**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

----

**FORM      10-QSB**

| x | **Quarterly                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange                  Act of                  1934.** |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended September 30, 2007**

| o | **Transition                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange                  Act of                  1934.** |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from ______to______.**

**Commission      file number 000-52186**

**Kandi      Technologies, Corp.**

**(Exact      name of registrant as specified in Charter)**

| **Delaware**                                                                                        |   | **333-123735**                      |   | **87-0700927**                                                      |
|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|---------------------------------------------------------------------|
| **(State                or other jurisdiction of****incorporation                or organization)** |   | **(Commission                File No.)** |   | **(IRS                Employee Identification                No.)** |

**Jinhua      City Industrial Zone**

**Jinhua,      Zhejiang Province**

**People’s      Republic of China**

**Post      Code 321016**

** (Address      of Principal Executive Offices)**

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**(86      - 0579) 82239700**

** (Issuer      Telephone number)**

----

**(Former      Name or Former Address if Changed Since Last Report)**

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**TABLE      OF CONTENTS**

|   |   |   | **Page** |
|--------|--------|--------|----------|

**PART      I-- FINANCIAL INFORMATION**

| Item                1. |   | Condensed                Consolidated Financial Statements                                                                | 3      |
|------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|
|                   |   |                                                                                                                      |   |
| Item                2. |   | Management’s                Discussion and Analysis of Financial Condition and results of                operations | 22     |
|                   |   |                                                                                                                      |   |
| Item                3. |   | Controls                and Procedures                                                                                    | 27     |

**PART      II-- OTHER INFORMATION**

| Item                1. |   | Unregistered                Sales of Equity Securities and Use of Proceeds | 28     |
|------------------------|--------|----------------------------------------------------------------------------|--------|
|                   |   |                                                                       |   |
| Item                2. |   | Defaults                Upon Senior Securities                             | 28     |
|                   |   |                                                                       |   |
| Item                3. |   | Submission                of Matters to a Vote of Security Holders         | 28     |
|                   |   |                                                                       |   |
| Item                4. |   | Other                Information                                           | 28     |
|                   |   |                                                                       |   |
| Item                5. |   | Exhibits                and Reports on Form 8-K                            | 28     |

----

**PART      I-- FINANCIAL INFORMATION**

**Item      1. Financial Statements**

**KANDI        TECHNOLOGIES, CORP.**

**(FORMERLY        STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**

**CONDENSED            CONSOLIDATED BALANCE SHEETS**

|                                     |   | **September                30,****2007** |       | **December 31,****2006** |   |
|------------------------------------------|--------|------------------------------------------|------------|-------------------------------|--------|
| **ASSETS**                               |   | **(Unaudited)**                          |       |                          |   |
| **CURRENT                ASSETS**        |   |                                     |       |                          |   |
| Cash                and cash equivalents |   | $                                        | 663,308    |                          | $      | 1,034,017 |   |
| Restricted                cash           |   |                                     | 8,666,535  |                          |   | 9,092,423 |   |
| Accounts                receivable       |   |                                     | 12,598,385 |                          |   | 7,572,565 |   |
| Deposit                for acquisition   |   |                                     | 9,740,470  |                          |   | - |   |
| Inventories                              |   |                                     | 3,378,476  |                          |   | 5,463,179 |   |
| Notes                receivables         |   |                                     | 1,181,535  |                          |   | 430,811 |   |
| Other                receivables         |   |                                     | 1,603,678  |                          |   | 2,988,016 |   |
| Prepayment                and deposits   |   |                                     | 738,388    |                          |   | 332,556 |   |
| Advance                to suppliers      |   |                                     | 46,884     |                          |   | 184,221 |   |
| Due                from employees        |   |                                     | -          |                          |   | 31,901 |   |
| Deferred                tax assets       |   |                                     | 4,684      |                          |   | 99 |   |
| Total                Current Assets      |   |                                     | 38,622,343 |                          |   | 27,129,788 |   |
| **NON                CURRENT ASSETS**    |   |                                     |       |                          |   |   |   |
| Plant                and equipment, net  |   |                                     | 9,346,741  |                          |   | 9,224,935 |   |
| Land                use rights, net      |   |                                     | 389,321    |                          |   | 395,926 |   |
| Construction                in progress  |   |                                     | 1,064,855  |                          |   | 307,158 |   |
| Deferred                tax assets       |   |                                     | 3,502      |                          |   | 2,784 |   |
| Total                Non Current Assets  |   |                                     | 10,804,419 |                          |   | 9,930,803 |   |
|                                     |   |                                     |       |                          |   |   |   |
| TOTAL                ASSETS              |   | $                                        | 49,426,762 |                          | $      | 37,060,591 |   |

| **LIABILITIES                AND SHAREHOLDERS' EQUITY**                                                                                        |   |   |       |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|
| **CURRENT                LIABILITIES**                                                                                                         |   |   |       |   |   |
| Accounts                payable                                                                                                                |   | $      | 7,586,970  |   | $      | 6,626,826 |   |
| Other                payables and accrued expenses                                                                                             |   |   | 298,639    |   |   | 310,406 |   |
| Short-term                bank loans                                                                                                           |   |   | 16,021,654 |   |   | 9,163,737 |   |
| Current                portion of long-term bank loan                                                                                          |   |   | 1,920,934  |   |   | 1,920,934 |   |
| Customer                deposits                                                                                                               |   |   | 1,107,022  |   |   | 601,168 |   |
| Notes                payable                                                                                                                   |   |   | 10,854,656 |   |   | 10,779,563 |   |
| Deferred                taxes                                                                                                                  |   |   | 8,167      |   |   | - |   |
| Due                to related parties                                                                                                          |   |   | 3,680      |   |   | - |   |
| Total                Current Liabilities                                                                                                       |   |   | 37,801,722 |   |   | 29,402,634 |   |
|                                                                                                                                           |   |   |       |   |   |   |   |
| **NON                CURRENT LIABILITIES**                                                                                                     |   |   |            |   |   |   |   |
| Deferred                tax liabilities                                                                                                        |   |   | 2,546      |   |   | 3,277 |   |
| Total                Non Current Liabilities                                                                                                   |   |   | 2,546      |   |   | 3,277 |   |
|                                                                                                                                           |   |   |       |   |   |   |   |
| TOTAL                LIABILITIES                                                                                                               |   |   | 37,804,268 |   |   | 29,405,911 |   |
|                                                                                                                                           |   |   |       |   |   |   |   |
| CONTINGENCIES                                                                                                                                  |   |   |       |   |   |   |   |
|                                                                                                                                           |   |   |            |   |   |   |   |
| **SHAREHOLDERS'                EQUITY**                                                                                                        |   |   |            |   |   |   |   |
| Common                stock, $0.001 par value, 100,000,000 shares authorized;                                                                  |   |   | 19,961     |   |   | 12,000 |   |
| 19,961,000                and 12,000,000 shares issued and outstandingat                September 30, 2007 and December 31, 2006, respectively |   |   |       |   |   |   |   |
| Additional                paid-in capital                                                                                                      |   |   | 7,138,105  |   |   | 7,154,193 |   |
| Retained                earnings                                                                                                               |   |   | 3,823,217  |   |   | 96,024 |   |
| Accumulated                other comprehensive income                                                                                          |   |   | 641,211    |   |   | 392,463 |   |
| Total                Shareholders' Equity                                                                                                      |   |   | 11,622,494 |   |   | 7,654,680 |   |
|                                                                                                                                           |   |   |       |   |   |   |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                |   | $      | 49,426,762 |   | $      | 37,060,591 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

**(FORMERLY        STONE MOUNTAIN RESOURCES, INC.)**

**AND        SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**

**(UNAUDITED)**

|                                                                                                  |   | **Three                Months                Ended** |       | **Nine                Months Ended** |   |
|-------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|------------|--------------------------------------|--------|
|                                                                                                  |   | **September                30,**                     |       | **September                30,**     |   |
|                                                                                                  |   | **2007**                                             |       | **2006**                             |   | **2007** |   | **2006** |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |
| **REVENUES,                NET OF SALES TAX**                                                         |   | $                                                    | 8,854,668  |                                 | $      | 1,552,217 |   | $ | 26,022,205 |   | $ | 6,338,562 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **COST                OF GOODS SOLD**                                                                 |   |                                                 | 7,389,605  |                                 |   | 1,129,089 |   |   | 20,666,981 |   |   | 5,440,601 |   |
| **GROSS                PROFIT**                                                                       |   |                                                 | 1,465,063  |                                 |   | 423,128 |   |   | 5,355,224 |   |   | 897,961 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| Selling                and marketing                                                                  |   |                                                 | 292,074    |                                 |   | 54,140 |   |   | 657,342 |   |   | 139,480 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| General                and administrative                                                             |   |                                                 | 248,992    |                                 |   | 65,501 |   |   | 614,615 |   |   | 285,757 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| Research                and development                                                               |   |                                                 | 16,122     |                                 |   | 37,777 |   |   | 68,925 |   |   | 87,538 |   |
| Total                operating expenses                                                               |   |                                                 | 557,188    |                                 |   | 157,418 |   |   | 1,340,882 |   |   | 512,775 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM OPERATIONS**                                                             |   |                                                 | 907,875    |                                 |   | 265,710 |   |   | 4,014,342 |   |   | 385,186 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **INTEREST                EXPENSE, NET**                                                              |   |                                                 | (272,818   | )                                    |   | (174,741 | ) |   | (723,171 | ) |   | (450,734 | ) |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **GOVERNMENT                GRANTS**                                                                  |   |                                                 | 3,049      |                                 |   | 30,968 |   |   | 15,233 |   |   | 97,194 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **FORFEITURE                OF CUSTOMER DEPOSIT**                                                     |   |                                                 | 233,584    |                                 |   | - |   |   | 500,304 |   |   | - |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **OTHER                INCOME (EXPENSES), NET**                                                       |   |                                                 | 20         |                                 |   | 4,971 |   |   | (77,404 | ) |   | 5,519 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **INCOME                BEFORE INCOME TAXES**                                                         |   |                                                 | 871,710    |                                 |   | 126,908 |   |   | 3,729,304 |   |   | 37,165 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **INCOME                TAXES**                                                                       |   |                                                 | (212       | )                                    |   | - |   |   | (2,111 | ) |   | - |   |
| **NET                INCOME**                                                                         |   |                                                 | 871,498    |                                 |   | 126,908 |   |   | 3,727,193 |   |   | 37,165 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE****INCOME**                                                      |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation gain                                                      |   |                                                 | 45,188     |                                 |   | 292,272 |   |   | 248,748 |   |   | 340,532 |   |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Income                  tax expense related toother comprehensive income                              |   |                                                 | (14,912    | )                                    |   | (96,450 | ) |   | (82,087 | ) |   | (112,376 | ) |
|                                                                                                  |   |                                                 |            |                                 |   |  |   |   |  |   |   |  |   |
| **OTHER                COMPREHENSIVE INCOME,****NET                  OF TAX**                         |   | $                                                    | 30,276     |                                 | $      | 195,822 |   | $ | 166,661 |   | $ | 228,156 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                                               |   | $                                                    | 901,774    |                                 | $      | 322,730 |   | $ | 3,893,854 |   | $ | 265,321 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                  AVERAGE NUMBER OF SHARESOUTSTANDING,                  BASIC AND DILUTED** |   |                                                 | 19,961,000 |                                 |   | 12,000,000 |   |   | 14,741,150 |   |   | 12,000,000 |   |
|                                                                                                  |   |                                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| **NET                  INCOME PER COMMON SHARE,BASIC                  AND DILUTED**                   |   | $                                                    | 0.04       |                                 | $      | 0.01 |   | $ | 0.25 |   | $ | 0.00 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

**(FORMERLY        STONE MOUNTAIN RESOURCES, INC.)**

**AND        SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**FOR        THE NINE MONTHS ENDED SEPTEMBER 30, 2007**

**(UNAUDITED)**

|                                             |   |                            |       |                         |   |         |   | **Accumulated**   |      |       |   |
|--------------------------------------------------|--------|---------------------------------|------------|------------------------------|--------|--------------|--------|-------------------|-----------|------------|--------|
|                                             |   |                            |       | **Additional**               |   |         |   | **Other**         |      |       |   |
|                                             |   | **Common                Stock** |       | **Paid-in**                  |   | **Retained** |   | **Comprehensive** |      |       |   |
|                                             |   | **Shares**                      |       | **Par                Value** |   | **Capital**  |   | **Earnings**      |      | **Income** |   | **Total** |   |
|                                             |   |                            |       |                         |   |         |   |              |      |       |   |   |   |
| **BALANCE                AT JANUARY 1, 2007**    |   |                            | 12,000,000 |                         | $      | 12,000       |   | $                 | 7,154,193 |       | $      | 96,024 |   | $ | 392,463 |   | $ | 7,654,680 |   |
|                                             |   |                            |       |                         |   |         |   |              |      |       |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation gain |   |                            | -          |                         |   | -            |   |              | -         |       |   | - |   |   | 248,748 |   |   | 248,748 |   |
|                                             |   |                            |       |                         |   |         |   |              |      |       |   |   |   |   |   |   |   |   |   |
| Recapitalization                                 |   |                            | 7,961,000  |                         |   | 7,961        |   |              | (16,088   | )          |   | - |   |   | - |   |   | (8,127 | ) |
|                                             |   |                            |       |                         |   |         |   |              |      |       |   |   |   |   |   |   |   |   |   |
| Net                income                        |   |                            | -          |                         |   | -            |   |              | -         |       |   | 3,727,193 |   |   | - |   |   | 3,727,193 |   |
|                                             |   |                            |       |                         |   |         |   |              |      |       |   |   |   |   |   |   |   |   |   |
| **BALANCE                AT SEPTEMBER 30, 2007** |   |                            | 19,961,000 |                         | $      | 19,961       |   | $                 | 7,138,105 |       | $      | 3,823,217 |   | $ | 641,211 |   | $ | 11,622,494 |   |

----

**KANDI            TECHNOLOGIES, CORP.**

**(FORMERLY            STONE MOUNTAIN RESOURCES, INC.)**

**AND            SUBSIDIARIES**

**CONDENSED            CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                      |   | **Nine                Months EndedSeptember 30,** |        |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-------------|
|                                                                                                      |   | **2007**                                          |        | **2006** |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                  |   |                                              |        |   |   |   |   |
| Net                income                                                                                 |   | $                                                 | 3,727,193   |   | $ | 37,165 |   |
| Adjustments                to reconcile net income to net cash provided by (used                in)  |   |                                              |             |   |   |  |   |
| operating                activities:                                                                      |   |                                              |             |   |   |  |   |
| Depreciation                and amortization                                                              |   |                                              | 987,296     |   |   | 725,613 |   |
| Deferred                taxes                                                                             |   |                                              | 2,133       |   |   | - |   |
| Forfeiture                of customer deposit                                                             |   |                                              | (500,304    | ) |   | - |   |
|                                                                                                      |   |                                              |             |   |   |  |   |
| Changes                in operating assets and liabilities, net of effects of                acquisition: |   |                                              |             |   |   |  |   |
| (Increase)                Decrease in:                                                                    |   |                                              |             |   |   |  |   |
| Accounts                receivable                                                                        |   |                                              | (5,025,820  | ) |   | (2,119,004 | ) |
| Inventories                                                                                               |   |                                              | 2,084,702   |   |   | 180,420 |   |
| Other                receivables                                                                          |   |                                              | 1,384,338   |   |   | 693,923 |   |
| Due                to employee                                                                            |   |                                              | 139,695     |   |   | (13,542 | ) |
| Prepayments                for goods and prepaid expenses                                                 |   |                                              | (405,831    | ) |   | (1,004,419 | ) |
|                                                                                                      |   |                                              |             |   |   |  |   |
| Increase                (Decrease) in:                                                                    |   |                                              |             |   |   |  |   |
| Accounts                payable                                                                           |   |                                              | 960,146     |   |   | 624,376 |   |
| Other                payables and accrued liabilities                                                     |   |                                              | (19,672     | ) |   | 3,581 |   |
| Tax                payable                                                                                |   |                                              | (2,953      | ) |   | - |   |
| Customer                deposits                                                                          |   |                                              | 1,006,158   |   |   | 280,497 |   |
| Net                cash provided by (used in) operating activities                                        |   |                                              | 4,337,081   |   |   | (591,390 | ) |
|                                                                                                      |   |                                              |             |   |   |  |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                  |   |                                              |             |   |   |  |   |
| Restricted                cash                                                                            |   |                                              | 425,887     |   |   | 1,982,603 |   |
| Purchases                of plant and equipment                                                           |   |                                              | (1,102,497  | ) |   | (367,076 | ) |
| Purchases                of construction in progress                                                      |   |                                              | (757,697    | ) |   | (1,405,602 | ) |
| Deposit                for acquisition                                                                    |   |                                              | (9,740,470  | ) |   | - |   |
| Issuance                of notes receivable                                                               |   |                                              | (6,318,385  | ) |   | (616,844 | ) |
| Repayment                of notes receivable                                                              |   |                                              | 5,567,660   |   |   | 576,781 |   |
| Payment                for acquisition, net for cash acquired                                             |   |                                              | -           |   |   | (69,391 | ) |
| Reverse                merger with SMOU, net of cash acquired                                             |   |                                              | 373         |   |   | - |   |
| Net                cash (used in) provided by investing activities                                        |   |                                              | (11,925,129 | ) |   | 100,471 |   |
|                                                                                                      |   |                                              |             |   |   |  |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                  |   |                                              |             |   |   |  |   |
| Proceeds                from short term bank loans                                                        |   |                                              | 18,493,438  |   |   | 8,307,307 |   |
| Repayment                of short term bank loans                                                         |   |                                              | (11,635,522 | ) |   | (5,218,755 | ) |
| Proceeds                from notes payable                                                                |   |                                              | 23,284,106  |   |   | 101,155 |   |
| Repayment                of notes payable                                                                 |   |                                              | (23,209,013 | ) |   | (3,899,978 | ) |
| Repayment                of advances to related parties                                                   |   |                                              | 35,582      |   |   | 830,933 |   |
| Net                cash provided by financing activities                                                  |   |                                              | 6,968,591   |   |   | 120,662 |   |
|                                                                                                      |   |                                              |        |   |   |   |   |
| **NET                DECREASE IN CASH AND CASH EQUIVALENTS**                                              |   |                                              | (619,457    | ) |   | (370,257 | ) |
| Effect                of exchange rate changes on cash                                                    |   |                                              | 248,748     |   |   | 340,532 |   |
| Cash                and cash equivalents at beginning of period                                           |   |                                              | 1,034,017   |   |   | 876,989 |   |
| **CASH                AND CASH EQUIVALENTS, END OF PERIOD**                                               |   | $                                                 | 663,308     |   | $ | 847,264 |   |
|                                                                                                      |   |                                              |             |   |   |  |   |
| **SUPPLEMENTARY                CASH FLOW INFORMATION**                                                    |   |                                              |             |   |   |  |   |
| Income                taxes paid                                                                          |   | $                                                 | 3,011       |   | $ | - |   |
| Interest                paid                                                                              |   | $                                                 | 682,093     |   | $ | 440,453 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

**(FORMERLY      STONE MOUNTAIN RESOURCES, INC.)**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

**SUPPLEMENTAL      NON-CASH DISCLOSURES:**

| 1. | During                the nine months ended September 30, 2007 and 2006, $12,132 and $821,092                were transferred from construction in progress to plant and equipment,                respectively. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | On                September, 25, 2006, the Company acquired 100% interest of Zhejiang                Yongkang Import and Export Co., Ltd (“Top”) for $632,215 in cash and Top                became a 100% owned subsidiary of the Company. The following represents                the assets purchased and liabilities assumed at the acquisition                date: |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Cash                and cash equivalents             |   | $      | 562,824     |   |
|------------------------------------------------------|--------|--------|-------------|--------|
| Restricted                cash                       |   |   | 13,080,930  |   |
| Accounts                receivable                   |   |   | 2,779,098   |   |
| Plant                and equipment, net              |   |   | 312,311     |   |
| Other                receivables and prepayments     |   |   | 1,781,049   |   |
| Other                assets                          |   |   | 148,658     |   |
| Total                assets purchased                |   | $      | 18,664,870  |   |
|                                                 |   |   |        |   |
| Accounts                payable                      |   |   | (1,942,728  | )      |
| Other                payable and accrued liabilities |   |   | (1,095,986  | )      |
| Short-term                bank loans                 |   |   | (1,719,918  | )      |
| Notes                payable                         |   |   | (13,086,854 | )      |
| Deferred                taxes                        |   |   | (3,236      | )      |
| Other                liabilities                     |   |   | (183,933    | )      |
| Total                liabilities assumed             |   | $      | (18,032,655 | )      |
|                                                 |   |   |        |   |
| Total                net assets                      |   |   | 632,215     |   |
| Share                percentage                      |   |   | 100         | %      |
| Net                assets acquired                   |   | $      | 632,215     |   |
| Total                consideration paid              |   | $      | 632,215     |   |

----

**KANDI        TECHNOLOGIES, CORP.**

**(FORMERLY        STONE MOUNTAIN RESOURCES, INC.)**

**AND        SUBSIDIARIES**
**NOTES TO CONDENSED        CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND        2006**

**(UNAUDITED)**

**NOTE      1. ORGANIZATION AND PRINCIPAL ACTIVITIES**

**NOTE      2. BASIS OF PRESENTATION**

**NOTE      3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE      3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      (CONTINUED)**

(e)   Accounts        Receivable

      respectively.

----

**KANDI            TECHNOLOGIES, CORP.**

**(FORMERLY            STONE MOUNTAIN RESOURCES, INC.)**

**AND            SUBSIDIARIES**
**NOTES TO CONDENSED            CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND            2006**

**(UNAUDITED)**

**NOTE      3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      (CONTINUED)**

|                                                |   | **September                30, 2007** |   | **December                30, 2006** |   | **September                30, 2006** |
|-----------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|---------------------------------------|
|                                                |   |                                  |   |                                 |   |                                  |
| Period                ed RMB: US$ exchange rate     |   | **7.5108**                            |   | **7.8087**                           |   | **7.9087**                            |
|                                                |   |                                  |   |                                 |   |                                  |
| Average                period RMB:US$ exchange rate |   | **7.6598**                            |   | **7.935**                            |   | **7.9895**                            |

*      ,*

----

**KANDI              TECHNOLOGIES, CORP.**

**(FORMERLY              STONE MOUNTAIN RESOURCES, INC.)**

**AND              SUBSIDIARIES**
**NOTES TO CONDENSED              CONSOLIDATED FINANCIAL STATEMENTS**

**FOR              THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND              2006**

**(UNAUDITED)**

**NOTE        3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES        (CONTINUED)**

**NOTE 4.      NEW ACCOUNTING PRONOUNCEMENTS**

**NOTE      5.  **INVENTORIES****

|                             |   | **September                30,2007** |      | **December                31,2006** |   |
|----------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
|                             |   | (Unaudited)                          |      |                                |   |
| Raw                materials     |   | $                                    | 1,805,724 |                                | $      | 2,823,478 |   |
| Work-in-progress                 |   |                                 | 1,085,103 |                                |   | 1,938,932 |   |
| Finished                goods    |   |                                 | 487,649   |                                |   | 700,769 |   |
| Total                inventories |   | $                                    | 3,378,476 |                                | $      | 5,463,179 |   |

----

**KANDI              TECHNOLOGIES, CORP.**

**(FORMERLY              STONE MOUNTAIN RESOURCES, INC.)**

**AND              SUBSIDIARIES**
**NOTES TO CONDENSED              CONSOLIDATED FINANCIAL STATEMENTS**

**FOR              THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND              2006**

**(UNAUDITED)**

**NOTE        6.  **NOTES        RECEIVABLE****

|                                                                                                    |   | **September                30,2007** |      | **December                31,2006** |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
|                                                                                                    |   | (Unaudited)                          |      |                                |   |
| Due                March 19, 2007 (subsequently settled on its due date)                                |   |                                 | -         |                                |   | 97,327 |   |
| Due                May 30, 2007 (subsequently settled on its due date)                                  |   |                                 | -         |                                |   | 250,243 |   |
| Due                July 31, 2007 (subsequently settled on its due date)                                 |   |                                 | -         |                                |   | 83,241 |   |
| Due                October 9, 2007, interest free (subsequently settled on its due                date) |   |                                 | 105,049   |                                |   | - |   |
| Due                December 5, 2007, interest free                                                      |   |                                 | 66,362    |                                |   | - |   |
| Due                December 11, 2007, interest free                                                     |   |                                 | 13,131    |                                |   | - |   |
| Due                March 8, 2008, interest free                                                         |   |                                 | 77,815    |                                |   | - |   |
| Due                March 25, 2008, interest at 6.12% per annum                                          |   |                                 | 919,178   |                                |   | - |   |
| Total                                                                                                   |   | $                                    | 1,181,535 |                                | $      | 430,811 |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE        7 - CONCENTRATIONS**

|                               |   | **Sales**                                                     |   | **Accounts                Receivable**                        |
|------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------------------------------------|
|                               |   |                                                          |   |                                                          |   |   |   |   |
| **Major                Customers** |   | **For                the NineMonths EndedSeptember 30, 2007** |   | **For                the NineMonths EndedSeptember 30, 2006** |   | **September                30, 2007** |   | **December                31, 2006** |
| Company                A           |   | 29%                                                           |   | -                                                             |   | 20% |   | - |
| Company                B           |   | 18%                                                           |   | -                                                             |   | 19% |   | - |
| Company                C           |   | 13%                                                           |   | -                                                             |   | 13% |   | - |
| Company                D           |   | 14%                                                           |   | 35%                                                           |   | 12% |   | 31% |
| Company                E           |   | 10%                                                           |   | 22%                                                           |   | 9% |   | 19% |

|                               |   | **Purchase**                                                  |   | **Accounts                Payable**                           |
|------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------------------------------------|
|                               |   |                                                          |   |                                                          |   |   |   |   |
| **Major                Customers** |   | **For                the NineMonths EndedSeptember 30, 2007** |   | **For                the NineMonths EndedSeptember 30, 2006** |   | **September                30, 2007** |   | **December                31, 2006** |
| Company                F           |   | -                                                             |   | 22%                                                           |   | - |   | 17% |
| Company                G           |   | 9%                                                            |   | 9%                                                            |   | 7% |   | 7% |
| Company                I           |   | 10%                                                           |   | 5%                                                            |   | 5% |   | 3% |
| Company                J           |   | 6%                                                            |   | 5%                                                            |   | 5% |   | - |
| Company              K             |   | 6%                                                            |   | -                                                             |   | 4% |   | - |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE        8.  **PLANT        AND EQUIPMENT****

|                                          |   | **September                30,2007** |       | **December                31,2006** |   |
|-----------------------------------------------|--------|--------------------------------------|------------|-------------------------------------|--------|
|                                          |   | (Unaudited)                          |       |                                |   |
| At                cost:                       |   |                                 |       |                                |   |
| Buildings                                     |   | $                                    | 3,564,305  |                                | $      | 3,371,280 |   |
| Machinery                and equipment        |   |                                 | 8,258,164  |                                |   | 7,955,806 |   |
| Motor                vehicles                 |   |                                 | 745,760    |                                |   | 679,554 |   |
| Office                equipment               |   |                                 | 99,377     |                                |   | 81,376 |   |
| Pattern                                       |   |                                 | 522,907    |                                |   | - |   |
|                                          |   |                                 | 13,190,513 |                                |   | 12,088,016 |   |
| Less:                accumulated depreciation |   |                                 |       |                                |   |   |   |
| Buildings                                     |   |                                 | 384,714    |                                |   | 289,224 |   |
| Machinery                and equipment        |   |                                 | 3,184,193  |                                |   | 2,498,695 |   |
| Motor                vehicles                 |   |                                 | 137,193    |                                |   | 31,047 |   |
| Office                equipment               |   |                                 | 59,236     |                                |   | 44,115 |   |
| Pattern                                       |   |                                 | 78,436     |                                |   | - |   |
|                                          |   |                                 | 3,843,772  |                                |   | 2,863,081 |   |
| Plant                and equipment, net       |   | $                                    | 9,346,741  |                                | $      | 9,224,935 |   |

**NOTE        9.  **LAND        USE RIGHTS****

|                                          |   | **September                30,2007** |    | **December                31,2006** |   |
|-----------------------------------------------|--------|--------------------------------------|---------|-------------------------------------|--------|
|                                          |   |  (Unaudited)                    |    |                                |   |
| Cost                of land use rights        |   | $                                    | 460,943 |                                | $      | 460,943 |   |
| Less:                Accumulated amortization |   |                                 | (71,622 | )                                   |   | (65,017 | ) |
| Land                use rights, net           |   | $                                    | 389,321 |                                | $      | 395,926 |   |

|       |   | **September                30,2007** |    |
|------------|--------|--------------------------------------|---------|
|       |   | (Unaudited)                          |    |
| 2007       |   | $                                    | 1,661   |   |
| 2008       |   |                                 | 6,643   |   |
| 2009       |   |                                 | 6,643   |   |
| 2010       |   |                                 | 6,643   |   |
| 2011       |   |                                 | 6,643   |   |
| Thereafter |   |                                 | 361,088 |   |
| Total      |   | $                                    | 389,321 |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE      10. **SHORT      TERM BANK LOANS****

|                                                                                                                                                                                                                                                                            |   | **September                30,2007** |      | **December                31,2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                            |   | (Unaudited)                          |      |                                |   |
| Loans                from Industrial and Commercial Bank of China-Exploration Zone                Branch:                                                                                                                                                                       |   |                                 |      |                                |   |
| Monthly                interest only payments at 5.85% per annum, due June 5, 2007, secured                by                land use right and plant and equipment owned by the                Company.                                                                        |   | $                                    | -         |                                | $      | 1,280,623 |   |
| Monthly                interest only payments at 5.85% per annum, due July 24, 2007, secured                by                land use right and plant and equipment owned by the                Company.                                                                       |   |                                 | -         |                                |   | 384,187 |   |
| Monthly                interest only payments at 6.12% per annum, due September 7, 2007,                secured                by land use right and plant and equipment owned by the                Company.                                                                   |   |                                 | -         |                                |   | 345,768 |   |
| Monthly                interest only payments at 6.12% per annum, due October 17, 2007,                secured                by land use right and plant and equipment owned by the                Company.                                                                    |   |                                 | -         |                                |   | 870,824 |   |
| Monthly                interest only payments at 6.12% per annum, due November 1, 2007,                secured                by land use right and plant and equipment owned by the                Company.                                                                    |   |                                 | -         |                                |   | 448,218 |   |
| Monthly                interest only payments at 6.12% per annum, due November 27, 2007,                secured                by land use right and plant and equipment owned by the                Company.                                                                   |   |                                 | -         |                                |   | 512,249 |   |
| Monthly                interest only payments at 7.29% per annum, due September 5, 2008,                secured                by land use right and plant and equipment owned by the                Company.                                                                   |   |                                 | 393,933   |                                |   | - |   |
| Monthly                interest only payments at 7.29% per annum, due September 5, 2008,                secured                by land use right and plant and equipment owned by the                Company.                                                                   |   |                                 | 354,540   |                                |   | - |   |
| Monthly                interest only payments at 7.88% per annum, due June 5, 2008, secured                by                land use right and plant and equipment owned by the                Company.                                                                        |   |                                 | 656,556   |                                |   | - |   |
| Monthly                interest only payments at 7.88% per annum, due April 10, 2008, secured                by                land use right and plant and equipment owned by the                Company.                                                                      |   |                                 | 656,556   |                                |   | - |   |
| Monthly                interest only payments at 6.12% per annum, due November 27, 2007,                (subsequently settled) secured by land use right and plant and equipment                owned by the Company.                                                           |   |                                 | 525,245   |                                |   | - |   |
| Monthly                interest only payments at 6.12% per annum, due November 1, 2007,                (subsequently settled) secured by land use right and plant and equipment                owned by the Company.                                                            |   |                                 | 459,589   |                                |   | - |   |
| Monthly                interest only payments at 6.57% per annum, due October 17, 2007,                (subsequently settled) secured by land use right and plant and equipment                owned by the Company.                                                            |   |                                 | 892,916   |                                |   | - |   |
|                                                                                                                                                                                                                                                                            |   |                                 |      |                                |   |   |   |
| Loans                from Commercial Bank -- Jiangnan Branch:                                                                                                                                                                                                                   |   |                                 |      |                                |   |   |   |
| Monthly                interest only payments at 7.254% per annum, due January 15, 2007,                guarantee by Jiandezhen De’er Investment Co., Ltd and Yongkang Tangxin                Metal Foundry Company (subsequently repaid on its due                date). |   |                                 | -         |                                |   | 2,561,246 |   |
| Monthly                interest only payments at 7.605% per annum, due May 11, 2007, secured                by                land use right and plant and equipment owned by the                Company.                                                                       |   |                                 | -         |                                |   | 1,280,622 |   |
| Monthly                interest only payments at 7.67% per annum, due May 10, 2008, secured                by                land use right and plant and equipment owned by the                Company.                                                                        |   |                                 | 1,313,111 |                                |   | - |   |
| Monthly                interest only payments at 7.65% per annum, due January 10, 2008,                guaranteed by Jiangxi Jindezheng De’er Investment Co                                                                                                               |   |                                 | 2,626,223 |                                |   | - |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE        10. SHORT        TERM BANK LOANS (CONTINUED)**

|                                                                                                                                                                                                                       |   | **September                    30,2007** |       | **December                    31,2006** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|-----------------------------------------|--------|
|                                                                                                                                                                                                                       |   |  (Unaudited)                        |       |                                    |   |
| Loans                    from Agricultural Bank, Yongkang Branch. Secured by                    account                                                                                                                    |   |                                     |       |                                    |   |
| receivable                    with carrying amount $1,480,000:                                                                                                                                                             |   |                                     |       |                                    |   |
| Monthly                    interest only payments at 6.39% per annum, due February 2, 2007                                                                                                                                 |   | $                                        | -          |                                    | $      | 330,000 |   |
| Monthly                    interest only payments at 6.36063% per annum, due March 12, 2007                                                                                                                                |   |                                     | -          |                                    |   | 700,000 |   |
| Monthly                    interest only payments at 6.36% per annum, due January 13, 2007                                                                                                                                 |   |                                     | -          |                                    |   | 450,000 |   |
|                                                                                                                                                                                                                       |   |                                     |       |                                    |   |   |   |
| Loans                    from AOC-Hangzhou Branch:                                                                                                                                                                         |   |                                     |       |                                    |   |   |   |
| Monthly                    interest only payments at 6.36% per annum, due November 4, 2007,                    (subsequently settled) guaranteed by Nanlong Group Co.,                    Ltd.                             |   |                                     | 973,187    |                                    |   | - |   |
| Monthly                    interest only payments at 6.36% per annum, due October 11, 2007,                    (subsequently settled) guaranteed by Export Credit Insurance                                                |   |                                     | 604,241    |                                    |   | - |   |
|                                                                                                                                                                                                                       |   |                                     |       |                                    |   |   |   |
| Loans                    from Shanghai Pudong Development Bank:                                                                                                                                                            |   |                                     |       |                                    |   |   |   |
| Monthly                    interest only payments at 6.33% per annum, due February 14, 2008,                    guaranteed by Nanlong Group Co., Ltd.                                                                      |   |                                     | 2,626,223  |                                    |   | - |   |
|                                                                                                                                                                                                                       |   |                                     |       |                                    |   |   |   |
| Loans                    from Shanghai Pudong Development Bank:                                                                                                                                                            |   |                                     |       |                                    |   |   |   |
| Monthly                    interest only payments at 6.33% per annum, due August 9, 2008,                    secured by                    land use right and plant and equipment owned by the                    Company. |   |                                     | 3,939,334  |                                    |   |   |   |
|                                                                                                                                                                                                                       |   |                                     |       |                                    |   |   |   |
| Total                                                                                                                                                                                                                      |   | $                                        | 16,021,654 |                                    | $      | 9,163,737 |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE        11.  **NOTES        PAYABLE****

Notes      payable consist of the following:

|                                                                                              |   | **September                30,2007** |       | **December                31,2006** |   |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|-------------------------------------|--------|
|                                                                                              |   | (Unaudited)                          |       |                                |   |
| Bank                acceptance notes aaacceptance notes:                                          |   |                            |       |                                |   |
| Due                October 30, 2007 (subsequently settled on its due date)                        |   | $                                    | -          |                                | $      | 1,570,083 |   |
| Due                January 4, 2007 (subsequently settled on its due date)                         |   |                                 | -          |                                |   | 960,467 |   |
| Due                February 12, 2007 (subsequently settled on its due date)                       |   |                                 | -          |                                |   | 1,280,623 |   |
| Due                February 10, 2007 (subsequently settled on its due date)                       |   |                                 | -          |                                |   | 1,280,623 |   |
| Due                January 26, 2007 (subsequently settled on its due date)                        |   |                                 | -          |                                |   | 640,311 |   |
| Due                January 5, 2007 (subsequently settled on its due date)                         |   |                                 | -          |                                |   | 960,467 |   |
| Due                March 11, 2007 (subsequently settled on its due date)                          |   |                                 | -          |                                |   | 1,152,560 |   |
| Due                March 25, 2007 (subsequently settled on its due date)                          |   |                                 | -          |                                |   | 1,024,498 |   |
| Due                March 28, 2007 (subsequently settled on its due date)                          |   |                                 | -          |                                |   | 1,280,623 |   |
| Due                January 3, 2007 (subsequently settled on its due date)                         |   |                                 | -          |                                |   | 512,250 |   |
| Due                August 1, 2008                                                                 |   |                                 | 262,622    |                                |   | - |   |
| Due                March 12, 2008                                                                 |   |                                 | 69,327     |                                |   | - |   |
| Due                February 2, 2008                                                               |   |                                 | 377,567    |                                |   | - |   |
| Due                March 18, 2008                                                                 |   |                                 | 656,556    |                                |   | - |   |
| Due                November 18, 2007                                                              |   |                                 | 105,049    |                                |   | - |   |
| Due                November 18, 2007                                                              |   |                                 | 144,442    |                                |   | - |   |
| Due                February 6, 2008                                                               |   |                                 | 1,050,489  |                                |   | - |   |
| Due                February 6, 2008                                                               |   |                                 | 656,556    |                                |   | - |   |
| Due                March 20, 2008                                                                 |   |                                 | 919,178    |                                |   | - |   |
| Due                January 30, 2008                                                               |   |                                 | 525,245    |                                |   | - |   |
| Due                January 26, 2008                                                               |   |                                 | 1,575,734  |                                |   | - |   |
| Due                December 27, 2007                                                              |   |                                 | 656,556    |                                |   | - |   |
| Due                February 20, 2008                                                              |   |                                 | 1,313,111  |                                |   | - |   |
| Due                February 21, 2008                                                              |   |                                 | 1,313,111  |                                |   | - |   |
| Subtotal                                                                                          |   | $                                    | 9,625,543  |                                | $      | 10,662,505 |   |
|                                                                                              |   |                                 |            |                                |   |   |   |
| Notes                payable (interest-free and unsecured) to unrelated                companies: |   |                                 |            |                                |   |   |   |
| Due                November 11, 2007                                                              |   | $                                    | -          |                                | $      | 102,450 |   |
| Due                May 30, 2007                                                                   |   |                                 | -          |                                |   | 14,608 |   |
| Due                January 15, 2008                                                               |   |                                 | 656,556    |                                |   | - |   |
| Due                November 19, 2007                                                              |   |                                 | 572,557    |                                |   | - |   |
| Subtotal                                                                                          |   | $                                    | 1,229,113  |                                | $      | 117,058 |   |
|                                                                                              |   |                                 |       |                                |   |   |   |
| Total                                                                                             |   | $                                    | 10,854,656 |                                | $      | 10,779,563 |   |

----

**KANDI            TECHNOLOGIES, CORP.**

**(FORMERLY            STONE MOUNTAIN RESOURCES, INC.)**

**AND            SUBSIDIARIES**
**NOTES TO CONDENSED            CONSOLIDATED FINANCIAL STATEMENTS**

**FOR            THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND            2006**

**(UNAUDITED)**

**NOTE          11.  **NOTES          PAYABLE (CONTINUED)****

|                                                                        |   | **September                30,2007** |      | **December                31,2006** |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------|-----------|-------------------------------------|--------|
|                                                                        |   | (Unaudited)                          |      |                                |   |
| Due                January 4, 2007 (subsequently settled on its due date)   |   | $                                    | -         |                                | $      | 960,467 |   |
| Due                February 12, 2007 (subsequently settled on its due date) |   |                                 | -         |                                |   | 1,280,623 |   |
| Due                February 10,2007 (subsequently settled on its due date)  |   |                                 | -         |                                |   | 1,280,623 |   |
| Due                January 26, 2007 (subsequently settled on its due date)  |   |                                 | -         |                                |   | 640,311 |   |
| Due                January 5, 2007 (subsequently settled on its due date)   |   |                                 | -         |                                |   | 960,467 |   |
| Due                March 11. 2007 (subsequently settled on its due date)    |   |                                 | -         |                                |   | 1,152,561 |   |
| Due                March 25, 2007 (subsequently settled on its due date)    |   |                                 | -         |                                |   | 1,024,498 |   |
| Due                March 28, 2007 (subsequently settled on its due date)    |   |                                 | -         |                                |   | 1,280,623 |   |
| Due                January 3, 2007 (subsequently settled on its due date)   |   |                                 | -         |                                |   | 512,250 |   |
| Due                January 16, 2008                                         |   |                                 | 1,575,734 |                                |   | - |   |
| Due                February 20, 2008                                        |   |                                 | 1,313,111 |                                |   | - |   |
| Due                February 21, 2008                                        |   |                                 | 1,313,111 |                                |   | - |   |
| Due                February 6, 2008                                         |   |                                 | 1,050,488 |                                |   | - |   |
| Due                March 20, 2008                                           |   |                                 | 919,178   |                                |   | - |   |
| Due                March 18, 2008                                           |   |                                 | 656,556   |                                |   | - |   |
| Due                February 6, 2008                                         |   |                                 | 656,556   |                                |   | - |   |
| Due                December 17, 2007                                        |   |                                 | 656,556   |                                |   | - |   |
| Due                January 30, 2008                                         |   |                                 | 525,245   |                                |   | - |   |
| Total                                                                       |   | $                                    | 8,666,535 |                                | $      | 9,092,423 |   |

**NOTE        12. **LONG        TERM DEBT****

|                                                                                                                                                                                                                                               |   | **September                30,2007** |       | **December                31,2006** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|-------------------------------------|--------|
|                                                                                                                                                                                                                                               |   | (Unaudited)                          |       |                                |   |
| Loan                from Huaxia bank Hangzhou Jianguo branch, due November 22, 2007,                quarterly                interest only payments at 6.336% per annum, secured by the assets                owned by                the Company. |   | $                                    | 1,920,934  |                                | $      | 1,920,934 |   |
| Total                long-term bank loan                                                                                                                                                                                                           |   |                                 | 1,920,934  |                                | $      | 1,920,934 |   |
| Less:                current portion                                                                                                                                                                                                               |   |                                 | (1,920,934 | )                                   |   | (1,920,934 | ) |
| Total                long-term debt                                                                                                                                                                                                                |   | $                                    | -          |                                | $      | - |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE      13. INCOME TAXES**

|                              |   | **For                the Nine MonthsEnded September 30,** |   |
|-----------------------------------|--------|-----------------------------------------------------------|--------|
|                              |   | 2007                                                      |   | 2006 |   |
|                              |   | (Unaudited)                                               |   |
|                              |   |                                                      |   |   |   |
| Current:                          |   |                                                      |   |   |   |
| Provision                for CIT  |   | $                                                         | -      |   | $ | - |   |
|                              |   |                                                      |   |   |   |   |   |
| Deferred:                         |   |                                                      |   |   |   |   |   |
| Provision                for CIT  |   | $                                                         | 2,111  |   | $ | - |   |
|                              |   |                                                      |   |   |   |   |   |
| Income                tax expense |   | $                                                         | 2,111  |   | $ | - |   |

|                                                     |   | **For                the Nine MonthsEnded September 30,** |       |
|----------------------------------------------------------|--------|-----------------------------------------------------------|------------|
|                                                     |   | 2007                                                      |       | 2006 |   |
|                                                     |   | (Unaudited)                                               |       |
|                                                     |   |                                                      |       |   |   |
| Computed                “expected” (expense) |   | $                                                         | 1,230,670  |   | $ | 12,264 |   |
| Tax                exemption                             |   |                                                      | (1,230,744 | ) |   | (12,264 | ) |
| Tax                rate adjustment                       |   |                                                      | (60        | ) |   | - |   |
| Timing                difference                         |   | $                                                         | 2,245      |   | $ | - |   |
|                                                     |   |                                                      |       |   |   |   |   |
| Income                tax expense                        |   | $                                                         | 2,111      |   | $ | - |   |

----

**KANDI          TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE      13. INCOME TAXES (CONTINUED)**

|                                          |   | **September                30,2007** |   | **December                31,2006** |   |
|-----------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|
|                                          |   | (Unaudited)                          |   |                                |   |
| Deferred                tax assets:           |   |                                 |   |                                |   |
| Current                portion                |   |                                 |   |                                |   |
| Others                                        |   | $                                    | 4,684  |                                | $      | 99 |   |
| Subtotal                                      |   |                                 | 4,684  |                                |   | 99 |   |
|                                          |   |                                 |   |                                |   |   |   |
| Non-current                portion:           |   |                                 |   |                                |   |   |   |
| Depreciation                                  |   |                                 | 3,502  |                                |   | 2,784 |   |
| Subtotal                                      |   |                                 | 3,502  |                                |   | 2,784 |   |
|                                          |   |                                 |   |                                |   |   |   |
| Total                deferred tax assets      |   |                                 | 8,186  |                                |   | 2,883 |   |
|                                          |   |                                 |   |                                |   |   |   |
| Deferred                tax liabilities:      |   |                                 |   |                                |   |   |   |
| Current                portion                |   |                                 |   |                                |   |   |   |
| Others                                        |   |                                 | 8,167  |                                |   | - |   |
| Subtotal                                      |   |                                 | 8,167  |                                |   | - |   |
|                                          |   |                                 |   |                                |   |   |   |
| Non-current                portion:           |   |                                 |   |                                |   |   |   |
| Others                                        |   |                                 | 2,546  |                                |   | 3,277 |   |
| Subtotal                                      |   |                                 | 2,546  |                                |   | 3,277 |   |
|                                          |   |                                 |   |                                |   |   |   |
| Total                deferred tax liabilities |   |                                 | 10,713 |                                |   | 3,277 |   |
|                                          |   |                                 |   |                                |   |   |   |
| Net                deferred tax liabilities   |   | $                                    | (2,527 | )                                   | $      | (394 | ) |

----

** ****KANDI      TECHNOLOGIES, CORP.**

**(FORMERLY          STONE MOUNTAIN RESOURCES, INC.)**

**AND          SUBSIDIARIES**
**NOTES TO CONDENSED          CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND          2006**

**(UNAUDITED)**

**NOTE      14.  CONTINGENCIES**

**NOTE      15. FORFEITURE OF CUSTOMER DEPOSIT**

**NOTE      16. SUBSEQUENT EVENT**

----

**ITEM      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF      OPERATIONS **

*This      report contains certain “forward-looking statements” within the meaning of      Section 27A of the Securities Act of 1933, as amended, and Section 21E      of the Exchange Act of 1934, as amended, which are based on management’s      exercise of business judgment as well as assumptions made by and information      currently available to, management. When used in this document, the words “may”,“will”, “anticipate”, “believe”, “estimate”, “expect”, “intend” and words of      similar import, are intended to identify any forward-looking statements. You      should not place undue reliance on these forward-looking statements. These      statements reflect our current view of future events and are subject to certain      risks and uncertainties as described in this Report on Form 10-QSB as well      as      other periodic reports, filed with the Securities and Exchange Commission,      and      as noted below. Should one or more of these risks or uncertainties materialize,      or should underlying assumptions prove incorrect, our actual results could      differ materially from those anticipated in these forward-looking statements.      We      undertake no obligation, and do not intend, to update, revise or otherwise      publicly release any revisions to these forward-looking statements to reflect      events or circumstances after the date hereof, or to reflect the occurrence      of      any unanticipated events. Although we believe that our expectations are based      on      reasonable assumptions, we can give no assurance that our expectations will      materialize.*

**Overview**

**Results      of Operations**

***Comparison      of Three Months Ended September 30, 2007 and September 30,      2006.***

|   |   | **For                the Three Months Ended****September                  30,** |   |                           |   |
|--------|--------|---------------------------------------------------------------------------------|--------|--------------------------------|--------|
|   |   | **2007****(Unaudited)**                                                         |   | **2006****(Unaudited)**        |   | **Comparisons** |   |
|   |   | **Amount**                                                                      |   | **%                ofRevenue** |   | **Amount** |   | **%                ofRevenue** |   | **Growth                inAmount** |   | **Increasein                %** |   |

|                                          |   |    |      |   |   |    |   |   |      |   |   |   |   |
|-----------------------------------------------|--------|--------------|-----------|--------|--------|--------------|--------|--------|-----------|--------|--------|--------|--------|
| **REVENUES**                                  |   | $            | 8,854,668 |   |   | 100.00       | %      | $      | 1,552,217 |   |   | 100.00 | %      | $ | 7,302,451 |   |   | 470.45 | % |
| **COST                OF GOODS SOLD**         |   |         | 7,389,605 |   |   | 83.45        | %      |   | 1,129,089 |   |   | 72.74  | %      |   | 6,260,516 |   |   | 554.47 | % |
| **GROSS                PROFIT**               |   |         | 1,465,063 |   |   | 16.55        | %      |   | 423,128   |   |   | 27.26  | %      |   | 1,041,935 |   |   | 246.25 | % |
| Selling                and Marketing          |   |         | 292,074   |   |   | 3.30         | %      |   | 54,140    |   |   | 3.49   | %      |   | 237,934 |   |   | 439.48 | % |
| General                and Administrative     |   |         | 248,992   |   |   | 2.81         | %      |   | 65,501    |   |   | 4.22   | %      |   | 183,491 |   |   | 280.13 | % |
| Research                and Development       |   |         | 16,122    |   |   | 0.18         | %      |   | 37,777    |   |   | 2.43   | %      |   | (21,655 | ) |   | (57.32 | %) |
| **INCOME                FROM OPERATIONS**     |   |         | 907,895   |   |   | 10.25        | %      |   | 265,710   |   |   | 17.12  | %      |   | 642,165 |   |   | 241.68 | % |
| Government                Grants              |   |         | 3,049     |   |   | 0.03         | %      |   | 30,968    |   |   | 2.00   | %      |   | (27,919 | ) |   | (90.15 | %) |
| Forfeiture                of Customer Deposit |   |         | 233,584   |   |   | 2.64         | %      |   | -         |   |   | N/A    |   |   | 233,584 |   |   | 100.00 | % |
| Other                (Expense) Income, Net    |   |         | -         |   |   | N/A          |   |   | 4,971     |   |   | 0.32   | %      |   | (4,971 | ) |   | (100.00 | %) |
| Interest                Expense, Net          |   |         | (272,818  | )      |   | (3.08        | %)     |   | (174,741  | )      |   | (11.26 | %)     |   | (98,077 | ) |   | (56.13 | %) |
| **INCOME                BEFORE INCOME TAX**   |   |         | 871,710   |   |   | 9.84         | %      |   | 126,908   |   |   | 8.18   | %      |   | 744,802 |   |   | 586.88 | % |
| **INCOME                TAX**                 |   |         | 212       |   |   | 0.00         | %      |   | -         |   |   | N/A    |   |   | 212 |   |   | 100.00 | % |
| **NET                INCOME**                 |   |         | 871,498   |   |   | 9.84         | %      |   | 126,908   |   |   | 8.18   | %      |   | 744,590 |   |   | 586.72 | % |

----

***Revenues.***

***Cost      of Sales***
*.      *

***Gross      Profit.***

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***Income      Tax Provision***

***Net      Income***
**.**

----

***Comparison      of Nine Months Ended September 30, 2007 and September 30,      2006.***

|   |   | **For                  the Nine Months Ended****September                    30,** |   |                             |   |
|--------|--------|-----------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|   |   | **2007****(Unaudited)**                                                                 |   | **2006****(Unaudited)**          |   | **Comparisons** |   |
|   |   | **Amount**                                                                              |   | **%                  ofRevenue** |   | **Amount** |   | **%                  ofRevenue** |   | **Growth                  inAmount** |   | **Increasein                  %** |   |

|                                          |   |   |       |   |   |   |   |   |      |   |   |   |   |   |       |   |   |      |   |
|-----------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|------------|--------|--------|-----------|--------|
| **REVENUES**                                  |   | $      | 26,022,205 |   |   | 100    | %      | $      | 6,338,562 |   |   | 100    | %      | $      | 19,683,643 |   |   | 310.54    | %      |
| **COST                OF GOODS SOLD**         |   |   | 20,666,981 |   |   | 79.42  | %      |   | 5,440,601 |   |   | 85.83  | %      |   | 15,226,380 |   |   | 279.87    | %      |
| **GROSS                PROFIT**               |   |   | 5,355,224  |   |   | 20.58  | %      |   | 897,961   |   |   | 14.17  | %      |   | 4,457,263  |   |   | 496.38    | %      |
| Selling                and Marketing          |   |   | 657,342    |   |   | 2.53   | %      |   | 139,480   |   |   | 2.20   | %      |   | 517,862    |   |   | 371.28    | %      |
| General                and Administrative     |   |   | 614,615    |   |   | 2.36   | %      |   | 285,757   |   |   | 4.51   | %      |   | 328,858    |   |   | 115.08    | %      |
| Research                and Development       |   |   | 68,925     |   |   | 0.26   | %      |   | 87,538    |   |   | 1.38   | %      |   | (18,613    | )      |   | (21.26    | %)     |
| **INCOME                FROM OPERATIONS**     |   |   | 4,014,342  |   |   | 15.43  | %      |   | 385,186   |   |   | 6.08   | %      |   | 3,629,156  |   |   | 942.18    | %      |
| Government                Grants              |   |   | 15,233     |   |   | 0.06   | %      |   | 97,194    |   |   | 1.53   | %      |   | (81,961    | )      |   | (84.33    | %)     |
| Forfeiture                on Customer Deposit |   |   | 500,304    |   |   | 1.92   | %      |   | -         |   |   | N/A    |   |   | 500,304    |   |   | 100.00    | %      |
| Other                (Expense) Income, Net    |   |   | (77,404    | )      |   | (0.30  | %)     |   | 5,519     |   |   | 0.09   | %      |   | (82,923    | )      |   | (1,502.50 | %)     |
| Interest                Expense, Net          |   |   | (723,171   | )      |   | (2.78  | %)     |   | (450,734  | )      |   | (7.11  | %)     |   | (272,437   | )      |   | (60.44    | %)     |
| **INCOME                BEFORE INCOME TAX**   |   |   | 3,729,304  |   |   | 14.33  | %      |   | 37,165    |   |   | (0.59  | %)     |   | 3,692,139  |   |   | 9,934.45  | %      |
| **INCOME                TAX**                 |   |   | 2,111      |   |   | 0.01   | %      |   | -         |   |   | N/A    |   |   | 2,111      |   |   | 100.00    | %      |
| **NET                INCOME**                 |   |   | 3,727,193  |   |   | 14.32  | %      |   | 37,165    |   |   | (0.59  | %)     |   | 3,690,028  |   |   | 9,928.77  | %      |

***Revenues***
*.      *

***Cost      of Sales***
*.      *

***Gross      Profit.***

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

----

***Research      and Development Expenses***

***Income      Tax Provision***

***Net      Income***
**.**

**Liquidity      and Capital Resources**

***Cash      Flows***

*Nine      Months ended September 30, 2007 and 2006*

*Working      Capital*

**Contractual      Obligations and Off-Balance Sheet Arrangements**

*Contractual      Obligations*

----

|                                          |   | **Payments                Due by Period** |       |
|-----------------------------------------------|--------|-------------------------------------------|------------|
|                                          |   |                                      |       | **Less                than 1** |   |   |   |   |   |   |   |
|                                          |   | **Total**                                 |       | **Year** |   | **1                - 3 Years** |   | **3                - 5 Years** |   | **5                Years +** |   |
| Contractual                Obligations:       |   |                                      |       |   |   |   |   |   |   |   |   |
| Bank                Indebtedness              |   | $                                         | 17,942,588 |   | $ | 17,942,588 |   | $ | - |   | $ | - |   | $ | - |   |
| Other                Indebtedness             |   |                                      | 10,854,656 |   |   | 10,854,656 |   |   | - |   |   | - |   |   | - |   |
| Capital                Lease Obligations      |   |                                      |       |   |   |   |   |   | - |   |   | - |   |   | - |   |
| Operating                Leases               |   |                                      |       |   |   |   |   |   | - |   |   | - |   |   | - |   |
| Purchase                Obligations           |   |                                      |       |   |   |   |   |   | - |   |   | - |   |   | - |   |
| Total                Contractual Obligations: |   | $                                         | 28,797,244 |   | $ | 28,797,244 |   | $ | - |   | $ | - |   | $ | - |   |

*Off-balance      Sheet Arrangements*

**Related      Party Transactions**

**Accounting      Policies**

*Revenue      Recognition*

|  | --- | Persuasive                  evidence of an arrangement                  exists, |
|--|-----|---------------------------------------------------------------------------------|

|  | --- | Delivery                has occurred or services have been                rendered, |
|--|-----|-------------------------------------------------------------------------------------|

|  | --- | The                  seller's price to the buyer is fixed or determinable,                  and |
|--|-----|-------------------------------------------------------------------------------------------------|

|  | --- | Collectibility                is reasonably assured. |
|--|-----|------------------------------------------------------|

*Use      of Estimates*

**Recent      Accounting Pronouncements**

----

**Item      3. Controls and Procedures**

----

**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

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

**Item      3. Defaults Upon Senior Securities.**

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

**Item      5. Other Information.**

**Item      6. Exhibits and Reports of Form 8-K.**

|  | (a) | Exhibits |
|--|-----|----------|

|  | 31.1 | Certifications                  pursuant to Section 302 of Sarbanes Oxley Act of                  2002 |
|--|------|--------------------------------------------------------------------------------------------------------|

|  | 32.1 | Certifications                  pursuant to Section 906 of Sarbanes Oxley Act of                  2002 |
|--|------|--------------------------------------------------------------------------------------------------------|

|  | (b) | Reports                  of Form 8-K |
|--|-----|--------------------------------------|

----

**SIGNATURES**

|                                         |                                                       |                              |
|----------------------------------------------|------------------------------------------------------------|-----------------------------------|
|                                         | KANDI              TECHNOLOGIES, CORP.                     |
|                                    |                                                  |                         |
| Date:                November 19, 2007  | By:                                              | /s/ Hu              Xiaoming |
|                                         | Hu                Xiaoming                                 |
|                                         | President                and Chief Executive Officer  |

|                                           |                                             |                                       |
|------------------------------------------------|--------------------------------------------------|--------------------------------------------|
|                                      |                                        |                                  |
| Date:                  November 19, 2007  | By:                                    | /s/ Zhu                Xiaoying  |
|                                           | Zhu                  Xiaoying               |
|                                           | Chief                    Financial Officer  |

----