U. S.
Securities and Exchange Commission


Washington,
D. C. 20549





FORM
10-Q





[X]
              QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended March 31,
2009






[ 
      ]
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
transition period from _____ to _____





Commission
File No. 1-33726





ADVANCED BATTERY
TECHNOLOGIES, INC.


(Name of
Registrant in its Charter)




Delaware
              22-2497491(State
      or Other Jurisdiction of incorporation or organization)
              (I.R.S.
      Employer I.D. No.)







21
      West 39th
      Street, Suite 2A, New York, NY 10018Address
      of Principal Executive
Offices)




Issuer's
Telephone Number: 212-391-2752





Indicate  by
check mark  whether the  Registrant  (1) has filed
all reports required to be filed by Sections 13 or 15(d) of
the  Securities Exchange Act of
1934  during  the  preceding  12
months  (or for such shorter  period  that the
Registrant was required to file such reports),  and (2) has been
subjected to such filing requirements for the past 90 days.




YesX                  No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files.)  Yes 
No ___




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check One)




Large
      accelerated filer
            Accelerated
      filer X
            Non-accelerated
      filer
            Small
      reporting company




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)  Yes   No X





APPLICABLE
ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of each of the Registrant's classes of common stock, as of the latest
practicable date:




May 11,
2009


Common
Voting Stock: 57,821,577










PART
I - FINANCIAL INFORMATION








ADVANCED BATTERY TECHNOLOGIES,
      INC.CONDENSED CONSOLIDATED BALANCE
      SHEETSASSETSMarch 31,
                                                                                                  
                                                                                                  
                                                                                                  December
31,2009
                                                                                                  
                                                                                                  
                                                                                                  2008(Unaudited)Current
    assets:Cash and cash
      equivalents
                                                                                                  
                                                                                                  $
                                                                                                  33,545,014
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  32,746,155Accounts receivable,
      net
                                                                                                  
                                                                                                  
                                                                                                  16,724,986
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  14,708,078Inventories,
      net
                                                                                                  
                                                                                                  
                                                                                                  1,516,234
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,748,115Loan
    receivable
                                                                                                  
                                                                                                  
                                                                                                  1,619,355
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,600,000Other
      receivables
                                                                                                  
                                                                                                  
                                                                                                  109,163
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  240,726Advance to
      suppliers
                                                                                                  
                                                                                                  
                                                                                                  129,925
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  246,163Total Current
      Assets
                                                                                                  
                                                                                                  
                                                                                                  53,644,677
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  51,289,237Property, plant and equipment, net
      of accumulated depreciation of $2,959,062as of March 31, 2009 and
      $2,803,788 as of December 31, 2008
                                                                                                  
                                                                                                  
                                                                                                  16,481,181
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  16,635,843Total Fixed
      Assets
                                                                                                  
                                                                                                  
                                                                                                  16,481,181
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  16,635,843Other
    assets:Investment in unconsolidated
      entity
                                                                                                  
                                                                                                  
                                                                                                  1,027,751
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,037,550Investment
      advance
                                                                                                  
                                                                                                  
                                                                                                  3,814,946
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  3,000,000Deposit for long-term
      assets
                                                                                                  
                                                                                                  
                                                                                                  3,712,390
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,748,363Intangible assets,
      net
                                                                                                  
                                                                                                  
                                                                                                  1,514,834
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,548,158Goodwill
                                                                                                  
                                                                                                  
                                                                                                  2,482,873
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  2,487,080Other
assets
                                                                                                  
                                                                                                  
                                                                                                  26,624
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  6,000Total other
      assets
                                                                                                  
                                                                                                  
                                                                                                  12,579,418
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  9,827,151Total
Assets
                                                                                                  
                                                                                                  $
                                                                                                  82,705,276
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  77,752,231LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                                                                                                  
                                                                                                  $
                                                                                                  913,210
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  415,850Advance from
      Customer
                                                                                                  
                                                                                                  
                                                                                                  83,185
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  80,479Accrued expenses and other
      payables
                                                                                                  
                                                                                                  
                                                                                                  498,045
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  784,070Loan from
      officers
                                                                                                  
                                                                                                  
                                                                                                  8,390
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  17,236Tax payable
                                                                                                  
                                                                                                  
                                                                                                  1,079,760
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  -Total Current
      Liabilities
                                                                                                  
                                                                                                  
                                                                                                  2,582,590
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,297,635Total
      Liabilities
                                                                                                  
                                                                                                  
                                                                                                  2,582,590
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,297,635Stockholders'
      EquityCommon stock, $0.001 par value,
      60,000,000 shares authorized;54,821,577 shares issued and
      54,626,996 shares outstanding as of March 31, 2009and 54,781,577 shares issued and
      54,662,067 shares outstanding as of December 31,
    2008
                                                                                                  
                                                                                                  
                                                                                                  54,822
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  54,782Additional
      paid-in-capital
                                                                                                  
                                                                                                  
                                                                                                  39,602,197
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  39,289,991Accumulated other comprehensive
      income
                                                                                                  
                                                                                                  
                                                                                                  5,914,649
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  6,012,475Retained
      earnings
                                                                                                  
                                                                                                  
                                                                                                  34,993,347
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  31,393,050Less: Cost of treasury stock
      (194,581 and 119,510 shares as of March 31,2009 and December 31, 2008
      )
                                                                                                  
                                                                                                  
                                                                                                  (442,329
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  (295,702
                                                                                                  )Total Stockholders'
      Equity
                                                                                                  
                                                                                                  
                                                                                                  80,122,686
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  76,454,596Total Liabilities and
      Stockholders' Equity
                                                                                                  
                                                                                                  $
                                                                                                  82,705,276
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  77,752,231





2




ADVANCED BATTERY TECHNOLOGIES,
      INC.CONDENSED CONSOLIDATED STATEMENTS
      OF INCOME AND OTHER COMPREHENSIVE INCOME(UNAUDITED)THREE MONTHS ENDED MARCH
      31,2009
                                                                                                                            
                                                                                                                            
                                                                                                                            2008Revenues
                                                                                                                            
                                                                                                                            $
                                                                                                                            10,685,738
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            10,031,969Cost of Goods
      Sold
                                                                                                                            
                                                                                                                            
                                                                                                                            5,651,189
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,989,742Gross
Profit
                                                                                                                            
                                                                                                                            
                                                                                                                            5,034,549
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            5,042,227Operating
      ExpensesResearch & Development
      expenses
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,325Selling, general and
      administrative
                                                                                                                            
                                                                                                                            
                                                                                                                            896,319
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            567,565Operating
      income
                                                                                                                            
                                                                                                                            
                                                                                                                            4,138,230
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,470,337Other Income
      (Expenses)Interest income
      (expenses)
                                                                                                                            
                                                                                                                            
                                                                                                                            74,348
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            7,586Equity loss from unconsolidated
      entity
                                                                                                                            
                                                                                                                            
                                                                                                                            (9,798
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            -Total other income
      (expenses)
                                                                                                                            
                                                                                                                            
                                                                                                                            64,550
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            7,586Income Before Income
      Taxes
                                                                                                                            
                                                                                                                            
                                                                                                                            4,202,779
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,477,923Provision for Income Taxes
      (Benefit)
                                                                                                                            
                                                                                                                            
                                                                                                                            602,482
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            629,445Net Income
                                                                                                                            
                                                                                                                            $
                                                                                                                            3,600,297
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            3,848,478Other Comprehensive
      IncomeForeign currency translation
      adjustment
                                                                                                                            
                                                                                                                            
                                                                                                                            (97,825
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            1,590,979Comprehensive
      Income
                                                                                                                            
                                                                                                                            $
                                                                                                                            3,502,472
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            5,439,457Earnings per
      shareBasic
                                                                                                                            
                                                                                                                            $
                                                                                                                            0.08
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            0.09Diluted
                                                                                                                            
                                                                                                                            $
                                                                                                                            0.07
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            0.08Weighted average number of common
      shares outstandingBasic
                                                                                                                            
                                                                                                                            
                                                                                                                            47,055,374
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            41,510,498Diluted
                                                                                                                            
                                                                                                                            
                                                                                                                            54,692,874
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            49,688,998





3




ADVANCED BATTERY TECHNOLOGIES,
      INC.CONDENSED CONSOLIDATED STATEMENTS
      OF CASH FLOWS(UNAUDITED)THREE MONTHS ENDED MARCH
      31,2009
                                                                                  
                                                                                  
                                                                                  2008Cash Flows From Operating
      Activities:Net income
                                                                                  
                                                                                  $
                                                                                  3,600,297
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,848,478Adjustments to reconcile net
      income to net cash provided by (used in)operating
      activities:Depreciation and
      amortization
                                                                                  
                                                                                  
                                                                                  190,584
                                                                                  
                                                                                  
                                                                                  
                                                                                  295,963Amortization of deferred
      consulting expenses
                                                                                  
                                                                                  
                                                                                  50,281
                                                                                  
                                                                                  
                                                                                  
                                                                                  87,594Amortization of stock based
      compensation expense
                                                                                  
                                                                                  
                                                                                  261,965
                                                                                  
                                                                                  
                                                                                  
                                                                                  133,781Equity loss of unconsolidated
      entity
                                                                                  
                                                                                  
                                                                                  9,798
                                                                                  
                                                                                  
                                                                                  
                                                                                  -Changes in operating assets and
      liabilities:Accounts
      receivable
                                                                                  
                                                                                  
                                                                                  (2,016,908
                                                                                  )
                                                                                  
                                                                                  
                                                                                  2,099,466Inventories
                                                                                  
                                                                                  
                                                                                  231,881
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1,137,602
                                                                                  )Other receivable &
      prepayments
                                                                                  
                                                                                  
                                                                                  227,176
                                                                                  
                                                                                  
                                                                                  
                                                                                  373,611Accounts payable, accrued expenses
      and other payables
                                                                                  
                                                                                  
                                                                                  1,294,663
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,883,196Advance from
      Customer
                                                                                  
                                                                                  
                                                                                  2,706
                                                                                  
                                                                                  
                                                                                  
                                                                                  (21,046
                                                                                  )Net cash provided by operating
      activities
                                                                                  
                                                                                  
                                                                                  3,852,444
                                                                                  
                                                                                  
                                                                                  
                                                                                  7,563,440Cash Flows From Investing
      Activities:Loan
    receivable
                                                                                  
                                                                                  
                                                                                  (19,355
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Deposit for long-term
      assets
                                                                                  
                                                                                  
                                                                                  (1,964,027
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Purchase of property, plant and
      equipment
                                                                                  
                                                                                  
                                                                                  (33,353
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,689
                                                                                  )Payment made on investment
      advance
                                                                                  
                                                                                  
                                                                                  (814,946
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Net cash used in investing
      activities
                                                                                  
                                                                                  
                                                                                  (2,831,681
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,689
                                                                                  )Cash Flows From Financing
      ActivitiesLoan (to) from related
      parties
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  167,343Purchase of treasury
      stock
                                                                                  
                                                                                  
                                                                                  (146,627
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Repayment of officer
      loan
                                                                                  
                                                                                  
                                                                                  (8,846
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Net cash provided by(used in)
      financing activities
                                                                                  
                                                                                  
                                                                                  (155,471
                                                                                  )
                                                                                  
                                                                                  
                                                                                  167,343Effect of exchange rate changes on
      cash and cash equivalents
                                                                                  
                                                                                  
                                                                                  (66,432
                                                                                  )
                                                                                  
                                                                                  
                                                                                  919,979Increase in cash and cash
      equivalents
                                                                                  
                                                                                  
                                                                                  798,859
                                                                                  
                                                                                  
                                                                                  
                                                                                  8,649,073Cash and Cash Equivalents -
      Beginning of period
                                                                                  
                                                                                  
                                                                                  32,746,155
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,704,823Cash and Cash Equivalents - End of
      period
                                                                                  
                                                                                  $
                                                                                  33,545,014
                                                                                  
                                                                                  
                                                                                  $
                                                                                  11,353,896SUPPLEMENTAL CASH FLOW
      INFORMATION:During the year, cash was paid for
      the following:Interest
      expense
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -Income
taxes
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -NON-CASH INVESTING AND FINANCING
      ACTIVITIES:Common stock issued for incentive
      stock-based compensation
                                                                                  
                                                                                  $
                                                                                  152,800
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -





4





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





1. BASIS OF
PRESENTATION




The accompanying unaudited
condensedconsolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial
statements, In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March31, 2009 and 2008 are not necessarily
indicative of the results that may be expected for the full years. The
information included in this Form 10-Q should be read in conjunction with
Management’s Discussion and Analysis and the
financial statements and notes to thereto included in the
Company’s 2008 Form 10-K.




2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




Reclassification




Certain prior period amounts have been
reclassified to conform to the current period presentation. These
reclassifications had no effecton reported total assets, liabilities,
stockholders' equity or net income.




Principles of
consolidation




The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Cashtech
and ZQPT. All significant inter-company balances and transactions have
been eliminated in consolidation.




Use of estimates




In preparing the consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America, the management makesestimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the dates of the consolidated financial statements, as
well as the reported amounts of revenues and expenses duringthe reporting periods. Significant
estimates required to be made by the management include, but are not limited to,
the recoverability of long-lived assets and the valuation of accounts receivable
and inventories. Actual results could differ from those estimates.




5





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)




2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)




Cash and cash
equivalents




For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.




Accounts receivable




Accounts receivables are stated at net
realizable value. Any allowance fordoubtful accounts is established based
on the management’s assessment of the recoverability of
accounts and other receivables. Management regularly reviews the composition of
accounts receivable and analyzes historical bad debts, customer
concentrations,customer credit worthiness, current
economic trends and changes in customer payment patterns to evaluate the
collectability of accounts receivable and the adequacy of the allowance. The
allowance for accounts receivable is $16,478 and $ 16,506 as of
March31, 2009 and December, 31 2008,
respectively.




Inventories




Inventories are stated at the lower of
cost or market. Cost is determined on a weighted average method.Cost of work in progress and finished
goods comprises direct material, direct production costand an allocated portion of production
overheads. Management compares the cost of inventory with the market value and
an allowance is made for writing down the inventory to its market value, if
lower.




Revenue recognition




The
Company’s revenue recognition policies are in compliance with Staff Accounting
Bulletin (“SAB”) 104. Sales revenue is recognized when title and risks have
passed, which is generally at the date of shipment and when collectability is
reasonably assured.





The
Company sells its products to the customers who have passed the Company’s credit
check. Sales agreements are signed with each customer. The purchase price of
products is fixed in the agreement. The Company does not sell products to
customers on a consignment basis. The company makes custom products based on
sales agreements, so no returns are allowed. The Company warrants the product
only in the event of defects for one year from the date of shipment.
Historically, the Company has not experienced significant defects, and
replacements for defects have been minimal. For the three months ended March 31,
2009 and 2008, no such returns and allowances have been recorded. Should returns
increase in the future it would be necessary to adjust estimates, in which case
recognition of revenues could be delayed. Payments received before all of the
relevant criteria for revenue recognition are recorded as customer
deposits.





6





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND
2008


(UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)




Property, plant and
equipment




Property, plant and equipment are stated
at cost less accumulated depreciation and amortization. Maintenance, repairs and
betterments, including
replacement of minor items, are charged to expense; major additions to physical
properties are capitalized. Depreciation and amortization are provided using the
straight-line method (after taking into account their respective estimated
residual values)over the estimated useful lives of the
assets as follows:




Buildings and
      improvements
              39 yearsMachinery, equipment and motor
      vehicles
              5-10
  years




Construction in
progress




Construction in progress represents
buildings and machinery under construction, which is stated at cost and is not
depreciated. Cost comprises the direct costs of construction. Construction in
progress is reclassified to the appropriate category of property, plant and
equipment when completed and ready for use.




Prepaid consulting services




Prepaid consulting services represent
the aggregate fair value of the Company's common stock issued in return for the
consulting services provided by certain consultants to the Company. The fair
value is determined by reference to the closing price ofthe Company's common stock as quoted on
NASDAQ or otherUSstock exchanges at the date of
issuance. The prepaid expenses are amortized on a straight-line basis over the
respective terms of the service periods. Amortization of prepaid consulting
services for the three months ended March 31, 2009
and 2008 was $50,281 and $87,594, respectively.




Impairment of long-lived
assets




Long-lived assets, which include
property, plant and equipment and intangible assets, are reviewed for impairment
whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.




7





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)




2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)




Concentration of credit
risk




Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist of cash
and cash equivalents and accounts and other receivables.As of March 31, 2009, most of the
Company's cash and cash equivalents were held by major banks located in thePRCwhich the Company's management believes
are of high credit quality. With respect to accounts receivable, the Company
extends credit based onan evaluation of the customer's financial
condition and without requiring collateral. The Company conducts periodic
reviews of its customers' financial condition and customer payment practices to
minimize collection risk on accounts receivable.




Foreign currency translation




The functional currency of ZQPT is the
Chinese Renminbi (“RMB”). For financial reporting purposes, RMB
has been translated intoUnited Statesdollars ("USD") as the reporting
currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet
date. Income statement accounts are translated at the average rate of exchange
prevailing for the period. Capital accounts are translated at their historical
exchange rates when the capital transaction occurred. Translation adjustments arising from the use
of different exchange rates from period to period are included as a component of
stockholders' equity as "Accumulated other comprehensive income." Gains and
losses resulting from foreign currency translation are included in accumulated other comprehensive
income.




Goodwill




Goodwill and other intangible assets are
accounted for in accordance with the provisions of SFAS No. 142, “Goodwill
and Other Intangible Assets.” Under SFAS 142, goodwill, including any
goodwill included in the carrying value of investments accounted for using the
equity method of accounting, and certain other intangible assets deemed to have
indefinite useful lives are not amortized. Rather, goodwill and such
indefinite-lived intangible assets are assessed for impairment at least annually
based on comparisons of their respective fair values to their carrying
values.




Finite-lived intangible assets are
amortized over their respective useful lives and, along with other long-lived
assets, are evaluated for impairment periodically whenever events or changes in
circumstances indicate that their related carrying amounts may not be
recoverable in accordance with SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets.”





8





ADVANCED BATTERYTECHNOLOGIES, INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




In evaluating long-lived assets for
recoverability, including finite-lived intangibles and property and equipment,
the Company uses its best estimate of future cash flows expected to result from
the use of the asset and eventual disposition in accordance with
SFAS No.144. To the extent that estimated future undiscounted net cash
flows attributable to the asset are less than the carrying amount, an impairment
loss is recognized in an amount equal to the difference between the carrying
value of such asset and its fair value. Assets to be disposed of and for which
there is a committed plan of disposal, whether through sale or abandonment, are
reported at the lower of carrying value or fair value less costs to
sell.




Stock-Based
Compensation




Effective
January 1, 2006, the Company adopted the provisions of Financial Accounting
Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-Based Payments,” which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No. 123(R), stock-based
compensation is measured at the grant date, based on the calculated fair value
of the award, and is recognized as an expense over the requisite employee
service period (generally the vesting period of the grant). The Company adopted
SFAS No. 123 (R) using the modified prospective method and, as a result, periods
prior to December 31, 2005 have not been restated.





Prior to
December 31, 2005, the Company accounted for stock-based compensation in
accordance with provisions of Accounting Principles Board Opinion No. 25 (“APB
No. 25), “Accounting for Stock Issued to Employees,” and related
interpretations. Under APB No. 25, compensation cost was recognized based on the
difference, if any, on the date of grant between the fair value of the Company’s
stock and the amount an employee must pay to acquire the stock. The Company has
not granted any stock options and, accordingly, no compensation expense related
to options was recognized prior to the adoption of SFAS No. 123
(R).




Both
prior to and subsequent to December 31, 2005, the Company determined the fair
value of each stock award to be equal to the quoted market price for the
Company’s common stock on the date of the award.




Unearned
compensation represents shares issued to executives and employees that will be
vested over a certain service period. These shares will be amortized over the
vesting period in accordance with FASB 123 (R). The average vesting period for
the shares issued to date has been 11.37 years, based on the terms of the
employment agreements under which the stock was awarded. The expense related to
the vesting of unearned compensation was $261,965 and $133,781 for three months
ended March 31, 2009 and 2008, respectively.




9





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND
2008


(UNAUDITED)




2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)




The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Service.s.  The fair value of the option
issued is used to measure the transaction, as this is more reliable than the
fair value of the services received.  Fair value is measured as the
value of the Company’s common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s
performance is complete.  Thefair value of the equity
instrument is charged directly to compensation expense and additional paid-in
capital.




Research and development
costs





Research and development costs are
expensed as incurred.Engineers and technical staff
are involved in the
production of our products as well as on-going research, with no segregation of
the portion of their salaries relating to research and development from the
portion of their salaries relating to production. The total salaries are
includedin cost of goods sold.Research and development expense was $0
and $4,325 for the three months ended March 31, 2009 and 2008,
respectively.




Income Tax




The Company utilizes Statement of
Financial Accounting Standards (SFAS) No. 109, “Accounting for IncomeTaxes,”which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred income taxes are recognized forthe tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.The Company has provided a 100%
valuation allowance at March 31, 2009for the temporary difference related to loss carry-forwards
and stock-based compensation.




Comprehensive Income




Comprehensive income is defined to
include changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, items that are required to be
recognized under current accounting standards as components of comprehensive
income are required to be reported in a financial statement that is presented
with the same prominence as other financial statements. Comprehensive income
includes net income and the foreign currency translation gain, net of
tax.





10





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)







2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)




Basic and Diluted Earnings per
Share




Earnings
per share are calculated in accordance with the SFAS 128, “Earnings per share.”
Basic net earnings per share are based upon the weighted average number of
common shares outstanding, but excluding shares issued as compensation that have
not yet vested. Diluted net earnings per share are based on the assumption that
all dilutive convertible shares and stock options were converted or exercised,
and that all unvested shares have vested. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.




Recently Issued Accounting
Standards




In June 2008, the FASB issued FASB Staff
Position on Emerging Issues Task Force Issue 03-6, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested
share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period
EPS data presented shall be adjusted retrospectively (including interim
financial statements, summaries of earnings, and selected financial data) to
conform with the provisions of FSP EITF 03-6-1.The adoption of this FSP
EITF 03-6-1 did not have a material effect on the Company’s financial
position.





In March
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”)
No. 161, Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133,which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. SFAS No. 161 is effective beginning January 1, 2009. We are
currently assessing the potential impact that adoption of SFAS No. 161 may
have on our financial statements.





11





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)




2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)




In
December 2007, the FASB issued SFAS No. 160,“Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The
adoption of this SFAS 160 did not have a material effect on the Company’s
financial position.





In December 2007, Statement of Financial
Accounting Standards No. 141(R),Business
Combinations,was issued. SFAS No. 141R replaces SFAS
No. 141,Business
Combinations.SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called thepurchase method) be used for all business
combinations and for an
acquirer to be identified for each business combination. SFAS 141R requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at the acquisition date, measured at
theirfair values as of that date, with
limited exceptions. This replaces SFAS 141’s cost-allocation process, which
required the cost of an acquisition to be allocated to the individual assets
acquired and liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer
in a business combination achieved in stages (sometimes referred to as a step
acquisition) to recognize the identifiable assets and liabilities, as well as
the non-controlling interest in the acquiree, at the full amounts of their fair values (or other
amounts determined in accordance with SFAS 141R). SFAS 141R applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on
orafter December 15, 2008. An entity may
not apply it before that date.The adoption of this SFAS No. 141R did not
have a material effect on the Company’s financial position.





12





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)







3. INVENTORY




March
      31, 2009
                    
                    
                    December
      31, 2008Raw
      Materials
                    
                    $
                    621,520
                    
                    
                    $
                    791,891Work-in-process
                    
                    
                    546,321
                    
                    
                    
                    638,745Finished
      goods
                    
                    
                    348,393
                    
                    
                    
                    317,479$
                    1,516,234
                    
                    
                    $
                    1,748,115





The
accumulative allowance for inventory was $47,574 and $47,655 as of March 31,
2009 and December 31, 2008, respectively. No allowance for inventory was made
for the three months ended March 31, 2009 and 2008.





4.
LOAN RECEIVABLE





The
Company loaned to a non-related company, Harbin Jinhuida Investment Consulting
Limited, the amount of $1,600,000 for one year term from October 30, 2008 to
October 29, 2009 at a fixed interest rate of 10% per annum. The principal plus
interest will be repaid upon maturity. The Company accrued interest income of
$40,000 for the three months ended March 31, 2009 as a result of this
transaction.





The
Company also loaned $19,355 to RDX Holdings Limited. The entire amount is
expected to be paid back in May 2009 without interest.  Zhiguo Fu, the
Company’s Chief Executive Officer, is a member of the Board of Directors of the
parent of RDX Holdings Limited.




5. OTHER RECEIVABLES




Other
receivables generally consist of advances to employee and interest
receivable.  The Company has full oversight and control over the
advanced accounts. Therefore, no allowance for the uncollectible accounts is
considered necessary.





13





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED
MARCH31, 2009 AND
2008


(UNAUDITED)





6.
PROPERTY, PLANT AND EQUIPMENT, NET




Property, plant and equipment consisted
of the following at March 31, 2009and December 31, 2008:




March
      31, 2009
                    
                    
                    December
      31, 2008Building
      and improvements
                    
                    $
                    12,376,306
                    
                    
                    $
                    12,397,349Machinery
      and equipment
                    
                    
                    3,692,727
                    
                    
                    
                    3,698,917Motor
      Vehicles
                    
                    
                    250,368
                    
                    
                    
                    217,23616,319,401
                    
                    
                    
                    16,313,502less:
      Accumulated Depreciation
                    
                    
                    (2,959,062
                    )
                    
                    
                    (2,803,788
                    )Construction
      in Progress
                    
                    
                    3,120,842
                    
                    
                    
                    3,126,130Total
      property, plant and equipment, net
                    
                    $
                    16,481,181
                    
                    
                    $
                    16,635,843




Depreciation
expense for the three months ended March 31, 2009 and 2008 was $159,886 and
$273,796, respectively.




Construction
in progress represents direct costs of construction and design fees incurred for
the Company’s new plant and equipment. Capitalization of these costs ceases and
the construction in progress is transferred to plant and equipment when
substantially all the activities necessary to prepare the assets for their
intended use are completed. No depreciation is provided until it is completed
and ready for its intended use. Construction in progress
totaled $3,120,842 and $3,126,130 as of March 31, 2009 and December 31, 2008,
respectively.





7.
INVESTMENT IN UNCONSOLIDATED ENTITY





In the
fourth quarter of 2008, the Company entered an equity investment agreement
(“Agreement”) with Beyond E-Tech, Inc (BET) to acquire 49% of issued and
outstanding capital stock of BET for a total payment of $1,500,000. The Company
made the payment in full as of March 31, 2009. BET is a newly-organized company
that imports and distributes cell phones in the United
States.  Pursuant to the Agreement, during any period of time when the
Company is a shareholder of BET, BET shall exclusively market products for
resale that use ABAT’s rechargeable polymer lithium-ion batteries.





The
Company has a significant influence on BET and therefore uses the equity method
to account for the investment in BET. According to the Agreement, the Company
has significant influence over the operating and financial policies of BET,
including a right of approval of its operating budget, veto power over large
capital expenses, and other management controls. Net loss on using this equity
method investment was $9,798 for the three months ended March 31,
2009.





14





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





7.
INVESTMENT IN UNCONSOLIDATED ENTITY (Continued)





The
Company uses its best estimate of future cash flows expected to result from the
use of this asset in accordance with SFAS No. 157. There was $371,743 impairment
loss recognized on this investment for the year ended December 31, 2008 because
the estimated future undiscounted net cash flows related to this investment are
less than the carrying amount.





8.
DEPOSIT FOR LONG-TERM ASSETS





The
Company entered various agreements to purchase equipment and machinery in an
effort to expand its production in 2009. As of March 31, 2009, the Company made
a total down payment of $3.71 million on those long-term assets. The Company
expects to pay the remaining contract amount of $1.83 million in 2009. The
deposit will be reclassified to the respective accounts under the fixed assets
upon delivery and transfer of legal titles.





9.
INVESTMENT ADVANCE





On
October 24, 2008, Cashtech entered an agreement with Wuxi Angell Autocycle Co.
Ltd (‘Wuxi Angell’) under which the Company will acquire a 55% interest in Wuxi
Angell in exchange for a cash payment of RMB 25 million (approximately US$3.64
million) and  2 million shares of ABAT’s common stock.





On April
28, 2009 Advanced Battery Technologies and its wholly-owned subsidiary, Cashtech
Investment Limited, amended the above agreement and entered into a Share
Purchase Agreement with the owners of Wuxi Angell, who are Wuxi Baoshiyun
Autocycle Co., Ltd. and Bao Jin, .  The Share Purchase Agreement
provides that Cashtech Investment Limited will purchase 100% equity in Wuxi
Angell in exchange for (a) U.S.$3,640,000  already paid by Advanced
Battery Technologies, (b) 70,000,000 Chinese Renminbi (approx. $10,248,902) to
be paid at closing, and (c) 3,000,000 shares of the common stock of Advanced
Battery Technologies, Inc.





The
Company has advanced payment in the total amount of approximately $3.81 million
as of March 31, 2009.





Wuxi
Angell is the customer of ABAT with sales of $0.24 million and $2.41 million,
which represented 2.2% and 24.0% of the total sales of the Company for the three
months ended March 31, 2009 and 2008, respectively.





15





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)


10. INTANGIBLE
ASSETS




Intangible assets consist of land use
rights and patents. All
land in the People’s Republic ofChinais government owned and cannot be sold
to any individual or company. However, the government grants the user a
“land use
right”(the Right) to use
the land and the power line underneath. The Group leasestwo pieces of land per real estate
contract from thePRCGovernment for a period from August
2003 to September 2043, on which the office and production facilities of ZQ
Power-Tech are situated. The Group leases power from the local government for a
periodfrom July 2003 to July
2013.




Rights to use land and power and patent
right are stated at fair market value less accumulated amortization. The Company
amortizes the patents over a 10 year period. The Company evaluates intangible
assets for impairment, at least on an annual basis and whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable from its estimated future cash flows. Recoverability of intangible
assets, other long-lived assets, and goodwill is measured bycomparing their net book value to the
related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net
bookvalue of the asset exceeds the related
undiscounted cash flows, the asset is considered impaired, and a second test is
performed to measure the amount of impairment loss. As of March 31, 2009, no
impairment of intangible assets has been recorded.




Net
intangible assets at March 31, 2009 and December 31, 2008 were as
follows:


March
      31, 2009
                    
                    
                    December
      31, 2008Rights
      to use land and power
                    
                    $
                    1,024,957
                    
                    
                    $
                    1,024,225Patents
                    
                    
                    897,089
                    
                    
                    
                    901,0761,922,046
                    
                    
                    
                    1,925,301Less:
      accumulated amortization
                    
                    
                    (407,212
                    )
                    
                    
                    (377,143
                    )$
                    1,514,834
                    
                    
                    $
                    1,548,158





Amortization
expense was $30,698 and $22,167
for the three months ended March 31, 2009 and 2008,
respectively.





16





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES
TO FINANCIAL
STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





10.
INTANGIBLE ASSETS (Continued)





Based
upon current assumptions, the Company expects that its intangible assets will be
amortized over the next five years according to the following
schedule:





As
      of March 312010
                                                
                                                $
                                                120,8202011
                                                
                                                
                                                120,8202012
                                                
                                                
                                                120,8202013
                                                
                                                
                                                120,8202014
                                                
                                                
                                                120,820Thereafter
                                                
                                                
                                                910,734$
                                                1,514,834





11.
GOODWILL





Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets of the 30% minority interest in ZQPT
acquired from the minority shareholders in ZQPT. Goodwill is tested for
impairment on an annual basis and in between annual test dates if events or
circumstances indicate that the carrying amount of goodwill exceeds its implied
fair value. The Company determined the implied fair value of goodwill by
allocating the price paid to acquire the 30% minority interest to all of its
assets and liabilities.





12.
LOAN FROM
OFFICER




The Company’sCEO, Mr. Zhiguo Fu, periodically loans
money to finance the operations of its New York Office. As ofMarch 31, 2009, the Company still owed Mr. Fu a total
of$8,390. The loan is intended to be interest free anddue upon
demand.




13. STOCK-BASED
COMPENSATION




(1)           2004 Equity Incentive
Plan




The Company adopted the 2004 Equity
Incentive Plan (the “2004
Plan”) on August 24, 2004.
The purpose of the Plan is to promote the success and enhance the value of the Company by
linking the personal interests of the participants of the Plan (the
"Participants") to those of the Company's stockholders, and by providing the
Participants with an incentive for outstanding performance. The Plan
isfurther intended to attract and retain
the services of the Participants upon whose judgment, interest, and special
efforts the successful operation of the Company is dependent. The Company has
reserved 5,000,000 shares of common stock for the options andawards under the
Plan.





17





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





13.
STOCK-BASED COMPENSATION (Continued)




Subject to the terms and provisions
ofthe Plan, the Board of
Directors, at any time and from time to time, may grant shares of stock to
eligible persons in such amounts and upon such terms and conditions as the Board
of Directors shall determine.




The Committee appointed by the Board of
Directors to administer the
Plan shall have the authority to determine all matters relating to the options
to be granted under the Plan including selection of the individuals to be
granted awards or stock options, the number of stocks, the date, the
terminationof the stock options or awards, the
stock option term, vesting schedules and all other terms and conditions
thereof.




A summary of the status of the
Company’s unearned stock compensation under the
2004 Equity Incentive Plan as of March 31, 2009, and changes for the three months ended March 31,
2009, is presented below:





Unearned
      stock compensation as of January 1, 2009
                        
                        $
                        2,103,694Unearned
      stock compensation granted
                        
                        
                        -Compensation
      expenses debited to statement of operations
                          with
      a credit to additional paid-in capital
                        
                        
                        (66,440
                        )Unearned
      stock compensation as of March 31, 2009
                        
                        $
                        2,037,254





In addition, the compensation cost
capitalized as an offset to additional paid-in capital in relation to shares
issued to non-employee consultants under the 2004 Plan in prior years
and current period was $381,991. The Company’s contracts with these consultants have
terms ranging from 60 months to 120 months, and the unearned stock compensation
will be amortized as expense over the respectiveterms of the contracts. The amortization
for the three months ended March 31, 2009 and 2008 was $50,281 and $87,594,
respectively.





The
following table shows the amortization of the unearned stock compensation
relating to consulting contracts.





As
      of March 31,
                              
                              Amortization2009
                              
                              
                              116,3752010
                              
                              
                              115,3542011
                              
                              
                              100,7292012
                              
                              $
                              49,533$
                              381,991




18





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND
2008


(UNAUDITED)





13.
STOCK-BASED COMPENSATION (Continued)





(2)  2006 Equity Incentive
Plan





The Company adopted the 2006 Equity
Incentive Plan (the “2006
Plan”) on April 24, 2006.
The 2006 Plan became effective on April 18, 2006.  The number of shares
available for grant under
the 2006 Plan shall not exceed 8,000,000 shares and shares of stock and options
may be granted to the eligible persons at the discretion of the
Company’s Board of Directors or the Committee
administering the plan.  Incentive stockoptions (“ISO”), nonqualified stock options
(“NQSO”), or a combination thereof may be
granted but ISOs can only be granted to the Company’s employees.  The Committee can
also grant shares of restricted stock or performance shares (a performance share
is equivalent in value to a share of stock)
to eligible persons at any time and from time to time.





The exercise price for eachISOawarded under the 2006 Plan shall be
equal to 100% of the fair market value of a share on the date the option is
granted and be110% of the
fair market value if the eligible person owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporations.  The exercise price of a NQSO shall be
determined by the Committee in its sole
discretion.





No option shall be exercisable later
than the tenth anniversary date of its grant and each option shall expire at
such time as the Committee determines at the time of grant.  The eligible
person who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporations shall exercise his/her option before the fifth
anniversary date of its grant.





Options shall vest at such items
and under such terms and
conditions as determined by the Committee; provided, however, unless a different
vesting period is provided by the Committee at or before the grant of an option,
the options will vest on the first anniversary of the grant.





Optionsgranted under the 2006 Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each participant.





No award shall be madeunder the 2006 Plan after December 31,
2015.





A summary of the status of the
Company’s unearned stock compensation under the
2006 Equity Incentive Plan as of March 31, 2009 is presented
below:





19





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATEDNOTES TO FINANCIAL
STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





13.
STOCK-BASED COMPENSATION (Continued)




Unearned
      stock compensation as of January 1, 2009
                        
                        $
                        3,634,101Unearned
      stock compensation granted
                        
                        
                        152,800Compensation
      expenses debited to statement of operations
                          with
      a credit to additional paid-in capital
                        
                        
                        (195,525
                        )Unearned
      stock compensation as of March 31, 2009
                        
                        $
                        3,591,376




Other than the transaction as detailed
above, no options or awards have been made, exercised or lapsed during the three
months ended March 31, 2009 and 2008 under the 2004 Plan and the 2006
Plan.




14.
INCOME TAXES




Under the Income Tax Laws of the PRC,
the Company is generally subject to tax at a statutory rate of 25% and was,
until January 2008, subject to tax at a statutory rate of 33% (30% state income
taxes plus 3% local income taxes) on its taxable income. However, ZQ Power-Tech
is located in a specially designated technology zone whichallows foreign-invested enterprises a
five-year income tax holiday.  ZQ Power-Tech enjoyed a two-year tax
exemption through December 31, 2007, and enjoys an additional 50% income tax
reduction from January 1, 2008 to December 31, 2010.




On March 16, 2007, National People’s
Congress passed a new corporate income tax law, which was effective on January
1, 2008. This new corporate income tax unifies the corporate income tax rate to
25%, and includes cost deductions and tax incentive policies for both domestic
and foreign-invested enterprises inChina. According to the new corporate income
tax law, the applicable corporate income tax rate of our Chinese subsidiaries
decreased to 12.5% in 2008.




A
reconciliation of tax at United States federal statutory rate to provision for
income tax recorded in the financial statements is as follows:




For
      the Three Months
                                  Ended
      March 31,2009
                                
                                
                                2008U.S.
      statutory income tax rate
                                
                                
                                35.0
                                %
                                
                                
                                35.0
                                %Foreign
      tax rate difference
                                
                                
                                (10.0
                                %)
                                
                                
                                (10.0
                                %)Effect
      of favorable tax exemption in China
                                
                                
                                (10.7
                                %)
                                
                                
                                (10.9
                                %)Actual
      consolidated income tax rate
                                
                                
                                14.3
                                %
                                
                                
                                14.1
                                %





The
estimated tax savings as a result of our tax holidays for the three months ended
March 31, 2009 and 2008 amounted to $602,482 and $629,445, respectively. The net
effect on earnings per share had the income tax been applied would decrease
basic earnings per share for the three months ended March 31, 2009 and 2008 from
$0.08 to $0.07and from $0.09 to $0.08, respectively.





20





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND
2008


(UNAUDITED)





14.
INCOME TAXES
(Continued)





The Company was incorporated in theUnited States.  It incurred a net operating
loss forU.S.income tax purposes forthe
three months ended March 31, 2009 and 2008. The net operating loss carry forwards
, including amortization of share-based compensation, for United States income
tax purposes amounted to $664,422  and $397,191the three
months ended March 31, 2009 and 2008, respectively, which may be available
to reduce future years' taxable income. These carry forwards will expire, if not
utilized, beginning in 2027 through 2028. Management believes that the
realization of the benefits arising from this loss appear to be uncertain due to
Company's limited operating history and continuing losses for United States
income tax purposes. Accordingly, the Company has provided a 100% valuation
allowance at March 31, 2009 for the temporary difference related to loss
carry-forwards and restricted stock issuance. Management reviews this valuation
allowance periodically and makes adjustments as warranted. The valuation
allowances forthe three months ended March 31, 2009 and 2008 were$232,547and $139,017,
respectively.




15. EARNINGS PER
SHARE





Earnings per share for the three
monthsperiod ended March
31, 2009 and 2008 is determined by dividing net income for the periods by the
weighted average number of both basic and diluted shares of common stock and
common stock equivalents outstanding. The following is an analysis of the
differences between basic and diluted earnings
per common share in accordance with Statement of Financial Accounting Standards
No. 128, “Earnings Per
Share.”




The following demonstrates the
calculation for earnings per share for the three months ended March 31,
2009 and
2008:





For
      the Three Months EndedMarch
      31,2009
                            
                            
                            2008Basic earning per
      shareNet
      Income
                            
                            $
                            3,600,297
                            
                            
                            $
                            3,848,478Weighted
      average number of common shares outstanding-Basic
                            
                            
                            47,055,374
                            
                            
                            
                            41,510,498Earnings
      per share-Basic
                            
                            $
                            0.08
                            
                            
                            $
                            0.09Diluted
      earnings per shareNet
      Income
                            
                            $
                            3,600,297
                            
                            
                            $
                            3,848,478Weighted
      average number of common shares outstanding-Basic
                            
                            
                            47,055,374
                            
                            
                            
                            41,510,498Effect
      of diluted securities-Stock options
                            
                            
                            7,637,500
                            
                            
                            
                            8,178,500Weighted
      average number of common shares outstanding-Diluted
                            
                            
                            54,692,874
                            
                            
                            
                            49,688,998Earnings
      per share-Diluted
                            
                            $
                            0.07
                            
                            
                            $
                            0.08




21





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





15. EARNINGS PER SHARE
(Continued)




At March 31, 2009 and 2008, the Company
had unvested stock awards of 7,637,500 and 8,178,500, respectively, under the 2004 and 2006 equity
plans. All unvested stock awards were included in the diluted earnings per
share calculation as they are dilutive.





At March
31, 2009, the Company had outstanding warrants of 2,592,945 and there were no
outstanding warrants as of March 31, 2008. For the three months ended March
31, 2009, all outstanding warrants, with an exercise above the market price
during the three months ended March 31, 2009, were excluded from the diluted
earnings per share calculation as they are anti-dilutive.





16. STOCKHOLDERS’EQUITY





On August
8 and August 15, 2008 the Company issued a total of 5,058,834 shares of common
stock (the “Shares”) and warrants to purchase a total of 2,276,474 shares of
common stock (the “Warrants”) to eight accredited institutional
funds.  The aggregate purchase price for the securities was
$21,500,034.  From the proceeds of the offering, the Company paid a
fee of $1,075,002 to Rodman & Renshaw, LLC, which acted as the placement
agent for the offering.  The Company also reimbursed Rodman &
Renshaw, LLC for its out-of-pocket expenses totaling $68,560, and issued to
Rodman & Renshaw, LLC warrants to purchase 316,471 shares of common
stock.  The Company realized net proceeds of $20,356,480 from the
offering.





The
Warrants sold in the offering, as well as the warrants issued to Rodman &
Renshaw, LLC, permit the holders to purchase common stock from Advanced Battery
Technologies for a price of $5.51 per share.  The Warrants expire in
five years.  Cashless exercise is permitted only if there is no
effective registration statement permitting resale of the common shares
underlying the Warrants.  No warrant-holder may exercise a Warrant to
purchase shares that would cause the holder to own more than 4.99% of the
outstanding common stock of Advanced Battery Technologies.





Both Investor Warrants and Placement
Agent Warrants meet the conditions for equity classification pursuant to FAS 133
“Accounting for
Derivatives”and EITF 00-19
“Accounting for Derivative
Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock.”Therefore, these warrants were
classified as equity and included in the Additional Paid-in
Capital.




The fair value of the warrants at the
grant date was calculated using the Black-Scholes options pricing model using the
following assumptions: Volatility 91.52%, risk free interest rate 3.21% for
August 8, 2008 Placement and 3.11% for August, 15, 2008 Placement, and expected
term of 5 years. The grant date value was $8,709,964.





22





ADVANCEDBATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





16. STOCKHOLDERS’EQUITY (Continued)





Following
is a summary of the status of warrants activities as of March 31, 2009:




Warrants
                              
                              
                              Weighted
      Average
                              
                              
                              Average
      Remaining
                              
                              
                              Aggregate
      IntrinsicOutstanding
                              
                              
                              Exercise
    Price
                              
                              
                              Life in
    years
                              
                              
                              ValueOutstanding, December 31,
      2008
                              
                              
                              2,592,945
                              
                              
                              
                              5.51
                              
                              
                              
                              4.33
                              
                              
                              
                              -Granted
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Forfeited
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              -Exercised
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              -Outstanding, March 31,
      2009
                              
                              
                              2,592,945
                              
                              
                              $
                              5.51
                              
                              
                              $
                              4.33
                              
                              
                              
                              -
  On
December 8, 2008, the Board of Directors approved a stock repurchase program.
The Company repurchased 194,581 shares as treasury stock as of March 31,
2009.





In
addition, according to the five-year employment contract, the company issued
40,000 shares to one employee in January 2009 and there are 160,000 shares
remaining to be issued to him in the following four years.





As a
result of these transactions, there are 54,821,577 shares of common stock issued
and 54,626,996 shares outstanding as of March 31, 2009.





17.  CONCENTRATION OF
RISKS





Four major customers accounted for
approximately 50.0% of the net revenue for the three months ended March 31,
2009, with each customer individually accounting for 21.2%, 10.8%, 9.1% and
7.9%,respectively. At
March 31, 2009, the total receivable balance due from these customers was
$6,017,030, representing 36.0% of total accounts receivable. Four major
customers accounted for 59% of the net revenue for the three months ended March
31, 2008. At March 31, 2008, the total receivable balance due from these
customers was $3,604,435, representing 26% of total accounts
receivable.





Four major vendors provided
approximately 55.8% of the Company’s purchases of raw materials for the three
months ended March 31, 2009, with each vendor individually accounting for 17.4%,
14.7%, 12.6% and 11.1%, respectively. The Company’s accounts payable to these
vendors was $485,112 as of March 31, 2009, representing 53.1% of total accounts
payable. Four vendors provided around 60% of the Company’s purchase of raw
materials for the three months ended March 31, 2008, with each vendor
individually accounting for 18%, 16%, 14%, and 12%, respectively. The Company’s
accounts payable to these vendors was $132,963 as of March 31,
2008.





23





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(UNAUDITED)





18.
LITIGATION





In
September 2008, Susquehanna Financial Group, LLLP (“SFG”) commenced an action
against the Company in the Court of Common Pleas of Montgomery County,
Pennsylvania.  SFG alleges that it was party to two contracts with the
Company, pursuant to which SFG alleges that it was entitled to serve as
financial advisor with respect to any offering of securities by the Company
completed prior to March 2009.  SFG alleges that the Company failed to
afford SFG the opportunity to serve as financial advisor in connection with the
private placement by the Company in August 2008.  SFG alleges that it
is entitled to damages in the amount of $1,359,872 and a warrant to purchase
81,882 share of the Company’s common stock exercisable at $8.00 per
share.  The Company has answered the Complaint, and has denied that
SFG was entitled to serve as financial advisor in connection with the August
2008 private placement by reason of the fact that SFG had terminated its
agreements with the Company, had waived any continuing rights under the
contracts, and had acted in bad faith in connection with the services it
undertook to perform for the Company.





19.
WARRANTIES




The Company warrants that all equipment
manufactured by it will be free from defects in materials and workmanship under
normal use for aperiod of
one year from the date of shipment. The Company's experience for costs and
expenses in connection with such warranties has been minimal and during the
three months ended March 31 2009 and 2008, no amounts have been considered
necessary to reserve for warranty
costs.




20.
COMMITMENTS AND CONTINGENCIES





The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.





The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions at exchange rates set by the People’s Bank
of China, the central bank of China. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.





24





ADVANCED BATTERY TECHNOLOGIES,
INC.


CONDENSED CONSOLIDATED NOTES TO
FINANCIAL STATEMENTS


FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND
2008


(UNAUDITED)





20.
COMMITMENTS AND CONTINGENCIES (Continued)





The
Company entered various agreements to purchase equipment and machinery in an
effort to expand its production in 2009.  As of March 31, 2009, the
Company made a total down payment of $3.71 million on those long-term assets.
The Company still has the commitment to pay the remaining contract amount of
$1.83 million in 2009.





According
to the five-year employment contract, the company issued 40,000 shares to one
employee in January 2009 and there are 160,000 shares remaining to be issued to
him in the following four years.





21.
SUBSEQUENT EVENTS





On May 4,
2009 Cashtech Investment Limited, the wholly-owned subsidiary of Advanced
Battery Technologies, acquired 100% interest of the registered capital of Wuxi
Angell Autocycle Co., Ltd.  The registered capital was purchased from
Wuxi Baoshiyun Autocycle Co., Ltd. and Bao Jin, who are not affiliated with
Advanced Battery Technologies or its subsidiaries.  In exchange for
the equity in Wuxi Angell, the Company paid US$3,640,000 and 70,000,000 Chinese
Renminbi (approx. $10,248,902) in cash.  In addition, the Company
issued 3,000,000 shares of its common stock to the sellers.











25








ITEM
      2
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Forward-Looking
Statements: No Assurances Intended




In
addition to historical information, this Quarterly Report contains
forward-looking statements, which are generally identifiable by use of the words
“believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,”
“projects,” or similar expressions. These forward-looking statements represent
Management’s belief as to the future of Advanced Battery
Technologies.  Whether those beliefs become reality will depend on
many factors that are not under Management’s control.  Many risks and
uncertainties exist that could cause actual results to differ materially from
those reflected in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in the
section of our Annual Report on Form 10-K for the year ended December 31, 2008
entitled “Risk Factors.” Readers are cautioned not to place undue reliance on
these forward-looking statements. We undertake no obligation to revise or
publicly release the results of any revision to these forward-looking
statements.




Results
of Operations





Three Months Ended March 31,
2009 Compared to Three Months Ended March 31, 2008




Near
the end of 2004, ZQ Power-Tech obtained the financing needed to complete
additional factory facilities at ZQ Power-Tech’s campus in
Heilongjiang. Since 2004, the number of employees at our facility has
increased from 300 to, as of March 31 2009, 607, because we more than doubled
our production capacity to its current level of $45 million per year. We
now have two buildings (“A” and “B”) in full production.  As our
revenues in 2008 reached $45 million and continue to grow, the need to outfit
buildings “C” and “D” so as to double our production capacity became
apparent.  Toward that end, during 2008 we completed an equity
placement to obtain the capital necessary for the expansion.





Due to
the limitation of current capacity and higher administration cost, our business
presented slight growth during the three months ended March 31, 2009,
accompanied by a reduction in operating income and net income. Our revenue
increased by 6.5% and our net income decreased by 6.5%.  However, as
new manufacturing capacity will become available later this year, , we
expect  to achieve significant growth  in 2009. In
addition, on May 4, 2009 we acquired 100% of Wuxi Angell, a leading
manufacturer of battery-powered motorbikes and scooters. We believe that the
acquisition will help us to offset the effects of recent worldwide recession and
accelerate our future growth.





Revenues.In the three months
ended March 31, 2009, we realized $10,685,738 in revenues, an increase of 6.5%
compared to the $10,031,969 in revenue that we achieved in the same period of
2008. As a result of competition and fully utilized production capacity, our
prices and unit sales have remained relatively stable.





26




The
growth in our battery business has been accompanied by a reorientation in the
relative importance of different battery sizes.  When we first entered
the battery business in 2003 and following years, the bulk of our sales were
small capacity batteries, primarily those used in consumer electronic
devices.  Our growth, however, has been propelled by customers for our
medium capacity batteries (used for electric scooters, electric bicycles, power
tools, miners’ lamps, searchlights, etc.) and large capacity batteries (used for
electric sanitation vehicles, stationary applications, and other large scale
battery applications). In the three months ended March 31, 2009, the
contribution of batteries in these categories as well as the contribution of
miner’s lamps to our total revenues was:




Type
                Amount(US$)
                %
      (of total revenue)Small
      Capacity Batteries
                $976,580
                9.14%Medium
      Capacity Batteries
                $3,593,637
                33.63%Large
      Capacity Batteries
                $3,829,069
                35.83%Miner’s
      Lamps
                $2,286,452
                21.40%




Gross Profit.Our cost of
revenues consists of the cost of raw materials, labor costs and production
overhead. In the three months ended March 31, 2009, our revenue increased
by 6.5% and our cost of goods sold increased by 13.3%, from $4,989,742 to
$5,651,189.  This higher growth in cost of sales is mainly
attributable to the higher proportion of sales from lower margin products, i.e.,
medium capacity batteries. The result was a deterioration in our gross margin
from 50.3% in the three months ended March 31, 2008 to 47.1% in the same period
of 2009.





The
current global recession has caused a widespread and dramatic drop in the cost
of raw materials, including the metals that we utilize in our
batteries.  We expect this situation will help us to return to the
level of gross margin that we achieved in 2008. However, if the recession
results in diminished sales or our acquisition initiatives do not generate
higher profit in the first year after acquisition, our gross margin is likely to
suffer.





Operating Expenses: The
Company’s operating expenses increase by 56.7%, from $571,890 in the three
months ended March 31, 2008 to $896,319 in the same period of
2009.  The increase is primarily due to the higher noncash stock
compensation amortization expense and higher administration expenses incurred by
our US office, such as salaries and legal fee. However, considering only
the operation expenses in Heilongjiang ZQPT, our main production base in China,
the operation expenses only slightly increased by $51,818, which is mainly
attributable to our expanded operation.





Included
in our general and administrative expense during the three months ended March
31, 2009 was $312,246 attributable to amortization of the market value of stock
that we granted to employees or consultants.  This non-cash expense
resulted from our use of stock during our early years to incentivize key
individuals.  The market value of the stock at the time it was issued
is being amortized over the term of the employee’s or consultant’s services,
thus:





27




●
            In
      the case of employees, the period of amortization is based on a vesting
      schedule included in the employees’ contracts.  The average
      vesting period for the employees is 11.4 years.  To date, only
      one employee of the Company who received stock awards has terminated
      employment; so the amortization has been proportional to that
      schedule.●
            In
      the case of consultants, the period of amortization is based on the term
      of the consulting contracts, although amortization will be accelerated if
      the consulting relationship ceases.  Again, to date, the
      consultants who received stock have remained involved in the Company’s
      affairs, so there has been no acceleration of
  amortization.





At March
31, 2009 there remained $5,628,630 in unamortized stock compensation on the
Company’s books.  The amortization of this sum will contribute to our
operating expenses as described above.





In the
three months ended March 31 2009, we realized $74,348 interest income, which is
mainly due to our $1.6 million lending to a non-related company, Harbin Jinhuida
Investment Consulting Limited, at an interest rate of 10% per annum, and our
cash deposited in Chinese banks. Additionally, we recognized $9,798 investment
loss from our 49% equity investment in Beyond E-Tech, Inc., a Texas corporation
recently organized to engage in distributing cellular telephones in the United
States.  The acquisition has been recorded as an “investment in
unconsolidated entity” on our balance sheet, and our participation in that
business will be accounted for through the equity method.  Because
Beyond E-Tech incurred a net loss of approximately $19,997 in the three months
ended March 31, 2009, the value of our investment was reduced on our balance
sheet by 49% of that sum – i.e. $19,997 – and we incurred “equity loss” in that
amount





The
Company’s revenue less expenses produced a pre-tax income of $4,202,779 for the
three months ended March 31, 2009 and a pre-tax income of $4,477,923 in the same
period of 2008.  In the three months period of 2009, domestic (U.S.)
pre-tax loss was $664,422 and foreign (China) pre-tax income was $4,867,201. As
a result of Chinese tax laws that reward foreign investment in China, currently
and through 2010, ZQ Power-Tech is entitled to a 50% tax abatement, which
results in an effective corporate tax rate of approximately
12.5%.  After taxes of $602,482 realized in the three months ended
March 31 2009, our net income was $3,600,297, a decrease of 6.5% over
2008.  This first quarter 2009 income represented $.08 basic earnings
per share and $.07 fully diluted.





Our
business operates primarily in Chinese Renminbi, but we report our results in
our SEC filings in U.S. Dollars.  The conversion of our accounts from
RMB to Dollars results in translation adjustments.  While our net
income is added to the retained earnings on our balance sheet; the translation
adjustments are added to a line item on our balance sheet labeled “accumulated
other comprehensive income,” since it is more reflective of changes in the
relative values of U.S. and Chinese currencies than of the success of our
business.  During the three months ended March 31 2009, the effect of
converting our financial results to Dollars was to reduce our accumulated other
comprehensive income by $97,825.





28




Liquidity
and Capital Resources





At March
31, 2009 the Company had a working capital balance of $51,062,087, a slight
improvement from our working capital balance of $49,991,602 at December 31,
2008. The primary reason for the improvement in working capital was the net
income realized during the three months period. During this same period, in
order to complete the expansion plan for two new assembly lines and replace some
outdated equipments, we made an additional deposit of $1,964,027 with our
vendors during this three months period; we also made advanced payment of $814,
946 to Wuxi Angell shareholders to fulfill our acquisition
agreement.





ZQ
Power-Tech has sufficient liquidity to fund its near-term operations and to fund
the working capital demands of an expansion of its operations. If we
determine that additional funds are needed for other attractive growth
opportunities, we have available $16,481,181 in property, plant and equipment,
which ZQ Power-Tech owns free of liens.  On May 7, 2009 our backlog of
firm orders was approximately $64 million.  Based on that backlog of
orders, we believe that secured financing will be available on favorable terms
if needed





Given the
financial resources available to ZQ Power-Tech, management believes that it has
sufficient capital and liquidity to sustain operations for the foreseeable
future.





Impact
of Accounting Pronouncements





There
were no recent accounting pronouncements that have had a material effect on the
Company’s financial position or results of operations.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition or results of
operations.





ITEM
      3
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK





Our
operating subsidiary, ZQ Power-Tech, carries on business exclusively in Chinese
Renminbi.  Therefore it does not have any derivative instruments or
other financial instruments that are market risk sensitive.





ITEM
      4
            CONTROLS
      AND PROCEDURES





(a)           Evaluation of disclosure controls and
procedures.





The term
“disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to
the controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded,
processed, summarized and reported, within time periods specified in the rules
and forms of the Securities and Exchange Commission.  “Disclosure
controls and procedures” include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.





29





The
Company’s management, with the participation of the Chief Executive Officer and
the Chief Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by this
report (the “Evaluation Date”). Based on that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that, as of the
Evaluation Date, such controls and procedures were effective.





(b)           Changes in internal
controls.





The term
“internal control over financial reporting” (defined in SEC Rule 13a-15(f))
refers to the process of a company that is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company’s management, with the participation
of the Chief Executive Officer and Chief Financial Officer, has evaluated any
changes in the Company’s internal control over financial reporting that occurred
during the period  covered by this report, and they have concluded
that there was no change to the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.





PART
II - OTHER INFORMATION





Item
1.     Legal Proceedings.




None.





Item
1A.  Risk Factors.




There
have been no material changes from the risk factors included in the Annual
Report on Form 10-K for the year ended December 31, 2008.





Item
2.     Unregistered Sales of Equity Securities and Use
of Proceeds.





(c)
Repurchase of Equity Securities


The following table sets forth
information regarding the Company’s repurchase of shares of its common stock
during the 1st quarter
of 2009.
 
 Period
                Total
      Number of
                  Shares
      Purchased
                Average
      Price
                  Paid
      per Share
                Total
      Number of
                  Shares
      Purchased
                  as
      Part of Publicly
                  Announced
      Plans
                  or
      Programs(1)
                Maximum
      Number of
                  Shares
      that May Yet Be
                  Purchased
      Under Plans
                  or
      ProgramsJanuary
      1, 2009- January 31, 2009
                0
                N.A.
                0
                3,880,490February
      1, 2009 – February 28, 2009
                0
                N.A.
                0
                3,880,490March
      1, 2009 – March 31, 2009
                75,071
                1.9532
                75,071
                3,805,419Total
                75,071
                1.9532
                75,071
                3,805,419
 
 (1)
              In
      December 2008 the Board of Directors announced a stock repurchase program
      under which the Company may purchase up to 4 million shares of its common
      stock.  Purchases will be made, from time to time, in the open
      market, depending on several factors, including price, prevailing market
      conditions, and other investment opportunities.  The program
      will expire on November 30,
2009.





Item
3.     Defaults Upon Senior Securities.




None.





Item
4.     Submission of Matters to a Vote of Security
Holders.




None.





Item
5.     Other Information.




None.





30





Item
      6.
            Exhibits31.1
            Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            Certification
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.







SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





ADVANCED
      BATTERY TECHNOLOGIES, INC.Date:  May
      11, 2009
              By:
      /s/ Zhiguo
      FuName:  Zhiguo
      FuTitle:
      Chief Executive OfficerDate:  May
      11, 2009
              By:
      /s/ Guohua
      WanName:  Guohua
      WanTitle:
      Chief Financial Officer









31