Kandi Technologies Corp.: Where are the Cocos?

Kandi Coco 1

Over the past two years, Kandi Technologies Corp. (Nasdaq: KNDI) has reported selling more than 3,700 of its Coco electric cars — golf cart-like vehicles that are approved for street use and top out at around 30 miles an hour.

But a Sharesleuth investigation found that the Chinese company, which went public in the United States through a reverse merger, appears to have greatly overstated its sales figures.

Sharesleuth checked with Kandi’s own electric-vehicle dealers and found none that could account for the sales volume the company has claimed in its Securities and Exchange Commission filings and earnings reports.

The co-owner of the most successful dealership, in Oklahoma City, Okla., said he sold roughly 350 of the Cocos, which resemble Smart Cars and have a suggested retail price of more than $13,000. The next biggest dealer sold fewer than 100.

Our survey of dealers, distributors and others familiar with Kandi’s activities found that well under 1,000 people have purchased Cocos in the United States, the company’s main market for the past three years.

The wide gulf between Kandi’s claimed sales and actual dealer sales is significant because the Coco accounted for nearly 20 percent of the company’s reported revenue for 2009 and 2010. It’s also significant because the company raised $26.6 million in two private placements last year based partly on representations about the progress of its electric car business.

Sharesleuth’s research turned up other inconsistencies that raise additional questions about Kandi’s sales figures.

For example:

  • Kandi said it sold 2,110 Cocos in its very first year on the market, which would have ranked it among the top companies in the industry.
  • Although one of Kandi’s investor-relations representatives said the company took orders for 1,200 orders Cocos in Oklahoma in 2009, state records show that only 328 buyers claimed tax credits for Coco purchases.
  • Kandi’s most recent SEC filings contain lower 2009 sales numbers for the Coco and other vehicles than the company originally reported — without any corresponding adjustments to revenue or earnings.

Kandi declined to answer a list of questions submitted by Sharesleuth.



Kandi, which has headquarters in Jinhua, China, went public in June 2007 through a reverse merger with Stone Mountain Resources Inc., a Nevada company that had been pursuing a gold-mining venture.

Kandi was one of 11 Chinese reverse-merger companies featured in an earlier Sharesleuth investigation about a network of promoters who played a hidden role in bringing those companies public and received millions of dollars worth of stock in return for their assistance.

The story showed that the promoters paid the legal fees, accounting fees, investor-relations expenses and listing expenses for four of the  companies – Kandi, Telestone Technologies Corp. (Nasdaq: TSTC), Orsus Xelent Technologies Inc. (AMEX: ORS) and New Oriental Energy & Chemical Corp. (Pink Sheets: NOEC.PK), which recently was delisted from the Nasdaq.

Kandi and the other companies did not disclose those arrangements in their SEC filings.

As recently as November, Kandi’s shares were trading for as much as $7.25, giving the company a market capitalization of nearly $160 million. The stock has been falling since then, and closed Tuesday at $2.73.

(Disclosure: Mark Cuban, majority owner of Sharesleuth.com LLC, has no position in the shares of Kandi. Chris Carey, editor of Sharesleuth.com, does not invest in individual stocks and has no position in any of the companies mentioned in this story, nor does co-author Justin McLachlan.)

Unlike other Chinese reverse-merger companies that are alleged to have inflated revenue and earnings, Kandi sells the bulk of its products in North America rather than China.

Kandi Coco No. 2

Kandi introduced the electric Coco in early 2009, and has been touting electric vehicles as its biggest prospect for growth. The company has marketed the Coco primarily in America because Chinese homes and parking facilities are not set up for plug-in recharging.

However, Kandi now is turning its focus to China, with a plan that relies on battery-replacement stations that quickly swap charged batteries for drained ones. It announced in July that it the Hangzhou Postal Service had placed an initial order for 60 Cocos. The company and its backers say that the battery-replacement stations, combined with new subsidies authorized by the Chinese government, could lead to the sale of thousands of Cocos annually.

Kandi announced earlier this year that it had received a purchase order for 1,000 Cocos from a little-known Italian company, Share s.r.l., which was established only last year.  Share did not respond to a request for comment on that deal.



Kandi distributes its electric vehicles in the United States through two companies: Kandi USA Inc., in Rancho Cucamonga, Calif., and Solus International Corp., which has headquarters in the Seattle area.

According to SEC filings, Kandi USA is independent from Kandi Technologies. However, its president is Wangyuan Hu, the son of Kandi Technologies’ chairman and chief executive, Xiaoming Hu.

Wangyuan Hu also was a vice president and director of Kandi Technologies. He resigned from the board in January and was no longer listed as an officer in the company’s annual SEC filing.

Solus International’s website includes a directory of Kandi dealers, searchable by city, state and zip code. We entered a variety of locations and found that the directory listed just nine Coco dealers nationwide.

We also looked elsewhere for Kandi dealers and found a handful of additional outlets that currently or previously marketed Cocos.

Sharesleuth reached out to all of them in attempt to verify Kandi’s sales figures. Although the company reported selling Cocos by the thousands, most of the dealers we spoke to said they had sold few, if any, of the cars.

For example, a dealer in Florida called Riva Motorsports said it took several Cocos for demonstrators but hadn’t sold any. A sales manager added that Riva doesn’t plan to carry the line any longer.

Similarly, Prosser RV Rentals and Sales, in Milwaukee, appears to still be trying to unload its two demonstrators. Another dealer, Electrick Motorsports, in Northern California, does not advertise the Coco on its website or list any of the cars in its inventory of new or used vehicles.

The owner of a fourth dealership, in Houston, said he’d sold a very small number of Kandi’s mini-cars, adding that the market for electric vehicles in the United States remains focused on brand names like Nissan’s Leaf or the Chevrolet Volt.

A representative for two Arizona-based dealerships listed as Coco outlets said each had sold only a modest number of the vehicles, primarily to buyers who wanted to use them within golf-course communities.

The owner of a seventh dealership, also in Northern California, said its Coco sales had been light as well. He said the Coco wasn’t suited to the roads in that area, which have speed limits higher than 35 miles per hour.

Another dealer, Rusty Wallis, operates Honda and Volkswagen outlets in the Dallas area. He signed up to be a Kandi dealer in 2008, just before the economy melted down. Despite the difficult conditions, his operation sold 30 to 40 Cocos.

“I still have a few left,” Wallis said, adding that he is no longer actively promoting the vehicles.

Sharesleuth also found someone in Miami who was not on Kandi’s official dealer list but had been advertising the Coco through videos on the Internet. Alex Gutierrez, who set up the site MiamiNEV.com, said his group got a shipment of 40 Cocos in 2009 to evaluate and sell.

Gutierrez said the vehicles were cheaply made, underpowered and loud. Although his group was able to move some of the Cocos, it left many of them in their shipping crates and liquidated them overseas.

Two companies identified as regional Kandi distributors in a March 2009 press release – Franklin Motorsport LLC of Miami and Engesser Eco Autos of Spearfish, S.D. — are no longer promoting the Coco.



Kandi was more successful in Oklahoma, where an unusually generous combination of state and federal tax credits in 2009 reduced the net cost of a Coco to less than $900.

Oklahoma offered a tax rebate equal to half the price of the vehicle, which in the case of a Coco priced at $10,599 worked out to nearly $5,300. The federal tax credit was an additional $4,435.

Kandi said in its annual SEC filing for 2009 that it sold 2,110 Cocos, with a little under half of that volume coming in the final quarter.

Robert Agriogianis, one of Kandi’s investor-relations consultants, was quoted in the China Economic Review in March 2010 as saying that the company got 1,200 orders in Oklahoma alone in 2009.

But if Kandi sold that many vehicles in the state, there’s no evidence of it.

Jake Conrady, manager and part owner of GKU Electric Vehicles LLC, told Sharesleuth that his company sold only 350 or so Cocos, nearly all of them in the second half of 2009.

The elimination of Oklahoma’s tax credit — and a reduction in the federal tax credit to 10 percent of the purchase price — wiped out demand for electric vehicles after that, he said.

GKU sold only a handful of Cocos last year, and still has about 50 sitting in a warehouse, Conrady said.

Another dealership, Trinity Trikes, told an Oklahoma paper in October 2009 that it was selling about 10 Cocos a week, mostly to people who wanted to tow them behind their motor homes. It wound up selling just under 100 of the vehicles.

Sharesleuth found no mention of any other Oklahoma outlets in Kandi’s promotional materials, in news stories or in directories of electric-vehicle dealers. And the Oklahoma Tax Commission records do not reflect any Coco sales by other dealers in the state.

Although it’s possible that some people who bought Cocos did not apply for the $5,000-plus tax rebate available to them under that state’s incentive program, it is highly unlikely that hundreds of people would have passed up that money.


Others in the electric-vehicle industry questioned Kandi’s sales figures, both in Oklahoma and beyond.

The Oklahoma Tax Commission records show that the buyers of 4,492 electric vehicles applied for that state’s tax credits.  Of that total, 328 had purchased Cocos.

State records show that five other manufacturers outsold Kandi in Oklahoma, including Global Electric Motorcars LLC (GEM) and Tomberlin Automotive Group, two of the industry’s biggest players.

GEM, a unit of Chrysler LLC, has sold 45,000 vehicles in 13 years, or an average of roughly 3,500 annually. Its totals include fleet sales to government agencies, universities, corporations and other fleet buyers — a market that Kandi has not tapped.

Kandi’s claim to have sold more than 1,600 Cocos in 2010 was particularly surprising to industry experts, given that demand for electric vehicles plunged after tax credits were reduced.

Zenn Motor Co., a publicly traded Canadian company, stopped making its electric cars last year because of disappointing sales. It had sold roughly 500 vehicles in the previous two years.

Wheego Electric Cars Inc., an Atlanta company that entered the market in September 2009, had sold 300 of its low-speed vehicles through the end of last year, said Michael McQuary, its chairman and chief executive.

About 100 of Wheego’s sales were in Oklahoma, McQuary said.

“LSVs were a tougher sell in 2010 than 2009, because people knew full-speed vehicles were coming,” he said.

It’s possible that Kandi’s distributors, Kandi USA and Solus International, purchased significantly more vehicles than their dealer network has been able to move. We asked Kandi to explain the discrepancy between the number of vehicles the company reported selling and the number the dealers reported selling. Kandi, through an attorney, said that responding to our questions could violate Regulation FD, an SEC rule covering selective disclosure of company information.


Kandi said in its annual SEC filing for 2009 that it sold 2,110 Cocos, nearly all of them in the United States. It reported selling an additional 1,618 Cocos last year.

But Sharesleuth noted that a chart in Kandi’s annual SEC filing for 2010 — comparing year-over-year sales figures for each of the company’s product lines — listed a lower total for Coco sales in 2009.

The chart said Kandi sold only 1,892 Cocos in 2009, or 10 percent fewer than the company originally reported.





The year ended December 31






















All-terrain Vehicles (ATVs)

















Super-mini car (CoCo) (1)


































Mini Pick-up

















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The year ended December 31






















All-terrain Vehicles (ATVs)

















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Mini Pick-up

















Utility vehicles (UTVs)

















Three-wheeled motorcycle (TT)



































The prospectus for Kandi’s December placement of $16.6 million in stock, at $5.50 a share, listed the higher sales numbers for 2009.

Kandi’s latest annual filing lowered its reported sales of all-terrain vehicles in 2009 by more than 12 percent, to 5,433 units, and reduced its previously reported sales of utility vehicles by nearly 10 percent, to 3,171 units.

The same chart showed an upward revision in the number of three-wheeled motorcycles sold in 2009. Kandi more than doubled that figure, to 1,133 vehicles.

It’s possible that some of the sales were originally put in the wrong categories. But even allowing for those types of corrections, the vehicle totals and the revenue totals do not track with the revisions.

All told, the chart in the 2010 filing showed that Kandi sold 25,248 vehicles in 2009, or 697 fewer than it initially reported. Despite that drop in unit sales, the company did not alter its original revenue figure of $33.8 million for the year.

Kandi’s auditor for both its 2009 and 2010 annual filings was Albert Wong & Co., which is based in Hong Kong. Kandi hired the firm in mid-2009, after dismissing Weinberg & Co., of Boca Raton, Fla.

Weinberg & Co. said at the time of its dismissal that it had no disagreements with Kandi. The firm did not respond to questions from Sharesleuth.

The conflicting numbers in Kandi’s annual filings were no aberration. Kandi’s quarterly reports for the second and third quarters of 2010 also contained charts that included revised sales figures for 2009.

For example, Kandi initially reported selling 646 Cocos in the first half of 2009. But in the company’s SEC filing for the second quarter of 2010, that figure was reduced by nearly 30 percent, to 474 Cocos.




Six Months Ended June 30









All-terrain Vehicles(“ATV”)









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Mini Pick-up









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Six Months Ended June 30









































































Utility vehicles (“UTVs”)

















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Likewise, the totals in Kandi’s third-quarter reports changed without explanation. In 2009, the company said it sold 1,141 Cocos through the first nine months of the year. In the 2010 report, that figure was lowered to 896.





Nine Months Ended September 30









All-terrain Vehicles(“ATV”)









Super-mini car (“CoCo”)


















Mini Pick-up









Utility vehicles (“UTVs”)









Three-wheeled motorcycle (“TT”)























Nine Months Ended September 30









































































Utility vehicles (“UTVs”)

















Three-wheeled motorcycle (“TT”)

















Pick – up



















We also noted that Kandi’s financial report for the first half of 2010 reflected a second-quarter sales surge that the company mentioned in its earnings release but never fully explained.

The company’s SEC filings show that its Coco sales shot from 372 in the first quarter of 2010 to 1,005 in the second quarter. They then dropped just as steeply as they’d risen, falling to 215 Cocos in the third quarter and 26 in the fourth quarter.

Last Nov. 15, Kandi announced its results for the first nine months of 2010. It said in its press release that the strong Coco sales in the second quarter were a key reason the company’s revenue was up 50 percent. That same day, Kandi’s shares hit their 52-week high of $7.25.

SEC filings show that on Nov. 17 and 18, Wangyuan Hu sold about 87,000 shares of his Kandi stock – more than half of his holdings – for a little over $500,000.

Two weeks later, CEO Xiaoming Hu sold 10,000 shares for $56,200, his first ever sale of Kandi shares.



Sharesleuth’s investigation also turned up a lawsuit alleging that Kandi defrauded its original U.S. distributor and strong-armed that company out of its potentially lucrative contract.

Kandi’s SEC filings never mentioned the suit, which sought more than $4 million in damages.

Kandi’s original U.S. agent was a company called Seaseng Inc, headed by Cong Wang, a Chinese citizen living in California.

In 2006, Wang signed a deal that made Seaseng Inc. the exclusive distributor of Kandi products in the United States. According to a lawsuit that Wang filed against Kandi, Kandi USA, Xiaoming Hu, Wangyuan Hu and several other defendants, Kandi was to develop 10 new product lines a year, provide two-year service warranties and supply free replacement parts.

Kandi and Seaseng also agreed to swap shares in their respective companies, so that each would own a part of the other. According to the suit, Kandi promised to invest $300,000 in Seaseng but never did.

Wang said that, between June 2007 and November 2007, Kandi shipped 56 containers of its products to Seaseng, without the execution of any purchase orders or contracts.

That was just after Kandi had become a public company.

According to the suit, another 70 containers followed in December 2007. Seaseng had to use its own funds to pay the customs charges, duties and storage costs.

Around the same time, Kandi began negotiating a deal to acquire another U.S.-based company, SunL Group Inc. The suit said that Kandi’s chief executive, Xiaoming Hu, wanted Wang to sell SunL a controlling interest in Seaseng, and to let SunL distribute Kandi products that were exclusively designed for Seaseng.

Wang said in the suit that Kandi used him to gain access to the U.S. market and then began looking for ways to get rid of him. He alleged that, while he was in a meeting with officials from Kandi and SunL in January 2008, Wangyuan Hu stole corporate documents, including Seaseng’s business license, its customer lists and some blank stock certificates. Wang said the theft was captured on video.

Things only got worse from there. Wang says his family in China was threatened, sometimes by Xiaoming Hu. Wang also said that Kandi’s chief executive caused criminal charges to be filed against him in China in January 2009, by claiming that Wang was a Kandi employee who had himself stolen corporate documents.

Kandi filed a lawsuit against Wang and Seaseng in California in February 2008, alleging fraud, conversion and other offenses. But the suit was never served on Seaseng and was later dismissed.

According to Wang’s suit, Xiaoming Hu called Wang’s father in China on Feb. 27, 2008 and threatened Wang’s welfare. The next day, Hu called Wang and demanded that he sign a promissory note and settlement agreement.

Despite the ill will, Wang and Hu met on Feb. 28 and agreed to a settlement that called for Seaseng to pay for some of the Kandi vehicles it had received and to send some back to China. In addition, Wang agreed to relinquish any claim of ownership in Kandi, and Kandi agreed to relinquish any claim of ownership in Seaseng.

Wang said in his suit that Seaseng had received approximately $7 million worth of vehicles from Kandi. He said he made $436,000 in payments to Kandi in the three months after the companies negotiated their settlement.

But that truce didn’t last long. Kandi filed another lawsuit against Wang and his company in July 2008, saying they had breached the agreement and a fiduciary duty to give Kandi control of Seaseng.

Kandi eventually dropped that suit as well.

In October 2008, the California Department of Motor Vehicles cancelled Seaseng’s distributor license. Around the same time, according to Wang’s lawsuit, Seaseng began hearing from people who had purchased Kandi vehicles and had complaints about “poor quality and performance, missing parts and defects.”

Those unhappy customers wanted new parts, or refunds. According to the suit, Wang forwarded the complaints to Kandi, but the company refused to act on them. Eventually, Wang liquidated all of his remaining Kandi inventory to distributors in Mexico, “at heavy losses.”

But Wang’s dealings with Kandi and its executives weren’t quite over. He said in his suit that, in December 2008, Xioaming Hu sent his bodyguard to Seaseng with a warning — that he’d made a deposit with someone to “take care of Mr. Wang.”

Wang reported that visit to the local police.

In June 2009, Kandi filed another lawsuit against Wang, asking the court to enforce the settlement agreement and to make Wang pay for the balance of the Kandi vehicles that he had received.

Wang responded with his own suit, seeking damages from Kandi. That case was dismissed last year for lack of prosecution.



Sharesleuth also turned up another problem that Kandi never disclosed to shareholders.

In August 2008, the company proudly announced that its first shipment of 100 Cocos had reached the United States. Unlike the current version, those models were gasoline powered.

Kandi said it expected that shipments would “continue to build in succeeding months to meet anticipated strong customer demand,” and Xiaoming Hu predicted that the company would sell 5,000 of the vehicles by the end of the year.

But Kandi soon hit a roadblock, one it never disclosed to investors: The cars were here illegally.

Federal law prohibits the importation of vehicles into the United States without specific regulatory approval from the Environmental Protection Agency.

The EPA found that Kandi’s distributors, Kandi USA and Solus International, violated that law by importing crates of vehicles from China bearing EPA labels that said the contents met the agency’s standards for ATVs.

When the U.S. Customs and Border Inspection Service inspected a shipment of 28 vehicles at the Port of Savannah in September 2008, it found that the contents were not ATVS, as described, but mini-cars not covered under the EPA certification.

In early 2009, Kandi USA and Solus International voluntarily disclosed to the EPA that they’d already brought a larger shipment of 70 Cocos into the country, under the same declarations.

Both Kandi USA and Solus settled the charges with the EPA in June 2009.  Without admitting or denying any guilt, they each agreed to pay a fine of $40,000 and either destroy or export the illegal vehicles.

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