Kandi Technologies Group, Inc.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kiwa Luo, Investor Relations Manager for Candy Technologies. Thank you. You may begin.

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

Hello everyone, I'm Xue Qingdong.

the CEO of Candy Technologies Group. Welcome to today's conference call. Looking back on the challenges of 2023, I am very proud of the success we achieved through our strategic pivot into off-road all-electric vehicles and associate parts.

2023 is a year full of ups and downs for us. We developed a pure electric TV electric mini golf carts, and other new products and pushed them into the market. On the sales channel, we strategically acquired a northern corporation. On the basis of strengthening cooperation with Lois, we expanded our cooperation with more supermarkets and retailers, and expanded our market coverage in North America. In 2023, we achieved a change from loss to profit. Sales revenue is the highest point in history in the past three years. Our net profit has increased by 112% 2023 was

a landmark year for us as we developed and launched new products such as electric UTVs and electric mini golf carts. We beefed up our sales channels by acquiring Northern Group and expanding collaboration with Lowe's. At Lowe's, we grew our partnership by partnering more of their super centers and dealers, thereby expanding our coverage of North America. In 2023, we returned to profitability. With revenue hitting its highest level of the past three years, gross profit increased by 112% to $40.4 million. And we achieved a net profit of $1.7 million, a huge swing from the $12.9 million net loss in 2022. These achievements laid a solid foundation for our future growth. strengthening our belief in the potential of the electric off-road vehicle market.

我们有信心在2024年实现大幅增长,并持续努力为客户和股东创造更大的价值。 希望我们的战略调整能得到广大股东的理解和支持。 As we look to 2024, our enhanced focus on research and development will enable us to introduce more competitive all-electric off-road vehicle products.

This strategy shows our confidence in the company's future growth and is a pledge to boost shareholder value. By addressing the growing demand for electrified off-road vehicles, we are confident we can achieve significant growth in 2024, which can translate into greater value for our customers and shareholders. We hope our strategic shifts are understood and supported by you, our shareholders.

Now we will move on to the Q&A session. Chairman Hu Xiaoming and I will answer your questions, and Ms. Kewa and Ms. Alan Ling will provide translation for English questions.

please go ahead and ask your question. Operator, please go ahead.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star key. Once again, it's star one to ask a question. One moment while we pull for questions. Thank you. Our first question comes from the line of Mike Pfeffer with Oppenheimer and Company. Please proceed with your question.

Good morning. A couple quick comments and then a couple quick questions, please. In January, according to the Candy American Facebook page, Mr. Who came to the U.S. and with senior management and first visited the PGA Expo where Candy got Coleman Lowe's and its first 10,000 golf cart orders in 2022. Candy was honored by the Expo as an innovator with its patented expandable mini cart by the NBC Golf Channel. Afterwards, he went on to meet with Lowe's home office management to plan Candy's expansion to for this year and beyond. Maybe you can just translate that quickly, please.

Sure. 根据美国在康迪美国的 Facebook 脸书页面, 看到一月份的时候呢, 胡总来到了美国以高管的一起 参加了 TGA 博览会这个 show. 当时就是之前康迪在 2022 年 获得了和 Lowe's 的首个 1000 辆高尔夫球车的订单。 And this year, at the exhibition, we also received the MBC golf channel, which is for innovation, patent and expansion of mini golf ball cars. And then, the management team also met with the Lowe's headquarters management team to plan the expansion plan after the year of Condi.

Thank you. A few weeks later, another message came up on the Facebook page announcing that Candy was invited to present its current line of golf carts, cowboy side-by-side, e-bikes, etc., at Lowe's annual all-hands manager meeting. From the looks of the video on the Facebook page, it appeared that Candy was given the largest and prime location in the display hall and from pictures was inundated by Lowe's managers. Not surprising since Candy has the highest price of products sold by Lowe's and managers' bonuses are based on the dollar volume of sales of their store. Here are a few questions. Maybe you can just translate that and I'll go to the questions quickly. Thank you.

然后几周之后呢,在同样脸书上面呢,又看到了一部消息上面讲到就是Candy被邀请在Lowe's的年度全员经理会议上展示 The current golf ball car cowboy brand seat and then electric bicycle and other products line from the page of this face book On the page, I saw that it was the best and largest position in this exhibition and was also very popular with the managers of this Lowe's. This is actually not surprising at all because of the Since Lowe's has now worked with Candy for over a year, can Mr. Hu give us any color on just how big this Lowe's relationship can evolve? 既然现在咱们跟Lowe's已经合作了一年多了, 胡先生是否能提供一些关于 What has the relationship with Lowe's developed to give more detailed information? We are very happy that our products can be pursued by Lowe's.

This fully shows that our cooperation with Lowe's over the past year is very pleasant. I think as we continue to work together, in addition to golf and basketball,

We are glad that our products are popular among the customers of Lowe's. This shows that our cooperation with Lowe's for more than a year has been pleasant. As our cooperation between the two parties continues to expand and deepen, on top of the golf carts that we are currently selling, There will be other products will continue to be sold in the retail stores of Lowe's. We believe that our cooperation with Lowe's will continue to expand and deepen.

Thank you. As compared to Walmart, which at least for now does not seem to stock the carts locally, Lowe's seems to have a rotating inventory in the store of various candy products. What are the payment terms that candy has with the various chains, primarily Lowe's and Walmart?

Walmart, at least from the current point of view, does not recommend our vehicles for local storage. Compared to this, Lowe's seems to have a variety of Condi products in the store, and has a vast storage. What are the payment terms for Condi and these major chain stores, mainly Lowe's and Walmart? We and Lowe's

Please note that the payment terms we have with Lowe's or Walmart and some other super stores are confidential.

But what we can say is that all the payment terms are strictly following the terms agreed upon by both parties.

Okay. How many more Superstore chains over and above the five we currently know does Mr. Hu think Candy will add over the next 12 months, and how many outlets are involved?

So this year, we are strengthening our cooperation with Lois. Currently, we have increased our cooperation with more than 10 supermarkets. These supermarkets are already testing our products. In addition to cooperation with supermarkets, we will have more than 1,000 new stores in 2023 and more than 1,000 in 2024. Thank you.

So for this year, on top of what we are working with the lowest superstores, we have now added the cooperation with more than a dozen or so of the retail chains with different scales. Currently, we are working on the child sales in those superstores. In addition, on top of the cooperation of the supermarkets, we are working with the dealership with more than 300 partnerships during 2023. And in this upcoming 2024, we are trying to work with more than 1,000 dealerships in the U.S. market.

Thanks. It appears that a few states, including Texas, have not yet approved the Candy Cowboy side-by-side for sale. Can you tell us what the holdup is and when it may be released?

It looks like some states in Texas haven't approved the Candy Cowboy yet. Thank you.

Regarding the sales plans, like what kind of products or the timeline, it's based on the sales plan with our partners and is working accordingly. Currently, our corporate products is selling based on our selling plan. Thank you.

Last question. Thank you. In 2023, it appears that candy sales at the big box stores were mainly golf carts. What new products are being introduced this year and then next year? Thank you.

My last question is that in 2023, the main consumers of Condi's large chain stores will be golf balls. Which new products will be launched this year and next year?

The company will continue to launch golf balls and other series of products that are extremely competitive, such as pure electric non-track cars. At the same time, we will also launch car-friendly

So on top of the golf course, we'll gradually launch different other highly competitive electric off-road vehicle series. On top of that, we're going to launch the lithium batteries for different kind of utilizations. Moreover, we plan to develop the electric water Thank you.

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

Okay, can you hear me?

Yes, I can hear you.

All right. At the last bullish November conference call, Candy traded at $3.40 a share. At that time, it was a premium to its reported $2.89 per share in cash and CDs. A few days ago, it traded below $2.30, just above its 52-week low. I said bullish based on the CFO's response and that question last regarding the announced purchase of Candy's second 75,000 square foot distribution assembly facility in Garland, Texas, which increased the total capacity to 125,000 square feet. In the PR that announced that, one of your people said, Candy America intends to drive growth through geographic penetration across the U.S. with this and additional distribution centers This will likely be key to fueling demand in a timely and courtly effective manner. That was a quote out of that. Let me follow it a little bit here. The shareholder follow-up question went on to ask, is it safe to assume with this added capacity reached over the next two years that revenues could approach $500 million? And that was the question. The CFO's response was, quote, the purpose of purchasing the new warehouse in Garland, Texas, is to increase our sales capacity. our sales in the state will definitely increase in a more significant manner. Go ahead and pass that on to him right now.

Okay. $2.89 per share and $50 per share. A few days ago, the stock price fell by $2.3 per share in the trading day, which is the lowest point of 52 weeks. The reason why I said it was a rise is because of the answer of the chief financial officer, CFO, to a question. The question is about the company's announcement of the purchase of a new 75,000 square meter distribution and assembly facility in Texas, a new 75,000 square meter distribution and assembly facility in Texas, So the shareholder then asked, Through the interpretation of the content published in the news, the management team's idea is to ask whether we can assume that if we achieve this increased productivity in the next two years, the company will achieve nearly $500 million in revenue. Is this feasible? Go ahead. Okay.

He went on to say, and this is a quote out of it, our goal of sales target is estimated to be close to $500 million within the next two to three years. He also said, quote, it is estimated that the gross profit margins for the whole year of 2023 would be above 30%. If even close to achieving these targets, the CAGR, compound annual growth rate, would be over 80%. Gross profit around $1.75 a share. in that year, which I assume he's talking about is 26. Obviously, with the stock down 40% since the last conference call and 85% below its all-time high, not only is the market not believing management, it's betting on a negative growth over the next few years. This is despite the company announcing a $30 million share buyback right after the last conference call. I have a few questions to follow up, but I'll just say that to them first.

According to the translation he just gave us, CFO predicted that the next sales target would be close to $5 billion in two years. And the annual profit margin would also exceed 30%. If the reality is close to these goals, that is to say, it will achieve more than 80% of the annual growth rate. The net profit per share will reach $1.75. However, the share price has dropped by 40% since the last phone meeting and 85% since the highest point in history. This means that the market doesn't believe in management's predictions. Go ahead. Okay.

Do you think maybe the major price decline could have something to do with no press releases in over four months, and when candy in years had put out over 40 a year for the past 10 years? Let's make it two.

Let's make it two questions. Okay, go ahead. Let's do one question per time, okay? Okay. Okay.

所以我们还是坚持一个比少说多做的方式。 现在随着我们的业绩不断增长, 接下来我们会加大相关的宣传力度。 We have been through the strategic shift in the last two years that caused uncertainties. That's why we stick with a more conservative approach of the PR effort.

As our performance continues to grow and become more steady, we will definitely increase our PL effort.

Well, that's quite obvious with the stock being down, but you're not doing any effort to get public relations out. I think that's very bad. Stocks need to be promoted. It's not by management, by analysts, or somebody. But let me move on. Does management still stand by the target of $500 million in sales and 30% gross margins over the next two to even three years?

During the fiscal year 2023,

We achieved a turnaround from net loss to net profit. So we are convinced that the sales and profit will continue to increase significantly in the next two to three years. Thank you.

So you're not standing by that 500 number, but that's okay, I guess. Why do you not report non-GAAP numbers as well? If you were to report, you know, what was it? About $11 million in non-cash charges for stock-based compensation, that would have added 12, at least for analysts to look at, they like looking at that number because it's a one-time item, it's a non-cash charge. And in this particular case, we would have earned 12 or 13 cents for the year. If it was any other company, it would report the non-GAAP.

Why does the company not disclose the data that non-GAAP does not meet the accounting criteria? Because the company has a one-time non-credit expenditure of about 11 million yuan. Because if you do this, you can look at the company from different angles. At least the analyst can see that if the company does not count the non-credit expenditure, the company can have a better Non-GAAP.

Non-GAAP. Non-GAAP.

Alan, you can... Alan, can you explain the situation? Okay.

I'll explain it in Chinese. First of all, if we don't have two non-GAAP examples, we try to improve our data according to the most basic SEC requirements. In addition, this also depends on some suggestions from the previous audit. We try to make sure that all the data from our financial statements can be completely consistent with GAAP, the U.S. financial standard. 那些非遮鬼的披露方式,其实这个是公司的选项。 目前我们比较保守,先希望把所有的准确的数据上报。 吴总,你对这个有什么补充吗? 可以,可以,就这样做到翻译了。 你翻吧。 So what we're doing right now is full gap disclosure. We stick with the complying with the SEC disclosure regulations and requirements. So basically, we would like to present an accurate presentation to investors without too much confusion. And second of all, it's based on the recommendation from our auditors to present GAAP-compliant figures. We're trying to take a more conservative approach to present the exact correct amount to all the investors and regulators. But what you mentioned, we may take into consideration in the future. Thank you.

Am I ready for my last question here?

Yes, please.

Okay, well...

First, a comment to that as well. Well, again, that costs us about 12 cents a share in earnings where any other firm out there would report both sets of numbers. Analysts, particularly in tech-related companies, don't even care about GAAP anymore when they put out their research reports. They look at the non-GAAP because they know that these companies are putting out shares all the time. So, I mean, as far as stock-based compensations, a lot of times they don't even get exercised. So, again, it cost us about, we would have had probably 14 to 15 cents in non-GAAP income for the year instead of just showing 2 cents. And I can promise you the stock would not be trading at 90 cents under cash or 70 cents under cash in a bank. You have $3 a share in cash in a bank now. On top of everything else that's been growing. And I see you also bought back, am I correct, over 700,000 shares of stock so far since December when you started the share buyback?

This is the question, whether we have bought back 700,000 shares. I think we disclosed all the shares back in the K. Is that what you're trying to ask?

Yeah, there are two sets of numbers in it. One was, I mean, you didn't start buying until probably December because you announced it the last week in November. And that shows about 175,000 shares last year. but you also have a subsequent event there that shows over half a million more shares were purchased. So my question is, have we in fact repurchased somewhere between 700,000 and 800,000 shares in just the past couple, three months?

So your question, whether that's the number, 700,000 we have purchased, right?

Right. I mean, that's the number that you have. I just wanted to make sure you have two separate numbers. It does seem to say that In 2023, you purchased around $180,000. And I guess so far, you've bought over half a million at an average price of around $274,000.

Okay, let me translate so far. He said I'm not... Just now, when you answered that question, he gave some comments. He said it's not that you don't disclose it according to the rules, it's just that you're disclosing another kind of data. It's... It doesn't include the cost of you sending the stock. He said that many high-tech companies will do this, because high-tech companies often send stocks. And now many analysts don't really care about this way of disclosing GAAP. They will also look at what kind of data the non-GAAP way will be. He said that if our company's In this case, if we also report this non-GAAP number, we may increase the profit per share by at least 12 cents. In this case, we will go from 2 cents to maybe 10, 14, 15 cents. So he thinks this way is more transparent and fair. In addition, I would like to ask one thing. from last December to now, how many stocks have we repurchased? I saw two sets of data in 10K. One set is in our report, we saw that we bought about 180,000 stocks until December 31st. Then in the climate chart, we saw that we bought about About 500,000 shares. So we should have bought nearly 700,000 shares. But I want to make sure if these two groups show the correct data in 10K respectively. And then how many total numbers have you bought so far? These two data add up to about 700,000 shares. This is the total number of shares we have repurchased so far.

Just now he said that the previous adjustment, I think his suggestion is very good. We may adjust it according to this next time. So how many data do you have in total? Just add it and tell him. How much did that stock buy? This is right, right? More than 200,000 last year, more than 500,000 this year. It should be right. It's right, Hu Dong. This is right.

So as for the amount of the shares we have purchased since December until February, the figure we get is correct. It's roughly 700,000 shares we have buyback in the last two, three months. Correct.

That is pretty impressive when you consider the average daily volume is straight down to about 60,000 to 70,000 shares a day, and you can only buy 25% on any given day of the average daily volume. But What about insiders? We used to see insiders buying this stock at $4 and $5 a share in years that they were losing money hand over fist. We haven't seen Mr. Hu or Henry Yu or any other insider buy a share of this stock in two and a half years. And if you're doing 10B5s with the corporation, that should not restrict inside, you know, executive buying as well, at least if it's not within the window. 如果公司买了70多万股,这还是非常名人。

China. You may go in there to tell you. Yeah, I'll be on board. Yeah, I'll be on board. Yeah, I'll be on board. When the company's stock was trading at 4.5 yuan, the management, such as Mr. Hu and Mr. Yu, would buy it. Now the company's stock price is so low, the company also has this 10B5 plan, and it will not affect the management of the company to buy it. Why didn't Mr. Hu and other executives buy it back? China's foreign exchange management is very strict.

We are now thinking about how to buy it, but the RMB will not go out.

我们还在努力做这样的事情。 Well, for management, especially those from PLC, because of the restrictions of the foreign currency disbursement, so it takes us more effort to buy the shares, but we definitely will have such plan and proceed in the future. Thank you.

With the stock trading 60 cents below cash, I can't imagine the time being any better than right now than worrying about the future, unless you just like paying higher for it. Anyway, with all this cash we have, now it's almost $3 a share, and it's gone up every quarter, which is amazing this year. Are you going to make an acquisition with that? Are you going to buy a manufacturing facility, maybe in the U.S. or Mexico? Or how about just doing a straight 20 million share buyback at $3 a share. Just don't worry about Dutch auctions or anything else. Go ahead and tell them that. I'm just about done.

I'm sorry. Can you repeat the last part? You said if we're going to acquire any facility in the U.S. and Mexico and what's after that?

Yeah, what I was saying. No, what I was just saying. Or maybe make an acquisition with this cash. Maybe a manufacturing or maybe... Buy another company or do an actual tender to buy. I mean, there's no better. There's no more undervalued stock than your own right now. You're trading a third of book value. You're trading, like I said, 80 cents below cash in the bank. Just go out and make a $20 share tender for, I'm sorry, $20 million share tender for $3 a share. I doubt you'll get anything wanting to meet it, but at least it'll wake up the market.

He said that now the company has so much cash, and Condi's stock is also very, very underestimated. Now it still holds $2.5 billion of cash, which is almost counted as $3 per share. Will you consider buying any production facilities in the United States or Mexico, or just directly use this cash for acquisition? He also said, or do one, for example, you use $3 per share, This is what we are all working on.

Yeah, we are striving to work on it, including we are considering the plan for any possible acquisitions or the facilities set up. And as for the shares buyback, yeah, we will work on it. Thank you.

Well, that didn't really answer my question, but let's just face it. You're talking about maybe buying a facility in this hemisphere? Is that perhaps what he was just saying? Mexico.

Mexico.

Mexico. Mexico.

Mexico. Mexico.

As you mentioned, we are really seriously considering such plan.

Considering there are some other factors like from the political, the economy, we will definitely take those all into consideration. And if there are further development, we will timely disclose to the public.

That might be a surprise. One last question over here. I don't know. We don't even know who the chains are. I mean, all the company has reported in press releases has been that Rural King and Peavy in Canada, who have a total of about 410 locations. Can you go down the list right now and tell us what other, Walmart, Amazon, just a whole list of who

we're doing business with right now.

I'm sorry, you want us to go the list of... Again, you've only put press releases out on PV Mart and Rural King, a total of 410 locations. We know that you're in Walmart. We know you're in... What's the name of that... Marcus Limonis' company, Camper's World, and we know you've got your own Amazon site. We've never seen any press releases. So an average person looking at it would think that you only got 400 locations, but you got $60 million in inventory. So what other locations do you have within the United States or in the area or close to?

He said, can you list in detail how many stores you have in the U.S.? Because it looks like from our news, we have cooperated with Walmart, Rural King, Campus World, and Amazon. We also mentioned Amazon online, but we didn't see it. But we have about 600 million of this inventory, which is very difficult to connect these points of cooperation with our real cooperation points. Can you give us a little bit of information about how many sellers we have and how many stores we have now working to sell our products?

uh uh

For example, Costco has already started to sell out. So how many stores do they have? Because their stores, for example, always have more than 1,800 stores. So there are also thousands of others, hundreds of others. We haven't added how many stores. But this year we will be in the street. It's the gold box here. We used to have more than 300 stores. This year we will increase to more than 1,000 stores. So it's very tense to start shipping in March. Well, I noticed that you would like to know exactly how many the retail stores

we have our exposure to. It's hard to confirm because what we can confirm is how many the companies, like the company, megastore company or the retail chains we're working with. We are working with over a dozen of those megastore companies and the retail chains in different scales. But then each company, they have a number of the retail stores that not all of them necessarily will sell our products. So I guess it's easier for us to disclose the number of the partners we have working with instead of the retail store number to give more accurate figures to the public. Besides, currently we're working with over 300 dealerships in the US market. We expect to expand our exposure to over 1,000 of those channels to dealerships in 2024. We expect that the sales and the volume will continue to improve this year. So that's what we can tell you for the plan of the sales.

Okay. That pretty much answered my question. So right now, I think I named five, and you said you're working with 12. So maybe they should explain why they don't want to give up the names in press releases. I understand that. I'm not hoping against it. But to give the shareholders a reason why you don't put the names out.

Well, see, we are

Working with those different types of the superstores and the retail chains, and apart from the five that you have found out from the public information, the rest actually are doing the trial sales of our products. That's why it's not 100% like finalized yet. We're still working on the terms and the sales plan among both parties. We will disclose more public information when it's all finalized.

Okay. Okay.

We would like to add more, Carlo, that as you may know, just like what we have been through with Lowe's, the sales form with Lowe's is pretty material, but then we need to have their consent for the public information disclosure. But then many of those thoughts, maybe they decline so because they're working on their own sales plan. So, you know, they're just confidential at the end, and that's how it works in the business world. So we have to, you know, get the consent before we can give our information, even though we want to. We have to stick with the terms of both parties. We're working on that. We try to release more information in the future, and trust us, we're working on that collaboration.

And besides, even though we've entered the agreement of ourselves with those parties,

it would take months for them to finalize and go through the legal and other departments before all the information becomes public. So there will be a time lag, so I hope you understand that.

Look, I 100% agree with you. That's what I was hoping you were going to say. We understand. But, you know, the only ones we have, like I said, we've had to find out on our own, those doing individual investigation in the past. But if they don't want to say who they are, why can't we do something and just put out on the website, for example, just put on there the total number of chains. If you can't name the chains, just put total number of chains or total number of stores that have been increased to a certain level, just something like that. But anyway, look, I think you're doing a great, great job with Lowe's et al. You're doing a terrible job. in getting the stock information out. It's got to be an ultimate embarrassment. You've been trading under cash in the bank and half a book value for two years now. And in the meantime, you added Lowe's and Walmart and Marcus Lamonis' company. You know, I mean, these are big people. These are big companies. And somehow, if you just put out that you passed 20,000 vehicles made or 30,000 vehicles made, you know, it just, Or just generically, you could put out and say, we're now up to 12 chains. You don't even have to name them. Something like that. Just stay in touch with the public. We haven't had a press release since November. Okay? And no new product one. I mean, Johnny Tide does his own press releases for Candy America, but they're dedicated to the trade journals. They don't necessarily show up on the Wall Street tiers. Okay, I'm done. Thank you very much. It can only go up from here.

Thank you. He said that since November, there has been no real news. For example, you mentioned that there are already 12 companies. You can mention in the news that there are already 12 large and large companies cooperating with each other, and that they are going to launch a lot of cars. You don't necessarily have to point out who it is. There are other ways to say it, but you have never said it. County, America, they have their own news. But, David, listen to what I said. He said County, America, does have its own news. But their news department is more focused on their industry. and the overall layout of the company is two different things. Anyway, I've already said so much. The company needs to carefully consider how to get these real data out. Because we have to dig through our own research to know how the company is progressing now.

Okay, I'll take the next question. I'm sorry, sorry. Alan, go ahead.

Thank you for your opinion. Thank you for your support. We definitely take that into consideration, and we will strengthen our PL effort. Thank you.

Thank you. Our next question comes from the line of Frank Blatterman, private investor. Please proceed with your question.

Well, yes, and a good evening to those of you in China. I have two quick questions. Is a Dutch auction still under active consideration? I didn't quite understand the answer that was given to Art. My second question, take care of the first one.

Currently, we did not adopt the Dutch auction for the shares buyback. However, the company is undergoing the shares buyback process.

For more detailed information, please refer to our 10-K disclosure. Thank you.

Okay, thank you. And my second question, I, along with many of the longtime shareholders, invested in the company due to the electric car business. Do you have any plans to reintroduce electric cars, perhaps with quick battery exchange in the future?

I and many of the company's long-term shareholders, we invested in stocks because of the company's pure electric car business. Will the company still develop this piece of pure electric car, this business of fast charging? This is because China's electric cars are relatively short.

Now everyone is struggling with more losses. So our focus is now on the non-track road. Um,

Currently, because of the market in China being too competitive, even unhealthy, you know, for the EV industry. That's why we shift our focus to the electric off-road vehicle series for better return in terms of the financial perspective. But definitely, you know, like in the EV product, the battery charging, we are working on it. at the current, and we will see and assess the market. When the time is right, we will enter in a more active approach. Thank you.

Thank you very much.

Thank you. Thank you. Our next question comes from the line of Steve Miller, private investor. Please proceed with your question.

Thanks. For almost two years now, I've been tracking on a daily basis seven days a week using U.S. import data. candy shipping container imports coming into U.S. ports and compiling various cargo information from the accompanying bills of lading. I received the data within 24 hours of port arrival. So I've got some questions relating to your imports so I can gain a greater understanding. Qiwa, can you go ahead and translate that?

Every week, every seven days, every day, I will use my network to track down the goods that the company delivers to the United States. I want to ask some specific questions about the company's exports.

Go ahead.

Great. Thank you. Whether those containers arrive at the ports of Houston, Los Angeles, or Long Beach, SC Autosports is listed as the recipient on the bills of lading. Do you ship any product to the United States from China that does not bear SC Autosports name on the bills of lading? That is, is any product sent directly to a US or Canadian customer from China? Regarding the latter, if so, are those contents fully or partially assembled?

I'm sorry, can you repeat? My understanding is you said you have seen we shipped a container to Houston, Los Angeles, and Texas, and what's the second part?

Okay, my question is, all the containers that arrive at any of those ports are shipped to SC Autosports. without regard to whether it's Houston, LA, or Long Beach. I want to know, does Candy ship any containers directly to a US or Canadian customer outside of SC Autosports directly? And if so, are those contents in those containers fully or partially assembled? That's my question.

Okay. He said he saw that the company moved these things to several ports in Houston, Texas, Long Beach, and Los Angeles. It's all marked on it. It's SC Autosports. Did our company just put these goods together and move them directly to B2C customers?

So there's no direct delivery from our China base to those end customers. We have two assemble points in U.S.,

One is the primary point in our Dallas base where our SCO2Sports subsidiary is located. There's another assembly point in Los Angeles. So once the products assemble, we will then ship the end products to the dealerships for them to deliver to the customers.

Okay, so you have some kind of a receiving or distribution facility in LA but not in Long Beach. So when containers arrive there, are those all sent to your Dallas facility before arriving at your customer's location, or are they shipped directly to a customer location, for example, from the LA port?

I'm sorry. Can you repeat one more time?

Right. Alan said that you have some kind of a receiving distribution facility at the Los Angeles port. Apparently not at Long Beach or in Houston.

But wait, wait, I think the Long Beach... 胡总,他刚才说就是我们讲在洛杉矶有一个点嘛,对吧? 就组装点。 那个其实具体的位置是不是就Long Beach啊? 因为在加州的Long Beach还是... 是不是就是这个,就是同样的地方嘛? 还是...

I think there was a confusion.

I think what the chairman meant in California, Los Angeles, he meant Long Beach.

He just doesn't know the exact city name.

Okay, so let me see if I can understand this. So if containers arrive in Long Beach, those are not sent either by rail or by truck to Texas. Those are sent directly to customer locations.

Go ahead. Sorry. Go ahead.

So for those products that we, you know, those products we receive and then we assemble in Los Angeles County, we will then ship to the West Coast region.

Okay. And then in the, then is that from, that's Long Beach? And then for Los Angeles, are all those containers then trucked or sent by rail to Texas?

No, they don't. They don't. They just directly, once they have been assembled in Long Beach, they will just directly ship to the customers.

So whether the containers arrive in Long Beach or Los Angeles, those are dealt with in your facility there and they're sent directly to the customer. Is that correct?

Correct. So basically we only have one, just to clarify, we only have one location in California, which is Long Beach. So it's not, there is one in Long Beach, one, the other one in Los Angeles.

Is that facility in California? Did we know about that? Have you ever announced it or what kind of a facility is it?

He said, we have never disclosed where we are in California. What kind of place is it? We asked someone to help us, but it's not our place.

We asked him to send us a copy to the west. Because our stuff is closer and faster to Los Angeles. So we set up a point in Los Angeles.

You mentioned that we didn't disclose such facility in Los Angeles because it's not owned by our company. It's one of the partners we are working with in that region. Then we pay them to do the assembling of our products. Then they will ship those products to the end customers or the dealerships.

in that region got it how does your product get to canadian customer locations do you use any canadian shipping ports and if so do you have any kind of a distribution facility at those ports um

So currently those products selling in Canada are shipped from our US subsidiaries.

Ongoing, we plan to add another point of the assembly over there in Canada. Yeah, but then it will be in a similar approach as what we do in Los Angeles, that we will work with those local partnerships for the assembly and then shipping to those customers in the region.

Understood. And then which of your products in the containers arrive fully assembled and which require assembly, and are there any tariff or tax considerations involved in that decision?

So essentially, we are paying the tax based on the category of those products featuring the U.S. tax regulations.

So is there an advantage for them to be unassembled versus assembled or does that make a difference in what you pay?

They're the same. Ms.

Wu also adding that the reason we assemble here because this way each container can have more shipment versus if you ship the whole car here.

Understood. Okay, so then according to the numbers for North America from the US import data, at least according to what I track, you shipped 4,474 golf cart containers in the first quarter of 2023. But as of two days ago, March 13th this quarter, you've only shipped 2,036 golf cart containers. Why has the number of golf cart containers shipped to North America dropped this quarter so far? Is that due to product going instead to resellers in China for worldwide sales and or to distributors that you now set up, like, for example, in the UK? Or has demand simply fallen off? Or is the current buildup inventory adequate?

According to my data, when you import a car from North America, there are 4,400 cars in the first quarter of 2023, but there are only 2,300 cars in this quarter. Why is there such a big decline? Is it because some cars are sold out in China? Or is it because you went to the UK? Or what caused the decline in the data?

This has been planned for a long time. He was talking about the comparison between the first quarter of last year and the first quarter of this year.

Last year, we didn't sell it to Loss. We sold it to Common. Common was prepared to give it to us first.

This year, we went to the supermarket ourselves. We are adopting a different sales approach in last year and this year. That's why there's some variance of the sales volume.

Okay, do you want to explain that any bit more so that we can understand that?

What exactly do you not understand that you would like Chairman to explain? Well, the number of golf cart containers

during this first quarter appears to have basically been slushed in half. So I was just curious to know or try to get a better understanding of the reason for that, whether it was related to demand, adequate inventory, or if the product is going not to the U.S., but to resellers or distributors that you set up in other places. That's all.

He said, you didn't answer my question just now. I'm asking, from the first quarter of 2023 and 2024, why is the import of golf balls to the U.S. stock market almost half less? He said, what kind of reason is it? Is it because the demand for golf balls in the U.S. has decreased? Or is it because of the change in your inventory? Or is it because you want to sell it to other people in China? Or is it because you want to send the number of differences to other countries? What is the reason? I've already explained it so clearly, but she still doesn't understand it.

This is what he did last year. We just started, so he has to prepare the amount he forgot. So in the first quarter, he taught us a lot of supply and demand. Then we started from last year. Slowly, slowly, we are now in the United States. Preparation of forgotten goods This is separated, not only in the first quarter, but also in the third and fourth quarters of last year. We are now stored there. You don't know how much we have there. So this is completely different from that.

So last year, we would ship large quantities first. This year, we will ship as many as we need, right? We don't need such a large quantity first. We don't know how much to sell, so we put it here. And then last year, large quantities... I said last year, we will ship these. There are still some left. So this year, we don't need to ship so much. Right.

Okay, let me try to explain. I think Alan got cut off the line. So the chairman is trying to say, so last year,

In 2023, all the golf cards in the US, we have to go through Coleman, if you remember, as a median in order to sell to those stores. But however, this year, we directly deal with those with the other buyers. So we only ship the amount of products they need. So this way we don't have to ship more than what they need. But last year Coleman required us to ship more so they can have enough inventory for them to market to those companies for sale.

Okay, understood. And then I guess related to that, I've noticed that the value of what SC Autosports has in stock at the end of each quarter has increased rather dramatically from 4.5 million at the end of the first quarter in 2022 to 22.8 million at the end of the first quarter in 2023, then up to 50.5 million at the end of the quarter four in 2023. And my question is, is all of this inventory actually sitting at SC Autosports? Or is it located at large customers like Lowe's as an example, but not yet invoiced so that the sales have not yet been booked? Or can you explain how that works?

Okay, I got a question, but can you just tell me the numbers one more time so I can, I'm writing down so I can accurately.

That's okay. No problem. At the end of quarter one in 2022, SC Auto Sports had inventory of 4.5 million.

Okay.

In the end of the quarter one in 2023, it went up to 22.8 million. And at the end of the fourth quarter, just last year, 2023.

I'm sorry. End of Q1 2023 went up to what? End of the fourth quarter in 2023, it went up to 50.5 million. 6.5 million, okay.

So I'm just trying to figure out, is this inventory sitting at SC Autosports?

Okay, got it, got it. Okay, got it. I got it. So he wanted to ask, he observed that the value of SC's inventory has been constantly increasing. From the end of the first quarter of 2022, it was 4.5 million. It has been until 2023. In the middle, he also talked about a figure of more than 5 million yuan. Then in the fourth quarter of 2023, it increased to 6.5 million yuan. He wanted to know why there were so many stockpiles. Is it because they haven't sold them yet? Is it because they have already opened the ticket office and haven't transported them yet? Or what specific reason caused the stockpile to continue to increase?

So he said it might be that he didn't know this.

So I guess the increase was based on the sales plan of our partners like Lowe's. So we will have more inventory in U.S. under our facilities like SC just to get ready to meet the sales plan of our partners. 另外我补充一点,就是因为我们刚才我们也说了我们在2024年我们现在与更多的超市在开展合作。

And as we mentioned earlier, right, we have expanded our collaboration of the over tens of those retail chains and then the superstore companies.

Plus, we are expanding our channels to those dealerships. So that's why we have to get ready and have more inventory in place to be prepared for the upcoming sales transaction and activities.

Okay. And then we've heard unofficially about candy distributorships. for off-road sales outside of the U.S. and China, like in the U.K. and in the E.U.? Can you describe what your business plan is for utilizing distributorships for off-road sales outside of China and the U.S.? What distributorships currently exist, and what's your projected timetable for expansion of those?

We also have some retailers that bring our products to places other than the U.S. and China, such as the UK and the EU. Can you tell us more about that? It's not the U.S. that brings it out.

It's the Chinese foreign trade companies that want our products to be sold to Europe, the UK, and Southeast Asia. They're all interested in selling our products. They're all thinking about it now.

So we are going to those foreign trading companies located in China to have our sales shipped to those areas like the UK, the EU, and some other Southern Asia areas as well. And the volume right now is not so large at the moment. So, yeah, that's what happened right now.

And can you give us any in color of what's in your backyard in China for... off-road EV sales. 你能不能给我就是给点信息就是在中国的这个你的他说后院里面大概有多少的辆就是多少的辆是正在卖的这个都是小辆的都在自销他们有兴趣先买我们的样车去自销就没有多少辆

The amount is not that material. There are some distributors and some other wholesaler to get our samples for the test cells. But then the amount, as I mentioned, is not that material.

Okay. And then the political change, there may be a political change in the U.S. that might significantly increase tariffs on manufactured goods from China. Are you very concerned about that? Somewhat concerned or not concerned at all? And might that propel you to fall through with the press release that you issued a number of years ago about possibly establishing a manufacturing facility if not in or close to the Texas facility, perhaps in Mexico?

Do you say the POLICO will impact what?

Well, there's a possible political change here in the United States, and there's a chance that that might have a result of increasing tariffs on manufactured goods received from China. And I just wondered how concerned you guys might be and how much that might motivate you to establish a manufacturing facility either in Texas or in Mexico following up Mr. Hu's press release that he put out a number of years ago about wanting to do something like that.

Got it. He said that this year's U.S. evidence may make some changes, and it will affect the taxes imposed by foreign manufacturers. A few years ago, the company published a piece of news that it was likely to buy and build a factory in Mexico. So we are considering those factors and thinking of the plan

for the facility establishment in North America. We are thinking about it, and we have such thought, and we will disclose more information with further development.

All right. And then just one follow-up from something that Art kept asking about, and this is sort of a crazy question, but I'll ask it anyway. Okay. Those 540,362 shares that you repurchased using your buyback in January and February of this year, was that done in the open market or was that part of a private transaction? 这个问题呢,我是想问就是你披露到今年一二季度你回购的50多万股,你是从这个公开市场买的呢,还是你是以一种私,私,私,

就是私下的交易的方式来回购的。 我们是委托证券公司跟按照法律, 按照SEC的相关规定买的, 我们自己也不能买。 是公开的,那个Alan你要讲, 是实地务的那个计划。 我知道,我知道,好的。 So yeah, we do our broker, we do the stress buyback from the open market, compliant with all the SEC regulations.

Okay, that's all my questions, and I'll just echo what Art was trying to get across to you, and it doesn't seem to be getting through to anybody there. You guys went public back in 2007. Where the stock's sitting now and what you've been managed to accomplish, clap, clap, is not being reflected in the share price, and from anyone's third-party view, it doesn't appear that, first, you're very concerned about it, And second, that you're doing anything about it. Blue shirt, you seem to have their hands tied behind their back. You're not letting them loose to go out and try to generate institutional interest. All they seem to be doing is reviewing drafts of your press releases and chiming in on comments on your monthly meetings, but not utilizing the resources that they have to promote companies' stock. I just don't Most of us are just puzzled why you don't seem to be more concerned about it. And using amorphous and ambiguous and arbitrary language saying that you're working on it and you know you're concerned, it just gets old hearing it year after year. Shareholders are very frustrated. Anyway, thank you very much for your responses. I appreciate it.

Thank you. It seems that the company doesn't care and doesn't make real efforts to change the situation. The company also cares about the external investor-related companies, but it seems that the company will not actively use their resources to expand the influence of the company on the market. It seems that what they do is just to respond to the company's requirements, help the company to change the news, and help the company to make suggestions. Many shareholders are very anxious and anxious, but it seems that the company is a little indecisive. Anyway, I just want to reiterate what Art, an early investor, asked the question.

Thank you. Our next question comes from the line of Walter Hill with Cardi and Company. Please proceed with your question.

On the last conference call, it was explained why no press releases mentioning Lowe's Superstores as the first big box. candy retailer with 2,500 locations. This was done in deference to letting Lowe's make the first promotion move. Subsequently, the attack was taken again in August with Walmart coming aboard with 4,500 stores. Next, the Amazon store. Early January, with no PR, it was discovered that all candy products are now in Marcus Limonis' Kemper's World stores, which is a public company. Over in November, two smaller chains, Rural King with 140 stores, PV Mart in Canada with 270 stores, were given candy PRs. PV also holds a Canadian license to Tractor Supply and Ace Hardware. So based on published information, both PR and SEC filings, if an average candy shareholder relies on press releases and SEC filings for a stock update, might assume that Candy's total outlets are less than 1,000, even when adding independent dealers. This is despite the actual outlet count be over 8,000 when adding in unannounced Lowe's, Walmart, and Kemper's World. Where this lack of knowledge becomes a problem is when looking at Candy's $47 million in inventory at the end of Q3, This much inventory might be a red flag if there were only reported 1,000 locations, but a very well-timed and smart position with 8,000-plus locations. Now, my question is, if new accounts... Hang on.

I'm sorry. Hang on. Let me translate what you have so far. Okay. All right. Very good. This question is about the number of stores we have. In the last phone call, you explained why there were no new stores in the entire year of 2023. and the news articles about the supermarket in Los Angeles. It's out of respect for them because they don't want you to be exposed. And then in August, Walmart and Amazon joined. It's the same strategy, but it's not exposed. And then in early January, we also found that the company entered a listed company called Campus World. And then if If an ordinary investor does not enter a forum where they can have a private chat, it is only based on the news articles and the SEC. They may not know about this information at all. They may only know that the company has cooperated with two chain stores. One is Rural King and the other is PV Mart Canada. So based on the information that has been announced, whether it is a news article or the SEC, The new investors, from their understanding, can only know that the total number of stores in the company is less than 1,000. And even if you add all the independent retailers, but in fact, in addition to the Lowe's, Walmart, Campus World that we haven't announced, the number of stores that are covered may exceed 8,000. The lack of this kind of information will make people think that the storage of $47 million announced by the company at the end of the third quarter is a very obvious problem. This number is not enough, because now the report only shows that there are 1,000 doors and doors that can be covered. So this is a potential problem. It has several problems. Go ahead with your questions.

Okay. If new accounts or products are added, Candy should announce milestones without being specific, such as each time a chain is added, starting out with PR, with the total number of outlets, also keeping a tally on Candy America website. If an investor needs to know specifics, all he'd have to do is search big box e-commerce sites. Okay. Let's go one question first. Go ahead.

Go ahead. You can publish a piece of news and announce how many stores there are in this new chain. And also keep a record of the number of stores in this county. If the investors want to know more about this, they can see this information by searching on the Internet.

你这个建议很好。 我们会和我们的合作伙伴沟通确认后做出一些相应的调整。 谢谢你。 Thank you for your suggestions.

That's a very good opinion. We will make corresponding adjustments after communicating and confirming with our partners. Thank you.

All right, another part. And possibly similarly replicate, update continued candies November 3rd 2022 PR where it said Candy Technologies produces 10,000 crossover electric golf carts. You should put out each time there's maybe another 10,000, put out a new PR showing that they've passed another 10,000 units. 还有就是比如说你之前在2022年11月份就披露过就是刚提

Thank you for your advice.

Thanks again for the suggestion. That's a great idea. In the past two years, we have been through the strategic shift which caused uncertainties.

That's why we are relatively conservative in terms of the public release, the press release approach. Ongoing, we will strengthen our efforts in PR and make more promotions of our products and development. Thank you.

All right. The other question I was going to ask has already been answered, is whether you're going to add any new Superstore outlets this year. So, y'all have already answered that question, so. That's all of my questions.

You still want to ask how many new super stores?

Yeah, I just was going to find out how many, if they were going to add any new superstore outlets this year, and if so, how many outlets would there be?

Okay. Okay. How many new super market stores are expected to be added? If there is a plan, how many will be the total number of stores? We have answered this question just now.

This year, we are strengthening our cooperation with Lois. We have added more than 10 small supermarkets. So based on the foundation working with Low Superstores, we have now added more cooperation with more than 10 superstores outlets with different skills.

Besides, we are expanding our cooperation with the dealerships from 300 in the past to more than 1,000 in 2024. Thank you.

That's all my questions.

Thank you. Thank you. Our next question comes from the line of Mark Knoll, private investor. Please proceed with your question.

Good morning and good afternoon and hello. First, I have to make some comments and then my questions. On the pre-accomplice call, a question was asked from the filing about the company's retention of a business growth and financial advisory service consultant. The CFO simply responded, indeed, it is for our separate plan to our U.S. subsidiary, SC Autosports, to explore the possibility of being separately listed on the U.S. main board. Nothing further was discussed. on the subject since it was the last question's answer. If I understand this correctly, it appears the board of directors are considering spinning off the US subsidiary, Candy America, into a separate US NASDAQ company. This makes a lot of sense in the releasing of the true value of Candy as a separate manufacturer being able to book its sales and spin off also being able to book its own P&L. Particularly since Candy At its current price, it's not being given any value for all of its business entities above its cash values. Cleaver, if you can translate this first, and then I... Okay, thank you.

他这个问题是关于就是上次电话会议当中有人就从SEC的公司文件里面看到了一个问题。 I saw an article about a company that wants to preserve business growth and hire financial consulting services. The CFO's answer was simple. We want to have an independent plan for SC Autosports, a subsidiary company in the U.S., and explore whether it is possible to go public alone in the U.S. Because this is the last question, so there was no further discussion at that time. If my understanding is correct, this may mean that the board of directors is also considering including the subsidiary companies in the United States, including the subsidiary companies that have been acquired by the North, into an independent NADAC listed company. Can the CFO give us some more color as to what the board is thinking and what is the end goal? Can you explain to us more about what the board thinks about this and what the final goal is?

At the moment, we are still working on the plan for the SIPO in the U.S. According to the relevant regulations of the board, the specific market progress will be announced in time. So regarding the IPA process of our US subsidiary, SCO Sports, the company is still considering of this matter. And as for further development, we will provide disclosure timely in accordance with the relevant regulations of the SEC.

Okay, understood. Also, since Candy China makes in-house 85% to 90% of all parts that go into its own vehicles, it can double dip so how would the revenues be booked should candy spin off its u.s subsidiary um

to this financial report. If Condi breaks its U.S. subsidiary, how will this amount of income go into the account?

First of all, all internal transactions and internal usage, we will not double-check the relevant income. We will follow the legal accounting method to fully compare the relevant amount. There will be no re-calculation. In addition, suppose that So first of all, for all the intercompany transactions occurring in the company, we will not have any double dip or any duplicate recognition of the revenue or related amount. Based on the proper accounting treatment, we will eliminate all those related balances to make sure no double or duplicate recognitions of the revenue. And besides, if SCO2 Sports will be separately listed, it's very likely Candy, our group, will still be the controlling shareholder of SCO2 Sports and the related parties, and this such group. So we will continue to consolidate the financial statements of SC into our group consolidated financial statements. So hope that can resolve your question.

Yeah, that solves my question. Very good. And in the past, the last question is, you know, in the past, there were also talks about the China subsidiary that produces lithium batteries and powertrains to be spun off separately. Is there anything happening here or is this off the table?

And then the last question is, when we also revealed that our battery company at noon was also going to break out and do a listing, what progress has been made in this matter? Mr. Wu. Mr. Wu.

You didn't hear that just now, did you?

Hello, can you repeat the question again?

He asks, we have previously disclosed that our company, our Chinese subsidiary, battery company, will be separated and listed separately. Is there any progress in this matter? We are still adjusting the product structure. After we received it,

China China China China China So currently, we are having the strategic shift of those battery recharge industry and related businesses.

So I guess once we have it all settled, we will go from there and discuss more upcoming development information.

Okay, I understand. Thank you a lot for the answers, and have a nice day.

Thank you.

Thank you. We've come to the end of our time allowed for questions. I'll turn the floor back to management for any final comments.

Thank you again for joining today's conference call. If you have any further questions, please don't hesitate to contact our IR consultant, Blue Shirt, at gary at blueshirtgroup.co, or you can contact us at ir at candygroup.com. We look forward to updating you on our next earnings call. This concludes our call for today. Thank you very much. You may now all disconnect.