Hello and welcome to Kandi Technologies Full Year 2022 Financial Results Conference Call and Webcast. [Operator instructions] As a reminder this conference is being recorded. It is now my pleasure to turn the call over to the Kewa Luo, Manager, Investor Relations. Please go ahead, Kewa

Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss Kandi's results for the full year 2022. Earlier today, we issued a press release covering the results. You can find a press release on the conference website as well as from newswire services. On the call with me today are Mr. Xiao Ming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Dr. Dong will be delivered prepared remarks in Chinese, which I will then translate. After that, we will have a Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking 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, Xueqin Dong. Go ahead, Dr. Dong.

Hello, everyone. I'm Xueqin Dong, CEO of Kandi. Today, our Chairman, Mr. Xiao Ming Hu, and CFO, Alan Lim, and myself are all here to share Kandi's financial results for 2022 with you. Thank you very much for joining today's conference call. Our total revenue for the full year of 2022 was approximately $118 million. Results were impacted by the strategic adjustments to our product structure over the past two years as well as the pandemic. This drove a loss of approximately $12.9 million in 2022. However, if we exclude 2021 onetime gain of $66.2 million from the disposal of long-term assets and equity transfer, this is actually a significant improvement. As we enter 2023, our balance sheet is healthy with a cash balance of approximately $232 million. This lays a good foundation for our future development. To cope with the challenges of the pandemic and the oversupply of EVs in China that is causing intense competition, we shifted our focus to off-road vehicles. We have used our unique electric vehicle technology to form a more diversified and flexible business model. This resulted in healthy revenue growth for us while reducing potential losses in the electric vehicle market. Moving forward, we will cater to the evolving needs of our clients. We will collaborate closely with our partners, drive innovation in fully electric off-road vehicles and deliver exceptional customer service. Our deep knowledge and expertise in full electric technology equips us with a solid foundation to gain a competitive advantage in the market of fully electric off-road vehicles. Over the past two years, our company has undergone a strategic adjustment period and faced the unprecedented challenge of the pandemic, resulting in losses. Nevertheless, as our revised strategy begins to take shape, I am confident that we will soon turn the tide. I am eager to make meaningful contributions to Kandi's success and growth. Now we will move on to the Q&A session. Chairman, Hu Xiao Ming and I will answer your questions. and Ms. Kewa and Mr. Alan Lim will provide translation for English questions. Please go ahead and ask your questions.

[Operator Instructions] Our first question is coming from Mark Canal from a private investor.

Yes. Good morning, everybody, and thanks for the terrific results you presented. I have a question that is out of three questions. As discussed on the last conference call, it appears the long-awaited 300,000 government accredited Uber-like rideshare program has started to wake up. International government finally approving Kandi built K23 for full highway use now being licensed under the partner with certified China automaker Hengrun. Now my three questions from Mr. Hu's statement on this subject at the last conference call, it appears that Kandi will be paid for providing the parts required for Hengrun to manufacture this EV. When Mr. Hu says parts, how many parts it can be providing? About how much in parts revenue can Kandi receive for each vehicle built? Maybe start with first.

All right. Thank you for your question.

So first of all, thank you for your question. So, what we previously we're providing the whole set of the vehicle for the assembly parts, in which we will obtain more than 95% of the revenue of each piece of the vehicle.

Well, that sounds a great number. Then my next two questions is, it appears Kandi 23 is being built in Kandi’s Hainan facility bought by Hengrun. Is that correct? And if so, whose employees are being used at the facility? Do you anticipate any new models being built in the rideshare company? And if so, will they also be built under the Hengrun licenses Kandi provided all of the parts? And then last question. On the last conference call, Mr. Hu said, we basically get all the income generated from the completed steps of these parts to sell to Hengrun. Does he really mean that Kandi provide all the parts or just major parts like motor batteries -- battery management systems and so on?

Got it. Thank you.

So, as for the question related to the work process, so all the parts and manufacturing for the components are taking place in Hainan of our company, whereas Hengrun is responsible for the final assembly for the vehicle. That's how we work together in the corporation. If a new model is going to be developed, our plan is to cooperate with Hengrun under the current situation. And as for the parts that we are manufacturing, yes, we're actually manufacturing and providing all the parts, including the engines, the motors, the batteries and other parts, is all done -- the part is all done by Kandi.

Great. Thank you, for taking my question. And keep on good work. And I can see the shipment that's coming into the U.S. the UTVs, it looks terrific these days. So just keep on the good work and talk to you on the next conference call then. Thank you.

Thank you.

Thank you.

Our next question is coming from Mike Pfeffer from Oppenheimer. Michael, I cannot hear you. Are you on mute?

Thank, for taking my question. On the last conference call, Mr. Hu said, so regarding the production conditions for the K32 off-road trucks, we have been refining the whole production workflow in the past few months. And right now, we are capable of the full and mass productions. While investors are getting a lot of feedback on golf carts. We've heard very little on this really good-looking truck. Though this truck is fully equipped as a plug-in electric, sales in the low $30,000 level, somewhat similarly equipped Ford F-150 would sell at more than twice that price, around $75,000. While we know the top speed is around 65 miles per hour and up to 130-mile range, would think though not yet approved for general highway use, this would be a real big seller under farm truck license exemptions, which are variable in most agricultural states. And maybe just pass that on to Mr. Hu. I have two quick questions after that.

Okay. Thank you. Go ahead with your question.

What specifically did Mr. Hu mean by quote I mentioned above? And by referring to Kandi being now capable of full mass production, if this is true, is he referring to the truck being produced as an LSEV? Or is he inferring that he soon expects it to be cleared for full NHTSA registration?

So, as to your question, our current model, the K32, is developed according to the standards for the farm vehicles under the U.S. Transportation Department, which belongs to the category of load big vehicles or you can say the LSVE that cannot be utilized on high road. So yes, we categorized our K32 as LSEV.

Okay. And just last question. As an alternate course, what would be Mr. Hu's thoughts regarding my comment about the farm truck sales market?

Yes, currently, actually, the K32 is in the phase of the test marketing in the U.S. market. And your comments are highly consistent with our thoughts. We believe that once the customers can understand and try our cost, they will know the performance, the user experience that can lead to a larger market in the U.S. side.

Thank you, and thanks for your comment.

Our next question today is coming from Arthur Porcari from Corporate Strategy.

Good morning, all. Well, I'm going to change my thing around a little bit. I'm surprised we haven't gotten the 10-K announced yet. So, I'm going to ask a few questions on basic products first, and then I want to ask a few more questions about these results just came in with. But let's get back to the product situation. So, with a couple of comments followed by some questions on golf cart. As mentioned in Kandi's Q1 '22 10-Q, made public on May 22, we saw the following, "On February 22, 2022, the Seattle Sports and Coleman Powersports signed an MOU regarding the sale of 5,000 Kandi carts -- golf carts, value of $29 million, also in the same SEC filing a few days later, another MOU was signed on March 3 with a group of more than 20 dealers, and that was put down to be valued about $39 million also for another 5,000 units. While both were mentioned in the 10-K, PR and SEC filing, which didn't come out until May. So, several months later, there was never a PR dedicated to either of these, which likely could be Kandi's largest EV contracts to date. And also, to date Kandi has never publicly identified to the public, the Coleman carts cards were primarily for Lowe's Corp., one of the nation's largest big-box store chains that prominently showcases the Kandi carts with the Coleman front plate. And they put them outside the front entrance, mine actually has seven of them right now. They started with two, and they've been selling them, and I guess, because I'm down here in the south. But considering there's 2,400 Lowe's stores, the potential looks great there. Go ahead and pass that on to I one more comment to make in my questions.

Go ahead with your questions.

Okay. So, nine months after that original last statement back on November 29, the company made its first freestanding press release on golf carts when already surpassed the 10,000 contracted level, an amount call for these first two accounts alone. A few weeks after that, shareholders saw a second PR with Coleman not only extended its contract for an additional 4,800 with a value of $28 million, which is about equal to the full order for 2022. However, all to be delivered in just Q1 '23 and ensuring the best Q1 ever likely to be reported in May. With this said, I then have a few questions.

Go ahead, Arthur.

Okay. All right. Anyway, as was mentioned in the last conference call, I'm sure you all are aware that there is a logistical service called import key that any shareholder or any analysts, anybody would like to subscribe to, which gives a tremendous amount of detail on container shipping as it's coming out of China into the United States by 41 columns with everything imaginable, what's in there? How many pieces are in and so on. Anyway, with that available to us, and we talked again in the last conference call about it, it appears here that the question at the time was when you announced the 10,000 golf carts being surpassed in the company's press release. At that time, the import key had only shown that 7,500 carts were imported to the United States. So, a logical inference could be the candies now selling these golf carts in China or other countries can management confirm or at least explain the difference…

So, that's a fair comment question. During on November 2022, the company announced that our Hainan base has produced more than aggregate of 10,000 pieces of crossover golf carts. At that time, 7,000 of the golf carts already arrived in the United States. whereas remaining 3,000 were in transit to the space. During 2022, our golf carts are primarily sold to the United States with a small portion of mount sales in China. And that can explain the variance that you mentioned.

Okay, fine. From the last conference call, there was a question about AGM batteries, which we're currently in the golf carts. I was asked whether Kandi was -- I think you mentioned that you were not making the AGM batteries, but you would be changing over shortly to lithium. And at that point in time, Kandi would be providing the batteries. Can you explain a bit regarding the timing? And since Kandi has its own high-end battery subsidiary and also what parts of the golf cart does Kandi make?

So, in the 2023, we will mainly be manufacturing the electric of golf carts and other off high roads electric vehicles using the lithium batteries produced by ourselves. Besides the major components of our cost of golf carts are basically produced by ourselves as well.

Well, that's great news then. I mean that we have a great battery division already anyway. Looking forward to seeing the 10-K see how that's continuing to improve. One more question area in the golf carts and then I want to talk a little bit again about the numbers. Okay. And for 2023, it appears we now have a six-passenger golf cart, and even more impressive, something I could certainly use where I am, would be a two-passenger golf cart with a really nice lift bed in the back with, I guess, a hydraulic lift bed in the vacuum, a 3,500-pound, winch in the front. These seem to be new models for the year, and there already be an advertiser in the United States by a company called safer wholesale. And I believe the -- just within the past week, I think Lowe's has now put them on their websites as well. And I guess, they appear to be about -- well, at least as far as the two passenger and the -- with the lift head in the back and all that seems to sell for about the same price, just under $10,000, at Lowe's. And well, just under $10,000 with -- I'm sorry, I think that's around $10,999, I think that's what Safer Wholesale was selling that one for. Also, it's kind of interesting. They've got different colors. You get some now with that deck on the front, it's great for hunters that want to sneak up on their -- on what they shoot, what they're hunting for. Anyway -- so yes, just could you go ahead and see if we -- I guess, I don't have a question in there.

I'm sorry, what's your question? Can you finish your question?

I'm sorry, I carried off. I would say my question basically was, well, I guess -- some of it got pretty much answered on the last actually -- there was an question for me. I'm actually responding back to the answer he made. So, let's talk about something else here now. On these numbers, you said that we had -- at that time you put out that press release some 7,000 had already been sold into the United States, and that was still back, if I remember right, the end of November, how many carts did we deliver for all of 2022? I'm sure it will probably show up when the numbers show up. They're not here yet. So, for the benefit of everybody here, how many golf carts do we actually sell that got booked in 2022?

So, your question is, since 2022 November, how many golf cars have we sold until today or for 2022?

Yes, all of 2022, how many were sold for all of 2022? And how many were you made both?

In 2022?

Right.

Okay.

So, there we have two parts of the sales. One is the sales between our Hainan and our U.S. subsidiary, SC. For that part, we sold roughly 10,000 pieces of the golf carts from our China and then U.S. subsidiaries. And for the U.S. sales under the SC companies, we have sold roughly 7,000 during 2022.

So, you're saying you've done 17,000 units in 2022?

7,000 -- 7,000 pieces.

I will say 10,000 plus 7,000.

So, the 10,000, as I mentioned, we have two parts, right? One is the sales amount of China to SC. Of course, that will be eliminated in our consolidated financials, but we want to show that how our internal operations stand for, right? So, 10,000 is from our Hainan facilities to SC and then 7,000 is really selling to the external customers. we have on the book.

Well. At that time also, actually, even prior to that, November, you already got the new contract, I guess, from Coleman for another 4,800 units, but this time instead for the whole year was only for the one quarter. Is that correct?

I'm sorry, say one more time?

Okay. What I was saying is that for the -- you've got that additional contract that came -- was announced by the company for 4,800 units for Coleman, but only for the -- to be delivered in the first quarter. I guess my two-part question on that is will they all be delivered in the first quarter 4,800? And if so, what would that bring the total up to -- total sales through the first quarter? I realize the first quarter is not over yet. But I mean, you have expectations to do, let's say, another -- at least the 5,000 in the first quarter? And if so, how much more?

So, we expect that the sales of the golf cart vehicles to our end customers or extended customers of roughly 3,000 pieces of the golf carts during the first quarter.

So that would bring the total up to 10,000 then?

Yes, more or less, there will be an aggregate of 10,000 pieces of the golf carts sold by the end of. Yes, so more or less, yes, you're correct.

Okay. Well, obviously -- so that's how many that will be at least transferred to SC? Or do you expect that’s how many that will actually be sold to the end user?

Yes, so you're correct. So, by the end of the Q1 of this year, roughly aggregate of 10,000 pieces of the golf carts will be delivered to our external customers.

Okay. What about for the full year? Do you think -- could you give us any type of what's your target goal right now based on what you see on the horizon?

So, for the fiscal year 2030, we expect the sales during this year roughly 20,000 to 25,000 pieces of that golf carts will be sold in the U.S. market because we have more in-depth discussion and cooperation with lows directly, so that can facilitate the sales to jump up in this year. So, but your answer, there will be 20,000 to 25,000 pieces of the golf carts to be sold in this year.

That's great. That's an incredible number. That will put you probably is either number two or number three in golf cart sales in the United States in your second year. That's great news, I guess for us. Miles at one point in time is the actual sale booked on our books like you've delivered stuff to SC, that hasn't -- if it hasn't been brought out to the end user, I guess, it doesn't book then. So, this quarter, even though 10,000 were effectively done and shipped, I guess, up until the end of last year, you only booked 7,000 of it. So what point does that actually happen?

Yes. So, our sales is recorded on the consolidated financial statements based on the sales from the SC that we made to the external customers. And the revenue is recognized when our performance obligation is completed. So primarily, the deliverables is complete based on the shipping terms.

Okay. So, I guess, what I'm saying when the end user -- it's not like plus 90 or plus 30 or plus 60, are they built immediately like when you're dealing with? Is there a lag time when you're dealing with some of these biggest Lowe's?

I don't get your question.

Alan probably does. As far as us getting paid, is -- the sales when...

So plus, how many days we get actually paid, right?

Right, right.

So, for our current cooperation with Coleman, we actually have the advanced payment from them for ourselves. But as for the cooperation with Lowe's, the credit terms will be roughly six days primarily.

six days, it's excellent.

Yes, 60 days, right.

Okay. Let me wrap this up over here then. Obviously, the loss in the quarter was a bit surprising. But again, I'm sure it will be clarified in the 10-K. because Mr. Hu's made it very clear why you didn't want to compete in the overall business of EVs is compete and something you lose money at. So, I would have to believe that the strong addition of this new product line in the fourth quarter, there must have been something else that was written off or such?

What's your question?

You do not hear me? Just a bit, somebody was trying to call me so the line. Okay. Let me try it saying again. Mr. Hu has made it very clear that he does not like to get in a business that he loses money, and that's why he -- even though he was the big first mover in the industry, he decided to an EV industry, he's decided to look for other sources for the time being. So, the fact we took this sizable loss in the fourth quarter leads me to believe there must have been some sort of special write-down or something that caused it. And -- but we haven't seen the 10-K yet, because normally, you get it out before the call starts, so I'm going to ask that as a question. Why did we take such a big loss in the fourth quarter on this new product line?

Yes. So actually, if you look at our financial statements for the last three quarters, we have roughly 3 million of the net loss. So, the net loss, we have the whole year is roughly $12.8 million. So that's trend for the previous whole year. Even though our sales for the golf carts is doing pretty well, plus -- but then we have some adjustment like, for example, some impairments and some other items that we incurred for this year, plus we no longer have the gain from the self-equity fixed assets from this year. That's why we have such the net loss incurred for the whole year. And of course. you can refer to... Yes. Plus, you may consider the shutdown of the China, especially November, December, there's the high peak of the COVID infection in the China market. That's why that has some impact to our operations as well. But I believe that's over, so it will be better upcoming.

That's right. Okay. Well, anyway, it's great to hear about the 22,000 to 25,000 units expected for this year. I'd say that's quite a number in this industry. And a good job by all that managed to get that done. So next year, we have the same annual meeting, I think it will be a lot different picture for everyone. Thank you very much. Appreciate hard work, and I'll pass them here on.

Thank you. Yes, we have time for one more question.

Our next question is coming from Francis Forte, a private investor. Your line is now live.

Kandi announced two important agreements in October of 2020. And I would like to know the current status of each of them. The first one is the strategic agreement with State Grid EV Services company to cooperate on Cubex on battery exchange. And the second one is the agreement with CITIC Securities to initiate the process of doing an IPO on the Kandi Smart Battery Swap company -- subsidiary company on the tech exchange, the Star exchange. What is the status now of both of those agreements, please?

So, for the current market for the EV market in China, certain electric vehicle companies, they have faced the market shares at a huge loss expense. So, our company think that as long as the market has not reached the state of the healthy and development is not too wise to participate in this kind of competition with our own financial cost. That's why we try to just this way and see until the condition in the economics for the EV market becomes more healthy. And that's why we try to live it hold up for our cooperation with the State Grid company.

Okay. So, the State Grid agreement is on hold?

Well, let's put it this way. It's not really on hope per se, but it's progress slowly. And then now we are primarily just focused in the market of Hainan. And in this coming year, we plan to have one or two more locations to be added in our Battery Swap process, but the amount may be not material.

Okay. And is CITIC investments still committed?

So, the agreement with CITIC is still effective at the moment. So yes, there is still on.

Okay. Very good. Thank you, and congratulation, for the great year.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Kewa at this time.

Thank you, operator. Thank you again for attending today's conference call. If you have any more questions, please feel free to contact user or us directly via the e-mail ir@kandigroup.com. We look forward to updating you on our next conference call. This concludes our call for today. Thank you. You may now all disconnect.

Thank you. That does conclude today's teleconference and webcast. You may now disconnect your lines, and have a wonderful day. We thank you for your participation today.