The records, which originated with the Department of Homeland Security, reinforce our earlier findings that Kandi greatly exaggerated the sales of those vehicles.
The Chinese company has said in Securities and Exchange Commission filings that it sold more than 4,600 of its mini cars from 2009 through 2011. For most of that period, the United States was the main market for the vehicles.
But a database containing detailed cargo information for vessels delivering goods to U.S. ports shows that fewer than 1,100 of Kandi's cars were ever shipped here.
The database was created by ImportGenius.com, an Arizona company that helps businesses find sales prospects, evaluate suppliers and monitor rivals. It contains more than 79 million records drawn from the bills of lading for all ocean-freight imports.
Sharesleuth's investigation turned up a number of discrepancies between Kandi's reported sales of its low-speed, battery-powered cars and the actual deliveries of those vehicles to American ports.
-- Kandi said in an SEC filing and an earnings release that it sold 1,141 cars in the United States in the first nine months of 2009. But the Customs records show that only 203 were delivered to American ports in that period. They also show that just 143 additional vehicles were delivered in the last three months of that year.
-- Kandi said in an earnings release in 2010 that one of the main contributors to its revenue and income growth was a "strong second quarter contribution from U.S. sales of the super mini Kandi Coco." Kandi previously had reported selling 1,005 electric-powered Cocos in that quarter, primarily in the United States. But Import Genius' database shows that just 156 of the cars were delivered to American ports that year.
-- Kandi disclosed in its annual SEC filing last year that only 658 of the 1,618 cars that it reported selling in 2010 were actually electric, and that the rest were gasoline-powered. That unexplained revision means it would have been mathematically impossible for Kandi to have sold 1,005 electric cars in the second quarter of that year, as it claimed.
The above examples suggest that the gains in electric-car sales that Kandi reported during pivotal periods in 2009 and 2010 were illusory. The company's public statements regarding those sales contributed to spikes in its stock price and trading volume, and allowed certain parties to sell shares at peak levels.
Kandi, through its U.S. law firm, declined to comment on the discrepancies.
Kandi has said that because it sells its vehicles to middlemen who export them to the United States, Europe and other markets, it has no specific knowledge of where those products end up. Nevertheless, the company expressly stated in its SEC filings and earnings releases that the bulk of its car sales in 2009 and 2010 were "U.S. sales."
The Customs data shows that although Kandi reported selling around 2,000 electric cars in the United States in the first nine months of 2009 and the second quarter of 2010, only about 500 were delivered to American ports in those years..
Kandi said in an SEC filing that it sold 1,077 cars in 2011. It did not specifically say that those sales were in the United States. But with the exception of a purported order from Italy that has yet to materialize, it did not report any large sales elsewhere in the world.
Our analysis of the records in Import Genius' database showed that 290 of Kandi's mini cars were delivered to American ports in 2011.
Kandi said in its latest annual filing that it sold 3,915 electric cars in 2012. The company said that the increase, which included more than 2,800 sales in the final quarter of the year, marked a breakthrough in its effort to develop a mass market in China.
Kandi reported that its revenue grew by more than 60 percent last year, to $64.5 million. However, it said net income fell by roughly a third, to $6 million.
The filings also show that although Kandi's revenue rose by $24 million last year, its accounts receivable jumped by almost as much - $20.6 million. That means that the company had yet to be paid for most of the additional sales that it booked.
Kandi filed a shelf registration with the SEC on Friday, covering the possible sale of up to $60 million in stock or other securities.
We think that investors who are eyeing Kandi because of claims that it will soon be selling large numbers of cars in its home country might want to know about the false or misleading statements it has made about sales in the United States.
(Disclosure: Mark Cuban, majority owner of Sharesleuth.com LLC, does not have a position in Kandi's shares. Chris Carey, editor of Sharesleuth and the author of this report, does not invest in individual stocks and has no position in Kandi's shares).
Kandi went public through a reverse merger with a U.S.-listed shell company in 2007. It was one of 11 Chinese companies that gained listings on American exchanges through deals that were packaged and promoted by a common group of players. At their peak, those companies had a combined market value of more than $1.6 billion.
Although the architects of the deals made millions by selling the stock they received, none of the companies has produced significant long-term gains for ordinary investors.
Four of the 11 companies have been delisted from the Nasdaq or the American Stock Exchange. Two more did reverse-stock splits last year to boost their share prices above $1 and maintain their Nasdaq listings.
Last week, the Nasdaq suspended trading in the shares of yet another of the companies - Telestone Technologies Corp. (TSTC) - after it failed to submit its annual report to the SEC in a timely manner, citing incomplete financial records.
Sharesleuth raised questions in December about who really owned the shell company that became Kandi. Among other things, we reported that certain people who were listed in SEC filings as holding large amounts of stock in the shell told us they never were investors, or never heard about the merger and never received any Kandi shares.
The stock listed in those people's names later could have been sold for more than $10 million.
Sharesleuth used Import Genius' database to track the historical deliveries of Kandi's electric cars. Import Genius created the database using shipping information that comes directly from the U.S. Customs and Border Protection Service, which monitors the nation's ports and is a part of the Department of Homeland Security.
"The data is public record,'' said Ryan Petersen, president and co-founder of Import Genius. "We aggregate it and put it on our website, in a form that's searchable and easier for people to understand.''
Import Genius' database enabled Sharesleuth to search for deliveries of Kandi's vehicles using a number of variables, including the shipper's name, the recipient's name, the recipient's address, the product name and the model number. We ran dozens of different searches to ensure that we found all, or nearly all, of the shipments.
Some shipments appeared more than once, usually because of separate entries for the companies that arranged to ship the goods and for the ones that actually transported them. To avoid double counting, we based our tallies on unique bill of lading numbers.
Import Genius reviewed our methodology and concurred with our general findings.
Import Genius' database has proven reliable in other investigations. For example, Food Safety News used it to help document how millions of pounds of potentially unsafe Chinese honey were shipped to the United States through methods that concealed its country of origin. Five individuals and two American honey processors were charged with crimes earlier this year in connection with the illegal imports.
In addition, a federal judge presiding over a civil suit in another matter evaluated Import Genius' database and ruled that the information it contained was admissible as evidence, Petersen said.
"Our whole business model depends on people trusting our data,'' Petersen said.
Kandi's original electric car, dubbed the Coco, was a golf-cart like vehicle with a fiberglass shell. Although approved for street use, it had a top speed of around 35 miles per hour, making it illegal to operate on many American roadways.
Kandi said it initially targeted the U.S. market with its electric vehicles because apartment buildings and parking facilities in its home country were not set up for plug-in recharging. It now is focusing on China, and is working to create a network of quick-change battery stations where drivers can swap depleted batteries for fresh ones.
Kandi says it is poised to sell hundreds of thousands of its newer, faster electric cars in its home country, through deals with leasing companies that will offer them as monthly or hourly rentals. Its stock rose to a 52-week high of $5.13 last August, after reports began circulating about a looming order for 20,000 cars from one of those partners.
Kandi later said it had agreed to deliver 5,000 of those vehicles by the end of 2012. However, the sales numbers in the company's latest SEC filing show that it fell well short of that figure.
Kandi's stock has declined 30 percent since the August rally. Its shares closed Monday at $3.56, off 27 cents, giving the company a market value of $116 million.
SALES CLAIMS AND STOCK GAINS
Kandi's stock has risen and fallen with the perceived fortunes of its electric-car business, which the company expects to be the main source of growth in the years ahead.
The company's shares were trading for less than $1 at the start of 2009. They climbed to $1.50 by the middle of that year, buoyed by an improving global economy and rising sales of go-karts, which historically have been its biggest source of revenue.
Kandi's stock climbed even more sharply in the final four months of 2009. It announced in October of that year that the electric Coco had been approved for federal tax credits in the United States.
In November 2009, Kandi said in its third-quarter earnings release that it had sold 1,141 mini cars in the United States in the first nine months of the year. The company's shares reached $4.60 that day, and touched $6 the next month, as its promoters continued to report growing U.S. sales.
Kandi said in its annual SEC filing that it sold nearly 1,000 Coco in the final quarter, bringing the total for 2009 to 2,110 vehicles. According to a chart in that filing, those sales generated $8.5 million in revenue, which amounted to one-fourth of the company's overall revenue.
But as we noted earlier, the Customs records in Import Genius' database tell a very different story. They show that just 346 of Kandi's cars were delivered to American ports that year.
SALES BREAKDOWN FROM 2009 ANNUAL SEC FILING
The year ended December 31
|All-terrain Vehicles (ATVs)|
|Super-mini car (COCO) (1)|
|Utility vehicles (UTVs)|
|Three-wheeled motorcycle (TT)|
(1) The Company had previously categorized the predecessor generation CoCo as a UTV in the 2008 Form 10-K, but has adjusted the categorization in this report to clarify year over year comparisons.
Kandi's stock shot to an all-time high of $7.25 in November 2010, after the company reported that revenue for the first nine months of that year was up 50 percent from the same period in 2009. It also said its "adjusted net income" was up 57 percent.
Kandi credited the gains to strong sales of its go-karts and electric cars. The company reported in an SEC filing that day that it sold 1,582 mini cars in the first nine months of 2010, including 1,005 in the second quarter alone.
It said the sales in the second quarter were "primarily in the U.S.'' However, ImportGenius' database shows that only 156 of Kandi's cars were delivered to American ports in 2010. According to the records, all of the cars arrived in a single shipment on May 23 of that year.
SEC filings show that in the days after the third-quarter earnings report, the son of Kandi Chairman Xiaoming Hu sold about 87,000 shares of stock for a little over $500,000. That represented more than half of his holdings.
Two weeks later, Hu himself sold 10,000 shares for $56,200, marking his first-ever sale of Kandi shares.
Kandi said in its annual SEC filing for 2010 that its mini car sales generated $6.8 million in revenue. That translated to just under 16 percent of the company's overall revenue.
SALES BREAKDOWN FROM 2010 ANNUAL SEC FILING
The year ended December 31
|All-terrain Vehicles (ATVs)|
|Super-mini car (EV)|
|Utility vehicles (UTVs)|
|Three-wheeled motorcycle (TT)|
CROSS-CHECKING THE DATA
To test the accuracy of Import Genius' data, we asked a second company that offers a competing service to run searches on its database. The results returned by that company, Zepol Corp., showed the same delivery dates, shippers and recipients. Zepol listed a smaller number of vehicles than Import Genius for some shipments. In those instances, we used the larger figure, to ensure that we did not undercount.
We also compared information in Import Genius' database against two months of freight invoices sent to one of Kandi's previous U.S. distributors. We found that the dates of the invoices, which doubled as delivery notices, tracked with the Customs records. We also found that the number of vehicles listed on them matched the number in the database.
COMPARING SALES AND DELIVERIES
Kandi introduced the Coco in the second half of 2008. It reported in SEC filings that it generated $856,195 in revenue from mini-car sales that year. At a wholesale price of around $4,000 per vehicle, that would translate to 214 cars.
Import Genius' database showed that 182 of Kandi's cars were delivered to American ports that year.
Kandi later reclassified some of its utility vehicles as mini cars, boosting its unit sales for 2008 to 2,125. Because most of the utility-vehicle sales would have predated Kandi's U.S. push with the Coco, we did not attempt to track those shipments and deliveries.
THE NUMBERS DIVERGE
As we noted previously, Kandi initially reported selling 2,110 Cocos in 2009. It said nearly half of that volume came in the final quarter, after the U.S. government and some states approved its electric vehicles for renewable-energy tax credits.
Kandi later revised its sales figure for 2009 to 1,892 cars, saying the lower number reflected accounting adjustments for vehicles that had been sold but not yet invoiced. Regardless, the Customs data shows that only 346 of the cars were delivered to American ports.
It's conceivable that some of the cars sold in 2009 would not have been shipped until the following year. But because the Customs data shows that just 156 Cocos were delivered in 2010, that would not be enough to explain the shortfall in deliveries, let alone account for the additional 1,618 vehicles that Kandi reported selling that year.
The only other way that Kandi's vehicles could have reached the United States without appearing in the database was if they were delivered by alternate means - flown into the country or shipped to Canada or Mexico and then imported by truck or train.
People in the import-export business told us that both of these scenarios were unlikely, because of the added cost and logistical complexity.
It also is possible for companies to petition the U.S. government to keep details of their shipments confidential. But the fact that imports of Kandi's vehicles have shown up regularly in the database since 2008 suggests there were no undisclosed deliveries.
Import Genius' database shows that 290 of Kandi's mini cars were delivered to American ports in 2011, and that 34 were delivered in 2012. The database shows that an additional 14 cars were delivered in January of this year.
Sharesleuth first raised questions about Kandi's sales figures two years ago. We reported that our survey of the dealers that carried the company's electric cars in the United States showed that they had sold fewer than 1,000 of them.
Kandi, however, stood by its unit-sale figures and its reported revenues. It noted in its response that because it sells its vehicles to export agents and other middlemen, it has no direct dealer network and is not involved in the retail supply chain.
However, SEC filings show that a single Chinese exporter accounted for nearly 90 percent of Kandi's revenue in 2009 - one of the years in which the company's reported unit sales in the United States sales far exceeded actual imports.
That exporter, Zhejiang Yongkang Top Import & Export Co. (also known as Dingji), had been part of Kandi until 2008.
BREAKDOWN OF SALES BY CUSTOMERS, FROM 2010 ANNUAL SEC FILING
Our investigation also found that just two companies have been master distributors for Kandi's electric cars in the United States. One of them is run by Xiaoming Hu's son, Wangyuan Hu. He previously was a vice president and director at Kandi.
SHIPMENTS BY ZHEJIANG YONGKANG
When we searched Import Genius' database for all shipments by Zhejiang Yongkang, we found that it sent 929 of Kandi's mini cars to the United States from 2008 through 2012. All but one of Zhejiang Yongkang's deliveries were listed as going to Kandi's original U.S. distributor, Solus International Corp. or to the current one, Kandi USA Inc.
Solus was based in Seattle and took most of its shipments through ports in Seattle and Tacoma, Wash. Kandi USA, headed by Wangyuan Hu, is in Rancho Cucamonga, Calif. Its deliveries have come through the ports of Los Angeles and Long Beach.
SHIPMENTS TO SOLUS
We also searched the database for all shipments to Solus and Kandi USA, to determine whether any other Chinese exporters might have been delivering electric cars to them.
We found that Solus had received 336 vehicles that were described as electric cars, mini cars or golf carts from 2008 through 2010. The shipments that were identified as golf karts listed model numbers that corresponded to Kandi's mini cars.
All of the shipments came from Zhejiang Yongkang.
As we reported in our initial story on Kandi's sales figures, at least 98 of the cars that Solus imported in 2008 had gasoline-burning engines. That means that fewer than 240 of the vehicles that Solus received were electric.
SHIPMENTS TO KANDI USA
Our search of Import Genius' database found that Kandi USA had received 676 vehicles described as electric cars or mini cars. The data showed that it got 182 Cocos in 2009 and 156 in 2010.
According to the records, Kandi USA received 285 mini cars in 2011. That total included the biggest single shipment in the database, 218 vehicles delivered in June of that year.
Those cars arrived about a month after Sharesleuth first questioned the accuracy of Kandi's sales figures. Kandi later reported selling 542 mini cars in the first half of 2011, which represented a 60 percent decline over the previous year.
Although the records compiled by the Customs and Border Protection Service are exhaustive, they do contain some glitches.
A dozen or so entries for shipments from Zhejiang Yongkang to Solus or Kandi USA had blank spaces in the fields describing the contents. But in most cases, the weight and number of units suggested the items were something other than mini cars.
Even allowing for the unlikely possibility that some of those shipments were mini cars, the total number of vehicles delivered to the United States still would be only a fraction of the number that Kandi claims to have sold.
Sharesleuth also noted that two shipments with the same bill of lading number were reported to have reached the United States nearly a month apart. Both shipments were listed as having 36 vehicles.
The first shipment was reported to have arrived in Los Angeles on Aug. 25, 2008. The second was reported to have arrived in Savannah, Ga., on Sept. 23, 2008. We believe this represented a single group of cars, most or all of which wound up in Georgia.
In consultation with Import Genius, we counted those entries as a single delivery of 36 Kandi vehicles, rather than 72, as the raw data implied.
SHIPMENTS BY ZHEJIANG KANGDI
The database showed that one of Kandi's own subsidiaries, Zhejiang Kangdi Vehicles Co. Ltd., also shipped electric cars to the United States. By our count, Zhejiang Kangdi delivered 83 vehicles to American ports.
According to the records, it sent 35 cars in 2011, 34 in 2012 and 14 in January of this year. All went to Kandi USA.
GASOLINE VERSUS ELECTRIC
The first mini cars that arrived in the United States were gasoline-powered rather than electric. And as we reported in 2011, at least some were brought into the country illegally. According to a complaint by the Environmental Protection Administration, 28 Cocos that arrived at the Port of Savannah in September 2008 were in crates bearing labels that said the contents met the agency's standards for all-terrain vehicles.
On closer inspection, Customs agents discovered that the crates actually contained mini cars rather than all-terrain vehicles, and that the mini cars were not covered under the EPA certification.
Solus and Kandi USA later admitted shipping 70 other gasoline-powered Cocos to the United States under the same false declarations. Each company agreed to pay fines of $40,000 and destroy or export the vehicles.
Many of the vehicles that Kandi reported selling in 2010 also turned out to be gasoline-powered. As we mentioned earlier in this story, Kandi disclosed in an SEC filing last year that 960 of the 1,618 mini cars it sold in 2010 had regular combustion engines.
That disclosure, in a footnote to a sales chart, contradicted its earlier assertions that the "all-electric Coco LSV'' was one of the biggest contributors to its revenue growth.
SALES BREAKDOWN FROM 2011 ANNUAL SEC FILING, WITH 2010 REVISIONS
Year ended December 31
|All-terrain Vehicles (ATVs)|
|Utility vehicles (UTVs)|
|Three-wheeled motorcycles (TT)|
|1)||Includes the CoCo EV and mini-cars. In 2011, sales of super-mini-cars included 1,076 EVs and 1 gas powered super-mini-car; whereas in 2010, such sales were 658 EVs and 960 gas powered super-mini-cars.|
The revised figures mean that just 658 of the cars it sold in 2010 were electric, and that Kandi's reported sales of electric cars actually fell by almost two-thirds from the previous year. It is unclear why Kandi waited until 2012 to clarify the sales numbers.
In the past few months, Kandi has made a series of announcements that suggest it is rapidly gearing up for the mass production and sale of electric cars in China.
Kandi announced in February that it had signed a "cooperation framework agreement'' with a subsidiary of Geely Automobile Holdings Ltd. to establish a joint-venture company that would develop and manufacture electric vehicles. Kandi said the plan called for each company to have a 50 percent stake in the joint venture, which would be established with assets from both Kandi and Geely.
The companies said in late March that they had finalized the joint-venture agreement. They said each would contribute $80 million in capital - in cash - to the new company, Zhejiang Kandi Electric Vehicles Co. Ltd.
Kandi also announced last month that it had agreed to pay $43.2 million for an electric-vehicle production facility currently owned by Zhejiang New Energy Vehicle Systems Co. Ltd. Kandi said the deal was part of its preparation for the joint venture with Geely.
Kandi announced April 3 that it had completed a full-scale production and assembly line in Zhejiang Province. It said the annual production capacity for the first phase was expected to reach 100,000 units.
It appears that Kandi will not be able to pay for all of those expansion activities with its current cash and lines of credit. According to its annual SEC filing, Kandi had just under $28 million in cash and equivalents at the end of 2012, and more than half of that was restricted. Kandi said it also had around $24 million available on its bank lines of credit.
Kandi has since received an additional $4 million through the exercise of warrants issued in connection with a previous stock placement.
SEC filings show that Kandi's total liabilities stood at $85.8 million at the end of 2012, up from $58.1 million three months earlier. That figure included $25.3 million in notes payable, which the company said it issued to suppliers in lieu of cash.
Kandi said that more than $3.1 million of the notes have since been repaid. The remainder come due in June. We will continue to monitor Kandi's activities and report on any interesting developments.
Gregory Stevens provided fact-checking services for this article.
Additional disclosure: Mark Cuban, majority owner of Sharesleuth.com LLC, has no position in the shares of Kandi Technologies or any other company mentioned in this report. Chris Carey, editor of Sharesleuth.com and author of this report, does not invest in individual stocks and has no position in the shares of any company mentioned.