Greetings. Welcome to Kandi Technologies First Quarter 2022 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Kewa Luo, Director of Investor Relations. Thank you. You may now begin..

Thank you, Operator. Hello, everyone. Thank you all for joining today’s conference call to discuss Kandi’s results for the first quarter of 2022. Earlier today, we issued a 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 question-and-answer session.

Before we continue, please note that today’s discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties as such the company’s actual results may be materially different from 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 US dollars. With that, let me now turn the call over to our CEO, Hu Xiaoming. Go ahead, Mr. Hu..

[Foreign Language] Hello, everyone. Good morning to those who are in the US, and good evening to those who are in Asia. Looking at this quarter, I think the highlight is our outstanding business performance. We generated nearly $25 million of revenue, a year-over-year increase of 56%. This is a great start to the year.

At this time last year, in order to expand our business, we leveraged our technology to develop new products and enter new markets. We're announcing the fruit of that effort. In particular, new oil or electric luxury crossover both cars, which are in high demand and we see a sales revenue is kicking off.

We will continue to launch more new models of those all electric or battery power to vehicle products in a year to drive meaningful growth. In February 2022, we established a company, Hainan Kandi Holding New Energy Technology Company Limited in Hainan Province to produce crossover electric golf cars.

On February 22, our US subsidiary, SC Autosports signed a deal to supply Coleman Powersports with 5,000 vehicles and another deal with over 20 other distributors to deliver another 5,000 units on March 3. The company Hainan Kndi Holding is already manufacturing the vehicles, and we delivered 778 units by the end of April to our US subsidiary.

And expect to ship another 2,000 in May. We are optimistic that, this is just the start of what can be a large business for us. Looking ahead, -- we are optimistic about Kandi's prospects in all electric off-road vehicles.

We also believe that our EV supported by our battery swapping technology will make a slash and again strong traction once the China EV market reaches a healthy and stable state. We will remain focused on innovative R&D that can improve our technology and create new opportunities for our off-road vehicles and electric vehicles with battery swapping.

Let's now start the Q&A session. Kewa will take any English questions and translate for me. And our CFO will transfer the answer. Operator, please go ahead..

[Operator Instructions] Our first question is from Harald Kobori [ph], Private Investor. Please proceed..

Hello. Hello, everyone. On January 10, Kandi PR announced the Kandi enters Framework Agreement to produce battery swap enabled electric vehicles, referencing has signed Framework Agreement with Hunan Hengrun Automobile Limited. to jointly produced battery swap enabled pure electric vehicles.

At first glance, it looks very positive as it appeared to provide Kandi earlier access to a required China EV license originally projected on the last call, not to be expected until April.

This was the requirement that was holding back Kandi from building and selling passenger EVs in China to outfits, such as the 300,000 EV government-accredited EV-only ride heading program. But upon further reading, it appears that vehicles in the JV will carry or all carry the NG, not the Kandi brand name. Now I have four questions.

Firstly, has the deal been activated? That’s the first question, has the deal been activated?.

Okay. Let me translate what you have so far? [Foreign Language].

First of all, thank you for your questions. The first question regarding the progress of our corporation. The agreement indeed is in place and then we are working with them orderly. And then the application is already basically approved and then is in public pronouncement stage right now in the China government agency center..

Okay.

Did I misinterpret the appearance of the Kandi brand in China will not be used even in the Kandi founded ride heading program question?.

[Foreign Language] Okay. Let's put it this way. Even though we are working together with Hengrun and the brand name of vehicles that we work together is under the name of Henghe. Although Kandi will take a major role of the whole corporation and the process in the manufacturing..

Okay.

Now, about the 300,000 ride heading program and the quick battery exchange also talked about in the aforementioned PR, what exactly does Hengrun contribute to the Kandi's practice in quick battery exchange?.

[Foreign Language] So, what we're working with Hengrun is we make the major part in the manufacturing process, including producing all the major part components of those battery swap electric vehicles. And then both parts will be assembled by Hengrun when we delivered the part to them.

And then because they have the license to sell in China market, that's why once they assemble, they will sell the brand in Henghe to their PLC market and that's the whole process of the whole -- of sales..

One last question. What does each partner primarily contribute? And what percentage goes to Hengrun and what specific products and services, the PR seems enticing but left a lot of questions.

Hopefully, management can clear this up?.

[Foreign Language] So in our cooperation Hengrun because there's no – the definition of the shares proportion. So we don't really have the issue of the percentage of the contribution or the sharing of the profit Instead, we are taking different parts.

As you may know, we are producing all the parts and components, and we'll make the margins from those sales of the products to Hengrun. And after that, they're assembling and then their own mark up to the PLC market they will have their own margin as well. So we are taking different roles in the whole manufacturing and sales.

So it's not really the percentage of the sales, but then we have own profit – old process..

Thank you very much – thank you very much.

Thank you..

Our next question is from Arthur Porcari with Corporate Strategies Incorporated. Please proceed..

Okay. Well, my primary area I was going to try to get more information on is a quick battery exchange. We talk about it a last month, and I'm not sure, anybody really understands, where we stand in that. But let me first say, congratulations on an all-time record first quarter.

With all the negative-ness in the US and China economies, it's incredible to think that we actually did a $25 million quarter in the first quarter. It's about the Chinese New Year and all the rest that go along with it.

But why did you – why is it – we find out now you have some $70 million in contracts you just signed just over the new electric golf carts, and we haven't seen any press releases on that. That's that question first to Mr. Hu, please..

[Foreign Language] So I guess in the past, maybe we have a different kind of the press release about the news and development. An ongoing our strategies, we try to strengthen our fundamental businesses and operations. And once we have some achievement, then we'll circulate the press release to all the investors. Okay.

So basically, in order to make the whole thing more positive. Thank you..

Well, I'm not sure, we’ve done much good in the market environment, we've been having lately anyway, but it's nice to know for the longer haul. Also, we didn't see anything in the press release on share buyback.

Have we -- did we buy any shares back over the past quarter? Do we continue with the program?.

[Foreign Language].

[Foreign Language] Yes, we did. We actually -- as a matter of fact, we have disclosed such that our share buyback in the subsequent event, note in our 10-Q. There’s a release on the SEC website. The shares we repurchased from April 1 to May 5 is a total of 603,000 shares of the company's stock..

Okay. Thank you. Let me get on to my main area of discussion here. So my primary question, as I said, has to do with Kandi's decade-old discussion regarding its Quick Battery Exchange and a little bit of background first, since I've been around long enough to see it from the beginning.

Over a dozen years ago, Kandi patent put into service China’s first Quick Battery Exchange program in Jinhua.

Even today, there are a few YouTube videos accessible that I personally posted a decade ago showing Kandi battery exchange in action, both robotically and at a changing terminal at around 60 seconds, as well as a roadside mobile exchange in just a moments.

The mobile feature to this day, to my knowledge, has not been replicated by any subsequent competitor.

What made this possible with Kandi's patented QBX, Quick Battery Exchange, which allowed the batteries to be exchanged simply by sliding in under the car doors between the wheels, rather than requiring a car to be lifted or battery turned with specialized stations like Neo [ph] and all the rest of them seem to have to do.

This was considered so revolutionary at the time that the PRC government published a white paper in September 2012, recommending for all of China only three charging methods as the preferred mode for EVs, the plug-in, which we still have today, obviously, lease just the battery, but the third one actually named Kandi in the official name of the project was called the Hanju [ph] Kandi lease and battery swap mode.

Not surprising, it was the only mode that could allow a battery to be exchanged in minutes anywhere at any time by a mobile unit. Needless to say, this was an exciting time for Kandi stock were announced by the government. With this background reminder, I've got a few questions from Mr. Hu on the subject.

Kewa, could you go ahead and share that with him. And I’ll get my questions.

Okay, sure. [Foreign Language] Go ahead, Art..

Okay. Okay. There’re about five sub-questions here. First, two I'll take together. What happened is that time because Kandi to lose the momentum after it's incredible nationwide government endorsement.

And today's Kandi QBX still use the side by – slide in between the tires exchange model, which allows for the mobile change on the road side as well as mechanical station..

[Foreign Language] Okay. To answer your questions, our Smart Battery Swap Technology did have its advanced nature and practicality. So it was recognized by the relevant government agency at a time.

However, prior to 2020, those relevant government departments in principle focus their support and promotion of the rechargeable EVs instead of the battery swap BEVs. So basically, our battery swappable electric vehicles were somehow materialized.

The government agencies -- the issue and the question and they noticed that the battery swappable vehicles is more advance, and then more practical. So until April of 2020, the four major state ministries and the commissions, then we list their announcement to support the battery swap more instead.

So at the moment, the better swap more of their EVs has been promoted and supported by numbers of the companies in China. However, the progress is relatively slow. Why? Because it does take time for years for them to reinvent, develop those EV models that is better swappable.

So they won't happen right away, but it takes time, but then we can foresee that progress will be better and better. At present, our intelligent battery swap exchange equipment, we're still using the original size life technology. We've believe that this technology is definitely the best direction of our future development.

And we will never give up, and we'll continue to develop and advance this technology in the upcoming future..

Well, I'm really happy to hear that. In fact one of the YouTube videos that's up there shows the mobile unit being used in downtown one of the cities where the change was made in about two minutes, 2.5 minutes with two guys in a little hand, kind of, lift type of gadget over there.

And, I mean, if you could break down -- you can run out of charge anywhere. Any other battery change programs seem to have to tow the car in the station. Here, it can be done in a couple of minutes. But aside from that, let me expand on that I'm really happy to hear that. Okay.

So it can be still controls this pattern what that mean is third-party automakers who use the technology would have to pay royalties to Kandi to use this side slide mode. And you've already said this is the same one the China Battery Exchange is using, so I'll skip that part of my question.

And by saying, can the China Battery Exchange subsidiary also custom made QBX stations for other battery exchange modes?.

[Foreign Language] So our company does own currently the pattern for all the sites like battery swap technology. Although in China market, there are not many products or vehicles adopting the size like technology at the moment. Rather, there are more vehicles using the battery exchange from other format like a treasury.

So, therefore, at the moment, the impact or the effect of the fast-life better swap patent is not is significant, I would say. And as for our subsidiary, the China Battery Exchange Technology Company Limited, yes, we are developing the product commercialization.

It adopts the standard life battery swap mode, of course, and we are trying to explore the optimal way that can develop for the third-party to commercialize on our pure EV in the SaaS life battery swap mode..

I thought I was going to finish, but I wouldn't do a follow-up on that. It would just seem to me again; no other model can be done where they could change it in place. I mean you're going to recall roadside assistant on your cell phone, they can have a unit out there to swap the batteries in a few minutes, even in downtown Beijing.

But why is it that such logical technology is not being used or even being endorsed or being promoted. It seems like it could be done with any size vehicle -- anyway, try to address that, if you could, please..

[Foreign Language].

So as for the development in China market, as you may know, back in maybe a decade or more than 15 years ago. The EV is a new topic in China.

So at that time, the development government agency, they may have not too much experience in this aspect that time they didn't really buy the idea of the battery swap mode, even though they recognize it, but it's not their focus.

And through the development and experience of the past decade, over the past decade since 2020, they finally recognized that the rechargeable EV may not be the ideal optimal way of promoting the EV in the market. that's why they start to recognize and promote the battery swap mode.

At that time, the four major state-owned console the commissions and the ministries, they all released their pronouncement to support the better is what mode and since it's been in the rechargeable EV market for the last decade. It does take time for them to change. And besides, the current market is not quite healthy yet.

You may see many companies, they try to compete the occupancy of the market share. They spend a lot of money and even though they sell other products with a negative margin. To us that doesn't make sense in order to protect our investors, we have to expand wisely. We cannot just go in and compete like there's no tomorrow.

So we are waiting for the development become more healthy and more orderly. We think it will be soon. So once that healthy market becomes more obvious, more viable, we will then go in and compete with others. So that's our plan in the market development..

Okay. Well, I can't argue with that. I think it's wise. But, again, it's just amazing to see the stock trading at a $50 million, $60 million under cash in the bank, with hardly any debt. And, I mean, at least at the rate you're going, it will take a couple of hundred years or something to use up the cash you have in the bank.

If you keep having losses of only $600,000 with all the cash. It's just frustrating, but great, great quarter, and we're looking forward to a great year. Thank you..

Thank you..

[Operator Instructions].

Operator, if we have more in queue. Please, go ahead..

One moment, please. Our next question is from Fred Thacher [ph] with CleanTech Equities [ph]. Please go ahead..

Good morning. Congratulations on a great quarter considering everything happening in China. This is just fantastic. Several years ago, with the stock trading at well over double the current price, the company contracted with an IR firm called Blue Shirt Group.

Aside from the fact that the stock is now trading at a five-year low, while top and bottom line have improved considerably. And Kandi is trading at a huge discount to both book value and even cash. They seem to be on the payroll. Why is that? Blueshirt puts out a monthly market letter of highlighted stocks. Kandi is nowhere to be seen.

You would think Blueshirt would be able to get the attention, at least one or two legitimate analysts to look at Kandi with such an undervalued profile. This is especially true with this current quarter. What is management -- how does management plan to get this message out. Thank you..

Thank you for your question. [Foreign Language]..

[Foreign Language] So thank you for your question. I guess our main target or main role is always trying to do a good job in our business operation and strengthen our fundamentals. As for the stock price, it's true that the overall trend in the market right now is not very good for the Chinese stocks.

Although, we believe that the share price for our company is undervalued. We believe that as long as we’re doing our best, and we are continuing -- doing good business in the performance, in the financial statements. The share price of our company will naturally rise and get back to a more reasonable price.

Regarding the IR firm, The Blueshirt, we have been working with them for a few years. Indeed, they have a pretty good limitation in the US capital market. And I think they are one of the best out there. They are working with some other leading companies in our industry as well, just like Lucid or Arrival are too simple [ph].

So the expertise and connections in the market is pretty good, we believe. And we are overall satisfied, of course, with the cooperation in the past few years. They give us advice, they give us all the business opinion. However, the final decision maker is always the management of the company.

Apart from the opinion from the IR firm, we also take into consideration of the advice from -- our opinion from the lawyers, from auditors, and from relevant departments and then the operation team. So as you know, actually you may know, we're doing our best, and we're trying to work the best for the companies, for the investors.

So hopefully, in the foreseeable future, our share price will get back to the reasonable level. Thank you..

Thank you..

Our next question is from Frank Batterman [ph], Private Investor, please proceed..

Yes. Good morning.

Can you hear me okay?.

Yes..

Okay. Just my first question was already answered. I have one question. A while back, you had mentioned about the K23 and K27 coming into the US. And then that was halted because of an airbag problem.

So my question is, you have an expected time frame for this full speed K23 and K27 to be released to America with the airbag problem resolved to the satisfaction of US regulators?.

[Foreign Language] Yeah. So at the moment, our add-back safety requirement stand that has still not met the requirement from the DoT from US yet. We think that the requirement standard is really too high. There's another Chinese companies having over hundred AV numbers of test has still not passed.

So, at the moment, we cannot tell the exact timeline that we can meet the regulated requirement. However, in order to strip our strategy and the market approach, we did adjust our models of K23 and K27 to NEV, the Neighborhood EV models and the sale is staying okay at the moment. So, that's the update on about.

I understand about the NEVs, but I'm really surprised that the regulations are so difficult for Kandi because other companies appear to be selling into the United States satisfactorily. They have met the regulation. It seems to me, if you bought a Chevrolet car, you could reverse engineer the airbag description and mechanism.

But okay, would you like to comment on that?.

[Foreign Language] Well, the major reason we can meet the spend base not really just for Kandi, but for overall EV makers from the PLC market. As you may know, the requirements and the standard of the FX safety is different between US and China and also the European countries.

They have more requirements of the effect based on the size or the weight of the driver and the passengers. So, at the moment, we don't place any one of the manufacturer for the EVs and then the gasoline vehicle manufacturing in China being sold in US yet..

Okay. That will have to do. Thank you..

Thank you..

Thank you. Our next question is from Francis [indiscernible], Private Investor. Please proceed..

Thank you. Hello, Kewa..

Hi..

About years ago, the company spent about $40 million or more for a – on a design contract for a new EV model and I wondered, if Hengrun will be assembling that model or if there are some other plans for that expenditure? Thank you..

[Foreign Language].

So Mr. Hu, is saying that, any car – any account receivables that will be sold in China market will be sold to Hengrun..

Okay.

And will this model will be sold in the China market?.

[Foreign Language].

Yes, yes. It will be..

Any time frame on that..

[Foreign Language].

Like I mentioned earlier on the call, in China right now, it's again about being of losing money in order to achieve certain sales volume in the market, and we are definitely not in that kind of game, and we just don't have that kind of money to compete with these peers.

But however, we're not out of the game, we are still going to try test the order to start with the small volume of EV product in China. So I don't have exact time frame as of when, but however, this is our plan.

And you are not going to see a large volume of the EV or EV models we're going to launch?.

Okay. And what is the status of that very important strategic cooperation agreement between Kandy and the Xinjiang State Grid EV service Company. It was PRed in 2020 and Mr. Hu emphasized how important this agreement is to the future of Kandi and QBEX. So what's the status of that now? Please..

Hey, just let me -- so you say in 2020, a strategic partnership with Zhejiang?.

Yes. I'm asking what's the status of the strategic cooperation agreement between Kandi and state grid..

That’s really good. Okay. [Foreign Language].

[Foreign Language] The scope of schoolwork for this strategic agreement is to realize the battery exchange. But, however, it hasn't been launching in a great deal of volumes yet because like I mentioned earlier, the market is right now not ready for us. But however, we have had some trial project going on in Shaoxing.

But going forward, I believe, when the market condition is stable and state grid will be the one who playing the key role in this project to make a great investment into this to promote the battery exchange, because that will be the way to go for EV..

Great. I'm glad to hear that, it's still alive at least..

Yes..

And last quick question.

When the F4 is approved at some point in the future, does the company plan to call a special meeting for shareholders to vote on the reincorporation in BVI?.

Okay. [Foreign Language].

[Foreign Language] We're still right now in the process of going through the F4. It's not being approved yet. But once it's been proved, of course, we have to go through the shareholder meeting to -- in order to get approved being able to execute..

Okay. Thank you, very much..

Thank you for your question..

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Kewa for closing comments..

Thank you, again, for attending today's conference call. If you have any more questions, please feel free to contact us via the e-mail ir@kandigroup.com or you can also contact our IR consultant Blue Shirt. We look forward to updating you on our next earnings call in August. This will conclude our call for today. You may now all disconnect..