production line.

Thank you.

Thank you.

Our final question comes from the line of Ray Parmalou with Ranging Capital Consulting. Can we please concede with your questions?

Yes, hello. Having followed the company for a decade or more, it's initially because of your battery exchange program. I'm surprised to hear that you have decided strategically to scale down your EV production. At the same time, you have this partnership announced with Hang Run, which is a company that has a very wide array of vehicles they're producing. So are they producing EVs for which you supply the battery exchange technology? And furthermore, are you producing battery swap units for other companies at all? Are they in operation, or what is the plan on it? And then I have a second question.

I want to know if the company is now producing batteries, and whether the batteries produced are sold to many other third parties. Hi. Are you referring to Henry or Henry, right?

Well, whatever you pronounce it, the Chinese company that you're partnering with for the battery swap, they seem to have a wide platform of various vehicles they're already selling. So if you're not producing EVs yourself, are you producing battery swap exchange units for EVs? the use of other companies like Hangran or Hangrong or whichever way you pronounce it.

Well, both companies are in battery. One is Hongrei, which we announced in January. The other one is Huiyi, which we announced last year. Which one are you referring to?

It doesn't matter. I'm interested. Are you selling... battery quick exchange units at all? Are they in operation? What is your plan on it? If you're not producing EVs, are you producing the quick battery exchange units for sale, for use of other companies, for other makes?

Okay. He said that

Yes, our electric vehicles are still in production, but the announcement will be made in China, and it will be sold in the online car market. But the quantity will not be too large, because now, especially in the recent period, a few factories are struggling with losses. So a few years ago, I think it was normal. But recently, everyone is struggling with losses. Whoever is cheap, whoever sells more, is selling at a loss. So electric cars, we are now still, electric cars that don't change, we are still constantly improving and improving. Until this country continues to develop, we will fully exert ourselves and make it bigger. You said earlier that you were surprised. Because of the current situation in China, everyone is losing money, selling, and fighting the market. This is one. Then, So there are two parts to your questions. First of all, we are working with Heng Ren in order to get our filing approved by the local government, which is expected to be sometime in 2020.

quarter two in this year. After that, we are eligible to manufacture and sell the EVs in the domestic market. However, we will try to limit our production volume to a rather considerable less amount because of the disorderly stage of the market as mentioned. Recently, there are few competitors in the market The EV manufacturers, they try to, in order to enhance their market share, they're even selling the product with a negative margin. And that's not the plan we try to adopt because we try to reserve our financial resources. So we'll wait until the market is getting more orderly, more healthy, then we'll spend more effort to manufacture and sell more EVs at that moment. But at that point, at this point, we try to limit our production. And the plan is only to have our considerable image of that, you know, we are in the player in this market. We have our existence. However, we try to limit our production in order to to reserve our potential position for the benefit of shareholders and the company.

As for the second question about the... Yes, you mentioned that already three times throughout the conference call. My question was, if you're not producing EVs yourself, are you producing your quick battery exchange units for other companies, for other makes of EVs?

He said, you've already mentioned it three times. I was thinking, if you don't sell electric vehicles now, are you... Because the battery swap is not mature at the market. It's not that very prominent.

Each brand, each company, they are trying to develop their own standard. So consequently, there's not really a sales of the battery swap equipment to other companies because we only fit our own use, and other companies, they try to develop their own model as well. So no, there's no plan to sell our EV battery swap equipment to other companies at the moment.

I see. So... Since other companies are making headways in installing battery exchange units widely, how do you want to protect your technological advances that you obviously do have in the field?

Now you have such an advantage, how do you rush to them? How do you infiltrate the market?

Now we are doing a lot of construction, we are all losing a lot of money, everyone is spending money, but these large number of construction sites, the electric car is not really on the scale yet. We follow this in technology first, we have said many times before, Yes. Yes.

At the market right now, there are some major players. They try to spend aggressively, even with a huge loss, in order to gain the market share. However, as I mentioned, the market is not mature yet. Even though they built all the battery swap stations, the utilization rate is rather low. It's not prominent to the regular end users at the moment. Of course, we'll follow the technology, we'll enhance our own fundamentals, but we try not to enter this aggressive market because it's really just burning money and with our cash on hand, it will not be sufficient for us to enter this market in the long run. So we'll wait until the market becomes more healthy, it will be more cost-efficient, And margin-wise, it's making sense for us to enter in the future, but not at the moment.

Thank you. That's helpful. Can I add another question, please?

Sure.

Yes, please. Thank you. So from your explanation, it appears you are bound on reserving cash and you're sitting on a, very ample supply of cash that's probably above $3 per share. Since markets are widely manipulated and markets are also depending on psychological aspects, with a company that is sitting on hundreds of millions of cash and is undervalued with a 50% discount to book value, it does not appear that the owners of the company and the majority owners like Mr. Hu believe there is value in the company to spend for buying back their own shares. So that's a large concern for shareholders. Why do you believe it's not valuable to buy your company at a price where actually you're not only having a discount to book value but to the cash per share? How could you spend your money better if you believe in the company?

His question is like this. Back to buying stocks. He said that now the company has a lot of cash. And compared to our account value, it's only 50%. If the management of the company, including Mr. Hu, you don't trust the company, you don't have confidence in the company, you have such a low price limit, Thank you.

Actually, we have already answered such similar questions in the past, so we're not trying to elaborate too much, but long story short, we'll stick with our shared buyback plan and enter the market in the right moment.

So if our employees and C-level executives then also foregoing getting cash or buying or share compensation as incentives while they're not buying back their own shares and waiting for the markets to change?

He said, if I'm the management of the company or the employee of the company, I also get these stocks as part of my income. And the company itself doesn't buy back the stocks, Are you waiting for the market to change? We are also buying back. But if I buy, will the stock go up?

The big picture is here. We will make a decision based on our actual situation.

We are actually, again, a big gift of our plan and try to, you know, we're actually, as you may know, we have already bought like $4 million of the shares in the last few months, in the end of last year and another batch in January this year. So we will continue to proceed with the shares buyback with our plan. However, the thing is, even though we are competent with the shares, but if the company's Again, spend more money to buy the shares. It's not necessary, meaning the shares price will increase. So again, we will consider the whole market conditions and proceed with our shares buyback plan in the future.

So you're basically saying you don't think the company is at $2.50 a valuable buy for yourself, but you're preserving the cash you have for compensation for employees and for incentives and bonus shares for the company as a compensation plan. Is that correct? 那您是不是觉得在公司价格是2块5的时候不是你

It is not a price that is worth your repurchase, but at the same time, you give the company employees and management to reward them in the form of stocks.

Do you think this is the right way? Of course, we think, I didn't say that we don't repurchase now, we have a plan, right? As long as we do things well for the employees, So I guess our plan is, again, we will stick with our own buyback plan, and then as for the compensation, we just offer them with a standard package.

And, of course, we are not trying to manipulate the share price ourselves because that's not complying with all the SEC rules. So we just try to enhance our fundamentals, and hopefully the share price will be improved.

Well, I wasn't implying that you manipulate the share price. I was saying, do you believe the company at $2.50 is valuable enough to use the money that you have in the bank to buy your own shares? What do you think it's not valued correctly at $250 and should be cheaper? If you think it should be valued higher, it would be a pertinent investment into the company's benefit and the shareholder benefit.

I didn't say that you didn't say that the company needs to control the stock price. I think the stock price is now $2.50. Thanks again for your consideration. We'll definitely take your advice and consideration and proceed in the future.

Thank you. Appreciate the response.

Thank you. At this time, we've reached the end of our question and answer session. I'll turn the floor back to management for closing remarks.

Thank you again for attending today's conference call. Look forward to our next call. This concludes our call today. Thank you.

You may disconnect your lines at this time. Thank you for your participation.