KNDI 康迪车业

Operator

Good day and welcome to the Kandi Technologies’ First Quarter 2018 Financial Results Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Kewa Luo. Please go ahead.

Kewa Luo

Thank you, operator. Hello, everyone, and welcome to Kandi Technologies Group Inc’s first quarter 2018 earnings conference call. The company distributed its earnings press release earlier today and you can find a copy on Kandi’s website at www.kandivehicle.com. With us today are Kandi’s Founder, Chairman and the CEO, Mr. Hu Xiaoming; and Chief Financial Officer, Mr. Bing Mei, 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 U.S. Private Security 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, 2017 any other documents filed with the U.S. 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 website. I will now turn the call over to Kandi’s Founder, Chairman and CEO, Mr. Hu Xiaoming.

Hu Xiaoming

[Foreign Language] Hello, everyone. Thank you for joining our first quarter 2018 earnings conference call. [Foreign Language] We are very pleased with our strong business performance in the first quarter even though this quarter is a slow season. We have taken strides to accelerate our EV sales. In March, the JV Company unveiled its first all-electric SUV model Geely Global HawkEX3, although it is not yet in production, there has already been overwhelming requests from interested dealers. At the end of March, Kandi Model K23 production was launched and sales are expected to be advanced in the second half of 2018. We are confident in these new EV products becoming a driving force that will fuel the growth of Kandi’s EV business. [Foreign Language] In the first quarter, we completed the acquisition of Jinhua An Kao Power Technology Company Limited and have consolidated its financial statements. An Kao’s unique system of pure electric car battery replacement and battery technology are a major step forward to our existing EV offering. The acquisition is expected to generate additional revenues and provide a considerably competitive advantage in product delivery and services that will lead to market share gain. Looking forward, we expect continued momentum of Kandi’s EV business to a new phase of growth in 2018. Now, I would like to turn the call to our Chief Financial Officer, Mr. Bing Mei to give you details – our financial highlights of the first quarter. Afterwards, we will answer your questions.

Bing Mei

Thank you, Mr. Hu. And hello to everyone on the call. Now, I would like to provide a brief overview of our financial results for the first quarter of 2018. Please note all numbers I will discuss today are in U.S. dollars unless otherwise noted. First let me walk you through the first quarter financial results. Total net revenue for the first quarter were $8.3 million, an increase of 95% from $4.3 million for the same quarter of 2017. The increase in revenue was largely due to the revenue of EV part sales from our newly Jinhua An Kao Power Technology. EV parts of sales were approximately $6.4 million for the first quarter of 2018 or 76.4% of our total net revenue. A increase of $3.7 million or 139.1% compared with the same quarter of 2017. Our cost of goods sold was $7 million during the first quarter. A increase of 93.8% from $3.6 million in the same quarter of 2017. The increase was primarily due to the corresponding increase in sales. Gross profit for the first quarter was $1.3 million, an increase of 101.7% from the 0.7 million for the same quarter of 2017. Gross margin increased to 16.1% in the first quarter from 15.6% in the same quarter of 2017. Margin increase was mainly due to vast majority of the gross profits, came from more profitable EV parts business in the three months ended March 31, 2018. Total operating expense in the first quarter were $1.1 million, compared with $29.4 million in the same quarter of 2017. The decrease in total operating expense was mainly due to the decreasing R&D expenses and the stock compensation expenses in this quarter. Net income was a $3.7 million in the first quarter the increase of $27.9 million as compared to a net loss approximately $4.2 million in the same quarter of 2017. The increase was primarily due to the increased sales and the gross profits, increased profits from JV companies and significantly decreased R&D expenses in this quarter. Non-GAAP net loss in the first quarter, was a $0.6 million, a decrease of $21.1 million from $21.7 million of a non-GAAP net loss in the same quarter of 2017. The decrease of the loss was mainly due increase of sales and the gross profits, increase of profits from the JV company and the significant decrease of R&D expenses in this period. Let me touch on the JV companies, financials now. For the first quarter of 2018, the JV companies net sales were $33.8 million, compared to $1.3 million in the same quarter of 2017. There was 3,295 EV products sold during the quarter. Net income was $1 million compared to net loss of $10.6 million in the same quarter of 2017. We are confident of our investments in the JV company under the equity measure of accounting and we have a 50% interest in the JV company. As a result, we recorded a 50% of JV company’s net income for $0.5 million, for the first quarter of 2018. After eliminating interest entity profits and the losses or the share of the after tax profit of the JV company was $0.8 million for the quarter. Next I will review the company’s cash flow. For the three months ended the March 31, 2018 cash used in operating activities was $1.1 million compared to $13.7 million in the same quarter of 2017. Cash used by investing activity was $4 million as compared to cash provided by investing activity of 3.9 million for the same period of last year. Cash used in financing activity was $3.1 million as compared to cash provided by financing activity of $1.6 million for the same period of last. We have a working capital of $50.1 million at March 31, 2018 compared to $53.7 million as of December 31, 2017. As of March 31, 2018 we have a total cash and the restricted cash of $8.5 million compared to $16.1 million as of December 31, 2017. That is it from me.

Kewa Luo

Operator, we’re now ready for questions.

Operator

[Operator Instructions] We will take out first question from Karl Scherer, from Rang Ring Consulting. Please go ahead.

Karl Scherer

Good morning or good evening Mr. Hu and all attendants. I have a question regarding the last conference call, in which Mr. Hu, stated and confirmed that Kandi joint venture was already doing business with Didi Chuxing, the largest ride-hailing company in Asia and in honor of Uber China, in that conference call Mr. Hu anticipated that Kandi would soon be selling cars to the new Geely sponsored CaoCao hailing company valued at $1.6 billion, which was started by the Kandi joint venture partner Li Shufu, so had any sales had been made yet to CaoCao?

Kewa Luo

And I thank you for the question. [Foreign Language]

Hu Xiaoming

[Foreign Language] And how to ensure is that freight hauling program. Now regarding the freight hauling business, we’re still in a discussion with potential partners once we have to any definitive agreement where we update the market.

Unidentified Analyst

I see. So which of the Kandi models would like be used in that case?

Hu Xiaoming

[Foreign Language] We haven’t decided yet once I have news I will let you know.

Unidentified Analyst

I see. And with those electric vehicles be rather sold to the companies like DiDi or CaoCao or what they belief that their trial was some kind of interconnected through the ride-hailing companies.

Hu Xiaoming

[Foreign Language] For DiDi… [Foreign Language] Whether we sell the EV to DiDi or CaoCao will depend because DiDi is in program allows the driver to have their own car, or they can provide the car to the driver. But however for CaoCao [indiscernible] the drivers are not allowed to use their personal vehicle to do the program. Therefore for CaoCao [indiscernible] the driver will use the car that company provides. And in regard to how big the markets, Mr. Hu said this is very huge, it’s hard to predict.

Unidentified Analyst

I see. And how would that apply to the Hainan island province is that also going through partners like CaoCao, or DiDi or with Kandy be directly leasing the… [Foreign Language]

Hu Xiaoming

[Foreign Language] Mr. Hu is saying that everything is possible.

Unidentified Analyst

I see. Thank you. And congratulations for good first quarter which looks like you are making a turn around.

Hu Xiaoming

Thank you.

Unidentified Company Representative

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Operator

We will not take our next question from Ted Schwartz from TAS Associates. Please go ahead.

Ted Schwartz

Hi. With all the new Kandi EVs reported to pitch thorough the year, can Mr. Hu tell us which EVs are still being sold by name? And what market there being sold for, for instance Car-Share, consumer ride AL also which of the four facilities will be making each EV? And what’s the capacity in each of these facilities?

Unidentified Company Representative

Thank you Ted. [Foreign Language]

Unidentified Company Representative

[Foreign Language] K-12 and the K-17s are currently the products that are being sold. And K22 and K27 will be in production and be sold very soon. And these two cars are the modified vehicle based on the K12 and K17. And also we are going to have EX3 and K23 that going to be in production as well. And these two cars will be most likely for ride-hauling market and EX3 will also being targeting consumers as well. And JV Company’s vehicles in general are all consumer-focused. I’d also like to mention that other vehicles spun out that we have been sold is currently manufactured at Zhejiang Geely Auto’s subsidiary in Shanghai. And JV Company’s factory sells EV products to Geely’s subsidiary in Shanghai. And Geely’s subsidiary will sell the final EVs to the market. And once our Haikou [ph] facility receives the license, these EV models will all be sold to the markets on Haikou.

Ted Schwartz

One of – the other quick question is, Mr. Hu had previously said, we could get an idea of monthly sales from public sources over there in China. Can you explain why they showed zero sales for Kandi in the first quarter? Could it be that if it’s sold to be a car sharing or a car hailing company it doesn’t – they don’t pick it up as a sale. But it just doesn’t make any sense for them to shown a zero sales in the first quarter. I wonder if there is an explanation.

Kewa Luo

You say in the past that Mr. Hu said, look at those third-party resources or do look those resources. Because we always recommend that or follow the company’s official announcement and we cannot comment on the third-party – did you say that Mr. Hu, suggest to look both third-party resource for the sales or not look at those source for the sale.

Ted Schwartz

Thank you, at least very pleased, it looks like the company is finally turned around and look forward to the balance of the…

Bing Mei

[Foreign Language]

Hu Xiaoming

[Foreign Language] I’d like to recommend you one more time that did not follow the sales figures from the third-party media because they will have a different way to find out the sales number for each company. And as always follow the company’s official announcement on SEC filings and why the reason, I think maybe is our EVs are sold from Geely’s Shanghai subsidiary probably they didn’t catch that part. So again the third-party resources may not be accurate. So I cannot comment that but always follow our official announcements.

Ted Schwartz

Thank you very much.

Kewa Luo

Thank you, Ted.

Operator

We will now take our next question from Mike Pfeffer from Oppenheimer. Please go ahead.

Mike Pfeffer

Good morning. Late last year, Kandi made a major acquisition Jinhua An Kao. We were told among other it was involved in quick battery exchange, a feature pioneered and patented by Kandi early in the decade. Now we see this feature coming back not just with An Kao but as an option in Geely Kandi’s new EX3. Can Mr. Hu explain the differences and similarities of the new quick battery exchange to the old and why does he feel now a quick batter exchange can make it when it couldn’t in the past? And is it still side slide and if so are any other China EV companies likely to license Kandi’s patented side slide QBX? And can you just talk a little bit more about An Kao? Thank you.

Bing Mei

Thank you. [Foreign Language] Okay. I’d like to clarify that the different technology patent we have from An Kao. So what An Kao has is the equipment that can exchange the battery for EVs. And what we have in Kandi is the quick battery exchange technology on the EV. So it’s what each electric vehicle have this option for exchanging the battery. But An Kao has the equipment to help the EV to change the battery. So that’s the first thing I like to clarify. I hope you don’t get confused. [Foreign Language] Second, I do and I always believe that quick battery exchange is the ultimate solution for electric vehicles. In the past few years this concept has still not been acknowledged by the market. But however the reality has approved that this battery exchange method has been accepted widely by the market and will be popular going forward. [Foreign Language] Mike?

Unidentified Analyst

Yes. I mean, are other China EV companies likely to license your patented technology?

Hu Xiaoming

[Foreign Language] Mr. Hu is saying that now we don’t have any, but once the quick battery exchange becomes very popular, I think will be possible.

Unidentified Analyst

Thank you.

Kewa Luo

Thank you. Next question, please.

Operator

We will now take our next question from [indiscernible]. Please go ahead.

Unidentified Analyst

Hi, thank you for taking my call. I’d like to focus on Hainan for a minute. For two years management's been teasing shareholders of this new mystery EV Kandi was developing for the Hainan government with a $45 million grant in their new $250 million facility built by Kandi not the JV. For 18 months now we've been able to research and through the Chinese Internet have found constantly stories, articles – government articles about this facility being built by Kandi Technologies. And finally when the day comes for the grand reveal of this new mystery EV and PR comes out hints on a Friday which is usually reserved for bad news, but even worse it was on Good Friday, a holiday when U.S. stock market was closed. While the PR for those few who happened to see it saw that EV mentioned, a little was mentioned that this was also the grand opening of the new Kandi built and supposedly still wholly-owned $250 million facility. Nothing in the PR was mentioned about this cost or that Kandi itself did all the R&D it built with the factory or if it was going to be quick into the JV or regarding the power effect of the Hainan government had already given two-thirds of $45 million grant to Kandi with another $13 million or so due now. All these are important points to explain the story to investors. So my questions are, many of the new job placements have shown up in the last week for this plant, but in the name of Kandi, not a JV. Is the JV still going to assume half of the facility? And if so, what does this mean to Kandi financially? And I have follow-on questions after this.

Kewa Luo

Okay. Let me now translate what you have now. [Foreign Language]

Hu Xiaoming

[Foreign Language] The information you have mentioned about Hainan facility. We have gradually announced this information to the market throughout the quarter period. So its not that we haven’t announced yet. But we got into the job placement at my answer is, the ownership of Hainan facility belongs to Kandi vehicle 100% for now. And its not really to the company, that’s why you see they are in the name of Kandi.

Unidentified Analyst

Okay. Is the JV skill going to assume half of the facility? Will there be a transforms in the facility? [Foreign Language]

Hu Xiaoming

[Foreign Language] Based on the original agreement we have with Geely, Hainan facility well being injected into the JV when the factor is completely finished in cross selling the product and the timing is good. And by then the Hainan facility will be injecting to the JV.

Unidentified Analyst

Okay, excellent. Is the JV, is the K23 actually being made now. We’ve had the announced at production launch. Are you manufacturing the cars at this time? Are there any three sales? And if you’re not manufacturing the car at this time since there a targeted state of when the production of the vehicle will start? Okay. [Operator Instructions]

Hu Xiaoming

[Foreign Language] The progress of the Hainan facility has been growing pretty well. As you know from our press release the trial production for the first batch of K23 has began on March 28. And now its being evaluated by the national also like department. And the way I expecting to start the sell at the end of the June.

Unidentified Analyst

Okay, excellent. Thank you. Thank you very much and congratulations on a wonderful quarter. Have a good day.

Kewa Luo

Thanks [indiscernible]. Thank you very much. Next question please.

Operator

We’ll now take our next question from Mark Kahnau from Swiss Liquid Future. Please go ahead.

Mark Kahnau

Yes. Good morning, everyone. Good morning. As compared to the longer way to Hainan K23, which assume the – on the shareholders received with every surprises the announcement of the new EX3. Almost everyday now, on the China Media, this new joint venture Geely, which now assumes to have Geely name trust has been very favorable compares to the new top mid size EV SUV, all made in China manufacturers, particularly in price to features. My question, I was the designated change from the K26 to EX3, and Geely’s name now before the EX3 doesn’t mean that we should who is now openly behind pushing marketing of the new EV, and specifically sold in EV four shops. Will this can be part of the [indiscernible] company. And last question, what is the target market for each of the two EX3 models and could it be for export.

Kewa Luo

And so what’s the last question.

Mark Kahnau

What is the target market for each of these EX3 models and could it also be for exporting these parts.

Kewa Luo

Okay, what’s the target market for the EX3, right.

Mark Kahnau

Yeah.

Kewa Luo

[Foreign Language]

Mark Kahnau

[Foreign Language]

Kewa Luo

[Foreign Language]

Mark Kahnau

[Foreign Language]

Kewa Luo

Okay, let me go through although your four questions. First of all, actually, all our EV, all under the trademark Geely Hawk. Geely is our long-term partners and Li Shufu and Geely are always behind the JV Company with their support. I’m sure you have seen that. Secondly, the EX3 is actually targeting more of consumers, so maybe some of them will be used for right hauling program, but probably mostly will be for the consumer. And this one we will also be sold – some of them will be sold in for us. But since the launch ceremony, EX3 has been very popular and many of – approximately 200 dealers have already paid their deposit. So this car will be sold in provide the off dealership, not only in Geely for a store. Lastly, EX3 is All-Star Model of the JV Company, although right now it’s not in production yet by pretty confident that once they’ve seen in the market. It will be very well received and the market for this will be very huge. Now I can estimate. Is that all your questions?

Mark Kahnau

That’s very kind you, yes. Great answers.

Kewa Luo

Okay, thanks.

Mark Kahnau

And I really personally think that the EX3 will be the game changer for company and going forward. So thanks a lot for this great quarter and looking forward.

Kewa Luo

Thank you very much. Next question?

Operator

We will now take our next question from Steve Miller from Private Investor. Please go ahead.

Steve Miller

Hi, Kewa. I have two questions. My first question has to deal with the earnings information that was disclosed in the SEC 10-K that came out after the last conference call. But it wasn’t discussed in either the PR to that earnings release or in the call itself. In the past Kandi broke out first quarter results from the full years report. This year when we needed it most, it did not. However, if a rare shareholder check the terms and read that 10-K under a management’s discussion he would have seen and I quote management proudly, proudly breaks down that over 40% of 2017 revenues came in the fourth quarter. It would have been good if all the investors were shown their strong year ending before the conference call instead of just stressing the large full year loss that was caused by the first half. So my question is simply was there some strategic reason to break precedence and hide this clearly fourth quarter favorable result. [Foreign Language]

Hu Xiaoming

[Foreign Language] I think we’ll discuss in a great detail about the first quarter with a year-over-year comparison in 10-K. Our management team is pretty happy with the fourth quarter results. Hope all the shareholders, efforts we’re have been making constantly. Why we didn’t separately talk about fourth quarter, we didn’t really have any particular reason because we think we have discussed a lot under the MD&A part. So we didn’t have more information separately about the fourth quarter stated in the 10-K. But we believe we have talked pretty clearly and a lot of details already.

Hu Xiaoming

[Foreign Language] Mr. Hu saying that, we appreciate your suggestions in the future, we’ll take that consideration into our filing deterioration.

Steve Miller

All right. I just don’t understand why you would have said basically that piece of good information and I have emphasized it in your press release and on the last conference call. My second question is and I think everyone on this call will agree with me the share performance for the past few years compared to the rest of the market whether you consider the United States or China has been absolutely horrible. Not so much because of your performance but due to confusion and lack of clarity. Kandi has far outperformed hesitate to say, Tesla 3:1 that have been developed and Kandi has been much better and overall financial performance versus Tesla. But Tesla’s market cap is 200 times Kandi’s up from 20 churns in 2014 why because no one must respects the importance of keeping his shareholders and analysts and forms both on the good stuff and on the bad stuff. Kandi shareholders most of whom who don’t know a single word of Chinese don’t have the time or the ability to check the China media and mister who has already told us on his call not to trust the China media. This is great if you want to own the most undervalued best kept secret stock retirement but it’s terrible in trying to get new investors and those interested and it makes it easy for certain short parties to manipulate the shares price. If misters you have a comment and that’s my last comment. Thank you. [Foreign Language] Thanks for your suggestions. I think Kandi is more focusing on growing a business, in terms of how manage investors and managing expectations in the capital market. I have to say, we're still learning. The company were tries back to enhance our investor relations going forward to provide more transparency of loss, it does not in violation of the applicable loss. And we are into fear, the company's business operations and I want you say in the past, we always file Q or K before the market close. Sometime even the aftermarket close on the day. Getting a lot of suggestion from the shareholders starting this quarter, as you can see, we already filed our 10-Q before the market opens. So we also working very hard to making a progress. I hope the shareholder appreciate that. Hello.

Unidentified Analyst

Yes, that’s it. Thank you, Kewa.

Kewa Luo

Thank you.

Operator

[Operator Instructions] We will now take our next question from [indiscernible]. Please go ahead.

Unidentified Analyst

Congratulations on a great start for 2018, Mr. Hu. Both for Kandi and JVs, pleasant surprise is the 3,300 car sales in the quarter. This is really a multiple parameters, in addition to the earnings per share. And based on the limited information that we have from the press release, it's interesting you should just happen to mention before I get on over here. But that you actually did finally file, your filing at a – not at the end of the day which has been a pet peeve of mine for a number of years. Because let's face it, the reason but they can get better it's going to be put out, the 10-K has to be put out before, that's what analysts are looking for. They want to ask questions on the current 10-K or this current 10-Q. They need at least a half hour to an hour in advance to ask those questions. Otherwise, we get stuck in a dilemma, where we have to start asking questions three months later. Like for example, something that was buried in – let me address something that was very in the last 10-K, three months ago, if you want to tell Mr. Hu that so far, I'll go ahead in the my comment. [Foreign language] All right, go head. Okay, for example in the last 10-K, which is filed after – not only after the conference call, but after the market close Kandi had a possible major near-term upside $160 million cash windfall disclosed. But buried, not said in conference call or PR, it was buried in the 10-K. Had this filed have been pre-released questions could have been asked, liking much better market reaction. So let me ask now, hidden in the recent developments of that 10-K that never mentioned on the call, but the following quote regarding a possible Kandi land use right sale to the Xing Wang government of Kandi’s not the JV, but Kandi’s 400 acre old legacy off-road vehicle facility in Geneva. “From the 10-K, the land around the factory area has been greatly increased, since the land leasing for commercial use after the government revised allocation. If the negotiations reached to an agreement is expected that Kandi vehicles will receive more than RMB 1 billion in cash compensation from the development zone.” If I am correct such a sell would give Kandi and again not the JV. But Kandi almost $160 million U.S. dollars in cash for a little used asset, which is being carried on the books at less than $10 million, this alone is well over half a Kandi’s total market value. What's the likelihood – taken into my question, what is the likelihood that this will happen? And if it does with the company commit to take a portion of this to significantly buyback it's closely by each shares.

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

Based on the China government proposal and this land around actually will be changes for commercial use. Therefore, the government planed of taking the land [indiscernible] and the relocation look pretty promising, but as to where will this happen and how this going to happen, its totally up to the government on their own schedule. Once we have more details on governments plan, we'll all after the market and in terms of how the company going to utilize the compensated money will always having – we will use that to develop – for the needs of our business development and to maximize our shareholders value which is always our goal.

Hu Xiaoming

Okay. Well. I assumed if that was a government it came up with a price or wasn’t the Kandi said look we were at $160 million or $1 billion. And if that's the case with this summer the surprise and with this already put into the $600 million valuation Mr. Hu reported middle of last year as the value of care the loan, or with this situation to increase the value.

Kewa Luo

[Foreign Language]

Unidentified Analyst

[Foreign Language]

Kewa Luo

When the valuation is based on the surrounding, surrounding lands, a properties value to come up. But the final valuation will be based on of course up to the government, they will give the final valuation to you.

Unidentified Analyst

Was that included in the $600 million that Mr. Hu last year came from value of Kandi. Which is tripped encouraged stock price, but more then doubled certainly.

Kewa Luo

Or you saying $600 or $160 million?

Hu Xiaoming

What ever be it. This didn’t give a valuation last year they calculated out to about $600 million for Kandi. I think it was reported in the third quarter last year. It had to do with discussions at the time about prospective investors and so on. We talked about in prior conference call – in a prior conference call as well.

Kewa Luo

[Foreign Language]

Unidentified Analyst

[Foreign Language]

Kewa Luo

And she was saying that – that was Kandi’s vehicles valuation being $600 million, not the land of the land use right.

Hu Xiaoming

Okay. Well that’s not what we discussed in the last conference call. And as now with the press release and you don’t want to give in, but if you go back to press release you planned out last year, they said Kandi’s valuation. And again, I’m trying to pull it up right now, what we’re talking here. I think it was in the third quarter press release. I mean, if I can find it quickly here. Anyway, I won't beat back and if I find it, you go ahead and take the next question in the meantime.

Operator

We will now take our next question from Michael Fairnow from Focus Tech Investments. Please go ahead.

Michael Fairnow

Yes, I would like to address the subsidy payments. But last conference call Mr. Hu who indicated he hoped to have the payments by June of this year. My understanding is this is kind of a two part question that wrote approximate $150 million on a rear subsidy payments. And there’s also about $127 million in the 50% owned joint venture. Does Mr. Hu still expect these subsidy payments to be paid by this summer, and when they are paid, how quickly or what do you expect the money owed with the joint venture how will that be addressed?

Kewa Luo

I'm sorry if you get finished, you’re asking about the subsidy whether…

Michael Fairnow

Roughly payments, my understanding is from last conference call, Mr. Hu indicated it be paid, hope to be paid by June of this year. Does he still expect that to happen? And my understanding is that the rear payments to approximately $150 million, there's also $127 million owned two candy from the JV. When the subsidy payments are finally paid can Mr. Hu address how that will affect the payments owe from the JV as part of the answer to the subsidy question.

Kewa Luo

Okay, got it. Thanks. [Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

Okay. So for your first part of the question, on the subsidy payments for 2015 and 2016 right now is already in the process of acquiring, and settling. So we're still expecting to be finalize, and we see in June or July. And also I like to clarify, I think while you mention about owned amount money from the government to JV and from Kandi are different than as real number. As for now there was RMB 300 a little bit over RMB 300 million owned from Government to JV. And just a little bit short of RMB 100 million owned from JV to Kandi. So once JV has received price or the subsidies where to advertise the payment back to.

Hu Xiaoming

[Foreign Language]

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

Okay. Again Mr. Hu just correct himself. The amount of subsidy payment on to JV from the government is RMB 1.3 billion and about RMB 100 million owned from JV to Kandi. So I hope I make this clear.

Michael Fairnow

That was probably difference than numbers I understood. But let me kind of follow up and get some flavor on how these subsidies are going to be handled in the future. As we all know, Kandi has started introduction of two new vehicles that have much longer range. And if we get addressed the expectation of receiving a future subsidies and will the production sale of these longer range models in any way restrict payments due to the lack of – restrict the growth of the company I should say due to lack of receiving future subsidy payments.

Kewa Luo

I’m sorry, so where are you trying to ask?

Unidentified Analyst

Okay. I’m trying to get some flavor on Mr. Hu’s expectation on how long it will take to receive future subsidy payments earned…

Kewa Luo

Okay.

Unidentified Analyst

From future sales of vehicles until the subsidies expires. And specifically, with the two new models having a longer range and probably more expensive cars as those go into larger sales volumes in the coming quarters, is that going to restrict the company’s ability to operate at full capacities while waiting on future subsidy payments?

Kewa Luo

I see, I see. thank you. [Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

First of all, I don’t believe this is going to have an active impact on our sales and especially for the cash cycle. For now, to the company’s government subsidy, receivables are RMB 1.3 billion point, but I believe that by June or July, we should be able to receive about 500 million. So therefore, on the total owned in the future warrant exceeds RMB 1.3 billion as a result of sales and prepay subsidy, I’ll go into being a very healthy cycle. So, I don’t think this matters going to impact JV’s sales.

Unidentified Analyst

Okay. Thank you.

Kewa Luo

Thank you. operator?

Operator

There are no further questions in the queue at this time. So, I’d like to turn the call back to yourselves for any additional or closing remarks.

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

Thank you, ladies and gentlemen for attending Kandi’s 2018 first quarter earnings call. in closing, allow me to represent the board of directors and the management team at Kandi technologies scope to reaffirm all our commitments. We will continue to work diligently to maximize shareholder value by focusing on growing our EV business strategically while delivering strong operational results. Thank you very much for your support. we look forward to talking with you the next quarter if you have any additional questions, please don’t hesitate to contact our Investor Relations person. Good bye.

Operator

This concludes today’s call. Thank you for your participation, ladies and gentlemen. You may now disconnect.