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
      1934




For the
quarterly period ended September 30, 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.)




15 West 39thStreet, Suite 14A, New
York, NY 10018


(Address
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 filerXNon-accelerated filerSmall 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:




November
9, 2009


Common
Voting Stock: 66,904,092











PART
I - FINANCIAL INFORMATION







ADVANCED
      BATTERY TECHNOLOGIES, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETSASSETSSeptember
      30,
            
            
            December
      31,2009
            
            
            2008(Unaudited)Current
      assets:Cash
      and cash equivalents
            
            $
            33,839,657
            
            
            $
            32,746,155Accounts
      receivable, net
            
            
            22,984,388
            
            
            
            14,708,078Inventories,
      net
            
            
            6,144,293
            
            
            
            1,748,115Loan
      receivable,net
            
            
            1,622,417
            
            
            
            1,600,000Other
      receivables
            
            
            1,334,800
            
            
            
            240,726Advance
      to suppliers,net
            
            
            4,550,827
            
            
            
            246,163Total
      Current Assets
            
            
            70,476,382
            
            
            
            51,289,237Property,
      plant and equipment, net of accumulated depreciation of
      $9,856,869as
      of September 30, 2009 and $2,803,788 as of December 31,
    2008
            
            
            47,161,776
            
            
            
            16,635,843Total
      Fixed Assets
            
            
            47,161,776
            
            
            
            16,635,843Other
      assets:Construction
      in progressInvestment
      in unconsolidated entity
            
            
            975,079
            
            
            
            1,037,550Investment
      advance
            
            
            -
            
            
            
            3,000,000Deposit
      for long-term assets
            
            
            1,399,130
            
            
            
            1,748,363Intangible
      assets, net
            
            
            14,546,530
            
            
            
            1,548,158Goodwill
            
            
            2,487,185
            
            
            
            2,487,080Other
      assets
            
            
            47,975
            
            
            
            6,000Total
      other assets
            
            
            19,455,899
            
            
            
            9,827,151Total
      Assets
            
            $
            137,094,057
            
            
            $
            77,752,231LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilities:Short-term
      loan
            
            $
            7,333,674
            
            
            $
            -Accounts
      payable
            
            
            2,686,256
            
            
            
            415,850Advance
      from Customers
            
            
            522,843
            
            
            
            80,479Accrued
      expenses and other payables
            
            
            1,793,834
            
            
            
            784,070Loan
      from officers
            
            
            -
            
            
            
            17,236Tax
      payable
            
            
            1,232,245
            
            
            
            -Total
      Current Liabilities
            
            
            13,568,852
            
            
            
            1,297,635Long
      term liabilities:Deferred
      tax liability
            
            
            3,468,262
            
            
            
            -Total
      Liabilities
            
            
            17,037,114
            
            
            
            1,297,635Commitments
      and ContingenciesStockholders'
      EquityPreferred
      stock, $0.001 face value, 5,000,000 shares authorized;500
      shares issued and 500 shares outstanding as of September 30,
      2009and
      0 shares issued and outstanding as of December 31, 2008
            
            $
            1
            
            
            $
            -Common
      stock, $0.001 par value, 150,000,000 shares authorized;62,311,947
      shares issued and 62,117,366 shares outstanding as of September 30,
      2009and
      54,781,577 shares issued and 54,662,067 shares outstanding as of December
      31, 2008
            
            
            62,312
            
            
            
            54,782Additional
      paid-in-capital
            
            
            66,740,056
            
            
            
            39,289,991Accumulated
      other comprehensive income
            
            
            5,954,537
            
            
            
            6,012,475Retained
      earnings
            
            
            47,799,528
            
            
            
            31,393,050Less:
      Cost of treasury stock (194,581 and 119,510 shares as of September 30,2009
      and December 31, 2008 )
            
            
            (499,490
            )
            
            
            (295,702
            )Total
      Stockholders' Equity
            
            
            120,056,943
            
            
            
            76,454,596Total
      Liabilities and Stockholders' Equity
            
            $
            137,094,057
            
            
            $
            77,752,231










2




ADVANCED
      BATTERY TECHNOLOGIES, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
      INCOME(UNAUDITED)For
      Three-month ended September 30,
            
            
            For
      Nine-month ended September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Revenues
            
            $
            17,714,278
            
            
            $
            12,662,585
            
            
            $
            42,171,598
            
            
            $
            34,442,838Cost
      of Goods Sold
            
            
            10,087,228
            
            
            
            6,776,437
            
            
            
            23,197,017
            
            
            
            17,542,233Gross
      Profit
            
            
            7,627,050
            
            
            
            5,886,148
            
            
            
            18,974,580
            
            
            
            16,900,605Operating
      ExpensesResearch
      & Development expenses
            
            
            118,764
            
            
            
            -
            
            
            
            307,236
            
            
            
            -Selling,
      general and administrative
            
            
            2,264,173
            
            
            
            795,336
            
            
            
            6,900,571
            
            
            
            1,947,200Operating
      income
            
            
            5,244,112
            
            
            
            5,090,812
            
            
            
            11,766,773
            
            
            
            14,953,405Other
      Income (Expenses)Interest
      income
            
            
            76,841
            
            
            
            51,925
            
            
            
            247,387
            
            
            
            68,037Interest
      (expense)
            
            
            (120,417
            )
            
            
            -
            
            
            
            (326,636
            )
            
            
            -Equity
      income (loss) from unconsolidated entity
            
            
            5,190
            
            
            
            -
            
            
            
            (62,470
            )
            
            
            -Gain
      on bargain purchase
            
            
            -
            
            
            
            -
            
            
            
            9,909,320
            
            
            
            -Forgiveness
      of debt
            
            
            336,849
            
            
            
            -
            
            
            
            336,849
            
            
            
            -Other
      income (expenses)
            
            
            (160
            )
            
            
            -
            
            
            
            13,548
            
            
            
            -Total
      other income (expenses)
            
            
            298,302
            
            
            
            51,925
            
            
            
            10,117,997
            
            
            
            68,037Income
      Before Income Taxes
            
            
            5,542,414
            
            
            
            5,142,737
            
            
            
            21,884,770
            
            
            
            15,021,442Provision
      for Income Taxes (Benefit)Income
      tax-Current
            
            
            726,337
            
            
            
            770,777
            
            
            
            2,010,030
            
            
            
            2,125,733Income
      tax-Deferred
            
            
            -
            
            
            
            -
            
            
            
            3,468,262
            
            
            
            -Net
      income
            
            $
            4,816,077
            
            
            $
            4,371,960
            
            
            $
            16,406,478
            
            
            $
            12,895,709Other
      Comprehensive IncomeForeign
      currency translation gain (loss)
            
            
            (28,402
            )
            
            
            539,959
            
            
            
            (57,938
            )
            
            
            3,174,659Comprehensive
      Income
            
            $
            4,787,675
            
            
            $
            4,911,919
            
            
            $
            16,348,539
            
            
            $
            16,070,368Earnings
      per shareBasic
            
            $
            0.09
            
            
            $
            0.10
            
            
            $
            0.33
            
            
            $
            0.30Diluted
            
            $
            0.08
            
            
            $
            0.08
            
            
            $
            0.28
            
            
            $
            0.25Weighted
      average number of common shares outstandingBasic
            
            
            52,970,305
            
            
            
            44,349,487
            
            
            
            49,676,366
            
            
            
            42,456,824Diluted
            
            
            61,342,040
            
            
            
            52,527,987
            
            
            
            57,974,862
            
            
            
            50,635,324








3




ADVANCED
      BATTERY TECHNOLOGIES, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)NINE
      MONTHS ENDED SEPTEMBER 30,2009
            
            
            2008Cash
      Flows From Operating Activities:Net
      income
            
            $
            16,406,478
            
            
            $
            12,895,709Adjustments
      to reconcile net income to net cash provided
      by (used in)operating activities:Gain
      on bargain purchase
            
            
            (9,909,320
            )
            
            
            -Deferred
      income tax
            
            
            3,468,262
            
            
            
            -Depreciation
      and amortization
            
            
            1,763,076
            
            
            
            662,575Amortization
      of deferred consulting expenses
            
            
            108,468
            
            
            
            262,781Amortization
      of stock based compensation expense
            
            
            1,346,769
            
            
            
            439,844Equity
      loss of unconsolidated entity
            
            
            62,470
            
            
            
            -Provision
      for doubtful accounts and inventory valuation allowance
            
            
            982,866
            
            
            
            -Forgiveness
      of debt
            
            
            (336,849
            )Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (6,880,935
            )
            
            
            2,835,964Inventories
            
            
            (2,712,891
            )
            
            
            (313,311
            )Other
      receivable & prepayments
            
            
            (4,299,473
            )
            
            
            (954,006
            )Accounts
      payable, accrued expenses and other payables
            
            
            (5,995,661
            )
            
            
            1,633,906Advance
      from Customer
            
            
            (872,575
            )
            
            
            47,994Tax
      payable
            
            
            883,471
            
            
            
            -Loan
      receivable
            
            
            -
            
            
            
            (1,600,000
            )Net
      cash provided by (used in) operating activities
            
            
            (5,985,843
            )
            
            
            15,911,456Cash
      Flows From Investing Activities:Deposit
      for long-term assets
            
            
            (1,360,130
            )
            
            
            -Purchase
      of property, plant and equipment
            
            
            710,261
            
            
            
            (126,451
            )Cash
      acquried from subsidiary
            
            
            837,564
            
            
            
            -Payment
      made on investment advance
            
            
            -
            
            
            
            (200,000
            )Acquistion
      of Construction in process
            
            
            (9,003,299
            )
            
            
            -Net
      cash used in investing activities
            
            
            (8,815,605
            )
            
            
            (326,451
            )Cash
      Flows From Financing ActivitiesPurchase
      of treasury stock
            
            
            (203,788
            )
            
            
            -Repayments
      of notes payable
            
            
            -
            
            
            
            (411,263
            )Proceeds
      from equity financing
            
            
            16,091,868
            
            
            
            20,356,480Proceeds
      from officer loan
            
            
            -
            
            
            
            485,343Repayment
      of officer loan
            
            
            (13,143
            )
            
            
            -Net
      cash provided by financing activities
            
            
            15,874,937
            
            
            
            20,430,560Effect
      of exchange rate changes on cash and cash equivalents
            
            
            20,013
            
            
            
            1,919,453Increase
      in cash and cash equivalents
            
            
            1,093,502
            
            
            
            37,935,018Cash
      and Cash Equivalents - Beginning of period
            
            
            32,746,155
            
            
            
            2,704,823Cash
      and Cash Equivalents - End of period
            
            $
            33,839,657
            
            
            $
            40,639,841SUPPLEMENTAL
      CASH FLOW INFORMATION:During
      the year, cash was paid for the following:Interest
      expense
            
            $
            277,895
            
            
            $
            -Income
      taxes
            
            $
            1,083,556
            
            
            $
            2,183,516NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Common
      stock issued for incentive stock-based compensation
            
            $
            1,119,650
            
            
            $
            139,403Common
      stock issued for acquisition of Wuxi ZQ
            
            $
            9,870,000
            
            
            $
            -Options
      issued to executives for services
            
            $
            777,660
            
            
            $
            -










4





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)







1.
BASIS OF PRESENTATION




The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10–Q and Article
10 of Regulation S–X. 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 nine months ended September 30, 2009
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.
SIGNIFICANT ACCOUNTING POLICIES




Reclassification




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




Principles
of consolidation




The
consolidated financial statements for the nine months ended September 30, 2009
and 2008 include the accounts of Advanced Battery Technologies, Inc. (the
“Company” or “ABAT”) and its wholly-owned subsidiaries, Cashtech Inc. and Harbin
Zhongqiang Power-Tech Co., Ltd. (“Harbin ZQPT”).  The consolidated
financial statements for the nine months ended September 30, 2009 also
include the accounts of ABAT’s newly acquired subsidiary, Wuxi
Zhongqing  Autocycle Co., Ltd. (“Wuxi ZQ”), for the period from May 4,
2009 through September 30, 2009. (See Note 18). All significant inter-company
balances and transactions have been eliminated in consolidation.




In
addition, the consolidated financial statements for the nine months ended
September 30, 2009 and 2008 also include the accounts of Heilongjiang Zhongqiang
Power-Tech Co., Ltd. (“Heilongjiang ZQPT”).  Harbin ZQPT managed the
operations of Heilongjiang ZQPT pursuant to a set of agreements that transferred
all of the benefits and all of the responsibilities for the operations of
Heilongjiang ZQPT to Harbin ZQPT.  Pursuant to the principles set
forth in ASC 810, Heilongjiang ZQPT was a variable interest entity with respect
to Harbin ZQPT, as a result of which its accounts were consolidated with the
financial statements of Harbin ZQPT.  Both Harbin ZQPT and Heilongjiang
ZQPT are collectively referred to as "ZQPT" herein.




5





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)







2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)




Use
of estimates




In
preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, the management
makes estimates 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 during the 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.




Subsequent
Events




The
Company has evaluated subsequent events that have occurred through November 09,
2009, the date of this financial statement issuance (see note 24).




Acquisitions





The
purchase method of accounting is used to account for the acquisition by the
Company. The cost of an acquisition is measured at the fair value of the assets
given, equity instruments issued and liabilities incurred or assumed at the date
of exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost of acquisition is less than
the fair value of the net assets of the subsidiary acquired, the excess of the
value of the net assets acquired over the purchase price was recorded as gain on
bargain purchase and is shown as a separate component of revenues in the
Company’s Condensed Consolidated Statement of Income for the three and nine
months ended September 30, 2009.




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.




6





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)




Accounts
receivable




Accounts
receivables are stated at net realizable value. Any allowance for doubtful
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 $500,601and $16,506 as of September 30, 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 cost and 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 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 nine months ended September
30, 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 advance
from customers.





7





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






2.
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
            20-39
      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 of the Company's common stock as quoted on NASDAQ or other US
stock 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 nine months ended September
30, 2009 and 2008 was $108,468 and $260,104, 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.




8





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






2.
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 September 30, 2009, most of the Company's cash and cash
equivalents were held by major banks located in the PRC and United States which
the Company's management believes are of high credit quality. With respect to
accounts receivable, the Company extends credit based on an 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 and Wuxi ZQ is the Chinese Renminbi (“RMB”). For
financial reporting purposes, RMB has been translated into United States dollars
("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 ASC 350, “Goodwill and Other Intangible Assets.” Under ASC 350, 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 ASC 360, “Accounting for the
Impairment or Disposal of Long-Lived Assets.”





9





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






2.
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 ASC 360. 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 ASC 718, “Share-Based
Payments,” which establishes the accounting for employee stock-based awards.
Under the provisions of ASC 718, 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 ASC 718 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 ASC 718.




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 ASC 718. The average vesting period for the
shares issued to date has been 10.86 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 $763,524 and $439,844 for nine months ended
September 30, 2009 and 2008, respectively.





10





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)







2.
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 Services.  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.  The fair 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 included in cost of goods sold. Research and development expense
was $307,236 and $0 for the nine months ended September 30, 2009 and 2008,
respectively.




Income
Tax




The
Company utilizes ASC 740, “Accounting for Income Taxes,” 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 for the 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
September 30, 2009 for 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.





11





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)




2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)




Basic
and Diluted Earnings per Share




Earnings
per share are calculated in accordance with the ASC 260, “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 2009, the FASB issued ASC 105, the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162. The FASB Accounting Standards
Codification TM (“Codification”) will become the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. On the effective date of ASC 105, the Codification
will supersede all then-existing non-SEC accounting and reporting standards. All
other nongrandfathered non-SEC accounting literature not included in the
Codification will become nonauthoritative. ASC 105 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. Adoption of ASC 105 is not expected to have a material impact on the
Company’s results of operations or financial position.





In
June 2009, the FASB issued ASC 810, Amendments to FASB Interpretation
No. 46(R), which improves financial reporting by enterprises involved with
variable interest entities. ASC 810 addresses (1) the effects on certain
provisions of FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities , as a result of the elimination of
the qualifying special-purpose entity concept in SFAS 166 and (2) concerns
about the application of certain key provisions of FIN 46(R), including those in
which the accounting and disclosures under the Interpretation do not always
provide timely and useful information about an enterprise’s involvement in a
variable interest entity. ASC 810 shall be effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within the first annual reporting
period, and for interim and annual reporting periods thereafter. Earlier
application is prohibited. Adoption of ASC 810 is not expected to have a
material impact on the Company’s results of operations or financial
position.





12





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)





2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)





In
May 2009, the FASB issued ASC 855, Subsequent Events, which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. An entity should apply the requirements of ASC 855 to
interim or annual financial periods ending after June 15, 2009. Adoption of
ASC 855 did not have a material impact on the Company’s results of operations or
financial position.





3.
INVENTORIES





September
      30, 2009
            
            
            December
      31, 2008Raw
      Materials
            
            $
            3,311,522
            
            
            $
            839,546Work-in-process
            
            
            1,215,888
            
            
            
            638,745Finished
      goods
            
            
            1,664,538
            
            
            
            317,4796,191,948
            
            
            
            1,795,770Less
      allowance
            
            
            (47,657
            )
            
            
            (47,655
            )$
            6,144,291
            
            
            $
            1,748,115





The
accumulated allowance for inventories was $47,657 as of September 30, 2009 and
December 31, 2008. No allowance for inventories was made for the nine months
ended September 30, 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. On October 30, 2009,
the Company renewed the loan contract for another one year at the same fixed
interest rate of 10% per annum. The principal plus interest will be repaid upon
maturity. The Company accrued interest income of $120,000 for the nine months
ended September 30, 2009 as a result of this transaction.




Wuxi ZQ
occasionally provides loans to other non-related companies and individuals in
the normal course of business. These loans are free of interest and due upon
demand. As of June 30, 2009, the Wuxi had outstanding loans of
$687,038.




The
allowance for loan receivable was $664,621 and -0- as of September 30, 2009 and
December, 31 2008, respectively.





13





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






5.  OTHER
RECEIVABLES




Other
receivables generally consist of advances to employee, interest receivable, and
miscellaneous receivables.  Included in other receivables as of
September 30, 3009 was $890,000 that was wire transferred by the Company’s
subsidiary, Cashtech Inc, to Wuxi ZQ on September 21, 2009.  Wuxi ZQ’s
bank had not yet released the funds to Wuxi ZQ due to pending procedures
required by PRC foreign exchange control practice.




The
Company has full oversight and control over the advanced accounts and foreign
exchange account. Therefore, no allowance is considered necessary.




6.   ADVANCES
TO VENDORS




The
Company makes advances to certain vendors for inventory and equipment purchases.
The advances to vendors were $5,913,939 and $246,163 as of September 30, 2009
and December 31, 2008, respectively. The allowances for advances to vendors were
$1,363,112 and $-0- as of September 30, 2009 and December, 31 2008,
respectively.




7.
PROPERTY, PLANT AND EQUIPMENT, NET




Property,
plant and equipment consisted of the following at September 30, 2009 and
December 31, 2008:







September
      30, 2009
            
            
            December
      31, 2008Building
      and improvements
            
            $
            34,053,581
            
            
            $
            12,397,349Machinery
      and equipment
            
            
            14,744,133
            
            
            
            3,698,917Motor
      Vehicles
            
            
            540,529
            
            
            
            217,23649,338,243
            
            
            
            16,313,502less:
      Accumulated Depreciation
            
            
            (9,856,869
            )
            
            
            (2,803,788
            )Construction
      in Progress
            
            
            7,680,402
            
            
            
            3,126,130Total
      property, plant and equipment, net
            
            $
            47,161,776
            
            
            $
            16,635,843





Depreciation
expense for the nine months ended September 30, 2009 and 2008 was $1,394,130 and
$594,380, 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
$7,680,402 and $3,126,130 as of September 30, 2009 and December 31, 2008,
respectively.





14





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








8.
INVESTMENT IN UNCONSOLIDATED ENTITY





In the
fourth quarter of 2008, the Company entered into 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 September 30, 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 this investment
using equity method was $62,470 for the nine months ended September 30,
2009.
 
 The
Company uses its best estimate of future cash flows expected to result from the
use of this asset in accordance with ASC 820. 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 were
less than the carrying amount.





9.
DEPOSIT FOR LONG-TERM ASSETS





The
Company entered into various agreements to purchase equipment and machinery in
an effort to expand its production in 2009. As of September 30, 2009, the
Company made down payments in the total amount of $1,399,130 on those long-term
assets. The Company expects to pay the remaining contract amount of
approximately $6,132,907 by the end of 2010. The deposit will be
reclassified to the respective accounts under the fixed assets upon delivery and
transfer of legal titles.





10.
INTANGIBLE ASSETS




Intangible
assets consist of land use rights, patents and marketing network resource. All
land in the People’s Republic of China is 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 Company
leases two pieces of land per real estate contract from the PRC Government for a
period from August 2003 to September 2043, on which the office and production
facilities of ZQPT are situated. In addition, the Company also leases two pieces
of land from the PRC Government for a period from July 2003 to July 2053 and
from September 2002 to June 2057 respectively, on which the office and
production facilities of Wuxi ZQ are situated. The Company leases the power
lines from the local government for a period from July 2003 to July
2013.




15





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








10.
INTANGIBLE ASSETS (Continued)




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 3-10 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 by comparing 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 book value 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 September 30, 2009, no
impairment of intangible assets has been recorded.






In May
2009, the Company acquired Wuxi ZQ’s intangible assets consisting of the land
use rights, patents and marketing network resources which are amortized using
the straight line method over their respective lives. The fair market value of
the acquired intangible assets was $13,372,548, including $12,039,252 of the
rights to use land, $332,098 of the patents and $1,000,038 of the marketing
network resources.




Net
intangible assets at September 30, 2009 and December 31, 2008 were as
follows:


September
      30, 2009
            
            
            December
      31, 2008Rights
      to use land and power
            
            $
            13,857,129
            
            
            $
            1,024,225Patents
            
            
            1,230,360
            
            
            
            901,076Marketing
      network resource
            
            
            1,000,038
            
            
            
            -16,087,527
            
            
            
            1,925,301Less:
      accumulated amortization
            
            
            (1,540,997
            )
            
            
            (377,143
            )$
            14,546,530
            
            
            $
            1,548,158





Amortization
expense was $368,946 and $68,195 for the nine months ended September 30, 2009
and 2008, respectively.





16





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 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 September 30,2010
            
            $
            788,5452011
            
            
            788,5452012
            
            
            640,9482013
            
            
            434,3112014
            
            
            430,617Thereafter
            
            
            11,463,563$
            14,546,530





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.
SHORT TERM BANK LOANS




The
short-term loans include the following at September 30, 2009:




a)
      Loan payable to Huaxia Bankterm
      from 01/01/08 to 09/21/08,at
      a fixed interest rate of 0.5475% per month
            
            $
            2,929,909b)
      Loan payable to Huaxia Bankterm
      from 01/01/08 to 09/21/08,at
      a fixed interest rate of 0.6225% per month
            
            
            4,394,864Total
            
            $
            7,324,773




The
short-term bank loans are secured by the plant, equipments and land use right of
Wuxi ZQ. As of September 30, 2009, both loans are past due. The Company was
negotiating with the bank to renew the loans. The bank increased the interest
rate to 0.809% per month for both loans. As of the date of this report, the
loans are still outstanding and past due.




17





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)






14. 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 is
further 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 and awards under the Plan.




Subject
to the terms and provisions of the 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 termination of 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 September 30, 2009, and changes for the nine months
ended September 30, 2009, is presented below:




Unearned
      stock compensation as of January 1, 2009
            
            $
            2,103,694Unearned
      stock compensation granted
            
            
            -Compensation
      expenses debited to statement of operationswith a credit to
      additional paid-in capital
            
            
            (199,320
            )Unearned
      stock compensation as of September 30, 2009
            
            $
            1,904,374








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 $332,084. 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 respective
terms of the contracts. The amortization for the nine months ended September 30,
2009 and 2008 was $108,468 and $262,781, respectively.





18





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








14.
STOCK-BASED COMPENSATION (Continued)





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




As
      of September 30
            
            Amortization2010
            
            $
            116,3752011
            
            
            116,3752012
            
            
            81,9332013
            
            
            9,121$
            323,804







(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 stock options (“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 each ISO awarded 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 be
110% 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.





Options
granted 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.





19





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








14.
STOCK-BASED COMPENSATION (Continued)





A summary
of the status of the Company’s unearned stock compensation under the 2006 Equity
Incentive Plan as of September 30, 2009 is presented below:




Unearned
      stock compensation as of January 1, 2009
            
            $
            3,634,101Unearned
      stock compensation granted
            
            
            1,196,050Compensation
      expenses debited to statement of operationswith a credit to
      additional paid-in capital
            
            
            (564,204
            )Unearned
      stock compensation as of September 30, 2009
            
            $
            4,265,947








15.
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, ZQPT is located in a specially designated technology zone which
allows
foreign-invested enterprises a five-year income tax holiday.  ZQPT 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 in China.
According to the new corporate income tax law, the applicable corporate income
tax rate of the ZQPT 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 Nine MonthsEnded
      September 30,2009
            
            2008U.S.
      statutory income tax rate
            35.0%
            
            35.0%Foreign
      income not recognized in the U.S
            (35.0%)
            
            (35.0%)China
      Statutory income tax rates
            25.0%
            
            25.0%China
      income tax exemption
            (9.3%)
            
            (12.5%)Other
      items (a)
            9.3%
            
            1.7%Effective
      consolidated income tax rate
            25.0%
            
            14.2%(a)
      The 9.30% represents $3,244,423 expenses incurred by the Company’s US
      office and $9,909,320 gain on bargain purchase to Wuxi ZQ that are not
      subject to PRC income tax for the nine months ended September 30, 2009.
      The 1.7% represents $664,878 of expenses incurred by the Company’s US
      office that are not subject to PRC income tax for the nine months ended
      September 30, 2008.




20





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








15.
INCOME TAXES (Continued)





The
estimated tax savings as a result of our tax holidays for the nine months ended
September 30, 2009 and 2008 amounted to $2,181,377 and $3,131,772, respectively.
The net effect on earnings per share had the income tax been applied would
decrease basic earnings per share for the nine months ended September 30, 2009
and 2008 from $0.33 to $0.29 and from $0.30 to $0.23, respectively.




The
Company was incorporated in the United States.  It incurred a net
operating loss for U.S. income tax purposes for the nine months ended
September 30, 2009 and 2008. The net operating loss carry forwards , including
amortization of share-based compensation, for United States income tax purposes
amounted to $2,936,410 and $1,367,503 for the nine months ended September
30, 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. In addition, as a result of acquisition of Wuxi ZQ on May 4,
2009, there are net operating loss carry-forwards of $681,626 from Wuxi ZQ that
may be available to reduce future years’ taxable income in China and those loss
carry-forwards will expire in 2013. Management believes that the realization of
the benefits arising from these losses 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
September 30, 2009 for the temporary difference related to loss carry-forwards.
Management reviews this valuation allowance periodically and makes adjustments
as warranted. The valuation allowances for the nine months ended September 30,
2009 and 2008 were $1,198,150 and $478,626, respectively.




16.
EARNINGS PER SHARE





Earnings
per share for the nine months period ended September 30, 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 ASC 260, “Earnings Per
Share.”





21





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








16.
EARNINGS PER SHARE (Continued)





The
following demonstrates the calculation for earnings per share for the nine
months ended September 30, 2009 and 2008:




For
      the Three Months Ended
            
            
            For
      the Nine Months EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Basic
      earnings per shareNet
      Income
            
            $
            4,816,077
            
            
            $
            4,371,960
            
            
            $
            16,406,478
            
            
            $
            12,895,709Weighted
      average number of common shares outstanding-Basic
            
            
            52,970,305
            
            
            
            44,349,487
            
            
            
            49,676,366
            
            
            
            42,456,824Earnings
      per share-Basic
            
            $
            0.09
            
            
            $
            0.10
            
            
            $
            0.33
            
            
            $
            0.30Diluted
      earnings per shareNet
      Income
            
            $
            4,816,077
            
            
            $
            4,371,960
            
            
            $
            16,406,478
            
            
            $
            12,895,709Weighted
      average number of common shares outstanding-Basic
            
            
            52,970,305
            
            
            
            44,349,487
            
            
            
            49,676,366
            
            
            
            42,456,824Effect
      of conversion of preferred stock
            
            
            131,926
            
            
            
            -
            
            
            
            58,688
            
            
            
            -Effect
      of exercise of options and warrants
            
            
            602,309
            
            
            
            -
            
            
            
            602,309
            
            
            
            -Effect
      of diluted securities-unvested shares
            
            
            7,637,500
            
            
            
            8,178,500
            
            
            
            7,637,500
            
            
            
            8,178,500Weighted
      average number of common shares outstanding-Diluted
            
            
            61,342,040
            
            
            
            52,527,987
            
            
            
            57,974,862
            
            
            
            50,635,324Earnings
      per share-Diluted
            
            $
            0.08
            
            
            $
            0.08
            
            
            $
            0.28
            
            
            $
            0.25





As of
September 30, 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
September 30, 2009 and 2008, the Company had outstanding warrants of 9,175,725
and 2,592,945, respectively.  For the three and nine months ended September
30, 2009, 4,388,520 outstanding warrants and 340,000 outstanding options, with
an exercise price below the market price during the nine months ended September
30, 2009, were included in the diluted earnings per share calculation as they
are dilutive. Additionally, 500 shares of preferred stock were also included in
the diluted earnings per share calculation.





22





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








17.
STOCKHOLDERS’ EQUITY





1)
            Issuance
      of Preferred Stock





On June 1
and June 15, 2009, the Company issued a total of 17,000 shares of preferred
stock, consisting of 10,000 shares of Series E preferred stock (“Series E”) and
7,000 shares of Series F preferred stock (“Series F”), to several accredited
investors. The aggregate purchase price for the securities was $17,000,000 and
the preferred stock can be converted into a total of 4,388,522 shares of common
stock of the Company. Each Preferred Share is entitled to a preferential payment
of $1,000 in the event of a liquidation of Advanced Battery Technologies. From
the proceeds of the offering, the Company paid a fee of $850,000 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 $58,132, and issued to Rodman & Renshaw,
LLC warrants to purchase 219,426 shares of common stock.  The Company
realized net proceeds of $16,091,868 from the offering.





During
the third quarter of 2009, 16,500 shares of the convertible preferred stock were
converted into 4,256,595 shares of common stock. As of September 30, 2009, there
were 500 shares of the preferred stock outstanding.





2)
            Issuance
      of Common Stock





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





In March
2009, the company issued 24,775 shares to two audit committee directors for
one-year service as stock compensation.





On May 4,
2009, the Company issued 3,000,000 common stocks in exchange for the 100% equity
interest in Wuxi ZQ. The acquisition was completed on the same day.





On August
24, 2009, the Company issued 209,000 shares to 63 employees for one-year service
as incentive stock compensation according to its 2006 equity plan.





During
the third quarter of 2009, 16,500 shares of the convertible preferred stock were
converted into 4,256,595 common stock.





On
December 8, 2008, the Board of Directors approved a stock repurchase program.
The Company repurchased 194,581 shares as treasury stock as of September 30,
2009.





As a
result of these transactions, there are 62,311,947 shares of common stock issued
and 62,117,366 shares outstanding as of September 30, 2009.





23





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








17.
STOCKHOLDERS’ EQUITY (Continued)





3)
            Stock
      Options





For the
nine months ended September 30, 2009, the Company issued 340,000 stock options
in connection with the services rendered by the Company’s senior executives and
recorded total stock option compensation expenses of $583,246 for the nine
months ended September30, 2009. Of the total value of the options granted,
$194,415 has not yet been recognized and will be amortized over the requisite
service periods.





The
following table summarizes the stock option activities of the
Company:


Option
              
              
              Weighted
      Average
              
              
              Average
      Remaining
              
              
              Aggregate
      IntrinsicOutstanding
              
              
              Exercise
      Price
              
              
              Life
      in years
              
              
              ValueOutstanding,
      December 31, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Granted
              
              
              340,000
              
              
              $
              2.66
              
              
              
              0.25
              
              
              $
              571,200Forfeited
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Exercised
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Outstanding,
      September 30, 2009
              
              
              340,000
              
              
              $
              2.66
              
              
              $
              0.25
              
              
              $
              571,200








4)
            Stock
      Warrants





August 2008
Offering





On August
8 and August 15, 2008, in connection with an offering of common stock, the
Company issued warrants to purchase a total of 2,276,474 shares of common
stock  to eight accredited institutional funds.  The Company
also issued to Rodman & Renshaw, LLC warrants to purchase 316,471 shares of
common stock.  All the Warrants issued in August 2008 offering 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.




June 2009
Offering




On June 1
and June 15, 2009, in connection with an offering of preferred stock, the
Company issued warrants to purchase a total of 7,679,914 shares of common stock
of the Company for prices ranging from $3.79 to $5.68 per share.  The
warrants issued in the June 2009 offering consist of:





Series A
Warrants





Series A
Common Stock Purchase Warrants permit the holder to purchase 1,187,334 shares of
ABAT’s common stock for $4.92 per share at any time before November 27, 2014 and
875,000 shares of ABAT’s common stock for the same price at any time before
December 12, 2014.





24





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








17.
STOCKHOLDERS’ EQUITY (Continued)





Series B
Warrants





Series B
Common Stock Purchase Warrants permit the holder to purchase 2,638,520 shares of
ABAT’s common stock for $3.79 per share at any time before November 27, 2009 and
1,750,000 shares of ABAT’s common stock for $4.00 per share any time before
December 9, 2009.   Advanced Battery Technologies can force the
holders to exercise the Series B Warrants under certain
circumstances.





Series C
Warrants





Series C
Common Stock Purchase Warrants permit the holder to purchase 659,630 shares of
ABAT’s common stock for $5.68 per share at any time before November 27, 2014 and
437,500 shares for the same price at any time before December 12,
2014.  The holder may not exercise the Series C Warrants, however,
unless the holder has exercised Series B Warrants for 400% of the shares to be
purchased on exercise of the Series C Warrants.





Following
is a summary of the status of warrants activities as of September 30,
2009:


Warrants
              
              
              Weighted
      Average
              
              
              Average
      Remaining
              
              
              Aggregate
      IntrinsicOutstanding
              
              
              Exercise
      Price
              
              
              Life
      in years
              
              
              ValueOutstanding,
      January 1, 2009
              
              
              2,592,945
              
              
              $
              5.51
              
              
              
              4.08
              
              
              $
              -Granted
              
              
              6,582,780
              
              
              
              4.44
              
              
              
              1.85
              
              
              
              -Forfeited
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Exercised
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Outstanding,
      September 30, 2009
              
              
              9,175,725
              
              
              $
              4.74
              
              
              $
              2.48
              
              
              $
              -





Both
Investor Warrants and Placement Agent Warrants meet the conditions for equity
classification pursuant to ASC 815 “Accounting for Derivatives” and ASC 815-40
“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.




For the
August 2008 offering, 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 fair value of those warrants at the grant date was calculated at
$8,709,964.




For the
June 2009 offering, the fair value of the warrants at the grant date was
calculated using the Black-Scholes options pricing model using the following
assumptions: Volatility: 91.50%; Risk free interest rate: 2.55% and 0.29% for
Series A and Series B&C warrants, respectively with respect to June 1, 2009
issuance and  2.69% and 0.31% for Series A and Series B&C
warrants, respectively with respect to June 15, 2009 issuance; Expected term:
5.5 years for Series A Warrant  and 0.5 years for Series B&C
warrants. The fair value of those warrants at the grant date was calculated at
$12,176,507.




25





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








18.  ACQUISITION




Effective
May 4, 2009, the Company, through its wholly-owned subsidiary, Cashtech, Inc.,
completed the acquisition of 100% ownership interest of Wuxi Angell Autocycle
Co., Ltd., now known as Wuxi Zhongqiang Autocycle Co., Ltd. (“Wuxi ZQ”). The
results of operations of Wuxi ZQ from May 4, 2009 to September 30, 2009 have
been included in the Statement of Operations of the Company for the three and
nine month periods ended September 30, 2009. Wuxi ZQ, at the time of the
acquisition, was a manufacturer of electric bicycles, electric scooters and
other battery-powered recreational vehicles. Wuxi ZQ also uses the batteries
supplied by ZQPT, a consolidated entity of the Company.




The
acquisition was accounted for under the purchase method of accounting in
accordance with ASC 805. Accordingly, the purchase price was allocated to assets
and liabilities based on their estimated fair value at the acquisition date. The
consideration for the net assets acquired was concluded upon prior to the
assessment of the fair value (in accordance with ASC 805) of the net assets at
the acquisition date. Therefore, the excess of the value of the net assets
acquired over the purchase price was recorded as gain on bargain purchase and is
shown as a separate component of revenues in the Company’s Consolidated
Statements of Operations for the three and nine months ended September 30,
2009.




The
following table represents the allocation of the purchase price to the acquired
net assets and resulting gain on bargain purchase:




Fair
      value of common stock issued
            
            $
            9,870,000Total
      purchase price
            
            
            9,870,000Allocation
      of the purchase price to assets and liabilities at fair
    value:Assets:Cash
            
            $
            837,462Accounts
      receivable
            
            
            573,084Advanced
      payments to vendors
            
            
            1,823,105Loan
      from others
            
            
            58,575Inventories
            
            
            1,694,627Fixed
      assets
            
            
            21,908,014Intangible
      assets
            
            
            13,378,643Total
      assets
            
            $
            40,273,510Liabilities:Short-term
      bank loans
            
            $
            7,328,112Accounts
      payable
            
            
            5,285,072Other
      liabilities
            
            
            7,881,006Total
      liabilities
            
            $
            20,494,190Net
      assets acquired, at fair value
            
            $
            19,779,320Bargain
      purchase gain resulting from Wuxi ZQ acquisition
            
            $
            9,909,320




26





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








19.  CONCENTRATION
OF RISKS





Four (4)
major customers accounted for approximately 44.8% of the net revenue for the
nine months ended September 30, 2009, with each customer individually accounting
for 21.4%, 10.0%, 6.8% and 6.6%, respectively. At September 30, 2009, the total
receivable balance due from these customers was $5,504,761, representing 24.0%
of total accounts receivable. Four (4) major customers accounted for 46.0% of
the net revenue for the three months ended September 30, 2008. At September 30,
2008, the total receivable balance due from these customers was $7,136,652,
representing 31.1% of total accounts receivable.





Four (4)
major vendors provided approximately 60.0% of the Company’s purchases of raw
materials for the nine months ended September 30, 2009, with each vendor
individually accounting for 31.4%, 10.3%, 9.7% and 8.4%, respectively. The
Company’s accounts payable to these vendors was $558,741 as of September 30,
2009, representing 20.8% of total accounts payable. Three (3) vendors provided
around 38.2% of the Company’s purchase of raw materials for the three months
ended September 30, 2008, with each vendor individually accounting for 16.2%,
12.0%, and 10.0%, respectively. The Company’s accounts payable to these vendors
was $71,675 as of September 30, 2008.





20.  LITIGATION




On
September 30, 2009, the Company was named as a defendant in an action filed in
the United States District Court for the Southern District of New York. The
action, brought by the Company’s Chief Technological Officer, Mr. Sui-yang
Huang, alleges that based on his Employment Contract, he should have been paid
certain additional stock benefits by November 30, 2008, and it demands
approximately $1.25 million in damages. The Company believes that the alleged
claim has no merit and is contesting the claim. As of the date of this report,
the Company has not yet answered the complaint.




On July
21, 2009, the Company was named as one of the defendants in a lawsuit
filed by Veken Scooters, Inc. in the Circuit Court of Cook County,
Illinois.  Veken Scooters, Inc. alleges that ABAT breached the
agreement to pay $137,000 relating to certain allegedly defective
scooters.The Company has answered the complaint and  denied having any
liability to Veken Scooters, Inc.




27





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








20.  LITIGATION
(Continued)





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 a 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 its 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 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 and 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. No court decision has been made on this case.





In
September 2008, Jiansu Sanjiang Disheng Electric Machinery Co., Ltd. filed a
lawsuit at Wuxi Sub-district Court of High-Tech Industrial Park, demanding
specific performance of Wuxi Angell, now known as Wuxi ZQ for unpaid debts plus
accrued interests. Wuxi ZQ was ordered to pay a total amount of RMB1,024,524
(approximately $150,665), in addition to the applicable court costs. As of
September 30, 2009, Wuxi ZQ has not made any payments on this
claim.





In
September 2008, another action was filed against the Company by Jiande City Five
Star Automobile Co., Ltd. in Wuxi Sub-district Court of High-Tech Industrial
Park, seeking specific performance of Wuxi Angell, now known as Wuxi ZQ, for
unpaid debts of RMB303,720 (approximately $44,665). A judgment order was issued
against Wuxi ZQ for an immediate payment of the claimed amount plus court costs.
As of September 30, 2009, the entire amount has not been paid by Wuxi
ZQ.





In July
2008, an action was filed against the Company by Wuxi Longbiao Electronics Co.,
Ltd. in Wuxi Sub-district Court of High-Tech Industrial Park, seeking specific
performance of Wuxi Angell, now known as Wuxi ZQ, for unpaid debts of RMB341,514
(approximately $50,222). A judgment order was issued against Wuxi ZQ for an
immediate payment of the claimed amount plus court costs. As of September 30,
2009, the entire amount has not been paid by Wuxi ZQ.





In June
2008, an action was filed against the Company by Mr. Jinyu Zhu in Wuxi
Sub-district Court of High-Tech Industrial Park, demanding the payment of unpaid
debts of RMB1,000,000 (approximately $147,058) by Wuxi Angell, now known as Wuxi
ZQ. A judgment order was issued against Wuxi ZQ for an immediate payment of the
claimed amount plus court costs. As of September 30, 2009, the entire amount has
not been paid by Wuxi ZQ.





28





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








21.
PRODUCT WARRANTY




The
Company provides product warranty to its customers that all equipment
manufactured by it will be free from defects in materials and workmanship under
normal use for a period 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 nine months ended September 30 2009 and 2008, no product
warranty reserve was  considered necessary.




22.
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.





The
Company entered into various agreements to purchase equipment and machinery in
an effort to expand its production in 2009.  As of September 30, 2009,
the Company made a total down payment of $1,399,130 on those long-term assets.
The Company still has the commitment to pay the remaining contract amount of
approximately $6,132,907 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.





29





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








23.  SEGMENT
INFORMATION





The
Company follows the provisions of ASC 280, “Disclosures about Segments of an
Enterprise and Related Information”, which establishes standards for reporting
information about operating segments. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and assess performance. The Company’s chief
operating decision maker has been identified as the Chief Executive
Officer.





The
Company has two operating segments, which are batteries and electric vehicles
segments.





The
batteries segment develops, manufactures, and markets rechargeable Polymer
Lithium-Ion (PLI) products.  The batteries segment includes the operation
of ZQPT.





The
electric vehicles segment develops and manufactures various types of electric
vehicles through the operation of Wuxi ZQ. Wuxi ZQ owns three types of products
listed in the E-Bike directory, with more than 20 different specifications,
including electric bicycles, electric scooters, and various electric sports
utility vehicles. Wuxi ZQ products are exported to the countries and regions in
Europe, the United States and Asia.





The
measurement of segment income is determined as earnings before income taxes. The
measurement of segment assets is based on the total assets of the segment,
including intercompany advances among the PRC entities. Segment income and
segment assets are reported to the Company’s chief operating decision maker
(“CODM”) using the same accounting policies as those used in the preparation of
these consolidated financial statements. Historically, there have been sale
transactions between the two operating segments in addition to intersegment
advances.





30





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








23.  SEGMENT
INFORMATION (CONTINUED)





For
      the Nine Months Ended September 30, 2009
            
            Batteries
            
            
            Electric
      Vehicles
            
            
            Inter-segment
              Elimination
            
            
            Consolidated
      TotalNet
      Sales
            
            
            35,050,747
            
            
            
            10,346,916
            
            
            
            (3,226,066
            )
            
            
            42,171,598Interest
      Income (expense)
            
            
            243,894
            
            
            
            (323,143
            )
            
            
            
            
            
            
            (79,249
            )Depreciation
      and Amortization
            
            
            659,798
            
            
            
            718,102
            
            
            
            351,311
            
            
            
            1,729,211Segment
      assets
            
            
            88,894,078
            
            
            
            43,409,486
            
            
            
            
            
            
            
            132,303,564Segment
      net income (loss) before tax
            
            
            14,152,977
            
            
            
            (916,080
            )
            
            
            
            
            
            
            13,236,898Batteries
            
            
            Electric
      Vehicles
            
            
            Inter-segment
              Elimination
            
            
            Consolidated
      TotalFor
      the Three Months Ended September 30, 2009Net
      Sales
            
            
            12,807,469
            
            
            
            6,719,619
            
            
            
            (1,812,810
            )
            
            
            17,714,278Interest
      Income (expense)
            
            
            80,433
            
            
            
            (124,009
            )
            
            
            
            
            
            
            (43,576
            )Depreciation
      and Amortization
            
            
            276,792
            
            
            
            387,494
            
            
            
            210,788
            
            
            
            875,074Segment
      assets
            
            
            88,894,078
            
            
            
            43,409,486
            
            
            
            
            
            
            
            132,303,564Segment
      net income (loss) before tax
            
            
            5,321,094
            
            
            
            871,371
            
            
            
            
            
            
            
            6,192,466Reconciliation
      of segment incomes to consolidated incomes
            
            
            
            
            
            For
      the Nine Months
              Ended
      September 30, 2009
            
            
            
            
            
            
            For
      the Three Months
              Ended
      September 30, 2009Total
      segment income
            
            
            
            
            
            
            13,236,898
            
            
            
            
            
            
            
            6,192,466Elimination
      of intersegment profits
            
            
            
            
            
            
            (1,261,448
            )
            
            
            
            
            
            
            (650,052
            )Gain
      on bargain purchase
            
            
            
            
            
            
            9,909,320
            
            
            
            
            
            
            
            -Consolidated
      income before income taxes
            
            
            
            
            
            
            21,884,770
            
            
            
            
            
            
            
            5,542,414Reconciliation
      of segment assets to consolidated assets
            
            
            
            
            
            As
      of September 30, 2009Total
      segment net assets
            
            
            
            
            
            
            132,303,564Elimination
      of intersegment receivables
            
            
            
            
            
            
            (4,553,744
            )Increased
      asset value not allocated to segments
            
            
            
            
            
            
            9,344,237Consolidated
      assets
            
            
            
            
            
            
            137,094,057




31





ADVANCED
BATTERY TECHNOLOGIES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)








24.  SUBSEQUENT
EVENT





On
October 5, 2009, the Company sold 4,592,145 shares of common stock and 1,377,644
common stock purchase warrants pursuant to a Securities Purchase Agreement made
on September 30, 2009.  The aggregate purchase price for the
securities was $19,000,001. Each Warrant will permit the holder to purchase one
share of common stock from the Company for the price of $4.70 per
share.  The Warrants will expire in five years from the date of the
Agreement. The Company paid a fee of $950,000 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, and issued
to Rodman & Renshaw, LLC warrants to purchase 229,608 shares of common
stock. The warrants issued to Rodman & Renshaw, LLC may be exercised for a
price of $5.171875 per share for a period of five years.





32





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.





Overview




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 851 as of September 30 2009.  The increase has
occurred because we more than doubled our battery production capacity and we
acquired an electric vehicle manufacturer in May 2009.





In
2008 our battery production capacity was $45 million per year with 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. In July 2009, the two new production lines, “C” and
“D”, became operational with automated equipment. In August 2009, we decided to
upgrade the capacity of “A” and “B” with further investment in automated
equipments.





On
April 28, 2009, the Company, through Cashtech, a wholly-owned subsidiary of
ABAT, entered into a Share Purchase Agreement with the shareholders of Wuxi
Angell Autocycle Co., Ltd. Pursuant to the Agreement, the Company acquired a
100% ownership interest in the registered capital of Wuxi Angell and issued
three million shares of the Company’s common stock to the sellers. Immediately
after the completion of acquisition on May 4, 2009, Wuxi Angell Autocycle Co.
Ltd. was renamed as Wuxi Zhongqiang Autocycle Co., Ltd. (“Wuxi ZQ”).  In
June and October 2009, in order to support the future growth of our newly
acquired electric vehicle business and battery production, we completed
additional equity placements, obtaining net proceeds of approximately
$16,041,861 in June and $18,017,482 in October.





33




Results of
Operations





The following tables present certain
consolidated statement of operations information. Financial information is
presented for the three months and nine months ended September 30, 2009 and 2008
respectively.




For
      the Three Months Ended September 30,2009
            
            
            2008
            
            
            ChangeAmount
            
            
            %Revenues
            
            $
            17,714,278
            
            
            $
            12,662,585
            
            
            $
            5,051,693
            
            
            
            39.9
            %Cost
      of Goods Sold
            
            
            10,087,228
            
            
            
            6,776,437
            
            
            
            3,310,791
            
            
            
            48.9
            %Gross
      Profit
            
            
            7,627,050
            
            
            
            5,886,148
            
            
            
            1,740,902
            
            
            
            29.6
            %Operating
      Expenses
            
            
            2,382,938
            
            
            
            795,336
            
            
            
            1,587,602
            
            
            
            199.6
            %Operating
      Income
            
            
            5,244,112
            
            
            
            5,090,812
            
            
            
            153,300
            
            
            
            3.0
            %Net
      Income
            
            $
            4,816,077
            
            
            $
            4,371,960
            
            
            $
            444,117
            
            
            
            10.2
            %For
      the Nine Months Ended September 30,2009
            
            
            
            2008
            
            
            ChangeAmount
            
            
            %Revenues
            
            $
            42,171,598
            
            
            $
            34,442,838
            
            
            $
            7,728,760
            
            
            
            22.4
            %Cost
      of Goods Sold
            
            
            23,197,017
            
            
            
            17,542,233
            
            
            
            5,654,784
            
            
            
            32.2
            %Gross
      Profit
            
            
            18,974,581
            
            
            
            16,900,605
            
            
            
            2,073,976
            
            
            
            12.3
            %Operating
      Expenses
            
            
            7,207,808
            
            
            
            1,947,200
            
            
            
            5,260,608
            
            
            
            270.2
            %Operating
      Income
            
            
            11,766,773
            
            
            
            14,953,405
            
            
            
            (3,186,632
            )
            
            
            -21.3
            %Net
      Income
            
            $
            16,406,478
            
            
            $
            12,895,709
            
            
            $
            3,510,769
            
            
            
            27.2
            %





Revenues




We
had total revenues of $17,714,278 for the three months ended September 30, 2009,
an increase of $5,051,693 or 39.9%, compared to $12,662,585 for the three months
ended September 30, 2008. The increase in revenues was primarily due to the
contribution of sales from the electric vehicle business, which the Company
acquired on May 4, 2009.





For
the nine months ended September 30, 2009 our revenue reached $42,171,598, an
increase of $7,728,760 or 22.4% compared to $34,442,838 for the nine months
ended September 30, 2008. The increase in revenues was primarily due to the
contribution of sales from the electric vehicle business, which the Company
acquired on May 4, 2009.





34




Sales
of batteries to Wuxi ZQ are included in our 2008 financial results and excluded
from our 2009 financial results, since we acquired ownership of Wuxi ZQ in May
2009.  If sales to Wuxi ZQ are excluded from our 2008 results, our
revenue from battery sales increased in the nine months ended September 30,
2009, compared to the same period in 2008.  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 during the 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 and nine months ended September 30,
2009, the contribution of batteries in these categories as well as the
contribution of electric vehicles to our total revenues was:





Three
      months ended September 30, 2009
            
            Amount
      (US$)
            
            
            %
      (of total
              revenue)Small
      Capacity Battery
            
            
            1,085,202
            
            
            
            6.13
            %Medium
      Capacity Battery
            
            
            1,564,630
            
            
            
            8.83
            %Large
      Capacity Battery
            
            
            3,270,765
            
            
            
            18.46
            %Miner's
      Lamp
            
            
            5,074,095
            
            
            
            28.64
            %Electric
      Vehicle
            
            
            6,719,586
            
            
            
            37.93
            %Total
            
            
            17,714,278
            
            
            
            100.00
            %





Nine
      months ended September 30, 2009
            
            Amount
      (US$)
            
            
            %
      (of total
              revenue)Small
      Capacity Battery
            
            
            3,323,184
            
            
            
            7.88
            %Medium
      Capacity Battery
            
            
            7,976,003
            
            
            
            18.91
            %Large
      Capacity Battery
            
            
            10,855,478
            
            
            
            25.74
            %Miner's
      Lamp
            
            
            9,670,016
            
            
            
            22.93
            %Electric
      Vehicle
            
            
            10,346,916
            
            
            
            24.54
            %Total
            
            
            42,171,598
            
            
            
            100.00
            %





At
October 30, 2009 we had a backlog of over $66.8 million for delivery throughout
the next 12 months, including a battery backlog of approximately $55 million.
Therefore we expect to expand on the level of operations that we achieved during
2008 and the first nine months of the current year.





35




Gross
Profit




Our
cost of revenues consists of the cost of raw materials, labor costs and
production overhead. In the three months ended September 30, 2009, our
revenue increased by 39.9% and our cost of goods sold increased by 48.9%, from
$6,776,437 to $10,087,228, compared to the same period of 2008. This
disparate growth in cost of sales is mainly attributable to the higher
proportion of sales from lower margin products, i.e. electrical vehicles. The
result of the growth in cost of goods sold was a deterioration in our gross
margin from 46.5% in the three months ended September 30, 2008 to 43.1% in the
same period of 2009.





For
the same reason, in the nine months ended September 30, 2009 our revenue
increased by 22.4% and our cost of goods sold increased by 32.2%, from
$17,542,233 to $23,197,017, compared to the same period of 2008.  The
result was a deterioration in our gross margin from 49.1% in the nine months
ended September 30, 2008 to 45.0% in the same period of 2009.





Operating
Expense




The
Company’s operating expenses increased by 199.6%, from $795,336 in the three
months ended September 30, 2008 to $2,382,938 in the same period of
2009. The Company incurred operating expenses of $7,207,808 during the nine
months ended September 30, 2009, an increase of $5,260,608 or approximately
270.2%, compared to $1,947,200 during the nine months ended September 30, 2008.
These increases are primarily due to Wuxi ZQ’s high selling and administration
expenses (approximately $3.1 million) after the acquisition on May 4
2009.  Wuxi ZQ’s administrative expenses included a bad debt allowance
of approximately $980,000.  The Wuxi ZQ expenses also include
satisfaction of approximately $1,200,000 in debts that were incurred in prior
periods but were not previously recorded.  Our operating expenses also
increased because our US office incurred higher administration expenses in the
three and nine months ended September 30, 2009, including salaries, legal fee
and marketing expense related to our financing and our annual meeting
activities. The Company also recognized higher noncash stock and option
compensation amortization expense in the three and nine months ended September
30, 2009. However, considering only the operating expenses in Heilongjiang
ZQPT, our main battery production base in China, our operating expenses
increased by approximately $0.23 and $0.49 million during the three and nine
month periods ended September 30, 2009.  Those increases were mainly
attributable to our expanded operation.





Included in our general and
administrative expense during the three and nine months ended September 30, 2009
were  $540,344 and $1,455,238 attributable to amortization of the
market value of stock and options 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:





·
            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 10.6 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.




36




At
September 30, 2009 there remained $6,688,540 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 and nine months ended
September 30 2009, we realized $43,576 and $79,249 in net interest
expenses.  The $326,636that we incurred in interest on Wuxi ZQ’s
$7,333,674 short-term bank loan was partially offset by $120,000 in the interest
income 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 by
interest on our cash deposited in Chinese banks. Additionally, in the three and
nine months ended September 30 2009, we recognized $336,849 income due to the
forgiveness of interest payable on our existing short-term loans. Finally, for
the nine months ended September 30 2009, we recognized a $62,470 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 $127,490 in the nine months ended September
30, 2009, the value of our investment was reduced on our balance sheet by 49% of
that sum – i.e. $62,470 – and we incurred “equity loss” in that
amount.





Our acquisition of Wuxi ZQ in May 2009
resulted in a $9,909,320 gain on bargain purchase.   This
occurred because the fair value of the net assets of Wuxi ZQ was $19,779,320,
but the 3,000,000 common shares that we paid to acquire Wuxi ZQ had a market
value of only $9,870,000.  We recorded the $9,909,320 difference as
“other income.”




Net Income




The
Company’s revenue less expenses produced pre-tax income of $5,542,414 and
$21,884,770 for the three and nine months ended September 30, 2009 respectively,
representing increases of $399,677 and $6,863,328 from the same periods of 2008,
respectively. In the three and nine months ended September 30 2009,
domestic (U.S.) pre-tax losses were $759,549 and $2,795,887, respectively;
foreign (China) pre-tax incomes were $6,301,963 and $24,680,657, respectively,
which includes $9,909,320 gain on bargin purchase recognized in the second
quarter of 2009.  The deferred income tax because of gain on bargain
purchase for the three and nine months were $0 and $3,468,262, respectively. 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 $726,337 and $5,478,292 realized in the three
and nine months ended September 30 2009, our net income were $4,816,077 and
$16,406,478, respectively, representing 10.2% and 27.2% increases over the same
periods of 2008.





37




Liquidity
and Capital Resources




At
September 30, 2009 the Company had a working capital balance of $56,907,530, an
improvement from our working capital balance of $49,991,602 at December 31,
2008. From the cash reserve perspective, we had $33,839,657 cash (including
a $0.89 million other receivable from a PRC bank due to the local wire transfer
practice), an increase from our cash balance of $32,746,155 at December 31,
2008. The primary reason for the improvement in working capital and cash was the
preferred stock placement we completed in June 2009, partially offset by further
investment in our facilities With the sufficient cash available, we believe
we are able to fund the current debt obligations when due.





Wuxi
ZQ has a total of $7,324,773 in loans due to Huaxia Bank, currently bearing
interest at 9.708% per annum.  Both loans are in default, and we are
currently negotiating renewal. If those negotiations fail to yield a
satisfactory result, however, we have sufficient cash available to us to enable
us to satisfy the debts.  We have no other bank debt.





ZQ
Power-Tech and Wuxi ZQ have sufficient liquidity to fund their near-term
operations and to fund the working capital demands of future expansion. If
we determine that additional funds are needed for other attractive growth
opportunities or for the full implementation of our long term expansion plans
for Wuxi ZQ, we have available over $18 million in property, plant and equipment
that ZQ Power-Tech owns free of liens, for potential collateral loans. On
October 30, 2009 our backlog of firm orders was approximately $66.8
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 the Company, 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 subsidiaries, ZQ
Power-Tech and Wuxi ZQ, carry on business exclusively in Chinese
Renminbi.  Therefore the Company does not have any derivative
instruments or other financial instruments that are market risk
sensitive.





38




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.





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
annual 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.




On September 30, 2009, an action titled
“Sui-Yang Huang v. Advanced Battery Technologies, Inc.” was commenced in the
United States District Court for the Southern District of New York. The
plaintiff is the Company’s Chief Technological Officer.  The complaint
alleges that the Company has breached its employment contract with Mr. Huang,
and demands approximately $1.25 million in damages. The Company believes that
the alleged claim has no merit and is contesting the claim. As of the date of
this report, the Company has not yet answered the complaint.





39




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.




(a) Unregistered
Sale of Equity Securities





On August 24, 2009 the Company issued
209,000 shares of common stock to 63 of its employees.  The shares
were issued in consideration of services, and were valued at the market value on
the date of grant.  The issuance of the shares was exempt from
registration pursuant to Section 4(2) of the Securities Act, as the issuance did
not involve a public offering of securities.





(c)   
Repurchase of Equity Securities





The
following table sets forth information regarding the Company’s repurchase of
shares of its common stock during the 3rd
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
      ProgramsJuly
      1, 2009- July 31, 2009
            0
            N.A.
            
            3,805,419August
      1, 2009 – August 31, 2009
            0
            N.A.
            0
            3,805,419Sept.
      1, 2009 – Sept. 30, 2009
            0
            N.A.
            0
            3,805,419Total
            0
            N.A.
            0
            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.





40




Item
5.     Other Information.




None.





Item
6.     Exhibits




31.1
            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:  November
      9, 2009
            By:
      /s/ Zhiguo FuName:  Zhiguo
      FuTitle:
      Chief Executive OfficerDate:  November
      9, 2009
            By:
      /s/ Guohua WanName:  Guohua
      WanTitle:
      Chief Financial Officer









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