Good day, ladies and gentlemen. Thank you for standing by and welcome to CBAK Energy Technology, Second Quarter and First Half of 2021 Earnings Conference Call. Currently, all participants are in the listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to the Investor Relations Director of CBAK Energy. Mr. Li, please proceed..

Thank you, Operator. And hello, everyone. Welcome to CBAK Energy's Second Quarter and First Half of 2021 Earnings Conference Call. We released results earlier today. The press release is available on the Company's IR website at ir.cbak.com.cn, as well as from Newswire Services.

A replay of this call will also be available in a few hours on our IR website. On the call with me, today are Yunfei Li, who is our Chief Executive Officer; Mrs. Xiangyu Pei, who is our Chief Financial Officer; Mr. Xiujun Tian, our General Engineer; and Mr. Bing (ph), our interpreter.

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 in both ensuring 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 doesn't assume any obligation to update any forward-looking statements, except as required under applicable laws. Also, 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, Mr. Yunfei Li. Mr. Li will speak in Chinese and I will translate his comments into English. Go ahead, Mr. Li..

[Indiscernible].

And hello everyone. Thank you for joining our earnings conference call today..

[Indiscernible].

We are very pleased with our solid financial performance for the first half of 2021. Thanks to the robust sales growth for uninterruptible power supply batteries.

Net revenues grew to 5.9 million in the second quarter and 15.3 million in the first half of 2021, up 27% and 33% year-over-year respectively, reflecting the global market of pure for our industry-leading technology products and our effective business strategy execution.

Our gross margin increased by 15.6% from the prior year to 19.2% in the first half of this year..

[Indiscernable].

During the first half of 2021, we continue to leverage our funds, research, and development capabilities to innovate our products, which then help us broaden product applications. With additional capital rates from new financing, we are well-positioned to execute our business plans, such as capacity expansion.

Moreover, we made a strategic consolidation across the supply chain for great synergies. I'd like now to share with you more information on these recent developments, which have further our mission to become a leading innovative energy storage solution provider and lithium-ion battery producer in China..

[Indiscernible].

First, let me dive into the remarkable strike that we have made for product innovations during this period and our future development plans..

[Indiscernible].

We have successfully developed a special 26650 battery, especially for ultra-low temperature applications. This new battery is designed to operate in temperatures as low as minus 40 to minus 50 degrees Celsius and discharge a maximum C-rate of 60C at room temperature. On top of positive test performance results.

The special 26650 batteries, highly attractive for products used in extremely low-temperature conditions, such as in China's northern region, harsh weather conditions, as well as for the aviation and aerospace industries.

At this point, our clients have all given very positive initial responses, and we are anticipating mass production of the special 26650 battery at the end of this year, as we're expecting its meaningful contribution to production volume in coming years..

[Indiscernible].

Meanwhile, we are actively developing a series of large cylindrical batteries for the LEV market. The batteries for light electric vehicles have a capacity of nearly 4 times that of regular batteries and are 20% lower in cost, making this product a perfect solution for the LEV market.

We aim to be a major base rate supplier for top LEV manufacturers and expect growing traction among expanding customer base with our high quite to performance ratios and strong ability to adapt to customer needs..

[Indiscernible] [Indiscernible].

We were capable of broadening view scenarios with the support of our high-quality and dependable batteries products.

Earlier this year, we started cooperating with Chengdu Raja New Energy Automotive Technology Corporation to jointly develop a battery swapping project for food delivery and the logistics industries, as well as an uninterruptible power supply project for traffic lights.

As delivery services are becoming an increasingly indispensable part of life, the batteries swapping project aims to provide solutions for delivery riders that suffer from more battery weight, as well as inconveniences and risks in charging.

The UPS projects for traffic lights, on the other hand, keeps road space by ensuring the traffic lights are based on during power outages. So far, our cooperation with [Indiscernable] went well, and we will provide updates in the following quarters, should there be any new signs of progress..

[Indiscernable] [Indiscernible].

In addition, we're also focused our R&D efforts on developing next-generation beta risks to enable EPS, fasters, acceleration, and longer wrenches in driving. The batteries will have a lower loss rate and lower costs and present a huge opportunity in the EV market.

Our strong research and development capabilities are driven by continuous product innovation. Our product development roadmap is led by the new generation of technologies and market potential in the clean energy sector. We have established partnerships to develop Hydrogen Fuel Cells and solid-state batteries.

And these initiatives will allow us to maintain the mid-long-term industry advantages through technological innovation..

[Indiscernible].

Going ahead, we will continue expanding our operations in China, and establish our foothold in the global market through increased investments in R&D, and the Company's technical advantages in cylindrical batteries..

[indiscernible] [Indiscernable].

[Indiscernible].

Second, a strategic capacity expansion in the growing adjustable markets with continued new product developments and increasing customer demand and orders. We're renting up our production capacities. Two major projects are underway. The first being the Dalian Plant expansion, mainly for products used in the energy storage sector.

We plan to invest RMB 50 million, which is equivalent to USD 7.4 million to add the additional product line in our Dalian Plant. The new production line has an annual capacity of 0.4 gigawatt-hour and is expected to be completed by the end of 2021. The total annual capacity in Dalian Plant will increase to 2-gigawatt hour in 2021.

This expansion allows the plant could use an additional 100,000 units of model 26,650 beta risks per day. Second, the Nanjing plant will be established in two phases to mainly produce products for EV and LEV markets.

In Phase 1, we plan to invest a total or R&D 70 million, which is around $11 million in a 10,000 square meter space to develop a production line with an initial capacity of 0.7-gigawatt-hour. Both projects are on the right track of expansion and we are pleased with the progress.

The $70 million we raised in February supports our business expansion strategies and accelerates the product to go to the market..

[Indiscernible] [Indiscernible].

Next, through a strategic consolidation across the industry supply chain, we are pursuing remarkable synergies, which will further drive the Company's future growth and expansion. As a part of this strategy, we decided to buy 81.66% of Hitrans' equity interest via our subsidiary, Dalian CBAK Battery Corporation.

Hitrans is a leading developer and manufacturer of ternary precursors and cathode materials in China and is one of CBAK Energy's key suppliers. In the production of lithium-ion batteries, the cost of cathode materials accounts for about 40% of the total cost.

We believe this acquisition for a reliable raw material supply will place Hitrans as a strategic and complementary addition to fuel the continuous expansion of CBAK'S production and unlock potential for cost control. It will complement CBAK Energy's business portfolio, forming an innovative ecosystem across all our businesses.

This move will also advance the Company in diversifying total strategy and support, continued improvement iterations to maintain our market competitiveness. This transaction is due to subject to certain closing conditions and is expected to complete in the third quarter of 2021..

[Indiscernible].

Above all, our goal is to build an innovative ecosystem-based solution to power electric storage facilities and electric vehicles. We are moving forward to drive profitable growth as we increase our investments in expanding our capacities and R&D capabilities.

Our innovation further strengthens our existing product portfolio and drives growth in our adjustable market with new products. We're confident in taking our business into new areas that will better serve our customers by leveraging our core competencies and deploying new products. We are well-positioned to ensure rapid growth in the battery markets..

[Indiscernible].

Now, let me turn the call over to our CFO, Xiangyu Pei, who will provide details on our financial performance..

Thank you. Thank you [Indiscernible]. Thank you everyone for joining our call today. I will now go over our key financial results for the second quarter and the first half of 2021. Further through details of our financial results, please refer to our earnings press release..

Our solid financial performance demonstrated has drawn market revenues to our high quality and reliable batteries. Compared to the same period of last year, our net revenues increased 27% year-over-year to $5. 9 million in the Second Quarter of 2021.

And [Indiscernible] represents $15.3 million primarily driven by growing demand in batteries and our ability for uninterruptible supplies. Fueled by the increase in the sales volume, our cost of revenues, it's a good move to $4.8 million in the second quarter, and the child point for many of dollar in the first half up 6%, 10% year-over-year with Dr.

Lee, compared to the revenue growth, we still generated a positive operational average of 21%. And on the trended great present, respectively, reinforcing our confidence in our growth, drivers, deleveraging, Driven by higher sales of volume and cost management efforts, our profitability also increased.

Gross profit was $1.1 million in the second quarter, and the $2.9 million in the first half increase of 1148% and 899% year-over-year respectively. Also on a year-over-year basis with gross margin also increased by 1,670 basis points to 18.6% in the second quarter and the 1,650 basis points to 19.2% in the first half of the year.

The margin increase is primarily driven by higher utilization of cutout, capacity, and optimization of manufacturing, engineering. Total operating expenses were $3.8 million in the second quarter and the $5.7 million in the first half of the year increased to 283% and 79% from the previous year respectively.

We increased our research and development expenses by 171% year-over-year to $1 million in the Second Quarter, and 124% to $1.8 million in the first half of the year.

The increase was primarily related due to the expiration of the Chinese Government calling [Indiscernible] related policy in the relative corporation that shows insurance for them, and the increase in talent in R&D.

In addition to like, the cabinet increased in research expenditure into a new model of batteries for electric vehicles and batteries for [Indiscernable] low-temperature environment. Fewer sales and marketing expenses were $500,000 million in the second quarter.

And $800,000 in the first half, an increase of 435% and the 288% year-over-year respectively. Our general and administrative expenses were $2.3 million in the second quarter and $3.7 million in the first half of 309% and 96%, respectively. Apart from the aforementioned exploration of the Chinese Government called the [Indiscernible] policy.

The increase in G&A expenses was also a result of increased employees of the new plant construction in '19. After '19, it's one product and an additional product aligned in Dalian. They'll be completed in production by Q4 of 2021.

We expect to ramp up the transaction with customer orders and to generate itself [Indiscernible] will continue to manage and to improve customer relationship and the quality of our customers. We would tolerate of doubtful accounts with $100,000 in the second quarter of 2021 compared to 200,000 in the [Indiscernible] of 2020.

In the first half of 2021, the recovery of doubtful accounts was 300,000 compared to the provision of doubtful accounts of 400,000 in the previous year. Our change [Indiscernable] was $5.8 million in the second quarter, and the [Indiscernable] could $2 million in the first half-year, compared to both periods for prior year.

Sub halting the bariatric global fee revenue improved the gross margin, though positive change. It, rolling, we were able to generate net income of $2.7 in the second quarter. And our index, cricket two parts. And maybe, you know, first half compared to net loss of $29.6 million and $3.6 million into the same period of 2020. As Mr.

Li mentioned earlier, with success with $17 million derived ultimately from all the member share to finance our partners and working capital. As of June 30, 2021, our cash and cash equivalents, which surgically [Indiscernable] remaining dollars compared to $11.7. [Indiscernable] December 21, 2020.

With a strong cash position and an improvement in financial results, we remain confident that we are on the right path for accelerated growth. That concludes our [Indiscernible] remarks. Let's now open the call for questions. Operator, please go ahead..

Thank you. [Operator instructions] Our first question comes from the line of Karl Birkenfeld from American Trust. Please go ahead..

Good evening, management there. Does CBAK business involve sensitive technology that may cause the Chinese Government to turn [Indiscernible] its exports listing that is in the U.S.? I have a few more questions to ask..

Thank you. Thanks for the question, and I'm translating your question to our management to assist you. Just a moment. Thank you. [Indiscernible].

[Indiscernible] [Indiscernible].

Thanks very much for answering. And actually, as the Director mentioned, actually the new -- what we are dealing with in the industry of the new energy. In this term, all the relevant technologies are open to the public around the world.

and actually these -- there's nothing related to sensitive technologies. And also, on the other hand, the Chinese Government is giving the largest support to the developments of the new energy and relevant development of the business globally. So we don't have to worry about any sensitivities in terms of a technology. Thank you.

Anyway, we'll have another Director to also add some more information for our reference. Thank you..

Thank you. Thank you for putting all my investors at ease. I have other questions here..

Just a moment because sorry. Just moment because what we have another manager to add more information for -- in this term..

Okay, great. Thank you..

[Indiscernible].

And also additional information for your reference. Actually, in August 11, the Chinese Central Committee, the Central Government, issued a very important file. In this file, there some several key points are taken into the key considerations and monitoring.

In terms of the cross-border business, they are like a [Indiscernible] Fintech, there's a lot of computing and the relevance to business. And we have to say it, the new energy, what we are dealing with now is not included in those businesses, which we are under various very.

strict monitoring all to China's central government. So that's also additional information for our kind of reference to where you could totally be released from any commentary level monitoring or sensation. Thank you..

Thank you very much for putting us at ease here. Who are the C -- who are CBAK'S direct competitors, peers in each business segment? The battery materials, electric cars, LEV, the batteries for ultra-low battery applications..

Hold up. Thank you. Thanks for your question.

Domestic and foreign..

Domestic and foreign, okay. [Indiscernible].

[Indiscernible] [Indiscernible].

And thanks very much for your question. And our Director is going to give you the answers from the three main aspects. The first one, is stored energy, as one of the key pass rates for our business. The other one is also transportation. And the third one, is the ultra-low temperature.

Our Director just gave the answer for the first for the first point, that is storing energy. In terms of storing energy, domestically or globally, there are two competitors. The two competitors are both from China. The one -- the first one is [Indiscernible]. The other one is [Indiscernible].

But though we have the two main competitors, our output, which means -- well, output or shipment is larger than them in terms of quantity. And also, our business, the CBAK's business is largely connected to the global market. And we have many Fortune 500 partners and customers and key accounts, for example, Schneider.

So with the solid foundation of the global key accounts, we are surpassing the two main competitors as just mentioned, in terms of output in the business. Thank you. For the first one in terms of storage -- energy storage. And we are going to share with you about point 2..

[Indiscernible].

And for the second one that is about the power or electric powered driven transportation. That is many actually our EV as we shared before. And in this term, globally or domestically, there are two main competitors. The first one, the [Indiscernible], the other one is [Indiscernible] and also the two are actually a local businesses in China.

And compared to them, our more -- main competitiveness is that first one, our products is easier to use or to be installed because we are producing the cylindrical battery that is the lithium-ion phosphate. And comparing to -- compared to the competitors' prismatic batteries, it is easier to use or to being stored.

And because we are using the lithium-ion phosphates and also the -- it is designed, we are safer than the competitor's products. So our main competitiveness is flexibility and safety. Thank you. And we are going to move on to the third point..

[Indiscernible] [Indiscernible].

And then the third one is the ultra-low temperature application. And our main or key markets is, first one is the extreme cooler areas in American area and also the European area. And also the other key market is in the north part of China, which is very cold especially in winter.

So we are facing these main markets and also our technology developed by ourselves. We could've seen currently has no adverse competitors in this term, domestically or globally. Thank you..

Great. My next question and my last question is -- actually my next and the last question is, the CBAK has announced numerous business partnerships and investments in factories and new products.

What is the capital expenditure required to meet the commitments in 2021? How much have to see back invested so far, and how much does it plan to invest? What are the expected sales and revenues for -- that they expect to get from this additional investment in their growth..

Thank you..

[indiscernible] [Indiscernible].

[Indiscernible].

And thanks very much for the clarify -- the explanation. And as you may already hear from the previous introduction, that we have put it into the construction. The plants in Nanjing and plants in Dalian cities. And now we have invested almost Y=100 million. And we plan in this year to invest another around Y=50 million.

And we expected the two factories are going to be put into operation in the third or at least in the first quarter of this year. And we expect to generate the revenue or profits in the next, year in 2022 when the two factories capacity are put into the full usage, doing a certain time of operation. Thank you..

Okay.

My final question is, does the Company have a plan to raise capital again? And what's the estimated size of the raise? And then, when will it be used and for what purpose?.

Thank you. [Indiscernible].

[Indiscernible] [Indiscernible].

[Indiscernible] And thanks very much for Director Pei's detailed explanation in terms of the final question. And actually, as we mentioned, the Nanjing and Dalian plants is going to be put into operation at around the Third and Fourth quarter of this year. That is going to be the phase one plants.

And with the phase one plants in Nanjing and Dalian are going to be put into the operation and wait to [Indiscernible] currently. According to our calculation, the [Indiscernible] raised it before have been enough to cover our phase two construction and operation in both Nanjing and the Dalian.

We expect to do more analysis about the quality of our products capacities. And also the acceptance of the market of our products manufactured from the new to new factories in Nanjing and in Dalian.

It was all this data to be collected after two factories putting into the operation where you could understand that how -- Phase 2 in Nanjing factory is going to be expanded and how much fund needs to be raised.

And so basically, we will need the two factories to be putting this operation and to collect more information through the operation and give you all this data you are interested in. Thank you..

Thank you very much for supplying me with full disclosure and a concise description of your intentions. Thank you..

My pleasure. [indiscernible].

Thank you. Our next question comes from the line of Howard Yufem (ph) from Linden Capital. Please ask your question..

[Indiscernible].

Thanks very much for your question. We have a question about, that when bringing the report issued, that the CBAK has established a corporation and a partnership with J.C. by signing an agreement. And according to this agreement, it's going to be a three-year partnership to develop new products.

And the question is about how much revenue could be generated through this cooperation. And also, if. there's any first or commitment seeing this agreement for the partnership, as the financial commitment. And third one is that in terms of the IP for the co-designed or developer products, who is going to going to be the owner of the IP. Thank you..

[Indiscernible].

[Indiscernible] [Indiscernible].

[Indiscernible] Thanks very much before the Director's Li answer for this question. And we -- first, we have to mention that this cooperation with the GSA by CBAK, is now on the right track of the R&D or [Indiscernible] stage. But the one thing I would like to point out is that this corporation is focusing on the development of Verco.

And Verco, it generally needs at least two years for the R&D to be finished. And now we are on the right track in the process of R&D development. And also from the current progress, we J.C. is maybe satisfied with it. And also the product, we are co-developing is also a hot product that is the 4680 And these products its IP is owned by us.

And also this product is not going to be only to be supplied to J.C. It's also only going to be provided to other Verco manufacturers and producers. I believe that will help us to generate the progress -- the profits in the long run. And currently, where you could see in conclusion, the development of the partnership is on the right track. Thank you..

[Indiscernible].

Thanks very much for your question. And also from the previous introduction, we come to notice that CBAK is going to acquire a Company called Hitrans, which is app stream manufacturer for lithium batteries.

So would you like to share with us, if available, the scale or the revenue of this Company, the Hitrans that we are going to acquire? And after acquisition, merger and acquisition, if Hitrans is going to be integrated into CBAK whole business map or it is going to operate on its own [Indiscernable] Thank you..

[Indiscernible].

[Indiscernible].

[Indiscernible] And thanks very much for Ms. Pei's very detailed explanation in this term for this question. First, that after merchant acquisition to be finished. In terms of the general management and finance and also the risk management of the Hitrans is going to be integrated into the CBAK 's management at Operation Management scheme.

But on the other hand, we are going to lift Hitrans after merchant equitization or certain independence in terms of the business development and the business operation that is going to be administered by their previous technology team and management team for business and a business operation.

So that is going to be a good complementary of our support and also, their long year's experience and technology accommodation.

On the other hand, in terms of the financial and finance [Indiscernable] and because we are still in the progress of finishing the exchange and the transaction with them, so I think we are going to share with you the detail, the [Indiscernable] and the information in the next times meeting at a conference for your reference. Thank you..

[Indiscernible].

Thank you. [Indiscernible].

Thank you. Our next question comes from the line of Laura Liu from Stone Street Group. Please, ask your question..

Thank you, everyone. So my question is about the revenue growth for different business segments.

So can you tell us more about a strategy for the growth going forward? And also, what's the rationale behind it? Is it is going to be a merger or launching new technologies?.

[Indiscernible] Sorry, can I confirm with the last point, you mean the rationale of the strategy and we caught signal issue. I'm not quite catch-up all the information, especially the last sentence. Thank you..

Yeah. Sorry about that. Yes. So what's the rationale behind that, the growth strategy? Because I saw the Company will do some mergers and maybe potentially launching some new technology. So what is the major one between, yes -- and also behind the other growth? Thank you..

Thanks for your clarification. Thank you. [Indiscernible].

[Indiscernible].

First, that because we have another director to also answer your question.

And the first Director [Indiscernable] shares his answer to your question, is that in the long run, that is definitely CBAK is going to be focusing on the technology-driven business and especially for the batteries new technologies, update, and development with the merger and acquisition as support. So this is our main strategy and rationale.

And of course, we will have some niche markets. But because of a time limit, I do not expense upon here. Thank you..

[indiscernible].

[indiscernible].

Thanks very much for the further explanation and other information. And also the course, as we mentioned before, we are a technology-driven Company. It's also our mainstream for the development.

And also that merger and acquisition, for example, the Hitrans case, is also the because they are the ones to help us to provide a stable supply of the key materials for our batteries. It is of great importance strategically. So that's why we issued this merger and acquisition case. And so we could say, this is not just the merger acquisition.

We are not just taking it as drove driving force for our business. It is because it could add up to our technology-driven strategies to further strengthen our foundation in technology. Thank you..

Okay. Great. Thank you. That's my question. Thank you..

Thank you..

Thank you. Your next question comes from Lucy Liu from Venture Capital. Please go ahead. Good morning, everyone. I had a question about the EV and LEV market. At present all major battery manufactures being up to their production, capacity, expansion, while CBAK just decided to return to the EV and LEV market.

Isn't this sort of late?.

Hello. You can move on. Hello. [Indiscernable].

Hello..

Hello. Oh, sorry..

Hello, can you hear me now?.

Yeah, we can hear you. We heard that you talk -- talking about to the EV and they are also a lot of the players have been expanding their capacity. But on the other hand, and maybe CBAK is just entering into this business, and then the signal is [Indiscernable] ..

Okay.

Can you repeat the question again?.

Thank you..

And second, all major battery manufacturers are leading up their production, and capacity, expansion. While CBAK just decided to return to the EV and LEV market.

Isn't that sort of late?.

[Indiscernible].

[Indiscernible] It looks like you disconnected from the call..

Hello..

Hello. Sorry. Sorry for the signal issue..

Okay. Let me say the question again..

Yes..

Sorry. Maybe my signal is not good..

No problem..

At present, all major battery manufacturers are speeding up their production capacity expansion. While CBAK just decided to return to the EV and LED market.

Isn't it sort of late?.

[Indiscernible] [Indiscernible].

This is the Audio Operator. Maybe I can repeat the question. It's about whether is it too late to enter LEV markets..

[Indiscernible].

[Indiscernible].

[Indiscernible].

[Indiscernible] And thanks very much for the detailed explanation from our Director. And actually, one thing we'd like to clarify is that we are not a newcomer to the EV and LED market. Actually, we are back just like the very famous script, we are back from this market, but, of course, years before.

We strategically decided to exit the EV and LED market because, at that time, we analyzed the policies of the government and also the timing.

Do we start that it was not quite as supportive for us to develop our business or generate profits in EV and [Indiscernable] And is that's why at that time, we decided to put more energy into the development of the star rate -- energy storage markets. Which do generate the profits for us to sustain our development.

But on the other hand, now was the continuous understanding of the markets. We see it is a good time for us to reenter or back to the EV or LEV markets. So we say we already have the communication accumulation no matter of the technology or experience in this term. Thank you. [Indiscernible].

[Indiscernable] [indiscernible] [Indiscernible] [Indiscernable].

Thanks. And also, one thing would like to emphasize is that now we are back in this market. It is a big course. We have a strategic understanding about the market. So And the first -- I would like to share with you some additional information.

Actually, previously years before we exit the EV and LEV, we are the ones -- we were the ones taking part into the standards, making up for the EV and LEV. But at that time there's was only a stand -- that we only have the head of the standard for the industry. But now, we have China's national-level standard.

And we are also one part of it, of the standard making up. And also EPS before where you sort that EV and LEV, they grow very fast, the industry is hard to make profits.

So that's why we decided to temper the exit from their markets, but focusing on a business that can generate profits and sustain our long-term deployment of days, our actual policy, or for the development, that is, find the right business or industry to generate profits. With the profit, we can take a steady step to move forward.

And following these policies, we now say who market after years remembered has been more mature. And so that's why we decided to go back. And also we're not just back to a market to compete with those top level players. For example, AB, a big player, but they are more focusing on the ATEP, A-model cars. But we choose another list market, this market.

There's the A0000 model and also the aero UV minute to to where's The coast, which, which means where you focus more on the light. And the light type and model bear coast. We focused on different niche markets comparing to other key players. Thank you..

This is it..

Thank you. Ms.

Liu do you have any follow-up questions?.

Yes. I have a second question. It's the Company that received government subsidies.

And what's the regulation and incentive for battery space?.

Sorry. The signal is not quite good. Would you like to repeat it again? Thank you..

Yes. That the Company receives our government subsidies.

And what's the regulation and incentive for battery space?.

[Indiscernible] [Indiscernible].

[Indiscernible].

[Indiscernible] And first I think -- Thanks very much for your question. I think maybe because we are in the new energy markets. So we're currently affected or impacted by the general image. The Chinese Government is giving a lot of subsidies or incentives for the new energy business.

And actually, there is no incentive or subsidiary in China from a government level to battery manufacturers. This is one thing I'd like to clarify. But on the other hand, we are provincial-level high-tech enterprise. So we do receive some incentives from the local provincial government. This is one thing I'd like to clarify. [Indiscernible].

[Indiscernible].

And also as we mentioned before that, we are the provincial level high-tech Company and we do see -- receive an incentive from them. For example, that the local government gave us the fund that is, could only be especially used for upgrading and expansion of our product lines and our capacities.

So we do receive some subsidiaries or incentives from the government for a special purpose. This is also one thing we'd like to clarify with you. Thank you..

Thank you.

do you have further questions?.

Thank you. Thank you for the answers and that's all my questions. Thank you..

Thank you [Indiscernable].

Thank you. No more questions in the queue. Let me turn the call back to Mr. Yunfei Li for closing remarks..

[Indiscernible].

Thank you, Operator. And thank you all for participating in today's call. We appreciate your interest and look forward to reporting to you again next quarter on our next -- on our progress..

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