Kandi Technologies Group, Inc. (KNDI) Q4 2016 Earnings Report, Transcript and Summary

Greetings, and welcome to Kandi Technologies’ Full Year 2016 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. I’d now like to turn the conference over to Kewa Luo, Investor Relations Director. Please go ahead.

Thank you, Operator. Hello everyone, and welcome to Kandi Technologies Group’s full year 2016 earnings conference call. The Company distributed its earnings press release earlier today and you can find a copy on Kandi’s Web site at www.kandivehicle.com. With us today are Kandi’s Founder, Chairman and Chief Executive Officer, Mr. Hu Xiaoming and Chief Financial Officer, Mr. Mei Bing. Both will deliver prepared remarks followed by a question-and-answer session. Before we get started, I’m going to review the Safe Harbor statement regarding today’s conference call. Please note that the discussions today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company’s results may differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016 and in other documents filed in the US Securities and Exchange Commission. Kandi does not assume any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Kandi’s investor relations Web site. I will now turn the call over to Kandi’s Founder, Chairman and CEO, Mr. Hu Xiaoming.

Ladies and gentlemen, thank you for joining our full year 2016 earnings conference call. Today, we will discuss our financial results and recent business development. 2016 was a challenging year for us compared to the all-time high electric vehicle sales was reported in 2015. Our net sales and profitability decreased in 2016. This decrease was the result of confusion surrounding EV manufacturers and sold by the JV Company during 2013 and 2014 that used the reusable battery change model. These issues have since been partly resolved after the long time conversation and discussions with the relevant regulatory authorities. Although, the Chinese government's EV subsidy review has now been finalized, it had a negative effect on our business in 2016. However, despite these setbacks, the Company has continued to put forth its best efforts to improve its product and its business. We are also very excited of our progress that we have made in the recent quarters. Our JV Company still managed to beat our fourth quarter guidance of 2,000 to 2,200 EV products by more than 30% and sold 2,764 EV products. For the full year 2016, the JV Company sold a total of 10,148 EV products, which included 4,766 EV products to the Micro Public Transportation program and 5,382 EV products through the direct distribution channels. Our EV part sales in 2016 were impacted negatively because of the decrease in EV product sales. We believe the decline in sales is temporary, and the management team has tried the best to maintain the market competitiveness; meanwhile, we're working diligently to manage the expenses efficiently but also exploring strategic initiatives and opportunities to boost the EV product sales. In November of last year, Kandi’s wholly-owned subsidiary, Kandi Hainan, received a second subsidy payment of RMB100 million, approximately US$14.5 million from the Hainan Provincial Government for research and development expenditures for new EV model. The subsidy payment is a strong indicator of the Hainan Government’s general support for our Hainan EV project. We are pleased about progress that we have made since the beginning of this year. The JV Company’s two Global Hawk EV models, JL7001BEV18 as known as Kandi Model K11 and SMA7001BEV25 as known as Kandi Model K17, have been included in 2017’s first and second Directories of Recommended Models for Energy Saving and New Energy Vehicle Demonstration and Promotion issued by the Chinese Ministry of Industry and Information Technology. We believe that our inclusion in these directories has laid a solid foundation for the JV Company’s business growth in 2017. The new directories are a result of recently increased technical requirements for EVs or EV products requires modifications in order to be approved in the new MIIT directories. Now, the purchasers of our two Global Hawk EV models will be eligible to receive Central Government Subsidies. We expect that the rest of our EV models will eventually obtain MIIT recommendation. This month, our wholly-owned subsidiary, Yongkang Scrou, successfully launched its next generation advanced drive motor, which achieved higher output efficiencies and rated power at roughly the same cost of production. The JV Company expects to purchase more than 20,000 next generation drive motor units from Yongkang Scrou in the second half of 2017. The new motor will help enhance our product capabilities and increase its competitive advantages, while maintaining effective cost controls. In addition, with our continuous innovation, we are going introduce a new business model that is able to solve the common two misunderstandings regarding EV developments, reduce subsidies, three drivers of resources waste, ease the cities four major crisis; and a breakthrough five EV development barriers in order to further develop and improve the urban micro public transportation, MPT program, into the global cost share model. The Company will utilize the six innovational concepts, which are no-charging station, no charging needed, no staff attended, no place restricted, no mileage to be worried, and no environmental pollution. Now, I would like to turn the call to our Chief Financial Officer, Mr. Bing Mei, to give you more details on our financial highlights.

Thank you, Mr. Hu and hello to everyone, on today's call. Now, I would like to provide a brief overview of our financial results for the full year 2016. Please note, all numbers I will discuss today are in the US dollars, unless otherwise noted. First, let me walk you through full year 2016 financial results. Total net revenue in 2016 was $129.5 million, a decrease of 35.6% from $201.1 million in 2015. The decrease in revenue was mainly due to the decrease of the sales volume to the JV Company. EV part sales were approximately $120.1 million in 2016 or 92.7% of our total net revenue, a decrease of 38.8% as compared to 2015. Our cost of goods sold in 2016 was $111.8 million, a decrease of $68.9 million or 35.3% from $173.6 million in 2015. This decrease was primarily due to the corresponding decrease in sales, resulting from weak demand for our EV parts by the JV Company. Gross profit in 2016 was $17.7 million, a decrease of 37.6% from $28.4 million in 2015. Gross margin in 2016 decreased to 13.7% from 14.1% in 2015. The moderate decrease of gross margin was due to less profitable off-road vehicle sales this year. Total operating expenses in 2016 were $48.7 million, an increase of $16.3 million from $32.4 million last year. Total operating expenses included $26.5 million in R&D expenses compared with $3.5 million in 2015. Excluding R&D expenses, our operating expense in 2016 was $22.2 million, compared with $28.9 million in 2015, which is actually a 23% of decrease. Net loss in 2016 was $6.5 million as compared with net income of $14.7 million in 2015. The decrease in net income was primarily due to decreased revenue, gross profits, the JV Company’s net losses, and significantly increased R&D expenses to prepare the Company for future business growth. Non-GAAP net income in 2016 was $4.6 million a 83.9% decrease from $28.5 million in 2015. The decrease in non-GAAP net income was mainly due to the decline in revenue and GAAP net loss from the JV Company. Let me touch on the JV, the financial model. For the full year 2016, the JV Company’s net sales were $179.3 million, gross profit was $19.3 million, and the net loss was $14.2 million. Gross margin in 2016 was 10.7% as compared with 16.4% in 2015. The margin decrease in 2016 was mainly due to the decrease in production volume. We account for our investments in the JV Company under the equity method of accounting, as we have a 50% ownership interest in the JV Company. As a result, we recorded 50% of the JV Company’s loss for $7.1 million for the full year 2016. After eliminating intra-Company profits and losses, our share of after tax losses of the JV Company was $7.3 million for the full year 2016. Next, I will review the Company’s cash flow. In 2016, cash used in operating activities was $49.5 million as compared to cash used in operating activities of $6.4 million in 2015. The major operating activities that provided cash for 2016 was increase in accounts payable of $120.2 million and decrease in [technical difficulty] of $28.7 million. The major operating activities that used the cash for 2016, was the increase in accounts receivable of $41 million, a increase in other receivable $43.7 million and increase in receivables from the JV Company of $112 million. Cash provided by investing activities for 2016 was $1 million as compared to cash used in investing activities of $4.3 million for 2015. Cash provided by investing activities for 2016 was primarily the result of a repayment of notes receivable of $10.3 million. Cash used for investing activities for 2016 was primarily the result of purchase of the construction in progress of $6 million and short-term investments of $3 million. Cash provided by finance activities for 2016 was $44.8 million as compared to cash used in financing activities of $1 million for 2015. Cash provided by finance activities for 2016 was primary the result of proceeds from short-term and the long-term loan of $65.9 million, cash used in financing activities for 2016 was primarily the result of the repayments of a short term loan of $35.8 million. Finally, I would like to report the material weakness in the internal control assessment. Management conducts assessments of effectiveness of our system of internal controls over the financial reporting as of December 31, 2016. Based on the management’s evaluation under the 2013 quarter framework, management identified that certain material weakness existed as of December 31, 2016, in the Company’s internal control over the financial reporting. Principally, whether it is to the company’s period end financial reporting at the operational level. Management has been actively engaged in, the planning for and the implementation of, remediation efforts to address the material weakness. The remuneration efforts are intended both to address the material weakness and to enhance the Company’s overall financial control environment. This concludes my prepared remarks for the full year 2016. Operator, our management team is ready to take some questions, please.

Thank you. At this time, we’ll be conducting a question-and-answer session [Operator Instructions]. Our first question is from Ted Schwartz with TAS Associates. Please go ahead with your question.

Short sellers and some of the detractors are convinced that Kandi cannot maintain carrying the high level of uncollected receivables without doing some kind of an equity financing. Are there any plans in case the subsidies continue to be delayed to have joint venture raise capital so that they can pay Kandi the large amount of receivables owed to them?

We think the payment will start being paid gradually in 2017, hopefully going to be soon, which will help solve the uncollected receivables you mentioned. Currently, we don't have any financing plan. Kandi and the JV Company current cash flow are sufficient for the business operational for now.

So, there're no plans currently to do any kind of financing for the joint venture, I presume?

No, both Kandi and JV Company don't have any plan to do our financing right now.

Thank you. Our next question is from the line of Robert Limpert, Private Investor. Please go ahead with your question.

Before my question, I just want to commend you on your integrity and innovation as an American investor, I appreciate your leadership. Now, to my question, in 2016 letter to shareholders in December, Mr. Hu said he was going to target about 40,000 units in 2017. This before the PRC surprised the electric vehicle industry with new rules. Assuming subsidy payments come soon, is this 40,000 level still achievable based on expected market demand?

After we shared our vision of achieving the production of 40,000 units in the letter to shareholders, the government revised the subsidy policy and published the increased technical requirements for EVs receiving government subsidy at the end of 2016. Therefore, the industry is still digesting these new changes in the first quarter of 2017. But I believe as a government subsidy review was properly resolved the subsidy payment schedule will be back on track this year. Our JV Company business will also regain sales growth momentum gradually. What I can say is we'll try our best to do our work for this year.

Our next question is from the line of Steve Miller, Private Investor. Please proceed with your question.

Good morning, Kewa. I've got a series of questions on the subsidy payments that are owed to Kandi Geely Holdings EV JV. And I’ll ask each one individually to make is easy for you to translate, and get Mr. Hu's response. The first one is, is it an industry-wide delay or is it just Kandi Geely JV?

The delay for the 2015 subsidy payment is industry-wide delay, so not just to the joint venture company. Some companies may have already received the subsidy payments of sales in 2015. And in fact the JV Company also received the advanced payment of over RMB300 million back in March of 2015. We believe we are going to receive the rest of the payment for the sales in 2015 very soon. As far as the sales in 2016, the subsidy payment hasn’t even started to pay yet in the entire industry, which I also believe is going to start soon enough, we shouldn’t be waiting for too long.

And then another question is, is there any chance that government is never going to make or further reduce test payments owed?

Our EV sales in 2015 and 2016 are up to the government subsidy standards, so I don’t think the amount is going to be reduced, but however, it's going to take a longer time to receive them. I believe that as the payment is going to be again paid gradually in 2017. So, it's really just the matter of time not matter of whether they are going to reduce the amount of the payments they are going to pay to the company.

So does that mean that if you don’t know if when the payments begin, if they are all to be paid at the same time; or if there is going to be a schedule for those repayments?

In my opinion, I think going to start very soon. Based on our previous experience, I expect that all the past due payments will be paid in several installments, it won't be paid at the same time.

And approximately how much total in US dollars is the JV now owed?

Probably about US$160 million.

And I believe the JV debt to Kandi is well over $125 million. When the payment is made to the JV, what percent of the proceeds are you anticipating that JV is going to transfer to Kandi to reduce Kandi's receivables?

Since JV Company is the subsidiary of Kandi vehicle, so I believe if JV Company receives the subsidy payment, they will prioritize the delivery of accounts payable to Kandi Vehicle regarding to what kind of percentage, I believe going to be the big percentage that they’re going to pay to the Company, Kandi Vehicle.

And Kandi and/or the JV borrow against the subsidy receivables from banks, and if you folks given any thought to them?

The answer is, yes. We can borrow against the subsidy receivables. However, we haven’t done that because we have multiple factories in the lands that can be pledged, that’s why we haven't really used the subsidy receivables to borrow against.

And then I’ve got one more question unrelated to subsidies. When do you anticipate the restatements are going to be filed? And am I accurate to conclude that the SEC would not have permitted you to file for 2016 results today if the restatements would impact in anyway the reported results?

Can you repeat the last one, the SEC what…

My question was, basically when are you anticipating that the restatements are going to be filed. And am I accurate to conclude that the SEC would not have permitted you to file today’s full 2016 results, if the restatements were going to impact in any way your reported results?

We will receive all previous years' financial statements for the year ended December 31, 2015 and 2014, and the first three quarters in 2016, in this upcoming 2016 Annual Report. So, in other words, we will include all those restatements in this upcoming 10-K we will file today. So, as we indicated in our 8-K filed couple of days ago, this restatement we will -- primarily will to restate, including the adjustments to include the separate audit of financial statements for our joint venture company, and include the adjustments to correct the classification of notes receivable and notes payable in the statement of cash flow. In the previous -- rather than the years and some revision in our financial statements presentation to separate the identified certain accounts on the face of the balance sheet and the income statement. And include the amendment to certain previously disclosed amount. In note 18 tax, that is a note of our consolidated financial statements. This is most of the content in our restatements, the restatements including our upcoming 10-K. The restatement has no effect on net income.

Our next question is from the line of [Harold Gavori], Private Investor. Please go ahead with your question.

January 2016, Mr. Hu gave a keynote speech in China. His expectations with the problems ahead in 2016 based on government inconsistencies and in the regulations. How does Mr. Hu now feel about JV sales in 2017 and forward?

I believe the government will effectively regulate the industry and improve the existing weakness. There have been a lot policy changes from all these changes, I believe that the management team will again more experience to know how to develop the business to adapt to environment. So that development of China's renewable energy vehicle industry, I believe, will be accelerated in the future.

You didn’t address though how we see sales for 2017, and forward?

Are you talking about the sales of Kandi, or sales in general in the industry?

Sales in Kandi, the sales in cars and for Kandi for 2017, and after, how does…

As I mentioned earlier, because of the constant changes from the government in regards to the policy and to the subsidy and policies. So we are also trying to adjusting this. And I only can promise that we will do our best to do the work. And I believe this year we are going to be back on the leading position in the market.

Our next question is from the line of Arthur Porcari with Corporate Strategies. Please go ahead with your question.

Mr. Hu congratulations, we've made it 10 years as a listed US Company. Let me first just ask, I think, a couple of comments about the reported results and then I have two questions having to do with the new motor and the special EV license. As far as these numbers are concerned, we didn’t have a lot of time to review them. But I have to admit that increase in the working capital by $21 million in the fourth quarter to almost $2 per share, would be enviable by any company. Also impressive if the Kandi would have been GAAP profitable, if it not had to take care for the $14 million loss of the JV. So, Kandi's business itself obviously stayed impressively strong in spite of all the problems.

Okay, let me translate so far. Go ahead, Art.

And that portion, to paraphrase Mark Twain the year-end results clearly prove the reports of Kandi’s imminent demise have been greatly exaggerated. Anyway, let me go on and ask the questions specifically. About the next-gen EV motor. Mr. Hu has said in a prior press release that he anticipated sales in the second half of this year of this new motor about 20,000 units would be sold to the JV in the second half of 2017. And here’s my three specific questions; has the motor already been approved by the government, and does it itself have subsidy credits? Two, why is it better than existing motors, are there different versions of it for different JV EVs? And three, what is the expected unit sales price of this new motor, and will it be available for third-party sales?

To answer your question, right now, in order to install the new motor into our JV Company EV, it doesn't need application. And it is actually in the process, so I don't think there is any problems to being approved. And once it approved, I believe they will entitle to receive some government subsidy credit, as well. These are next generation drive motor achieve higher output efficiency through improved design processing and use of advanced material. All of which reduce the loss of electromagnetic energy, heat energy and mechanic energy. And to give you example, before was 18 to 30 kilowatts and right now you only -- we're going to be able to achieve 25 to 40 kilowatts. So, which means that the EV drive system efficiency will be increased by 10% to 15%, and the same time the energy consumption will be saved by at least 10% to 15%. And the price for this new drive motor is similar to the previous one. So, if the production capacity is allowed, it can be available for the third party sales.

Since the last conference call, six more special EV licenses have been awarded to various companies; all of these companies have production capacity less than the current JV capacity; each of these companies have had less total EV sales to-date; and at least three of these have it settled for subsidy discrepancies with the government last year’s investigation. Can you explain why the Kandi Geely JV has not yet been given this license? And maybe if you anticipate it, how soon we may get one?

I have to say last year, as you know we have being focused on the discussion with the government to solve the confusion surrounding the EV manufacture in 2013 and 2014. So, we really haven’t focused on [multiple speakers]. So, last year we have been focusing on lot of energy on the -- and solving the confusion issues with the government. So, we haven’t really followed closely on the EV license. But actually on this month 15th we have submitted the material to the National Development and Reform Commission, and we believe they have started reviewing our material. So, I think our hard work will deserve a positive result.

I want to just get back to my first question on the EV motor, maybe I missed it. Did Mr. Hu say how much these units are going to sell? Or in other words, if we sell 20,000 motor, these will be actual Kandi 100% Kandi sales. How much would that equate to or how much per motor will equate to?

Can you say one more time, out of 20,000, how much will be to Kandi's…

Assuming that we do the 20,000 new motors in the second half of the year, in dollar value, how much will that be worth to Kandi. And of course that is Kandi's own revenues not be split with the JV. So, effectively I'm asking how much per unit on average will one of these motors sell for.

I don’t have exact figure, but approximately RMB3,000 per motor that's the sale price. But don’t quote me on that, it's not the very accurate figure.

Our next question is from the line of Michael Fairnow with Focus Tech. Please proceed with your question.

I would like to address Kandi relationship with Li Shufu, who is of course your 50% equity owner in the JV. As I think most people know, Li Shufu has been quite successful in the auto industry, turning around Volvo as its owner, and Black Cabs and the owner, as well as of course the 43% owner in Geely Auto. My question addresses to the future relationship with Li Shufu beyond just an investor partner. Can you give some information on the expected synergies or joint opportunities that Li Shufu will bring to the table.

I want to say, the JV is in between Kandi and Geely, so, it’s not just up to Geely. And I believe that we both two parties will be working hard together. And we do remain very optimistic about joint ventures business in the future.

Can you give any specifics as to types of opportunities that Mr. Hu sees in working with Li Shufu?

Sorry Michael, Mr. Hu has trouble hearing me. But let me try again.

Do you need the question again…

No, I can hear you. But for some reason, in China they cannot hear me clearly.

I cannot tell you many details. But for example, for the JV license application Li Shufu has been very helpful as well together helping joint venture to receive the license approval. And besides that, also whenever we need any technology or innovation assistance from Geely’s existing technology, they're also being very supportive as well. That's all I can share with you now.

The next question is from the line of Peter Dalrymple with LPD. Please go ahead with your question.

It's good to see that Kandi's past two best-selling EVs, the K17 and K11 have been approved by the government. But the new K12 and the new K21, when do you expect that they will be approved?

The application for model K12, since we use the new battery, it has already been submitted. So, we believe it will be included in the next MIIT approval directory. For K21, we are still working on the model, so it's going to be taking a while.

Will it be this year?

It's hard to say, because K21 originally we were going to use for like Internet service, like Uber type of car. So, there were lot of things we need to adjust. But we are trying to get it down, but I cannot go and see when that can be done.

The next question is from the line of Charles Peak, Peak Performance. Please go ahead with your questions.

For 2016, many of the other automakers that sell both EV and ICE cars like BYD maintained record EV sales, presumably by prefunding their own subsidies. Was the JV's lack of these other cash flow is the primary reason for the large reduction in the 2016 sales, or were other factors unique to the JV?

I would think the primary reason was because the confusion from government regarding to the reusable battery model, we had on the EV back in 2013 and 2014. So, it's really the question of this model will you to have. So, it is the fact that the subsidy payment delay has made very negative impact on our production and sales in 2016, as well as our cash flow. However, as the government subsidy review was finally properly resolved and the subsidy payment is also expected to be paid and back on the normal schedule this year. I believe JV Company's business will regain sales growth momentum going forward this year.

If for some reason the government continues to delay those subsidy payments, would we look at borrowing money against facilities, or other ways of borrowing money to go ahead and get the sales momentum going, while we were waiting for the subsidies? Or will we feel like we need to wait?

From the close source, we have understand -- come to understand that government will start paying. So, it won’t be delayed for too long. And meanwhile, we’re also having fully prepared to be back on track for the production and sales. So, that’s going to be the plan.

The next question is from the line of Walter Hill, Private Investor. Please proceed with your question.

Last December, three Officer Directors bought over a third of a million open market Kandi shares for approximately $1.5 million. Mr. Hu alone bought over 322,000 for over $1.5 million in average price of about 4.84, well above the current market price. And you did this just before the year-end government’s restriction period. These were the first insider purchases and so small purchase by Mr. Hu in 2012, and each of -- nobody sold any shares. They should all be commended for the strong showing and the confidence of the Company. With a sharp few-week wind before the Q1 blackout allowing insider purchases, now open with year-end report out. Could we be seeing any more insider purchases or when the subsidies are paid, could we even see a company buyback?

Well, I can say from my personal point of view. When those open, I’m planning to buyback more shares. I can only speak of myself. I cannot speak on behalf of others. So, this is ultimately -- it’s individual behavior.

Next question is from the line of Frank Blatterman, a Private Investor.

I have questions regarding the facility under construction in Hainan Island. What is the completion status of the new Haikou, Hainan facility? And this facility still scheduled to start producing electric vehicles in the second quarter of 2017?

The construction for Hainan facility is on expected schedule. I think no problem to begin the trial production in the second quarter of 2017.

Can you tell us, at this point, what EV will be made in this facility? Or if you're not ready to disclose this yet, will it be a Kandi joint venture electric vehicle? Or will it be making EVs under contract for a different company?

I can say this question has been very mysterious, and many people want to know. So again, I cannot disclose any more information. But I can tell you, it's going to be for sure, Kandi's brand vehicle, and it's going to be a very well received once this being disclosed. And we will disclose when the time is appropriate.

I have two other questions, they're very short. When do you expect Kandi to receive the final third of the $33 million R&D research and development grant from the Hainan government? And also, has it been decided whether the joint venture or Kandi will maintain ownership in this facility?

According to the agreement, the rest of the government grant from Hainan government will be delivered a week after the EV product begins the formal production. The last question is, when is at the proper time this Hainan facility will be acquired by the JV Company at a reasonable price, according to the agreement signed earlier, and Mr. Hu emphases that it's going to be a good deal for Kandi.

The next question is from the line of John Neff with Parato Partners. Please go ahead with your question.

I have two questions, one concerning the joint venture and the other one on Kandi. The first question for the joint venture I started with a short story about the BMW legendary Chairman for 23 years Mr. von Kuenheim was asked about why BMW does not do joint venture. His answer was joint ventures are always end up like a ham and the egg venture between a pig and the chicken. While the pig becomes a ham and this date the chicken will continue to lay eggs. My question is in your view, which role the small shareholders will be playing in the joint venture, the chickens or the pigs, based on all what is happening?

I'm not sure about your question, what you mentioned about BMW. Can you just rephrase your question one more time?

He was talking about the joint venture. Joint venture is like a joint venture between the pig and the chicken to make…

Pig and a chicken…

Pig and the chicken to make ham and eggs, and it is not a good joint venture, because the pig will be dead and the chicken will be laying eggs. So, was all what's happening in the joint venture, in your view the small shareholders will represent a pig or a chicken? Are we going to die or we are going to be having a good future?

Mr. Hu is saying that he has never, in his memory he has never made that kind of metaphor of the joint venture company. And second of all -- he thinks as a small shareholder it should be your own decision how you should position yourself in your investment in the joint venture.

My last, this is really not an answer to the question. But my last question has to do with Kandi. And I directed to Mr. Hu, and I am saying Mr. Hu was the first to suggest and also to implement revolutionary new concept, such few periods, fast charging of EVs, vertical community garages, and the right share. What became of all of these, and because the small shareholder who brought and bought into your vision and the finance at your company are very much hurting right now. So, I have to ask this question. Is it not the time, now that Kandi recruit new manager and the new Board of Directors like what Mr. Li Shufu and Mr. Jack Ma, did to capitalize on opportunities of a lifetime and they made billions out of it. Then you can focus, then Mr. Hu can focus on what he does best, which is role of the Chairman and the Chief Business and the Product Development. Otherwise, we think that going from a crisis to a crisis and inviting all kind of lawsuits my last count to this morning was 17, with all the shareholders being losers. The Company needs somebody else to look at, not taking five-step backward and half a step forward. And nobody ask this question. And I’m sure Mr. Hu will evade answering this question. But I give it to him anyway.

I actually will answer your question. I don't think it's very difficult to answer. First of all, I want to say the Company is not having a crisis. So, I don't think we need anyone to play magic to bringing back alive. Like you mentioned, there has been a lot innovations from the Company. And for example, the QBEX, but unfortunately this business model got a lot of confusion and misunderstanding from the government last year, which has impact us very negatively. But fortunately we have finally got this clarified, and government right now has already accept this kind of business model. So, starting this year, like I mentioned earlier on the conference call, we are going to have six innovation concept; so I believe this is going to be even better and even more practical in our industry. And I want to tell you that Jack Ma is very busy, I don’t think he is interested and has the time to manage my Company and same is Li Shufu. But however, both of them are very interested and very supportive into EV industry. And lastly in the ’13, ’14, ’15, Kandi has been at the leading position in the EV sales sector. And in the 2016 due to the misunderstanding in our QBEX, I mentioned earlier, so our sales declined. But with the revised business model, I believe in the 2017 and ’18, we have confidence that we’ll back to the leading position. And again, during the open window, I as the individual, I'm going to continue buyback shares. I think that will be the strongest indicator of my confidence in the Company and in the Company's business in the future. And to conclude this answer, I always welcome all the talents to join the Company together to help the Company to manage. That's all.

I think you misunderstood my question. I didn’t mention Mr. Shufu or Mr. Ma to come and help running Kandi, am saying Mr. Shufu and Mr. Ma got a Chief Operating Officer to run the business, and they are the creative part of the business. And what I'm suggesting that Mr. Hu focus on the creativity of the business, and to bring somebody to manage the business, because in a business goes for around $22 a share to $3 a share this business is in danger. And Mr. Hu is a part of the solution, and the part of the problem. [Multiple Speakers]

I have to say, it’s always me behind the same, when the Company saw price from a $1 to $22. And it’s also me behind the business when the stock from $22 down to $4. Business will always experience ups and downs. I don’t think it’s fair for you to share your statement like that. So, I do have a confidence to regrow the business. And as far as a CEO, you suggest; again, the Company has always welcomed the talents to join as part of the team to grow the business.

Thank you very much. But I really appreciate if Mr. Hu give it a thought. Because, I believe he is the most creative part in the EV Industry. But management wise, I have a major doubt, and that’s why I said he is part of the solution and the part of the problem. And I hope the best. Thank you.

Thank you. At this time, I’ll turn the floor back to management for closing remarks.

Thank you, ladies and gentlemen for attending Kandi’s 2016 full year earnings call. In closing, allow me to present the Board of Directors and management team at Kandi Technologies Group to share our appreciation and reaffirm our commitment. We will continue to work diligently to position us to regain momentum and deliver long-term growth for our shareholders by focusing on using innovation to grow our EV business strategically, while delivering strong operational results. Thank you very much for your support in Kandi during this difficult time in 2016. We look forward to talking with you next quarter. If you have any additional questions, please don't hesitate to contact our Investor Relations. Good bye.

This concludes today's conference. You may disconnect your lines, at this time. Thank you for your participation.