Kandi Technologies Group, Inc.

Greetings. Welcome to Candy Technology's second quarter 2024 financial results call. 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. At this time, I'll now turn the conference over to Ki-Hwa Liu. Ki-Hwa, you may begin.

Thank you. Hello, everyone. Thank you all for joining us today's conference call to discuss Candidate's results for the second quarter 2024. Earlier today, we issued a press release covering the results. You can find the press release from the Newswire services. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding 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. Additionally, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. Before we continue, I would like to introduce the team joining me on today's call. We have Mr. Xiaoming Hu, Chairman of the Board, Dr. Xueqing Dong, Chief Executive Officer, Mr. Alan Lin, Chief Financial Officer, and for the first time on our call, Mr. Johnny Tai, CEO of Candy America, and Mr. Olin Rice, CEO of Northern Group. Dr. Dong will deliver his prepared remarks in Chinese, which I will then translate. Following that, we will have a Q&A session with Chairman Hu, Johnny, and Olin, and CEO to answer. Now, let us start with brief greetings from each of our executives.

Hello, this is Hu Xiaoming. Thank you for joining us today. Hello, everyone. I'm Xueqing Dong.

I'm pleased to share our progress with you shortly today.

Good morning, everyone, and hello, everyone. This is Alan Lim. Thank you for joining us.

Hi, everyone. It's Johnny. Good to be here with you. Good morning, everyone. This is Olin, and I'm excited to join the discussion today for the very first time.

Thanks, everyone. With that, let me now turn the call over to our CEO, Dr. Xueqing Dong, to share our Q2 performance. Dr. Dong, please go ahead.

Again, welcome to today's conference call. We are pleased to report that Kandy Technologies continued its strong growth trajectory in the second quarter of 2024.

We achieved total revenue of $39.1 million, up 8.9% from $36 million in the same period of 2023. The primary growth driver was our all-electric off-road vehicles and associated parts, with sales revenue increasing by 11.3% to $34.7 million.

The expansion of the U.S. market has made significant progress. The launch of new products has put new energy into the market. At the same time, through our exclusive cooperation with Lowe's, at the beginning of August, the special version of the NFL's special edition golf ball will be officially launched into the U.S. market. This shows our innovative capabilities and provides the players with an environmentally friendly and exciting way to show their love for the team.

We made significant progress in our U.S. market expansion with the launch of new product lines injecting new energy into the market. Additionally, through our exclusive partnership with Lowe's, the officially licensed NFL team golf carts will be launched in the U.S. starting from the end of August. This showcases our innovation and offers fans a eco-friendly way to show their team pride. 平均价格为每股2.25美元

Our financial position remains strong, with cash and cash equivalents, restricted cash, short-term investments, and certificates of deposit totaling $219.6 million as of June 30, 2024. We actively executed our share repurchase program,

buying back 673,896 shares at an average price of $2.25 per share, reflecting our confidence in the company's future and our commitment to enhancing shareholder value.

在全球扩展方面,我们取得了显速进展。 10K纯电动UTV获得了EEC认证,为进入欧盟市场铺平了道路, On the global front, we made significant strides, including securing EEC certification,

for our 10K all-electric UTV, paving the way for entry into the European Union market. In parallel, we have also opened up new markets for candy products in Asia, further expanding our international market share. Looking ahead, we remain focused on expanding our product portfolio and the market presence, particularly in the US and European markets. driving future growth through continued product innovation and market expansion.

现在开始问答环节,我和胡晓明董事长以及SC公司的CEO Johnny和北方集团公司的Olan, CEO Olan一起将回答大家提出的问题。 科娃和林志明先生会对英文的问题提供翻译,请大家开始提问吧。

Now we will move on to the Q&A session. Together with Chairman Hu Xiaoming, Johnny Tai, CEO of Candy America, and Alan Rice, CEO of Northern Group, I will answer your questions. Ms. Kewa and Ms. Alan Ling will provide translation for English questions. Please go ahead and ask your questions. Operator, please go ahead.

Thank you. If you'd like to ask a question at this time, please press star 1 on your telephone keypad and a confirmation tone to 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 keys. One moment, please, while we poll for questions. Once again, that is star 1.

Thank you. Thank you.

And our first question will be from the line of Joel Kramer with Private Investor. Please proceed with your question.

Thank you. This is regarding new products. On the Q1PR, the CEO stated, moving forward, we will launch new starter batteries as well as a variety of more competitive all-electric off-road vehicle products. and electric water sports products. Also, from a press release, we learned of Candy now selling its own branded lithium AA rechargeable batteries. Go ahead, Kewa.

Thank you. This question is about new products. In the first quarter of last year's press release, the CEO said, in the future, we will launch starting batteries, and various competitive pure electric non-road vehicle products and electric water-based sports products. In addition, we also learned from the news article that Condi is currently selling its free-brand Li-Charge Double-A batteries. And from an external article, we also see that Condi has launched a second version of the parallel 1-10K Cowboy. And from an outside article, we now see that a second version of the side-by-side E10K Cowboy called the Innovator

along with the new $19,000 electric off-road vehicle called the Lucky Nine, a few questions I have to ask. First, could you please explain what starter batteries are and how big the market could be? Go ahead.

The first question is, can you explain what a starter battery is and how big their market size is?

The start-up battery refers to the special battery used for vehicle start-up. According to the information provided on the Internet, the sales of the global car start-up battery market in 2023 reached 1636 billion yuan, which will reach 2059 billion yuan by 2030. The annual recovery growth rate is about 3.3%.

Okay, the starter battery refers to the particular battery used to start a vehicle. We are still in the rather early stage of the R&D, and we are conducting the market research. According to the information available, the global automotive starter battery market has reached the RMB $163 billion in 2023. and is expected to reach RMB $206 billion by 2030, with a compound annual growth rate of roughly 3.3%. Thank you.

The next two other questions. What would be the competitive all-electric off-road vehicle and the water sports product from the press release? And will Candy soon be offering 3A along with the AA lithium batteries, and can these batteries use any size compatible charger, or must it be a specific branded charger, candy charger?

Okay. Go ahead. In addition, will Condi launch 3A Li batteries and 2A Li batteries together? Then, can these batteries be used by any other compatible chargers or can they only be charged by Condi's exclusive chargers? There are two questions. I will answer the first one first.

In the draft, we mentioned the competitive pure electric non-road vehicles, which refers to our new generation of UTV, ATV, go-kart, and golf ball car series. Then we refer to the water sports products, which refers to a innovative single-person electric karting boat related products. This is the first question. Then the second question is about this AA battery and AAA Li battery. We launched AA batteries to test the feasibility of the American market. We have achieved some initial success. We will consider launching AAA batteries in the future. As for when to launch AAA batteries, we need to look at the performance of AA batteries in the market. Our current AA batteries can be combined with other chargers. They are not limited to the Chinese market of condi brands. Thank you.

So first of all, let me answer the first question. You know, the models you mentioned, those are related to our upcoming products in the future that we are still under development. We are expanding into the UTV and water sports category, and there will be more product description and details in the future. The so-called competitive pure electric off-high-rate vehicles mentioned in the press release refers to the newest generation of UTVs, ATV, go-kart, and the golf cart models, whereas the water sports products refer to the innovative single passenger electric jet ski. And then as for the second question, so basically we launched the AA batteries to test the feasibility of the U.S. market. We have some initial success and we consider launching the AAA batteries in the future. As for when to launch the AAA batteries, it depends on how well the AA batteries perform in the market. Our AA batteries are compatible with other chargers, and they are not limited to only the Candy-branded chargers or vehicles. Thank you.

Thank you. And the next question is, what is the difference between the E10K Innovator and the Intake E10K Cowboy? And when would you expect them to be cleared for sale in Texas? As a high end of Candy's products at $19,000, what market does the Lucky 9 address? And lastly, several years ago, Candy had a 910 scale gas trike. very similar to the Polaris Spyder. Two wheels in the front, one in the back. It would seem that it could be a big seller for older biker wannabes. Any thoughts about Candy bringing an electric trike version out? And any new vehicles expected to be released this year? Go ahead.

The next question is about the difference between the E10K Innovator and the E10K Cowboy. When do you expect these two cars to start selling in Germany? The next question is, as a high-end car of Condi, Lucky T9, is this car... I'm sorry, can you repeat your second question about Lucky T9?

Yeah, the gas strike. Is that, you had that years ago in your line. It was similar to the Polaris Spider?

No, no, the second question you said, the high-end, Okay, thank you.

第二个问题就是作为康迪的高端车Lucky T9, 这款车卖一万九千, 您觉得这个车的所针对的市场是什么样的市场? 然后最后的问题就是说在很多年前康迪有一款

The Polaroid is very similar to the Polaroid and the Polaroid is very similar to the Polaroid and the Polaroid is very similar to the Polaroid and the Polaroid

Let me answer the first question. From the perspective of product specifications, Innovator and Cowboy, two UTVs, are the same product. These two models are mainly due to the difference in shape, and the target customer group is different. Innovator has a more fashionable appearance, which often attracts the eyes of the community. Cowboy's outdoor style is more rough, and is more suitable for hunters and off-road car users. So as for the question between the innovator and cowboy, from the product specification perspective,

They are pretty much on the same tier. It's just the two models, they have different styling or outlook. And in order to target different customer groups, and that's pretty much the crux of it. The innovator, as you may know, has a more fashionable appearance and tends to attract the community with the better outlook, whereas the cowboy has a more outdoor style and is tailored for hunters and off-road vehicle users. Our goal is to expand the market for various retail sets. And in that decision, Power Boy is mainly sold in Lowe's, whereas the Innovator will be sold in Costco in the near future. Thank you.

克娃,第二個問題你再複述一下。 他第二個問題就說我們的那款高端車Lucky T9。

He sold this car for $19,000. He asked what kind of sales market this car is for, what kind of people. So this T9, our T9 is a sports car.

We got some more positive reviews in the early days. We were excited about the market response. So this product, as you may know, is an outdoor sports trike.

The market is really for those outdoor and sports fans in the market.

Thank you.

As for the models you mentioned in the past, those are the old models in our line, and we keep innovating and produce more up-to-date vehicles that match the target in the customer segment market. Right now, we focus on the leisure outdoor off-hybrid vehicles.

Thank you. Thank you very much. Our next question is from the line of Mark Cano, a private investor.

Pleased to see you with your questions.

Good morning, everyone. Let me introduce myself for a short time here. I'm a Swiss-based independent wealth manager and broker for 30 years, and I've been in Kenya with several million shares in position and a multi-year participation in these conference calls. I could never comprehend, let alone expect to see the NASDAQ stock in such a strong and timely position as Candy, trading at a 40% discount to cash, 65% discount to book value, and at a 13-year low price.

Kiva, could you just go ahead? Kiva?

This investor, he said he borrowed it first. He said he is an experienced investor Go ahead.

Okay. On the last conference call, a discussion came up about candy targeting to spin off as a separate NASDAQ company, its U.S. subsidiary, Candy America, later this year. There was discussion that the most candy could spin off and maintain full rights of consolidation of financials is just under 20%. But to make this possible due to the NASDAQ requirements of a minimum price per share of $4, and 50 million market cap, Candy itself would have to have at least $4 plus price per share to meet NASDAQ listing requirements for the subsidiary, but higher to assure the IPO doesn't go down on the first day of trading. What was suggested on the last call was for the company to just do a simple 10 million share tender offer at $3.50 a share, $1.50 on the bulk value, costing no more than 50% of Kennedy's cash. This announcement would call for an immediate increase in bids due to the traders bidding at least $3 to $3.40 against the $3.50 tender price, which is still well under the $5 book value. But each share bought under the book value will increase the remaining book value per share by the difference between the purchase price and the book value. So if the non-selling holder gained 150 to 15 million in book value for each 1 million plus share purchase, it alone would be a great win. The response to this question on the last conference call from the CEO was, thank you for your transition and we really appreciate that. We will take it in consideration and evaluate and react properly. But remember at the time, But this was set with Candy trading at $3. So is this even more, now this is even more important? And there will come my questions now.

Thank you. His question is about the last call meeting, we discussed the Candy plan. This year, later, the U.S. subsidiary, Candy America, will be an independent company. Nasdaq company to split the shares. In the discussion, it was mentioned that if Condi wants to maintain the full power of financial merger, it can only split shares below 20%. But to achieve this goal, one of the requirements of Nasdaq is that the lowest price of each share must be $4, which is at least $5,000. The stock price of Condi itself must reach at least $4 per share, so that it can meet the requirements of the subsidiary's listing, and it is better to be higher to ensure that the first trading day of the IPO will not fall after listing. At the last call meeting, investors suggested that the company could use a simple $10 million contract acquisition at a price of $3.5 per share, In other words, the value of the account is lower than $1.50. The cost will not exceed 15% of Conti's cash. This announcement will immediately trigger the price of the issuers. At least between $3 and $3.40 to fight the $3.50 promise price. This is still lower than the value of the account of $5. But each stock um um This must be a win-win situation. In the last phone call, the CEO responded in this way. Thank you for your advice. We are very grateful. We will consider and respond appropriately. But please note that at that time, Condi's stock price was more than $3. And now this mistake will be more important. Because now the stock is lower than it was at that time. 我有以下几个问题。 Go ahead with your questions.

On Wednesday, candy stock opened at $1.66 a share, the lowest price it had traded in the past 14 years. Does management know any other investment or use of cash better than spending 15% of candy average cash position held over the past three years than buying candy stock at a 30% discount to book value?

In the third week, Condi's stock price opened at $1.66 per share. This is the lowest trading price in the past 14 years. Does the management know if there is a better investment or cash use method to buy Condi stocks at 30% lower than the face value, especially in the average cash position in the past three years?

We understand that our stock is seriously and significantly undervalued, and we are increasing our budget in marketing and advertising to promote our brand.

hopefully it can attract more American investors. Thank you.

Okay. Does management still want to spin off candy America? And if so, does it have any better idea how to get candy stock price up to the price very quickly to assist this execution of the spinoff besides the marketing you just mentioned? Because, uh, you know, in the past there was already a lot of PRS and marketing. They were missing a little bit of figures and this and that. So there was no big impact with this marketing and the stock price.

But these things have been done more or less before, but they have not had much impact on the stock price.

Well, Condi has been considering for Condi in the United States to carry out a potential split listing. But the relevant progress information has not been released before. We follow the relevant regulations. Currently, we are not discussing this matter. Thank you.

So we are considering the potential deal listing for Kennedy America, but due to the SEC regulations, we are not allowed to discuss too much about this matter. Thank you for understanding.

Okay, thank you for this information. So that means in my view that you're considering and you have a quiet period for that. That's very good. Can you tell us a little bit more about the Monday announcement of the manufacturing agreement with Taiwan-based Halfport? Clearly, Candy has plenty of excess manufacturing capacity in-house and normally would not need to add significant capacity right now. So either this deal is being done as inferred in the first paragraph of the Monday announcement, meets all necessary manufacturing standards, regulatory requirements, and local contents, thresholds for both the U.S. and production in Taiwan, or Kandy is going to need all this current access capacity to make and deliver enough product to reach its 2025 goal of 500 million revenue? Which is it, or is there any other reason?

Thank you for your answer. If you can't say it now, it means you're in the final stages. It means you're making some moves. um um

Expanding to Taiwan is a strategic move for us to enhance our supply chain.

The main purpose is to add value to our existing products and further enhance and strengthen our market competitiveness. Thank you.

Okay, I understand. And that's my last question. In the report today, you mentioned the Lowe's deal, which is quite important for you as a company. Maybe now specifically to the US management team. Has there been any discussions about the size of this deal? So, you know, how many UTVs or whatsoever and how many years this is going to be in the market, this deal, that could give a very good insight for the future figures of the guidance.

The last question is, when the telephone meeting was opened today, you mentioned that you and Lowe's This question is for Johnny to answer. Ask him to be more specific. We are going to have a CEO of Candy America, Johnny, to answer your question. But if you can be more specific about what you would like to know, that would be really good.

Oh, yeah, of course. You know, I mean, if you're signing such a deal, Lowe's as well as Candy, you know, they must have some idea how many UTVs of this kind could be brought to the market or sold or being sold, you know, because candy has to be prepared production wise and those has to be prepared, you know, distribution wise. So I, I would think that there must have been some discussions about how many UTVs of these special NFL license UTVs could be sold or the market is willing to accept.

Okay. Uh, very good question.

You know, and I think, uh, I'm going to answer that first, and then I will invite my colleague, you know, Olin, to weigh in as well. Yes, we do have, you know, like a discussion, regular meeting, you know, with Lowe's to discuss, you know, what the market looks like. And we understand the market is quite, you know, challenging right now with all the economic, you know, climate, such as inflation and So I think that we carefully reviewed the market and then also we determined, you know, how many stores, how many inventory we would like to, you know, bring in. So I think that's, you know, we still have a lot of, you know, discussion going on with those.

And Olin, would you like to weigh in? Olin? Yes, I was unmuting.

Can you guys hear me? Yes. Okay. Yeah, so to Johnny's point, we are in weekly, several times a week, conversations with the Lowe's team. So as it relates specifically to the NFL, you know, in a position where we've got a lot of what everyone is excited about, the NFL, obviously, our team at the end. So we've got a plan. It's a three-year-long plan. That's the extent of the contract at this point. And so we are going down a path that would be to put a hard number on it right now. I would have a very hard time putting a hard number. There are certainly very high expectations. among all three parties involved. Johnny, if you feel better about it specifically, I'm happy to do that, but I just don't know that number yet. We do have very high expectations to impact Candy as a company. I'll stop there.

Well, thank you, Olin. I think you are a little bit breaking up, but I think I want to make a correction. It's a uh the nfl we have we are licensed to sell it from the golf cart um it's not the utv so right now you know it's uh it's actually available to older on los.com so i think yeah i agree with what olin mentioned thank you for your question uh okay then that's it for me just yeah okay

for just my last remarks for, for management, uh, especially in China is, you know, um, there's a good company, uh, that's one side and there's a good stock price. And these two things often don't match together. I think, uh, when it comes to the company, uh, the comp, uh, the management has done a terrific job over the last years. No, they kept the company afloat and to strike good deals and to bring the company where is it today. But when it comes to the stock price, I must say that, uh, there they are a little bit lagging behind for what reason ever. So I would say, you know, one could a little bit, you know, concentrate now a little bit also on the stock price for the shareholders and to make the stock a little bit, you know, in the public view that there's more attention about candy and what candy can provide and what candy can do, then the stock price could go significantly higher from the current position. Thank you for taking my questions.

The last thing I want to say is that the company itself is a very good company. And the company's stock price is another thing. Often these two things are not necessarily unified. Our company has developed very well in recent years. And we have all caught up with good opportunities. Today's development is very gratifying. But the stock price is very disappointing. Thank you. Operator, we're ready to take next question.

The next question is from the line of Steve Miller with a private investor. Please proceed with your questions.

Good morning, Kewa. You said in your press release today that the United States is your primary market and that the increased freight shipping expense from China to service your expanding customer base was the reason for the biggest increase in your selling and distribution expense. Although I can guess as to the reasons for your recently announced partnership with Hartford Industries, and Taiwan for manufacturing. Why don't you have manufacturing facilities in your primary market, the United States, especially as you contemplate spinning off Candy America to be an independent, publicly traded company?

Thank you. This question says, in the news we published today, it mentioned that the American market is our main sales market. It wants to ask, We are now, since our main sales center is in the United States, and we will allow Condi to be listed in the United States, then why don't we set up our production facilities in the United States and set them up in Taiwan? This should be said in this way. In the United States,

Taiwan is one of the

It's a strategy, and we may not, you know, disclose too much about that in this call. Thank you. All right.

I'm quite active understatement on social media, especially regarding candy. And there seems to be a campaign against candy by detractors on a lot of Internet chat boards claiming that candy is nothing more than a reseller of private labeling of its array of golf carts and various products. UTVs, ATVs, go-carts, other off-road electric vehicles, and even lithium batteries made by other manufacturers. As long-time Candy followers are aware, this is a false narrative, but easy for detractors to say since Candy does not have a high-profile corporate website in English that showcases its in-house capabilities. Hewlett, do you want to go ahead and translate that?

Okay. Recently, on the Internet, I've seen a lot of people who don't like and oppose Conti. They're always claiming that Conti is just a transfer company. They're selling golf balls produced by other manufacturers, various UTV, ATVs, and even batteries. They're selling them here. Go ahead, Steve.

Okay, thank you. So we all know, obviously, that candy stock is extremely undervalued, especially even though it's a highly integrated major manufacturer. So a few conference calls back, a question was asked as to what percentage of the cost of a typical candy vehicle, for lack of a better term, such as a golf court, was actually manufactured by candy in its own multiple state-of-the-art facilities. throughout whatever cities in China and now Taiwan. I believe at the time you said that a short management reply was somewhere around 90%. Could you go ahead and translate that? And I'll get to my three questions.

Okay. Go ahead.

Thank you. Now I've got three quick related questions. Was that 90% response accurate? And if so, can you briefly tell us for the record about each of Candy's owned various facilities, specifically where they are located, what kind of products are made in each facility? And also, can you comment about the current percent of capacity being used in each facility? and the maximum annual capacity available at each facility?

Okay. and then the main products produced by each production base, and then their annual production, their largest annual production capacity, and their use rate, as well as the average use of these devices. Okay. We, Condi, are in Hainan.

Thank you.

So, first of all, the Candice Highline Base mainly produces the golf carts and other series of the motors. Our Gene Car Base mainly produces the UTV, ATVs, the beach carts, and other series of the motors. Our Yongtang Base mainly produces the motor and electronic control products and the parts. whereas our Jiangxi base mainly produces delivery batteries and battery-packed products. Overall, Candy has an annual production capacity of more than 100,000 various types of vehicles and related products.

Thank you.

Oh, and by the way, you know, it's correct that our own manufacturing rate of the Candy products Does exceed 90%.

Thank you.

Out of curiosity, I don't know if this is possible. If one was to go and do a total replacement of your facilities and equipment, do you have any estimate of what the total cost would be in U.S. dollars that someone would need to invest to replicate all of your facilities and equipment?

Hi, do you mean just any one of facilities or all of the facilities we are going to replicate in the U.S.?

All of your facilities. I'm just trying to get a sense of what it would take if some third party came in and wanted to do what Canyon is currently doing. What kind of cost would it be to them to replicate all of your current facilities and equipment without regard to where they're located?

He said he was very curious. He said if there was a third party that wanted to invest in the U.S. to build a factory, if we had to copy all the capacity and equipment of all the factories in China in the U.S., if we had to build such a factory, how much investment would it take to achieve our current capabilities?

Um, so it seems, uh, from the dramatic standpoint is not quite feasible.

to replicate the whole facility from China to U.S., although we are considering to have assembly part of the lines in U.S. in the future. Whereas the total overall budget, it's hard for us to tell now, and we have to look at some other detailed financial analysis report. Thank you.

Okay, and Alan, I'm not sure if it broke up or I just didn't understand. That 90% number back from your previous answer in terms of what percent of a typical, like a golf cart is actually made by candy versus products acquired from outside is 90% still an accurate percentage?

It is. Yeah, it is.

Okay. And then my last question is, Your China-based website, quite frankly, seems to be outdated in that its images and videos are still heavy on EV autos and trucks. What about updating that site and on all of your websites, and this is related to the previous questions, can you at least create a PowerPoint presentation on your state-of-the-art manufacturing facilities and capacity so people who have questions about candy and in terms of how much you're actually manufacturing versus how much you're obtaining from third parties and then putting on your label exists. I think that would be actually quite helpful and counteract some of the claims out in social media. And that's all I've got. Thank you.

Thank you. Thank you. and now Condi's product has long been replaced with a non-commercial product. Is it possible to make a comprehensive update on Condi's website and have some information, such as a very complete PPP display to show China the facilities and production capacity of our various factories? Thank you for your opinion. Most of what you said has been adjusted. Of course, we will further improve it. Thank you.

Thank you for your suggestions and the feedback. They are very constructive. We have actually been working on or already adjusted most of those items. And, of course, we will further improve them to make them more accessible to our investors.

Thank you. Thank you.

Our next question is from the line of Fred Proctor with Cleantech Investments. Let's see if there are questions.

Good morning. With existing outlets in North America, which we know include Lowe's, 2,500 outlets, Walmart, 4,500 outlets, Campers World, Costco Canada, 108 outlets, National Big Box stores, along with PV Mart slash Ace Hardware Canada, 200 outlets, All but Lowe's added in the past year with maybe 1,000 independent outlets with, unfortunately, little announcement from the company. You want to start that, Kayla?

He said that last year we increased a lot of sales partners in the United States. There are more than 1,000 Lowe's. Just since the last conference call, it appears from sources several new international outlets have been opening.

to include a very impressive, which we talked about, Southeast Asia Thailand location, along with Aruba, Curaçao, Dominican Republic, and Dubai, and even now in the EU market. Go ahead, Kayla. Kayla, and then my questions.

He said, we have now increased to many areas, such as Southeast Asia, Okay, my question is outside of the U.S.

and Canada, actually how many international locations have been opened and are soon to be opened? In other words, a number or a close number. That's my first question.

So apart from our U.S. and Canada market, we're also exploring the European and Southeast Asia market. We're currently working in more than a dozen countries for the child sales.

Thank you. My second question is,

in your travels have any multi-store chain been targeted for international growth in other words large stores chains like Walmart and Lowe's thank you you mean internationally outside of US any multi-store chains big chains big companies big stores I know outside of US yes For international growth.

Taiwan. Taiwan. Taiwan. Taiwan. Taiwan.

um so uh in us we do work with those uh the um

the large scalable retail chain. However, in other countries, like the European countries, we actually tend to work with the distributors instead. And so that's our plan for now. Thank you.

Okay, thank you very much. I have a quick question for Johnny, if we could. How many Lowe's stores does he expect the NFL carts to be involved with?

最后这个问题呢,我是想问一下Johnny, 他想知道就是NFL的这些款车, 这些系列的车将会在Lowe's的多少家门店会进行销售?

Okay. Hey, Fred. Nice to meet you.

Thank you for your question. So for NFL right now, our plan is only available on Lowes.com. We do have some discussion with Lowes to expand to their stores. However, I think they have to look at their space availability, and we know the holiday season is coming up, so they're, you know, real estate is quite busy right now. So, but, you know, right now it's available on Lowe's.com.

Thank you. Okay, thank you. That's all. Thank you.

Thank you. Next question, please.

The next question is from the line of Arthur Porcari with Corporate Strategies. Let's just see what your question is.

Thank you. Well, I'm really happy to see that Johnny and Olin are on board here, someone that's been involved in candy since the very beginning. I also had the honor of being invited to come visit back in, I think, 2020 or 21, whenever the K23 appeared, I guess being the first shareholder that ever had a chance to test drive it. And I was very impressed with the time, kind of disappointed it never had a chance to go, but I can't blame you guys for it. But I can give you a lot of credit for what's happened since then. And I'm really happy to see Olin has joined you, Johnny. He's a very capable partner and somebody to marshal our assets as investors. Anyway, let me get back to my original piece. I wasn't expecting you here, but look forward to maybe taking that short drive up to Dallas and visit you all again soon. Maybe meet Olin too one time. Okay, anyway. Candy must have an incredible relationship with Lowe's based on Lowe's seemingly unending support and trust of Candy. Aside from the fact Lowe's picked up Candy two years ago to launch their newest, highest cost item in their system, only a few months after Candy first entered the U.S. golf cart arena. However, initially it was through marketing veteran Coleman, who only had one branded cart line back then. In less than a year, Lowe's has totally dumped Coleman out of the picture, went directly to Candy, picked up Candy's own branded golf carts, the industry's youngest brand, and as their sole golf cart supplier, and exclusively now show more than 80 variations of Candy carts on their web portal. Just checked that the other day. Just amazing. Go ahead and pass that on.

Okay. to Condi, Texas, to attend their K23 product ceremony. Johnny is a very capable, very capable person. I am also very happy to see that Condi can achieve such an achievement today. My first question is about several related issues related to Lowe's. Condi and Lowe's can see that the relationship is extraordinary. From Lowe's constant support for Condi, we can see that even though Condi only entered the golf cart market two years ago, Lowe's chose Condi within a few months. We all know that Condi used to sell golf carts with Coleman, but within a year, Please continue. Okay. Bear with me a second here.

To continue with the narrative, then I have a few questions. Then just a few months later, Lowe's pays $100 million to renew and expand its four-year relationship for the sole exclusive rights to become the official Lowe's home team sponsor to the National Football League. And for the first time, Lowe's adds golf carts to their NFL sponsorship inventory. Coincidentally, this is the largest single big ticket item that Lowe's sells nationwide by a double. But instead of bringing in any one of the more seasoned golf cart makers who would love to have had this account, they took what most would think was a risk to their reputation and picked the new kid candy and staked their reputation on it. Plus, they put up that $100 million. Go ahead and pass that on, and I have some questions.

became the official sponsor of the Lowe's Home Team at the NFL. For the first time, the golf cart has entered its product line. And this golf cart has also become the largest single-seater product in the country. The sales are twice as high as other products. And what is surprising is that Lowe's did not choose those experienced, very rich golf cart manufacturers, but took the risk of a huge business and chose the new Condi. Please go ahead.

Okay. And again, appropriate that you have Nolan on board for the rest of my questions here. In management's opinion, why did Lowe's pick Candy? Well, you already said that. It extends for the full remaining three years of the Lowe's NFL agreement. That part I think you already agreed that it does. But in your opinion, why did Lowe's pick Candy? And Olin, probably the appropriate person to ask that question to.

Sure. Yeah, so thanks for the question. Obviously, Lowe's, like any of the major mass retailers, has a very rigorous vetting process for vendor selection and product selection.

And so over the course of that short window of time that you referred to, we become one of their key partners in the outdoor recreational space, particularly in the electric side of that space. And I think that a lot of that's due to our quality and the value proposition and a high level of trust that we've developed with that team. Okay.

Is Lowe's planning on including actual golf carts and or six passenger carts? I asked that question after recently visiting a Galveston beach car rental business, and the golf course who would be happy, both the cases, to buy a fleet of NFL cars, even if they had to buy them from Lowe's to put them in their rental pool.

My second question is, I want to ask if Lowe's will plan to include golf balls or six-seater cars. I ask this question because I recently visited a place, a club, they said they would Yes, so I can answer this as well.

We are currently a supplier to Lowe's with six passenger cars in a limited store count, a couple hundred doors. We also have a very robust business with them online for that product, along with a number of other categories that perform well online. And as far as future Lowe's commitments to product offering, particularly on the floor, that's something that I wouldn't want to comment on because that's kind of an always evolving process for these major retailers as they look at the real estate they have available and what products make sense on their floor.

Well, that wasn't quite my question. My question was specifically had to do with the NFL. Again, You can imagine a Galveston cart rental company over there would love to have some, I hate to say it, cowboys too, but Texans carts to go ahead and let the people go up and down the seawall. And as far as the golf course is concerned, they think it would be quite interesting to have actual golf carts where you put the golf bags in the back. I mean, this model that you have right now is a beautiful model. It's 4P, all forward-facing seats. But it's not really golf compatible, and yet the sport of golf – And the sport of football seemed to have some sort of a relationship over here, more so than most other sports, as you well know. So that was the basis of that question, actually.

Yeah, okay. If I understand your question, I mean, right now the agreement is around 4P cart. And any NFL products that are obviously going to be marketed are going to be marketed via Lowe's because of the relationship. So I'm not sure if that answers your question totally, but that's our situation today.

But is it something that you might have an interest in doing or presenting for those to maybe have that or would be just too difficult to rekey? It seems like basically you're putting a wrap on an existing product that we already have and putting a logo embroidered into the headrest and getting maybe a couple of thousand dollars more for the equivalent. It would just seem like it. go hand in hand and didn't know whether that had been in the discussion yet, but if not, maybe it's something worthwhile discussing. That doesn't require a response, unless you want to respond to it.

Listen, I'll say this. We obviously are interested in expanding as success of the program dictates. So I think that everything could be on the table, but at this point we're so early into the program, I think we're going to play – with the 4P, and then I'm sure that there will be conversations if this is tremendously successful.

Sure. As we just discovered, this is a three-year deal, which makes it that much more exciting. I'm sure it does for you as well. Anyway, on the last conference call, management responded to a targeted question originally asked on the conference call in 2022, confirming it still had a high-end goal of possibly achieving as much as $500 million in revenues for 2025. But I suspect that number certainly would have gotten lower now, but still pretty impressive number because of the economy in general. But that's a long way from 120 million or maybe 200 million, 210 million we'll do this year. Anyway, let's see. I'm just looking at some notes I have over here. Oh, one other point I wanted to bring to your attention. I guess you're probably aware of this. But, you know, they do, as I mentioned, actually have about 80 different variations of your golf carts on Lowe's website. Of course, you're exclusive at Lowe's. I'm talking about in general. But what's interesting is there are several hundreds of five-star of the rating system, you know, on these golf carts. I don't know if you're aware or not, but you've got an overall 4.5-plus rating if you add in all the various different candy-provided products, which is pretty phenomenal and speaks very highly to it. at least the customers that have been buying the vehicles through those. And that's a real feather in y'all's cap.

But anyway, go ahead and pass that on.

But what's your question, Art?

Okay. Well, okay. Well, basically, well, that really wasn't a question. I guess that was more of a comment that I had here and only kind of asked the first part. Oh, let me see. I think we have one or two more items here. It is kind of prior things that were said. One of the questions I had was, since Candy's going to spin off Candy America as a special separate entity, wouldn't it be wise to bring the CEO and perhaps Olin on the call in the future? But you all did that, so there you go. Okay. Let's see.

Hang on. Let me translate what you have said so far. Okay. Okay. Okay, continue with your question if you have any.

Yeah, okay, just a couple of more light ones over here. This is a follow-up on a question that somebody else asked over here. I'm never sure we got the right answer for it or the answer that was understandable. Had to do with the total valuation of all of Candy's facilities if they had to be replicated. Well, I remember for a fact that Candy built from scratch the Haneem facility, which has the 100,000 capacity. And that was, I believe, four or five years ago, and that was done for about 200 million by itself. Subsequent to that, I know they sold the old facility and built a brand new facility in Genoa. And I guess that's where they're making your off-road products. So it would seem to me that the value of all those facilities, which if it had to be replicated today, would certainly be in excess of $300 million, maybe a bigger number than that. Am I wrong?

You mean $300 million what?

Okay. Originally, the original Hennan facility, was built for around $200 million by candy four or five years ago. And the new facility we have in Genoa, which is I guess there are two or four or five facilities in various cities are making vehicles, where I believe they're making the cowboy. I don't know what that cost, but maybe another $100 million or so. So my comment was when the question was asked about what the cost would be to rebuild it, that type of manufacturing capacity that we have, it would seem to me that number would be at least $300 million or higher. Am I wrong on that or what?

Let me ask. Mr. Hu, this question is to follow up on what the last questioner asked. If we want to restore China's production facilities in the United States, because from what he saw in our disclosure information, we spent about $2 billion five years ago, China China China China China China China China China China China China China China

It's very hard for us to tell at the moment because that involves too many parts like the supply chain, you know, the scale and other factors. But then we would like to think of that step by step. So that's our plan and consideration.

Thank you.

So you're not even willing to commit to the fact that the original cost of the facilities without taking all that other consideration? Well, I guess my question basically is, is it worth at least $300 million if you had to rebuild the whole thing again?

He said you can't even confirm that if it costs $3 billion in China, is it worth $3 billion in the United States if we have to build such a production base? You can't even confirm that?

If it is exactly the same, it is also doing such a large scale, it is also 90% or more to produce by itself, then it will definitely be more expensive in the United States, and it will be more than this. But if we go to America to produce, then some parts, some things still have to be purchased internationally. The entire supply chain is not 100% in the United States, so its investment is definitely different. So you have to have this data after the budget comes out. Because you just said that if it's exactly the same, it's just that it's not necessary to go through it. So of course it's not worth it. So of course, what I just said, if it's exactly the same, it's definitely more expensive than China. America is definitely more expensive than China.

So just to answer your question, if we replicate the whole exactly same scale, same thing, you know, from China to U.S., it will be even higher than $300 million. But then, again, it involves a lot of different factors when you do the manufacturing, like the supply chain and other factors. And it doesn't make sense economically. You just replicate the whole exact same thing, whole scale, whole same procedures in U.S. because it just doesn't work that way. But then, yeah, that's our conclusion for that.

Thank you. That was never my question. My question is the existing facilities that we have in China that are making all these vehicles that we are being – the company is being accused by the people on the Internet of farming out the building. If we had to just replicate them in China, in China, what would that value – what would it cost the company to replicate just the facilities in China?

Forget about importing.

Alan, you should translate this. Did I not translate it correctly just now?

Hu Jiong means that if we want to completely copy the entire supply chain, uh,

So in order to address your question again, you asked whether you will cost more than 300 million, right? Long story short, yes, if we do exactly the same thing. But just in the reality,

We may not do it that way because, again, it's not how it works in the production in the cycle. But, yeah, in order to answer your question, yes, it will be even more than that.

That's what I was asking.

Just for information.

Okay. Very good. Okay. Well, I guess last comment I have here, more of a comment than anything else. I have to admit, been in this business 51 years, never seen anything quite like this one where you have a company, where the stock is trading well under, over a dollar a share under cash in the stock market. It's got very little debt. As a book value, it's trading $3 or whatever it is, or more under book value. And you just landed probably the cherry project that virtually any golf cart country in the world would be trying to get right now, which you have with the NFL slash Lowe's. plus you have a sponsor like Lowe's, and you've got Walmart, you've got the camper's world, you've got all these others, and the stock is sitting down here. You've got to do something about getting the stock price up. I know even Olin is the second largest shareholder in the company now, and if I'm not mistaken, I think one year ago he did a deal at, what, $3.30 a share? You can't be too happy with that either. Got to do something, and I think the only thing you can do in the United States is you got to do something very definitive. And, you know, if normal circumstances, doing a deal with Lowe's would take any other stock up to $10 a share, we know this stock can actually do that because right after Candy America was brought on board, the stock went up to $19 a share just based on that. And then they were doing $10 million in revenues. This year you're probably going to do $150 million in revenues, just Candy America portion or more. And so that's just my final comment here. And if anybody wants to comment on it, I'd appreciate it. But if not, you know, we should have a great third quarter now because I guess you haven't done – no revenues have shown up yet because you're starting now in August from the Lowe's – I mean NFL program, so – I would think we're going to have a great third quarter. Maybe I'm wrong. If anybody wants to address that, I'll address that or not. Anyway, thank you.

Thank you for your remarks. Operator, that's all.

Thank you. I'll turn the call back to management for any closing remarks.

Thank you again for joining today's conference call. If you have any further questions, please don't hesitate to contact our IR consultant at gary at blueshirtgroup.co or you can contact us directly 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.

Thank you for your participation.