Greetings. Welcome to Kandi Technologies Full Year 2021 Financial Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Kewa Luo, Investor Relations Manager. Kewa, you may now begin..

Thank you. Good day, ladies and gentlemen. Thank you for standing by, and welcome to Kandi Technologies Full Year 2021 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today, if you have objections you may disconnect at this time. Hello, everyone.

Thank you all for joining us today to discuss financial results for the full year of 2021. Earlier today, we issued press release covering the results, you can find the press release on the company’s website as well as on the Newswire services. On the call with me today are Mr. Hu Xiaoming, Chief Executive Officer; and Mr.

Alan Lim, Chief Financial Officer. Mr. Hu 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 that 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 obligations to update any forward-looking statements, 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 and Chairman, Hu Xiaoming. Go ahead, Mr. Hu..

[Foreign Language].

Thank you, Kewa. Hello, everyone, and welcome to our conference call today. I’m happy to share our business and financial results for the full year 2021. Kandi was able to get back on track with meaningful sales growth in 2021.

This turnaround was the result of strategic actions we took to respond to a changing market landscape after the pandemic broke out in 2020. Also important highlights of 2021 was a remarkable growth of revenue in the electric scooter, electric self-balancing scooter and associated [parts sales] business.

This segment accounted for nearly 33% of total annual sales, growing approximately [120%] versus last year. Originally, our primary business operations were composed of designing, developing, manufacturing and commercializing EV products and EV parts.

However, in recent years, as the market got more crowded, some Chinese EV companies decided to chase market share with aggressive pricing, running huge losses. While China’s EV market took off early compared to other major economies, we believe that its EV market has not reached a healthy and orderly stage of development.

Therefore, considering our financial conditions, and the interest of shareholders and other stakeholders, we think it’s unwise for us to participate in this lost competition or risk to the bottom.

Hence, we decided to take the initiative and [indiscernible] the supply chain to find more viable business opportunities by leveraging our unique technological and operational strength in specific areas.

We firmly believe the battery swap is a prerequisite to universal adoption of EVs by leveraging our advanced [EVs] intelligent battery swap equipment, manufacturing capacity of EVs with intelligent battery swap mode and a dozens of patented technologies in batter swap, we will continue to build our position in the field of online car-hailing with battery swap mode and will make full efforts when China’s EV market enters a more healthy development stage.

Looking at the off-road vehicle business, the industry is gradually shifting its focus to electrification. In 2022, we will apply EV technology to off-road vehicle products and launch a variety of pure electric utility terrain vehicles, neighborhood EVs, golf carts and off-road crossover vehicles.

Our plan is to fully utilize our expertise and know-how in making electric vehicles by expanding to off-road vehicles. We will strive to become the market leader in this field in China within 3 years.

To sum up, we ended 2021 with initial success in [indiscernible] business transformation with sufficient capital from the government payment related to our facility relocation and with more business flexibility after exit the joint venture.

Looking forward, we are making full effort to develop products to enter the market for pure electric off-road vehicles, incorporating our EV technology. We expect more opportunities ahead in the EV market in China once it enters a more stable growth mode.

We believe there are plenty of opportunities to benefit from the industry’s development of EVs and electric off-road vehicles in the future..

[Foreign Language].

Now let’s start the Q&A session. Kewa will take any English questions and translate for me. Operator, please go ahead..

[Operator Instructions] Our first question is from the line of Frank Laderman [ph], a private investor..

Mr. Hu, I have 2 questions prepared for today’s conference call. One involving the status of the Hunan Hengrun battery swap and the other involving the status of the K23 and K27 in the United States. In light of your statement to today’s PR, I am assuming that these are dead in the water at this time.

Is that correct?.

Hello, Frank..

Yes.

Can you hear me?.

Yes, I can hear you.

Your last part is whether, what get in the water?.

The status of the K23 and K27. Also the status of the Hunan Hengrun battery swap. It looks as though we’re no longer going to be in that line of business at the present time and I’m looking for clarification is that is my understanding that it’s correct. And then I have 1 other short question..

[Foreign Language].

[Foreign Language].

Hello, Frank. So there are 2 questions. First of all, related to our cooperation with Hunan Hengrun. As you may know, Hunan Hengrun is an R&D company with the qualifications and license to manufacture EV in the China market. We are working with them right now at the moment at a Hunan production factory.

And we are working with them together to file the production filing. Once the filing is done with the government authority, which we expect around quarter 2 of this year. We can then pick up the orders and started to sell our EV products of K23, which have the battery swap features.

And as for our K23, K27, sale channel in the U.S., the problem we encounter is the requirement from the DOT safety requirement on the airbag. Originally, we need to have the approval from the EPA in order to sell our EV on -- for the highway usage in U.S. And then we noticed that for the safety requirement, it’s like a self-filing routine.

And then we noticed that later on, the requirement for the airbag is different between U.S. and China. There is a 1 standard requirement between China and European countries. However, we noticed that it’s different in U.S. Primarily is the airbag, you need to fit different sizes of the driver, which is a different requirement from the China standards.

And that takes us a long time and a lot of investment to refine in order to meet the requirements of the airbag safety per DOT. We are working on that very hard. And however, the time to complete such a refinement in order to meet the requirements in U.S. is uncertain at the moment. We are trying very hard.

So in order to proceed with our production, we are doing the parallel pathway approach. First is we are going to refine our airbag requirement at the meantime. And also, we are selling the K23 and K27 NEV version in U.S. We just already started -- in the market, and we have gradually delivered our products to the customers in U.S..

And I have 1 further question, which you may have already answered.

Is the company going to pursue an electric vehicle manufacturing license in China or by affiliation or preferably on its own in the future?.

Are you asking whether we’re going to apply our own production license....

Well, the answer I just received apparently gave me the answer to the first part. We’re going to operate utilizing the license of Hunan Hengrun -- now.

In the future, are we going to pursue a stand-alone license or is that undecided at this time?.

[Foreign Language].

[Foreign Language].

As for your questions, as you may know, is in past few years -- a few years ago, the license of manufacturing EV is highly sought and was difficult to apply. And when the market started to develop, many smaller companies get phased out in the market. And so currently, it’s easier to acquire those license through the acquisition of the companies.

From our approach, we plan to, at the right moment in the future, to acquire those companies with the license alone to consolidate them into our listing structures instead of applying the license from the local government because application may be more difficult to go through.

So our approach is to look for the suitable targets and complete our acquisitions in the future for those companies holding the license of manufacturing EV..

Our next question is coming from the line of Arthur Porcari with Corporate Strategies..

And by the way, I’m having a hard time how to call through to get the operator put me through on the queue for the call. And also, Kewa, when you opened up the opening, I couldn’t even understand you, but later on, it became clearer. Anyway, Yes.

Well, I guess, it’s been a pretty good year compared to what everybody else seems to be coming up within the industry over in China. The stock is just ridiculous. Yesterday, the stock closed at $2.52, a market cap of only $194 million.

Suddenly, this -- this puts this virtually debt-free company at a significant discount to its reported total cash of around $223 million or just under $3 a share. Now I’m counting all categories, including restricted cash and CDs. I don’t know why you don’t count $59 million in CDs in your number when you reported in the press release.

And at this level, it was also trading at almost a 60% discount to book value. Also, its reported total assets of $520 million with only $77 million in liabilities of 7:1 positive ratio.

And from a quick value point of view, current assets of $343 million compared to current liabilities of only $64 million is that a current ratio of 6:1 and positive working capital of $274 million or $3.70 a share. Yes, trading at $2.5.

And to top all this off 3 months ago, December 6, when the stock closed at $3.86, well over $1 higher, the company announced a $20 million share buyback. Yet, Friday -- actually, today, the stock is still down over 30% since that announcement. And finally, the insider buy-to-sell ratio in this company over the last 14 years, has been a very bullish.

And I’ve been in the market for over 48 years since dollar was trading at $5.86 in 1974. In all those years, until Kandi, I’ve never seen such a pervasive individual equity, market disconnect, particularly on the NASDAQ global national market security in a high industry, relatively high anyway, such as EVs.

With that said, I have a couple of questions..

Okay. Let me transfer first so far. [Foreign Language] Go ahead, Art..

Okay. Going back to a couple of conference calls ago, the Q2 ‘21 conference call. With the stock traded almost double the current price, in response to a similar undervaluation question.

The CFO also felt the stock was quite undervalued at that time and told shareholders who would personally take responsibility to work in improving Kandi’s perception in the stock market.

Can you give us an update how that’s coming along?.

[Foreign Language].

[Foreign Language].

Sure. And I can answer the question more directly. So we and our team and also the IR firm has been reaching out to the analysts and then different investors on a routine basis to let them understand the plan and then operation status of the company in order to improve our company’s perception in the stock market.

We believe that if they understand that’s better, it can help them to understand better in our company and have more confidence in investing in our stock..

Why is it you care of seem to get their attention? I mean, it seems like you’ve got [Invesco’s] attention. I mean they’ve been adding more and more recently, and I think it’s #2 on their list in their EV -- their special fund that they’ve got over there. We’re up to #2 from #8 about a month ago in the consumer discretionary areas.

So at least they like us. But it seems like this is -- it’s such a no-brainer on the stock. I mean, you’re trading at less than half book value and a huge now even a discount to net cash in the bank. Anyway, let me go on.

Can you tell us how many shares of stock the company has bought back today through this stock purchase program?.

[Foreign Language].

[Foreign Language].

So we are sticking with our plan for the share buyback at the moment.

And as a matter of fact, the company has bought back the shares back in end of last year, and beginning of this year with over USD 4 million to acquire and buy back more than 1.1 million of shares, and we will stick to the plan and proceed with our share buyback transactions in the future at the right timing..

1.1 million shares. And you’re trading under -- for the last 3 months, you’ve been trading right at basically cash. A couple of years ago, the company bought back probably about that many -- or just under that many shares and they pay as high as $5.50 a share. Anyway, why does the company just take 1/3 of the cash, including the CDs.

I mean, it’s irritating to see $139 million in cash, too, as you could tell from my opening there. Realistically, if you count all the real things in our cash equivalents like $59 million in CDs, you don’t even count that. Why don’t you take 1/3 of the cash, make it Dutch tender offer, let’s say, $4 a share. I might get even do it cheaper.

Buyback about 18 million shares, which is about the same amount you sold 1.5 years ago and raised $160 million at $8.80 average price. If you don’t do something quick, as one of the soon-to-be remaining left PCA will be certified Chinese companies that are safe from delisting, some smart private equity rater might just do it first..

[Foreign Language].

[Foreign Language].

Thank you for your advice and suggestions, Art. And [indiscernible] companies and Board of Directors will stick with our own share buyback plan, and we’ll definitely buy additional portion of the shares in the future at the right timing. So right now, we are still considering all the conditions and we will proceed with further buyback in the future..

At the rate you’re buying back right now. You’ve allocated $20 million through the end of this year, to my understanding, that the rates you’re buying back -- you better accelerate your plan if you’re planning getting near $20 million unless you might receive the shareholders.. I don’t think you want to do that.

So it seems to me you got to pick up the pace of it. Why wouldn’t you want to do it at under cash in the bank. It’s just insane to me. But either way, been here 14 years, I guess, I’ll be here another couple of years.

Anyway, you have a great -- but don’t get me wrong, I think it did a great this past year considering what everybody else has had to come up against. And even your analysts thought you’re going to lose $0.19 a share for the year from -- a GAAP loss of $0.19 and then you ended up making $0.30. I guess that’s why she’s probably not around anymore.

But anyway ....

[Foreign Language].

[Foreign Language].

Thanks again, for your support and consideration. Of course, we would like to have the better use of our cash on hand. In order to improve our fundamental R&D expenditure is key to us.

So I guess, at the moment, we try to plan ahead and have the better use of these proceeds in order to spend on our new products because we believe that with new products on the market that can improve our financial position and hence, improve our company’s stock value in market.

It definitely gets undervalued at the moment, but then we believe that the market is somehow irrational at the moment. And hopefully, you will be back to normal trends in the future..

The irrational market, you should be taking advantage of. But thank you. That’s it for my questions..

Our next question comes from the line of Walter Hill with Carty & Company..

Recently, the perennial hot topic concerning U.S. trading China stocks being forced delisted due to refusal by either the company or the China government to allow these companies’ books open to audits by the PCAOB for certification is back in the news.

However, this time, it seems for real in that the companies like Didi, NIO, Alibaba, JD, Nedis and several hundred others is mostly ADR specifically under attack and are already arranging for China or Hong Kong listing.

This has really highlighted last Friday when the average China stock, [big or small], saw their share price drop 10% to 40% or more and follow through severely yesterday and is even following through again this morning in the premarket. On conference calls, Kandi shareholders have been told, but not in writing, that Kandi does not have the same risk.

Aside from the fact Kandi is a CCAR, not an ADR and it clearly states in Kandi’s annual 10-K account audit opinions going back 3 years to 2019, that Kandi is PCAOB certified, fully compliant with U.S. SEC and stock exchange audit requirements for continued listing.

But that does not seem to stop the stock market from punishing Kandi severely as the rest over this situation yesterday and down another 11% to the mid-2s. Can both Mr.

Hu and the CFO once and for all, clearly explain for the record, all the preparations Kandi’s management wisely has been going back to 2019 to specifically shield Kandi shareholders from the same fate of forced delisting that some 90% of U.S. trading China stocks of all sizes are now worrying about.

And you need to put out some form of a press release stating that Kandi is a CCAR, not an ADR and a fully compliant PCAOB certified, fully compliant with all SEC and stock exchanges. This average -- the average investor does not read a 10-Q. The average investor gets their information from looking at press releases.

Most people that look at Kandi, do not have -- do not know this. So you guys need to get off your butts and put this out so that the average investor will know this and let’s get this done..

Thank you for your question. [Foreign Language].

[Foreign Language].

Thank you for your consideration of this topic and your advice. As you may know, those noncomplying companies from the Chinese-base stocks will get -- maybe get delisted from the stock exchange, is based on the Holding Foreign Companies Accountable Act, the HFCAA.

One of the key point is behind the auditor that cannot be happening what is inspected by the PCAOB. So in order to meet the requirements, our company starting from 2019 has already hired auditor with headquarter based in the U.S., and they will be -- they could -- they can be with -- inspected by the PCAOB routine inspection.

This can mitigate our risk and we can believe that we are not having the same relevant risks of being delisted. As for our -- and of course, such disclosure was included in our upcoming 10-K in the risk factor disclosure.

Apart from that, we will assess what’s the best way under the compliant -- or the requirements of the disclosure that we can circulate such news to the investments other than our 10-K. Thank you..

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

We need to get rid of you all and get somebody else in there in your place..

[Foreign Language].

[Foreign Language].

We understand your concern and frustration, and then we definitely will try to do that..

Our next question is from the line of Harold Gabry [ph], a private investor..

My question is, what is the status of Kandi’s special products like manufacturing of third-party parts such as for the hoverboard or other third-party EV parts and product sales like EV motors, batteries? Because it’s clear in past filings that Kandi is making third-party sales of parts and products, but other than the hoverboard motors and batteries, we never hear about the other parts and products.

Can Mr.

Hu tell us what is going on in this segment, both future and present?.

[Foreign Language].

[Foreign Language].

So thank you for your concern. So as a matter of fact, we are aware of the market that, as you may know, in the Chinese market, the EV companies, they’re trying to chase the market share, the occupancy with very aggressive pricing and even running the huge losses with the aggressive approach.

While in the China’s EV market pulled off early compared to other major economies like U.S. or European countries, we believe that the EV market has not reached a very healthy and orderly stage of the development.

Therefore, considering our financial conditions and the interest of shareholders, we think that it’s unwise for us to participate in this loss competition at the moment. We firmly believe that the battery swap is definitely a prerequisite to universal adoption of EVs in the future.

So by leveraging our advanced EV intelligent battery swap equipment technology and then the manufacturing capacities of the EVs that enables the battery-swap features as long as -- and as well as our dozens of the patent technologies in such category of the battery swap.

We believe that we’ll continue to build our positions and enhance our fundamental in the field of the online car-hailing industries in the market with our battery swap modes. And we definitely make a full effort when the EV market in China enters a more healthy development stage.

Apart from that, we are aware that in the whole major markets like U.S., European countries, those off-road vehicles, ATVs, UTVs, they tend to become more electric than the gas running in the past. So our plan is based on our technology, in 2022, we will launch a few more UTVs, off-road vehicles, the golf cart with the pure electric models.

With our technology acumen in the past, we definitely believe that we can be a leading position in the 3 years in both China and in the world. That’s our plan and our goal..

One other question Hello? Hello?.

Yes..

One other question.

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

I’m sorry, say 1 more time.

Are we selling the EV parts for other companies? Is that what you asked?.

Yes.

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

[Foreign Language].

[Foreign Language].

[Foreign Language] Can you elaborate your question? Are you asking whether there is other competitors also in the same business that offering the EV parts as supplier to other companies?.

Yes. I’m just trying to find out if we’re supplying parts to third party, to other people.

Example, are we selling battery to other companies?.

[Foreign Language].

[Foreign Language].

Yes. Addressing your question, we do with our more advanced technology and experience in manufacturing different parts and battery. We do and have edge to provide such electric vehicle parts and the batteries to other manufacturers. And that’s part of our business..

Our next question is from the line of Paul King [ph] with PK Capital Partners [ph]..

Our research indicates that NIO is leading the way in the battery swap technology stations throughout China. And now they are going global and in the Scandinavian countries they will be installing their battery swap stations. So it seems that their technology is recognized.

We have also discovered that NIO is working closely with the Chinese government in Beijing becoming the sole or would like to be the sole battery swap’s station in China.

What’s Kandi’s opinion or perspective on that? And how do they -- how does Kandi swap technology or how do they plan to catch up to NIO?.

[Foreign Language].

[Foreign Language].

As for the China EV market, as we mentioned earlier, it’s still not in a very healthy and orderly stage development. So -- and as for NIO, that you mentioned, the battery swap features, they offer only works for their own brand.

Our goal is -- and our vision is that as soon as all the spend is set, meaning the battery swap will be universal adopted by different brands, that will make the battery swap market and the whole field be more prominent and adopted by the regular users. We don’t see that stage has been reached yet.

But our own technology, however, enables the adoption utilization by different other brands with some minor auto and tailor-made features. So I guess we are different than NIO because we try to offer our battery swap services to different other brands. And we will wait until the time is right, and then we will enhance our market occupancy..

Okay. So you mentioned earlier that producing EV cars in China is not profitable at the moment.

So can you talk about the profitability of producing EVs for the car-hailing industry that you mentioned?.

[Foreign Language].

[Foreign Language].

As for your question, that exactly our thought because in current market in China EV field is, first saturated. However, it’s not becoming healthy and orderly developed. So it’s not very profitable or even having a huge loss [EBITDA cost] to enter this market. So we try to scale down our EV market share at the moment.

And in the meantime, we try to enhance our own battery swap equipment and the technology until the moment is right, then we can go in the market. At the moment, we try to focus on the more profitable products such as the electric off-road vehicles, the UTVs and ATVs, golf cart, those products. That’s our focus for this coming year..

I’m sorry, my question with regards to car-hailing.

If it’s not profitable to produce cars for the EV market, how is it profitable to produce EVs for the car-hailing business that you’re focusing on?.

[Foreign Language].

[Foreign Language].

And as to your question, as a matter of fact, it’s not profitable neither for the car-hailing products because they have the similar situation and conditions as other regular EV markets.

That’s why we mentioned that we have scaled down our production volume in the car-hailing vehicles and focus on the more profitable sector such as the off-road vehicles and UTVs, et cetera. However, we try to keep our share in the market and keep our name in it, but we try to not spending too much to have the larger market share.

We did try to have our position in the market and let people be aware of our systems, and that’s our major goal for now..

The next question comes from the line of Michael Pfeffer with Oppenheimer..

I’m going to make like 1 or 2 comments, and it leads up to my questions, if that’s okay.

About 6 months ago, the company announced an acquisition in China’s very hot lithium battery manufacturing sector of China-based Jiangxi Huiyi, a 7-year-old award-winning lithium battery producer with over 300 employees to include 40-plus researchers and holding some 50 related patents, already producing some 90 million batteries per year.

This seemed a perfect fit for Kandi’s already noteworthy battery division and that it brings Kandi a coveted full China battery manufacturers licensed to allow its passenger EV sales in China. Maybe you can translate that, and I’ll go to the next part, please..

[Foreign Language].

Okay. And then 1 more part. The deal called for Kandi to make an initial cash acquisition, which also called for a 3-year share earn-out for up to 2.5 million Kandi shares. To earn shares requires Huiyi to have a minimum annual net profit of $2.3 million each year, including this year or lose 1/3 of the 2.5 million shares each year misses.

Maybe you can translate that, and then I’ll get to the question, please..

[Foreign Language] Go ahead..

Okay. On the call right after the purchase, when asked if that $2.3 million profit that should be reached this year, Mr. Hu projected yes. And also shareholders were told Huiyi should also begin producing batteries for EVs by the end of ‘21. So a few questions.

Did Huiyi reach its expected $2.3 million profits to earn its first tranche of stock last year?.

[Foreign Language].

[Foreign Language].

As a matter of fact, there are 3 years, we’ll evaluate the net income, the margin for each year. The first period under evaluation is from the July 1, 2022 up to -- July 1, 2021 to the June 30, 2022. So the first period was not -- is not completed yet.

So that’s why the company has not reached the state whether they can earn the first tranche of the stock or not. And we will keep you posted in the upcoming filings..

Okay. Just a few more quick questions. In December, Kandi put out a PR about Huiyi’s new revolutionary lithium iron phosphate battery IFR-18650-2200MaH. The release called this one of the most advanced on the global market, now entering mass production.

Is this battery the new battery for EVs?.

[Foreign Language].

[Foreign Language].

Actually it’s not solely for EVs and yet, however, it’s rather more universal adopter like EVs, different other electric like the hoverboards, scooters, they can utilize the same battery as well. It’s just the battery with higher power capacity..

So could Mr.

Hu explain why this new battery is so much different or better than its competitors? Is it related to this high capacity you’re talking about?.

[Foreign Language].

[Foreign Language].

So I guess [crux] is the power capacity that we can compete and compare with other competitors. As you may know, energy density is one of the key indicators to measure the performance of the lithium-ion battery product. And this level reflects our R&D capacity and our technical level of 1 entity.

And we actually possibly launching such lithium-ion phosphate battery back in 2019 in our China domestic market. At that time, the product is 11% higher than the average in terms of the capacity. And then with the continuous self-improvement enhancements, Huiyi then developed a new battery in 2021 November.

The new product has been successfully mass produced. And then the new product compared with other -- the new -- the product we launched back in 2019, it enhanced a further 10% of the capacity with a higher energy density level.

With these more new products launched, it makes us be the -- having the leading position in the domestic market in China and also one of the most advanced position manufacturer in the whole country -- in the world..

Okay.

And the last question is, how does this tie into Kandi’s existing multiyear operating battery division?.

[Foreign Language].

[Foreign Language].

As you may know, we used to purchase the origin and then the role of the batteries from other manufacturers in the market.

With the acquisitions of Huiyi, we can now consolidate its battery production features and apply that in our different divisions in our EV manufacturing, that we can enhance our whole production chain and make the whole different divisions developed altogether. So basically, there’s a good synergy between Huiyi and our original EV production line..

Our final question comes from the line of Ray Palmer [ph] with Raging Capital [ph]..

Having followed the company for a decade or more, is initially because of your battery exchange program. I’m surprised to hear that you have decided strategically to scale down your EV production. At the same time, you have this partnership announced with Hengrun, which is a company that has a very wide array of vehicles they’re producing.

So are they producing EVs for which you supply the battery exchange technology. And furthermore, are you producing battery swap units for other companies at all? Are there any operation or what is the plan on it? And then I have a second question..

[Foreign Language].

[Foreign Language].

Are you referring to Hengrun right?.

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

Well, both companies is in battery.

One is Hengrun, which we announced in January; the other one is Huiyi, we announced last year, which one are you referring to?.

Doesn’t matter.

I’m interested, are you selling battery quick exchange units at all? Are there any operation? What is your plan on it? If you’re not producing EVs, are you producing the quick battery exchange units for sale for use of other companies or for other makes?.

[Foreign Language].

[Foreign Language].

So there are 2 parts to your question. First of all, we are working with Hengrun in order to get our filing approved by the local government, which is expected to be sometime in quarter 2 in this year. After that, we are eligible to manufacture and sell the EVs in the domestic market.

However, we will try to limit our production volume to rather considerable less amount because of disorderly stage of the market, I was mentioned.

Recently, there are a few competitors in the market, the EV manufacturers, they try to -- in order to enhance their market share, they even selling the product with a negative margin and that’s not the plan we try to adopt because we try to reserve our financial resources.

So we until -- yes, we will wait until the market getting more orderly, more healthy, then we will spend more effort to manufacture and sell more EVs at that moment. But at that point -- at this point, we try to limit our production. And the plan is only to have a considerable image of that we are in the player in this market. We have our existence.

However, we try to limit our production. So in order to reserve our financial position for the benefit of shareholders and the company. As for the second question about that...

Yes, you mentioned that already 3x throughout the conference call.

My question was, if you’re not producing EVs yourself, are you producing quick battery exchange units for other companies for other makes of EVs?.

[Foreign Language].

[Foreign Language].

Because the battery swap is not mature at the market, it’s not that very prominent. Each brand, each company, they are trying to develop their own standard.

So -- and consequently, we -- there’s not really a sales of the battery swap equipment to other companies because you only fit our own use and other companies they try to develop their own module as well. So no, there’s no sales -- there’s no plan to sell our EV battery swap equipment to other companies at the moment..

I see.

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

[Foreign Language].

[Foreign Language].

So at the market right now, there are some major players, they try to spend aggressively even with a huge loss in order to gain the market share. However, I obviously mentioned the market is not mature yet, even though they build all the battery swap stations, the utilization rate is rather low.

It’s not prominent to the regular end users at the moment. Of course, we follow that technology will enhance our own fundamentals, but we try not to enter this aggressive market because we have -- it’s really just burning money. And with our cash on hand, it will not be sufficient for us to enter this market in the long run.

So we will wait until the market becomes more healthy, you will be more cost-efficient and margin-wise, is making sense for us to enter in the future, but not at the moment..

That’s helpful.

Can I add another question, please?.

Sure..

Yes, please..

So from your explanation, it appears you are bound on reserving cash and you’re sitting on a very ample supply of cash, that’s probably above $3 per share, since markets are widely manipulated and markets are also depending on psychological aspects with the company that is sitting on hundreds of millions of cash and, is undervalued with a 50% discount to book value.

It does not appear that the owners of the company and the majority owners like Mr. Hu believes there is value in the company to spend for buying back their own shares. So that’s a large concern for shareholders.

Why do you believe it’s not valuable to buy your company at a price where actually you’re not only having a discount to book value, but the cash per share. How could you spend your money better, if you [believe] in the company..

[Foreign Language].

[Foreign Language].

Actually, we have already answered such similar question in the past. So we’re not trying to elaborate too much, but [indiscernible] we’ll stick with our share buyback plan and enter the market in the right moment..

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

[Foreign Language].

[Foreign Language].

We actually, again, stick with our plan and try to -- we’re actually -- we have -- as you may know, we have already put like $4 million [for shares] in the last few months, in end of last year and another batch in January this year. So we will continue to proceed with the shares buybacks with our plan.

However, the thing is we are -- even though we are confident with the shares, but if the company is again spend more money to buy the shares, it’s not necessary, meaning the share price will increase. So again, we will -- considering the whole market conditions and proceed for a shares buyback plan in the future..

So you’re basically saying you don’t think the company is at $2.50 a valuable buy for yourself, but you are preserving the cash you have for compensation for employees and for incentive and bonus shares for the company as a compensation plan.

Is that correct?.

[Foreign Language].

[Foreign Language].

So I guess our plan is, again, we will speak of our own buyback plan. And then as for the compensation, we just offer them with standard -- the package. And of course, we are not trying to manipulate the share price ourselves because that’s not complying with the SEC rule.

So we just try to enhance on the fundamental and hopefully, the share price will be improved..

I wasn’t implying that you manipulate the share price.

I was saying do you believe the company at $2.50 is valuable enough to use the money that you have in the bank to buy your own shares, or do you think it’s not valued correctly at $2.50 and should be cheaper, if you think it should be valued higher, whether it would be a pertinent investment into the company’s benefit and the shareholder benefits..

[Foreign Language].

[Foreign Language].

Then again for your consideration, we will definitely take your advising consideration and proceed in the future..

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

[Foreign Language].

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

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