Yongye International Management Discusses Q1 2013 Results - Earnings Call Transcript

May.11.13 | About: Yongye International (YONG)

Yongye International, Inc. (NASDAQ:YONG)

Q1 2013 Earnings Call

May 10, 2013 8:30 AM ET

Executives

John Capodanno - IR

Sam Yu - CFO

Kelly Wang - Finance Director

Analyst

Adam Waldo - Lismore Partners

Jared Cohen - J.M. Cohen & Company

Peter Sirrus - Huamei

Albert Maierovits - MMCAP

Joshua Bronsil - JMB Capital (ph)

Operator

Good day ladies and gentlemen. Welcome to the Yongye International's First Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today's call, John Capodanno. Sir, please go ahead.

John Capodanno

Thank you, operator. Good morning, ladies and gentlemen and welcome to Yongye International's first quarter 2013 earnings conference call. I'm John Capodanno of FTI Consulting, Yongye's Investor Relations advisor. With us today are Mr. Sam Yu, Yongye's Chief Financial Officer; and Ms. Kelly Wang, Yongye's Finance Director.

Before we start, I would like to remind our listeners that management's prepared remarks in this call contain forward-looking statements which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today due to such risks as, but not limited to, fluctuations in customer demand, management of rapid growth, intensity of competition from other providers of plants and animal nutrient products and services, general economic conditions, geopolitical events, and regulatory changes and other information detailed from time to time in the company’s filings and future filings with the United States Securities and Exchange Commission. Although the company believes that the expectations in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct.

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in the first quarter 2013 earnings release that was distributed today. Any projections as to the company’s future performance represent management’s estimates as of today, May 10, 2013. Yongye assumes no obligation to update these projections in the future as market conditions change.

Having now stated these formalities, I will now turn the call over to Mr. Sam Yu for a review of the company’s developments in the first quarter of 2013.

Sam Yu

Thank you, John. Thank you, everyone, for joining us on our first quarter 2013 results conference call. On today's call I would like to provide a top line review of our first quarter results and address our interaction with NASDAQ about the trading halt. After that I will turn the call over to Kelly to provide a detailed review of the quarterly results.

During the first quarter, we focused over efforts on the collection of accounts receivable. We decreased shipments to certain provincial level distributors who had prolonged payment period at the end of 2012. The decrease in shipments served as an incentive for these distributors to pay off their accounts receivable in a timely manner.

Our accounts receivable balance decreased by 179.6 million due to the collection of accounts receivable. You also would have seen from our earnings release that quarterly revenue declined on a year-over-year basis.

This decrease in revenue was a direct result of the decrease in shipment of our decreased liquid crop products to those provincial level distributors. It is important to point out that despite this decreased shipments, we are not seeing a decrease in demand for our liquid crop nutrition products. In fact, as of April 30, 2013, total year-to-date shipments were actually up to 28 million or 20% over the same four-month period in 2012.

So we're actually still seeing strong demand for our products as we progress through the second quarter, which along with the third quarter, is a peak season for our business. We expect that the lower sales revenue from the first quarter will be made up by increased sales generated during the second and third quarters. As a result, we are reiterating our previously issued 2013 shipment guidance in the range of 650 million to 680 million, representing a growth of 20% to 25% over 2012.

During the quarter we also continue to expand our branded retailer network and the number of brand new retailers increased from 35,058 to 35,246. The majority of the newly recruited branded retailers are from Hebei, Henan, Inner Mongolia and Shaanxi provinces. As a result of this growth, we are also reiterating our outlook that our branded retailer network will be expanding to 36,000 by the end of 2013, which represents a 3% increase over the 2012 number.

I'm sure you all have many questions regarding the NASDAQ trading halt. So I would also like to take a little time now to provide an update on this ongoing issue in order to address your concerns. As you are all probably aware, trading on the Yongye's common stock was halted by NASDAQ on March 15, 2013 after Yongye filed a notification of late filing on Form 12b-25 with the SEC. NASDAQ subsequently provided Yongye with a written request for additional information relating to the company's delay in the filing of the Form 10-K for the year ended December 31, 2012, the collection of accounts receivable as of the year ended 2012, the current state of the company's audit of the financial statements to be included in the company’s Form 10-K for the year ended December 31, 2012, and the status of the proposed 'going private' transaction pertaining to the company. On Tuesday, March 26, 2013, we provided a full detailed response to NASDAQ's initial request for additional information. Subsequent to our initial response, NASDAQ requested certain additional information from Yongye relating to the company's operations.

I would like to reassure all of our shareholders that Yongye is in regular contact with NASDAQ with respect to this matter and working diligently to address all of NASDAQ's requests. We expect to submit a detailed response to all of NASDAQ's inquiries. As soon as we have the definitive update from NASDAQ, we'll be sure to provide a timely update to the market. It is important to note that this process is ongoing and we will only make an announcement when there is a material and definitive news to disclose.

The company expects that the trading into securities will remain halted while NASDAQ conducts inquiries and that such trading will resume only upon NASDAQ being fully satisfied with the additional information provided. At this time we cannot speculate as to when or if NASDAQ will resume trading on our stock, but can assure you that we will maintain an open-ended communication with NASDAQ so as to address all of their concerns and ensure compliance with their regulations. I would like to thank everyone for their patience through this process.

With that, I would now like to provide an overview of our performance during the first quarter of 2013. Revenue decreased 29.7% to 45.3 million from 64.4 million in the first quarter of 2012. Shipment of Yongye's agricultural nutrients products decreased 37.3% to 43.7 million in the first quarter of 2013 from 69.6 million in the first quarter of 2012.

Gross profit decreased 38.9% year-over-year to 21.6 million. Income from operations was 1.1 million compared to 21.9 million in the first quarter of 2012. Net loss attributable to Yongye was 0.6 million or a loss of $0.03 per diluted share from net income of 16.4 million or income of $0.27 per diluted share in the same period 2012.

Adjusted net income attributable to Yongye, which excludes non-cash expenses related to the amortization of acquired Hebei Customer List, share-based compensation for management and executive directors, and a change in the fair value of derivative liabilities was 0.1 million or a loss of $0.01 per diluted share compared to a net income of 18.3 million or $0.31 per diluted share in the same period in 2012. The company collected 226 million from its distributors during the first quarter of 2013. Operating cash flow was 141.1 million compared to 61.7 million in the same period in 2012.

Now I would like to turn over the call to Kelly Wang, our Finance Director, to give you a more detailed overview of our financial results for the first quarter of 2013. Kelly?

Kelly Wang

Thank you, Sam, and good morning everyone. Thanks for joining us today to discuss our first quarter 2013 results. I will first discuss the results and then provide guidance for the full year. As I take you through the numbers, please note that I will only speak in U.S. dollar terms unless specifically mentioned.

Sales decreased by $19.1 million or 29.7% to $45.3 million in the first quarter of 2013 from $54.4 million for the same period of 2012. The decrease in revenue was primarily due to the decrease of shipments of our liquid crop products.

During the first quarter of 2013, we decreased the shipment to most provincial distributors which had prolonged payment periods at the end of 2012 in order to manage accounts receivable and this also served as an incentive for these distributors to pay off the accounts receivable in a timely manner.

Despite the lower shipments, as Sam mentioned earlier, we do not see a decrease in demand for our liquid crop nutrient in the first quarter of 2013. And in spite that, the decrease of sales of our liquid crop nutrient product in the first quarter of 2013 will be made up by the sales increase generated in the second and the third quarter which are the peak seasons for our liquid crop nutrient products.

In the first quarter of 2013. $43.9 million or 96.9% of the total sales was from liquid crop nutrients and $1.4 million or 3.1% of the total sales was from the powder animal nutrient. For the liquid crop nutrient, the two products for crop seeds and roots contributed $34.5 million or 78.7% of the total liquid crop nutrient sales, while the regular crop nutrient contributed $9.4 million or 21.3% of the total liquid crop nutrient sales.

Gross profit was 21.6 million in the first quarter of 2013 compared to 35.4 million in the first quarter of 2012, a decrease of 38.9%. Gross margin was 47.8% in the first quarter of 2013 compared to 55% for the same period of 2012. The decrease of gross margin for the three months ended March 31, 2013 was mainly due to the reduced sales amount and the increase of amortization of distributor vehicles recorded in cost of sales as compared to the same period of 2012.

Selling expenses increased by 1.2 million or 8.7% to 15.4 million in the first quarter of 2013 from 14.2 million for the same period of 2012. The increase in selling expenses was primarily due to an increase in advertising and promotional expense and distributors' seminar expenditure of 1.6 million relating to the marketing and promotional activities for our products.

General and administrative expenses increase by 6.3 million or 284.2% to 4.1 million in the first quarter of 2013 from a negative 2.2 million for the same period of 2012. The increase of G&A expenses was mainly due to the reversal of the allowance for doubtful accounts of 6.3 million which was recorded in the first quarter of 2012. G&A expenses mainly included accrued audit expenses, lawyer fees related to the proposed 'going private' transaction, and staff salary expenditure for the three months ended March 31, 2013.

Research and development expenses were 1 million in the first quarter of 2013 compared to 1.5 million for the same period of 2012. The R&D expenses mainly consisted of field test expenses for existing and new products on different crops and in various geographic markets.

Operating income was 1.1 million in the first quarter of 2013 compared to 21.9 million for the same period of 2012. Including non-cash expenses related to the amortization of the acquired Hebei customer list and the share-based compensation for management and independent directors, first quarter 2013 adjusted operating income was 1.9 million or 4.1% of sales. The decrease in income from operations was mainly due to the decrease in sales and gross margin, as well as the significant increase in selling accounts and G&A expense.

Net loss attributable to Yongye was 0.6 million or a loss of $0.03 per diluted share in the first quarter of 2013 compared to a net income of 16.4 million or $0.27 per diluted share in the same period of 2012. Including the impact of non-cash expenses related to the amortization of the acquired Hebei customer list, share-based compensation for management and independent directors and a change in the fair value of derivative liabilities, adjusted net income attributable to Yongye for the first quarter of 2013 was 0.1 million or a loss of $0.01 per diluted share compared to adjusted net income of $18.3 million or $0.31 per diluted share in the same period of 2012.

Turning to our balance sheet, as of March 31, 2013, the company had $184.4 million in cash and restricted cash compared to $44.6 million as of December 31, 2012. Working capital was $387.7 million compared to $383.3 million at the end of 2012.

The company had $51.5 million short-term bank loan, 19.1 million in current and non-current long-term payables, and 2.8 million in current and non-current capital lease obligations as of March 31, 2013. Stockholders' equity totaled 438.8 million as of March 31, 2013 compared to 436.3 million at the end of 2012.

Cash flow provided by operating activities were 141.1 million and 61.7 million for the three months ended March 31, 2013 and 2012, respectively. This was primarily driven by collection of 226 million of accounts receivable, but was partially offset by settled payment of accrued expenses.

Accounts receivable decreased by 179.6 million, which was mainly due to the collection of accounts receivable during the first quarter of 2013. The company collected 226 million from its distributors during the quarter, including 219 million of the accounts receivable outstanding at December 31, 2012. As of March 31, 2013, the amount of gross accounts receivable outstanding was 123 million, of which 26.2 million was past the company's six-month credit period.

Yongye recorded an allowance for doubtful receivables in the amount of 9.1 million as of March 31, 2013 taking into account current market conditions, customers' financial condition, the accounts receivable ageing and the customers' repayment patterns. The company continues to take measures to increase collection efforts and closely monitor its distributors' financial status.

Turning to our business outlook. As Sam mentioned earlier, the company continues to expect total shipments in 2013 in the range of 650 million to 680 million, representing a growth of 20% to 25% over 2012. The company also expects that its branded retailer network will be expanded to 36,000 by the end of 2013, which represents a 3% increase over the 2012 year-end number of 35,058.

As a reminder, according to our revised revenue recognition policy, certain distributors' revenue is still being recognized on a cash basis rather than a shipment basis. In addition, the company's distributors' payment cycle has been longer compared to prior years.

As a result, the company has difficulty knowing what its revenue will be with specificity until cash collection is completed. This is why we are now providing expectations on shipments as opposed to an official revenue figure which could be impacted by the revenue recognition issue mentioned before.

This said, I would like to turn the call back over to Sam for final remarks.

Sam Yu

Thank you, Kelly. Before concluding, I would like to reiterate a few points before opening up to questions. Despite the recent trading halt by NASDAQ, Yongye's basic fundamentals remain strong and we continue to demonstrate growth in both our branded retailer network and the shipment of our products. During the first quarter we focused our efforts on collections and saw a meaningful sequential decline in the accounts receivable, which is evidence that our efforts are paying off. Going forward, we will continue to take measures to increase collection efforts and closely monitor our distributors' financial statements.

We are entering the peak season for our business and as a result of this strong year-over-year shipment growth we have seen through the end of April, we are reiterating our full year outlook of total shipment to be in the range of 650 million to 680 million. Additionally, we reiterate our expectation that our branded retailer network will be expanded to 36,000 by the end of 2013.

I would also like to address the recent 'go private' offer that Yongye received in October 2012. We understand that many shareholders may have questions surrounding this proposal. However, at this time, I have no further update other than what was disclosed in our press release dated Tuesday, April 16, 2013. As was disclosed in this April 16th release, the buyer parties have confirmed to the special committee that they remain interested in pursuing the proposed 'going private' transaction set forth in their proposal.

On April 16th, the special committee was provided a letter amending the originally amended and restated financial commitment that was issued by Abax to Full Alliance International Limited on April 1, 2013. Pursuant to the amendment, the commitment letter was amended to: one, include an additional condition precedent that the common stock of the company resumed trading on NASDAQ, but without any requirement that the resumption must occur by a specified date; and two, extend the expiration of the commitment to May 15th.

Abax's commitment also remains subject to a number of other conditions, including Abax's completion of its review of, and satisfaction in all respect with the audited financial statements of the company for the fiscal year ended December 31, 2012.

Beyond this update, we are not in a position to comment at this time, but did want to reiterate that the special committee has been in discussions with the buyer parties regarding the proposed transaction and such discussions are continuing.

As a reminder, no decisions have been made by the special committee with respect to the company's response to the proposed 'going private' transaction. There can be no assurance that any definitive answer will be made and any agreement will be executed without this or any other transaction will be approved or consummated.

In terms of NASDAQ trading halt, I would just like to reiterate that what I mentioned earlier that we are working diligently to provide NASDAQ with all the necessary information they've requested and expect to submit a detailed response to all of NASDAQ's inquiries.

We cannot predict when or if NASDAQ will resume trading in our stock, but I can assure you that we will maintain an open line of communication with NASDAQ so as to address all of their concerns and ensure compliance with their regulations. We thank you for your patience through this process.

With that, I'd like to open this call up to questions. And just a reminder that, to make sure that everybody has addressed questions, please limit the number of your questions to two. Operator?

Question-and-Answer Session

Operator

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). Our first question comes from the line of Adam Waldo from Lismore Partners. Please ask your question.

Adam Waldo - Lismore Partners

Yes, good day. And thank you for taking my questions. I have two. I'll begin with my first one. The company has made limited disclosures since the luminous disclosures since the NASDAQ trading halt in its filings and its Forms 10-K and 10-K amended filing recently, its press releases and the conference calls you've kindly hosted, and all of those would seem to respond quite well to NASDAQ's request for information in three of the four areas specified by NASDAQ as its areas in inquiry. These are the status of the audit, the filing of the 10-K and the status of the accounts receivable collection. As a result, it seems very highly probable that the principal remaining area on which NASDAQ would still be seeking additional information is on the status of the buyout offer and the special committee evaluation process. Is that a fair conclusion for investors to draw? And if so, at this point, what specific additional information is NASDAQ still awaiting from Yongye management with respect to the buyout offer and the special committee evaluation process?

Sam Yu

Yongye is working diligently to provide NASDAQ with all the subsequent information that is requested and is currently on track to submit over to NASDAQ in an efficient and timely manner. We are currently not in a position to discuss the specific content of NASDAQ's request. We do not think it's useful or helpful to update the market on interim discussion with a request from NASDAQ that do not provide further clarity with this decision. We are focused on responding to NASDAQ in a timely and efficient manner. When we have a meaningful and definitive interaction with NASDAQ, we will update to the broad market. We understand that we will have questions and concerns and acknowledging that this uncertainty isn't easy for all of us. Thus, we want to be respectful of the process we're in and maintain our focus on complying with any and all requests of NASDAQ. And as I said earlier, we assure you all that we will provide an update when we have meaningful anticipated information to share. Thank you for your understanding.

Adam Waldo - Lismore Partners

Okay. My second question is, you've just disclosed today that Yongye had over $3.50 per share in net cash on hand at the end of the first quarter of 2013 as a result of your strong efforts and success in collecting outstanding accounts receivable during the quarter. This would seem to provide significant and comfortable headroom for the buyout group to sweeten its buyout offer to approximately the $8.50 per share book value of the shareholders' equity at the end of the first quarter or possibly higher given that about $6 per share of the current on the table $6.60 per share buyout offer is funded by committed bank loans from China Development Bank and the Abax as capital. What comments does management have on the observation that I've just made in terms of significantly headroom to increase the offer?

Sam Yu

Management is not in a condition to comment on the 'go private' offer. And the evaluation process is run by the special committee of the Board, which consists of three Independent Directors. As I said earlier, they are in ongoing discussion with the buyer parties. And as at this moment, I don't think they have made any decision yet.

Adam Waldo - Lismore Partners

Do you have any specific comments though on the liquidity comments I made with respect to the additional financial flexibility that the strong collections in the first quarter would offer a prospective buyer when this buyout is running now?

Sam Yu

I'm sorry, the voice sound very weak in the phone here. Do you mind repeating with your next question?

Adam Waldo - Lismore Partners

Yes. Do you have any specific comment on the observation about the enhanced liquidity of the company as a result of the first quarter collections providing any potential buyer, including the current buyout group with significantly headroom to increase its offer?

Sam Yu

I cannot comment on anything related to the 'going private' situation. But we did make excellent progress in collecting cash from the distributors. At the same time we also want to mention that we are in a very seasonal business. For the second quarter and third quarter will be a very busy season for us. And also if you look at our financial history, second and third quarters we'll be using a lot of cash to fund our growth.

Operator

Thank you very much. Our next question comes from the line of Jared Cohen from J.M. Cohen & Company. Please ask your question.

Jared Cohen - J.M. Cohen & Company

Yeah. Just I have a first question, just out of curiosity, did you use so far part of your cash to pay back some of your short-term debt that you collected from the first quarter? And with that also, so far have you collected some of the $26 million of 180-day past receivables that you mentioned in your past?

Sam Yu

Sorry? What's your last question?

Jared Cohen - J.M. Cohen & Company

Well, have you paid back some of the debt on your balance sheet given that you've collected with some of your cash on...?

Sam Yu

The normal status we provided is as of end of March 2013. In April we didn't take any action towards our...

Jared Cohen - J.M. Cohen & Company

Okay. And just out of curiosity, have you been able to collect some of those past receivables so far since you're in mid into May?

Sam Yu

Yes. In April we collected approximately RMB200 million of accounts receivable, roughly speaking.

Operator

Thank you very much. Our next question comes from the line of Han Liang. Please go ahead.

Unidentified Analyst

[Foreign Language]

Sam Yu

[Foreign Language]. The question was, we noticed that the company has recorded a decrease, a significant decrease in revenue during this quarter and I was wondering whether you can give us a more detailed situation regarding the top five customers. Since most of the conference is in English, so I answer in English first and then we will start with Chinese after that.

Yes, we did have significant decrease of our revenue and shipment in the first quarter of '13. We just explained the main reasons for the decrease. In terms of breakdown by our top five customers, in the first quarter our number one customer is Inner Mongolia and we had 90 sales from Inner Mongolia and that was actually a roughly 59% decrease over last year. Our second largest customer is our distributor for Heilongjiang in Liaoning with roughly 4 million sales and actually our sales were flat for this customer over last year. Our third largest customer Shandong in the first quarter and we had about 3.3 million sales, but 17% decrease over last year. Fourth largest customer Henan, and our sales there was 3.2 million, decrease was 29%. Our fifth largest customer is - sales were 2.6 million and the decrease was about 48%. Actually this information is included in our 10-K which will be filed shortly.

Having said that, I would also like to point out that our sales in April, our shipment actually increased incidentally. Inner Mongolia, in April alone we shipped roughly 18 million of sales, of product, representing a 25% growth if you look at from January to April on a combined basis. Our second largest customer in April is Heilongjiang Jilin in Liaoning and our sales there in April is roughly 10 million. That's a 69% growth on a combined basis from January to April. We also have good sales in Henan in April, another $2 million and growth is 32%. And Shandong had 1 million growth or about 40%. Shenzen $7.5 million growth as or 41%.

So I would explain briefly in Chinese now to discuss the situation. [Foreign Language]. Operator?

Operator

Thank you very much. Our next question comes from the line of Peter Sirrus from Huamei. Please ask your question.

Peter Sirrus - Huamei

Hi Sam. I have two questions. The first is, in terms of the, just so I understand, the sales in the first quarter and the second quarter, nobody really in places like Heilongjiang and Xinjiang, nobody is really using fertilizer in the middle of the winter. So in the past I guess a lot of the first quarter sales were just because people were getting extra credit and buying early. So is it better to look at the, I would say, four months than the three months?

Sam Yu

Our sales normally in the first quarter, there are several sources. First in the southern provinces, when the planting season starts earlier, I think it started in the first quarter, also in the northern areas, in case farmer use greenhouses, they can also use fertilizers. But there are also cases that our distributors are purchase in advance because they want to make sure that they have enough product to sell to farmers when the planting season comes. So it's a combination of various factors.

In north this year, we controlled shipment to distributors. And after we saw a progress, we also believe that we were able to fulfill much more orders than the last year. So on a combined basis January to April, we have seen a very healthy volume increase.

Peter Sirrus - Huamei

So the first four months sales are up like 20%, correct?

Sam Yu

18% over last year.

Peter Sirrus - Huamei

Okay. Second question I have, which I'm confused about is this. You changed a year ago your revenue recognition policy and the impact of changing the revenue recognition policy has been to make the earnings slide from a quarter-to-quarter. In other words, instead of recognizing the revenue when it's shipped, you're recognizing a good percentage of the revenue when you get paid. So the impact is that you have more earnings in the quarters when you get paid and less earnings in the quarters when they were shipped compared to the old system. Is that correct?

Sam Yu

Correct.

Peter Sirrus - Huamei

And so my question is this. On the made goods for MSPEA, the new accounting system, because when MSPEA made the investment, there was the old accounting system. The new accounting system would benefit then and their made goods for the combined 2011 to 2013. Is there going to be any adjustment for that assuming you do not go private by the end of 2013?

Sam Yu

MSPEA so far have not approached to talk about the adjustment of mix target, nor did us approach them on that subject. But based on my understanding, at least so far, we think we have, we are meeting their significant sales growth threshold target. And at the same time, they have the right to convey their preferential comments any time in the period. At this moment I haven't heard anything about the conversation from that. So anyway, they should answer, we haven’t discussed the subject.

Peter Sirrus - Huamei

Good. Because, just a personal comment. If assuming you do not go private, and I'm assuming you will go private, but assuming you do not go private, it does not seem fair to me to give them, if the change in accounting systems has pushed earnings from 2013 into 2014. It doesn't seem fair to me to get them that extra benefit because when you made the original agreement with them, there was no intention to change the accounting system. So that's just a personal comment where they could benefit at the expense of other shareholders. And I know it's not going to come to that, because I assume you're going to go private by that point, but I did want to make that comment.

Sam Yu

Okay. If I remember correctly, and I agree with what you've said. Their performance target is tied to the U.S. GAAP numbers.

Peter Sirrus - Huamei

I think its $399 million or something for the combined three years.

Sam Yu

Peter, did I answer your question or do you have...

Peter Sirrus - Huamei

Yes. No, I'm fine. Thank you, Sam. And thanks for your diligence in trying to solve all these problems.

Operator

Thank you very much. Our next question comes from the line of Albert Maierovits from MMCAP. Please ask your question.

Albert Maierovits - MMCAP

Hi Sam. Thank you. I'm trying to get a better understanding for where things stand with this NASDAQ call. So, you responded to the NASDAQ on March 26th. Then NASDAQ requested additional information from you. Can you detail what kind of additional information they requested?

Sam Yu

Hey Albert. I had mentioned earlier that - yes I did hear your question. I already discussed that we provided NASDAQ on March 26th initial request for this information and NASDAQ sent us some follow-up inquiries for information again. We're now in regular contact with NASDAQ and is working very diligently to address that request. At the same time we don't think it's useful to update the market with details in response to questions. We want to be very respectful of that process. And we will update to the broad market once we have material and definitive update from NASDAQ. We understand all you investors are anxious to hear the results, but we believe now it's best to let us focus on answering lots of questions and we're working very hard to do that.

Albert Maierovits - MMCAP

Okay. So, at this point NASDAQ is still waiting for a second response from you or have you already responded to the additional information they requested and you're just waiting to hear back from them? Where do things stand?

Sam Yu

Yeah. I cannot comment on the details of communication between NASDAQ and the company. But I can assure you that we're working diligently to fulfill NASDAQ's request.

Albert Maierovits - MMCAP

Okay. It sounds like they're still waiting for something from you because you're still working on information for them. Okay. The other question I had was, is it possible to have signed a definitive transaction for this 'going private' proposal while the stock is halted?

Sam Yu

Sorry. Albert, can you repeat your question again? I didn't hear you.

Albert Maierovits - MMCAP

Sure. Can you announce a going private transaction with the stock halted or does the stock have to trade for you to go private?

Sam Yu

I see. I'm sorry I cannot answer the question. This process is managed by the special committee and I guess this is also a legal question to be answered by lawyers. So honestly management will not...

Albert Maierovits - MMCAP

I'm just wondering if that's possible. I haven't seen any precedence to that where you can have 'going private' transaction while the stocks halted, but wondering if that's a possibility.

Sam Yu

I would suggest you write an email to our special committee to see whether they can answer that question from a legal perspective.

Operator

Thank you very much. Our next question comes from the line of Johann (inaudible) from RJT Capital. Please ask your question.

Unidentified Analyst

You have now a huge cash pile in your balance sheet. Does management consider giving investors a special dividend?

Sam Yu

We, based on my understanding, we currently have no plan to issue dividend.

Operator

Thank you very much. Our next question comes from the line of Joshua Bronsil (ph) from JMB Capital. Please ask your question.

Joshua Bronsil - JMB Capital

Just a question, it's a little bit of a follow-up I guess from Albert. I just wanted to know, in your prior communication with NASDAQ, it seemed like your response only took about 11 days or so to address their four inquiries and now we're well after five or six weeks. And I'm just trying to see why it's taking so longer? Can you tell us any of the four topics that they've addressed? Is it, are all four of them still ongoing or is NASDAQ satisfied with any of them? And I understand you're reluctant to speak about it, but I cannot recall an instance where a company has been halted this long without any information. Thank you.

Sam Yu

Thank you for your question. Unfortunately we cannot speak on behalf of NASDAQ if they're really satisfied with any of our answers. We're still working diligently to address NASDAQ's request for information. And we cannot, as we discussed, we cannot discuss in detail the issue of communication between NASDAQ and the company.

Joshua Bronsil - JMB Capital

Can you let us know how close you are to responding? Again, I mean the first response seemed like it took only a week to two weeks and if you responded and they subsequently came back with additional request. We're now working almost six weeks, five to six weeks for your next response.

Sam Yu

Sorry, we cannot disclose too much details about this communication. But we are working diligently to address this and maintaining an open line of communication with NASDAQ on this issue.

Joshua Bronsil - JMB Capital

Okay. And can you comment, are any of the issues they addressed in that first inquiry, the four points, have any of them been resolved or were all four continue to be readdressed by NASDAQ in their subsequent inquiry?

Sam Yu

Sorry, I cannot go into the details of that. Thank you for your understanding.

Operator

Thank you very much. Ladies and gentlemen, this concludes the Q&A session for today. I will hand the conference back to the presenters. Please go ahead, sir. The Q&A session is now closed. I will now hand the conference back to the presenters.

Ladies and gentlemen, this concludes the conference for today. Thank you for your participation. You may all disconnect.

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