**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

----

**FORM      10-Q**

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

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

**Kandi      Technologies, Corp.**

| Delaware                                                                                    |   | 87-0700927                                          |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                Employer Identification No.) |

**Jinhua      City Industrial Zone**

**Jinhua,      Zhejiang Province**

**People’s      Republic of China**

**Post      Code 321016**

----

**(86      - 0579) 82239700**

| Large                accelerated filer  ̈ | Accelerated                filer  ̈    |
|-----------------------------------------------|--------------------------------------------|
| Non-accelerated                filer  ̈   | Smaller                reporting company x |

----

**PART      I— FINANCIAL INFORMATION**

**Item      1. Financial Statements. (Unaudited) **

**KANDI      TECHNOLOGIES, CORP. **

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

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

|                                                                                                                                                                                  |   | **June 30,** |       |                  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|-----------------------|--------|
|                                                                                                                                                                                  |   | **2008**          |       | **December 31,** |   |
|                                                                                                                                                                                  |   | **(Unaudited)**   |       | **2007**              |   |
|                                                                                                                                                                                  |   |              |       |                  |   |
| CURRENT                ASSETS                                                                                                                                                         |   |              |       |                  |   |
| Cash                and cash equivalents                                                                                                                                              |   | $                 | 156,896    |                  | $      | 1,149,140 |   |
| Restricted                cash                                                                                                                                                        |   |              | 6,548,503  |                  |   | 1,367,222 |   |
| Accounts                receivable, net of allowance for doubtful accounts of $1,634 and                $3,701 as                of June 30, 2008 and December 31, 2007, respectively |   |              | 14,501,396 |                  |   | 11,401,367 |   |
| Inventories                                                                                                                                                                           |   |              | 5,425,919  |                  |   | 3,293,529 |   |
| Notes                receivable, net of discount of $68,285 and $0 as of June 30, 2008                and                December 31, 2007, respectively                              |   |              | 6,506,108  |                  |   | 47,853 |   |
| Other                receivables                                                                                                                                                      |   |              | 131,281    |                  |   | 416,454 |   |
| Deposit                for acquisition                                                                                                                                                |   |              |       |                  |   | 12,270,859 |   |
| Prepayments                and prepaid expenses                                                                                                                                       |   |              | 68,919     |                  |   | 17,774 |   |
| Due                from employees                                                                                                                                                     |   |              | -          |                  |   | 9,932 |   |
| Discontinued                operation                                                                                                                                                 |   |              | -          |                  |   | 14,158,890 |   |
| Total                Current Assets                                                                                                                                                   |   |              | 33,339,022 |                  |   | 44,133,020 |   |
|                                                                                                                                                                                  |   |              |       |                  |   |   |   |
| LONG-TERM                ASSETS                                                                                                                                                       |   |              |       |                  |   |   |   |
| Plant                and equipment, net                                                                                                                                               |   |              | 16,245,693 |                  |   | 10,427,176 |   |
| Land                use rights, net                                                                                                                                                   |   |              | 9,477,194  |                  |   | 385,539 |   |
| Construction                in progress                                                                                                                                               |   |              | 1,253,868  |                  |   | 1,321,832 |   |
| Deferred                taxes                                                                                                                                                         |   |              | 480,986    |                  |   | 405,006 |   |
| Discontinued                operation                                                                                                                                                 |   |              | -          |                  |   | 506,526 |   |
| Total                Long-Term Assets                                                                                                                                                 |   |              | 27,457,741 |                  |   | 13,046,079 |   |
|                                                                                                                                                                                  |   |              |       |                  |   |   |   |
| TOTAL                ASSETS                                                                                                                                                           |   | $                 | 60,796,763 |                  | $      | 57,179,099 |   |

----

**KANDI      TECHNOLOGIES, CORP. **

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

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**LIABILITIES      AND SHAREHOLDERS’ EQUITY**

|                                                                                                                                                                                                                                                   |   | **June 30,** |       |                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|-----------------------|--------|
|                                                                                                                                                                                                                                                   |   | **2008**          |       | **December 31,** |   |
|                                                                                                                                                                                                                                                   |   | **(Unaudited)**   |       | **2007**              |   |
| CURRENT                LIABILITIES                                                                                                                                                                                                                     |   |              |       |                  |   |
| Accounts                payable                                                                                                                                                                                                                        |   | $                 | 11,397,872 |                  | $      | 6,333,057 |   |
| Other                payables and accrued expenses                                                                                                                                                                                                     |   |              | 603,159    |                  |   | 378,675 |   |
| Short-term                bank loans                                                                                                                                                                                                                   |   |              | 27,139,905 |                  |   | 20,869,862 |   |
| Customer                deposits                                                                                                                                                                                                                       |   |              | 789,933    |                  |   | 483,320 |   |
| Notes                payable                                                                                                                                                                                                                           |   |              | 3,463,430  |                  |   | 1,476,600 |   |
| Due                to employees                                                                                                                                                                                                                        |   |              | 37,086     |                  |   | 310 |   |
| Due                to related party                                                                                                                                                                                                                    |   |              | 164,250    |                  |   | - |   |
| Discontinued                operation                                                                                                                                                                                                                  |   |              | -          |                  |   | 14,296,572 |   |
| Total                Current Liabilities                                                                                                                                                                                                               |   |              | 43,595,635 |                  |   | 43,838,396 |   |
|                                                                                                                                                                                                                                                   |   |              |       |                  |   |   |   |
| LONG-TERM                LIABILITIES                                                                                                                                                                                                                   |   |              |       |                  |   |   |   |
| Deferred                taxes                                                                                                                                                                                                                          |   |              | 296,511    |                  |   | 296,511 |   |
| Discontinued                operation                                                                                                                                                                                                                  |   |              | -          |                  |   | 2,651 |   |
| Total                Long-Term Liabilities                                                                                                                                                                                                             |   |              | 296,511    |                  |   | 299,162 |   |
|                                                                                                                                                                                                                                                   |   |              |       |                  |   |   |   |
| TOTAL                LIABILITIES                                                                                                                                                                                                                       |   |              | 43,892,146 |                  |   | 44,137,558 |   |
|                                                                                                                                                                                                                                                   |   |              |       |                  |   |   |   |
| CONTINGENCIES                                                                                                                                                                                                                                          |   |              |       |                  |   |   |   |
|                                                                                                                                                                                                                                                   |   |              |       |                  |   |   |   |
| SHAREHOLDERS’                EQUITY                                                                                                                                                                                                              |   |              |       |                  |   |   |   |
| Common                stock, $0.001 par value; 100,000,000 shares authorized; 19,961,000                and                19,961,000 shares issued and outstanding at June 30, 2008 and December                31,                2007, respectively |   |              | 19,961     |                  |   | 19,961 |   |
| Additional                paid-in capital                                                                                                                                                                                                              |   |              | 7,138,105  |                  |   | 7,138,105 |   |
| Retained                earnings (the restricted portion is $534,040 and $0 at June 30, 2008                and                December 31, 2007, respectively)                                                                                        |   |              | 8,635,534  |                  |   | 5,125,120 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                                  |   |              | 1,111,017  |                  |   | 758,355 |   |
| TOTAL                SHAREHOLDERS’ EQUITY                                                                                                                                                                                                        |   |              | 16,904,617 |                  |   | 13,041,541 |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                        |   | $                 | 60,796,763 |                  | $      | 57,179,099 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME**

**AND        COMPREHENSIVE INCOME**

**(UNAUDITED**

|                                                                             |   | **Three Months Ended** |       | **Six Months Ended** |   |
|----------------------------------------------------------------------------------|--------|----------------------------------|------------|--------------------------------|--------|
|                                                                             |   | **June 30, 2008**      |       | **June 30, 2007**    |   | **June 30, 2008** |   | **June 30, 2007** |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **REVENUES,                NET**                                                 |        | $                                | 12,424,373 |                                | $      | 11,109,555 |   | $ | 21,753,075 |   | $ | 16,471,019 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **COST                OF GOODS SOLD**                                            |   |                             | (9,139,131 | )                              |   | (8,468,179 | ) |   | (16,316,178 | ) |   | (12,861,099 | ) |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **GROSS                PROFIT**                                                  |   |                             | 3,285,242  |                           |   | 2,641,376 |   |   | 5,436,897 |   |   | 3,609,920 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| Research                and development                                          |   |                             | 224,146    |                           |   | 40,749 |   |   | 264,816 |   |   | 52,615 |   |
| Selling                and marketing                                             |   |                             | 180,596    |                           |   | 107,756 |   |   | 409,102 |   |   | 188,354 |   |
| General                and administrative                                        |   |                             | 432,238    |                           |   | 142,060 |   |   | 704,682 |   |   | 285,346 |   |
| **INCOME                FROM CONTINUING OPERATIONS**                             |   |                             | 2,448,262  |                           |   | 2,350,811 |   |   | 4,058,297 |   |   | 3,083,605 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| Interest                expense, net                                             |   |                             | (395,087   | )                              |   | (160,938 | ) |   | (1,009,699 | ) |   | (295,748 | ) |
| Government                grants                                                 |   |                             | 17,274     |                           |   | - |   |   | 40,574 |   |   | - |   |
| Forfeiture                of customer deposits                                   |   |                             | -          |                           |   | - |   |   | - |   |   | 267,673 |   |
| Other,                net                                                        |   |                             | (1,948     | )                              |   | (70,254 | ) |   | 20,047 |   |   | (69,694 | ) |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**         |   |                             | 2,068,501  |                           |   | 2,119,619 |   |   | 3,109,219 |   |   | 2,985,836 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **INCOME                TAX BENEFIT**                                            |   |                             | 33,920     |                           |   | - |   |   | 73,660 |   |   | - |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM CONTINUING OPERATIONS**                             |   |                             | 2,102,421  |                           |   | 2,119,619 |   |   | 3,182,879 |   |   | 2,985,836 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **DISCONTINUED                OPERATION**                                        |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| Loss                from discontinued operation                                  |   |                             | (34,219    | )                              |   | (212,568 | ) |   | (33,379 | ) |   | (140,200 | ) |
| Gain                from disposition of discontinued operation                   |   |                             | 368,249    |                           |   | - |   |   | 360,913 |   |   | - |   |
| **NET                GAIN (LOSS) FROM****DISCONTINUED                OPERATION** |   |                             | 334,030    |                           |   | (212,568 | ) |   | 327,534 |   |   | (140,200 | ) |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                                    |   |                             | 2,436,451  |                           |   | 1,907,052 |   |   | 3,510,413 |   |   | 2,845,636 |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME**                                    |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation                                      |   |                             | 93,622     |                           |   | 75,376 |   |   | 350,834 |   |   | 136,385 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES **

**CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS**

**AND        COMPREHENSIVE INCOME **

**(UNAUDITED)**

|                                                                                                                                           |   | **Three Months Ended** |       | **Six Months Ended** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------------------------------|--------|
|                                                                                                                                           |   | **June 30, 2008**      |       | **June 30, 2007**    |   | **June 30, 2008** |   | **June 30, 2007** |   |
|                                                                                                                                           |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                                                                                                      |   | $                                | 2,530,073  |                           | $      | 1,982,426 |   | $ | 3,861,247 |   | $ | 2,982,021 |   |
|                                                                                                                                           |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                  AVERAGE SHARES OUTSTANDING BASIC AND DILUTED**                                                                     |   |                             | 19,961,000 |                           |   | 12,176,911 |   |   | 19,961,000 |   |   | 12,088,456 |   |
|                                                                                                                                           |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **INCOME                  PER SHARE FROM CONTINUING OPERATION, BASIC AND                  DILUTED**                                            |   | $                                | 0.11       |                           | $      | 0.17 |   | $ | 0.16 |   | $ | 0.25 |   |
|                                                                                                                                           |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **INCOME                  (LOSS) PER SHARE FROM GAIN (LOSS) FROM DISCONTINUED OPERATION,                  BASIC AND                  DILUTED** |   | $                                | 0.01       |                           | $      | (0.01 | ) | $ | 0.02 |   | $ | (0.01 | ) |
|                                                                                                                                           |   |                             |       |                           |   |   |   |   |   |   |   |   |   |
| **NET                  INCOME PER COMMON SHARE, BASIC AND DILUTED**                                                                            |        | $                                | 0.12       |                                | $      | 0.16 |  | $ | 0.18 |  | $ | 0.24 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                                |   | **Six Months ****Ended June 30,** |       |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|------------|
|                                                                                                                |   | **2008**                                              |       | **2007** |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES:**                                                          |   |                                                  |       |   |   |
| Net                  income                                                                                         |   | $                                                     | 3,510,413  |   | $ | 2,845,636 |   |
| Net                  (gain) loss from discontinued operation                                                        |   |                                                  | (327,534   | ) |   | 140,200 |   |
| Income                  from continuing operations                                                                  |   |                                                  | 3,182,879  |   |   | 2,985,836 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |                                                  |       |   |   |   |   |
| Depreciation                  and amortization                                                                      |   |                                                  | 749,994    |   |   | 561,203 |   |
| Deferred                  taxes                                                                                     |   |                                                  | (75,980    | ) |   | - |   |
| Forfeiture                  of customer deposits                                                                    |   |                                                  | -          |   |   | (267,673 | )  |
|                                                                                                                |   |                                                  |       |   |   |   |   |
| **Changes                  in operating assets and liabilities, net of effects of                  acquisition:**   |   |                                                  |       |   |   |   |   |
| **(Increase)                  Decrease In:**                                                                        |   |                                                  |       |   |   |   |   |
| Accounts                  receivable                                                                                |   |                                                  | (3,100,029 | ) |   | (5,894,263 | ) |
| Inventories                                                                                                         |   |                                                  | (2,132,390 | ) |   | 877,564 |   |
| Other                  receivables                                                                                  |   |                                                  | 285,175    |   |   | (102,954 | ) |
| Due                  to employees                                                                                   |   |                                                  | 46,708     |   |   | 139,928 |   |
| Prepayments                  and prepaid expenses                                                                   |   |                                                  | (51,145    | ) |   | (347,195 | ) |
|                                                                                                                |   |                                                  |       |   |   |   |   |
| **Increase                  (Decrease) In:**                                                                        |   |                                                  |       |   |   |   |   |
| Accounts                  payable                                                                                   |   |                                                  | 5,064,815  |   |   | 1,943,480 |   |
| Other                  payables and accrued liabilities                                                             |   |                                                  | 224,483    |   |   | 208,276 |   |
| Customer                  deposits                                                                                  |   |                                                  | 306,612    |   |   | 859,386 |   |
| Net                  cash provided by operating activities from continuing                  operations              |   |                                                  | 4,501,122  |   |   | 963,588 |   |
| Net                  cash provided by (used in) operating activities from discontinued                  operation   |   |                                                  | 738,472    |   |   | (14,276 | ) |
| Net                  cash provided by operating activities                                                          |   |                                                  | 5,239,594  |   |   | 949,312 |   |
|                                                                                                                |   |                                                  |       |   |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**                                                          |   |                                                  |       |   |   |   |   |
| Purchases                  of plant and equipment                                                                   |   |                                                  | (1,887,802 | ) |   | (513,916 | ) |
| Purchases                  of construction in progress                                                              |   |                                                  | (545,134   | ) |   | (161,849 | ) |
| Reverse                  merger with SMOU, net of cash acquired                                                     |   |                                                  | -          |   |   | 373 |   |
| Purchase                  of a subsidiary, net of cash acquired                                                     |   |                                                  | (44,129    | ) |   | - |   |
| Issuance                  of notes receivable                                                                       |   |                                                  | (6,477,313 | ) |   | (4,986,053 | ) |
| Repayment                  of notes receivable                                                                      |   |                                                  | 19,057     |   |   | 2,016,236 |   |
| Net                  cash used in investing activities from continuing                  operations                  |   |                                                  | (8,935,321 | ) |   | (3,645,209 | ) |
| Net                  cash provided by investing activities from discontinued                  operation             |   |                                                  | -          |   |   | - |   |
| Net                  cash used in investing activities                                                              |   |                                                  | (8,935,321 | ) |   | (3,645,209 | ) |

----

**KANDI      TECHNOLOGIES, CORP. **

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

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                    |   | **Six Months ****Ended June 30, ** |        |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|-------------|
|                                                                                                    |   | **2008**                                                    |        | **2007** |   |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES:**                                              |   |                                                        |        |   |   |
| Restricted                  cash                                                                        |   |                                                        | (5,181,280  | ) |   | - |   |
| Proceeds                  from short-term bank loans                                                    |   |                                                        | 20,197,548  |   |   | 7,869,059 |   |
| Repayment                  of short-term bank loans                                                     |   |                                                        | (13,927,505 | ) |   | (5,008,645 | ) |
| Proceeds                  from notes payable                                                            |   |                                                        | 3,442,053   |   |   | 822,934 |   |
| Repayment                  of notes payable                                                             |   |                                                        | (1,455,223  | ) |   | (12,137 | ) |
| Repayment                  of advances to related parties                                               |   |                                                        | 164,249     |   |   | 17,288 |   |
| Net                  cash provided by financing activities from continuing                  operations  |   |                                                        | 3,239,842   |   |   | 3,688,499 |   |
| Net                  cash provided by financing activities from discontinued                  operation |   |                                                        | -           |   |   | - |   |
| Net                  cash provided by financing activities                                              |   |                                                        | 3,239,842   |   |   | 3,688,499 |   |
|                                                                                                    |   |                                                        |        |   |   |   |   |
| **NET                  (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**                               |   |                                                        | (489,262    | ) |   | 992,602 |   |
| Effect                  of exchange rate changes on cash                                                |   |                                                        | (502,982    | ) |   | 203,560 |   |
| Cash                  and cash equivalents at beginning of period                                       |   |                                                        | 1,149,140   |   |   | 365,567 |   |
| **CASH                  AND CASH EQUIVALENTS AT END OF PERIOD**                                         |   | $                                                           | 156,896     |   | $ | 1,561,729 |   |
|                                                                                                    |   |                                                        |        |   |   |   |   |
| **SUPPLEMENTARY                  CASH FLOW INFORMATION**                                                |   |                                                        |        |   |   |   |   |
| Income                  taxes paid                                                                      |   | $                                                           | -           |   | $ | - |   |
| Interest                  paid                                                                          |   | $                                                           | 937,362     |   | $ | 1,895,643 |   |

**SUPPLEMENTAL        NON-CASH DISCLOSURES:**

| 1. | During                  the six months ended June 30, 2008 and 2007, $613,097 and $12,117                  were                  transferred from construction in progress to plant and equipment,                  respectively. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | On                  June 24, 2008, the Company acquired 100% interest of Zhejiang Kandi                  Special Vehicles Co.,Ltd. ("KSV") for $12,314,988 in cash and KSV                  became a                  100% owned subsidiary of the Company. The following represents                  the assets                  purchased and liabilities assumed at the acquisition                  date: |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Plant                    and equipment, net                                                                                                    |   | $      | 3,200,615  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|
| Land                    use rights, net                                                                                                        |   |   | 9,114,373  |   |
| Total                    assets purchased                                                                                                      |   |   | 12,314,988 |   |
| Total                    liabilities assumed                                                                                                   |   |   | -          |   |
|                                                                                                                                           |   |   |       |   |
| Total                    net assets                                                                                                            |   | $      | 12,314,988 |   |
|                                                                                                                                           |   |   |       |   |
| Share                    percentage                                                                                                            |   |   | 100        | %      |
|                                                                                                                                           |   |   |       |   |
| Net                    assets acquired                                                                                                         |   | $      | 12,314,988 |   |
|                                                                                                                                           |   |   |       |   |
| Total                    consideration paid (including the deposit of $12,270,859 paid                    in prior                    periods) |   | $      | 12,314,988 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE        30, 2008**

**(UNAUDITED)**

**NOTE      1 – **
**ORGANIZATION      AND PRINCIPAL ACTIVITIES**

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE        30, 2008**

**(UNAUDITED)**

**NOTE      2 – **
**BASIS      OF PRESENTATION **

**NOTE      3 – **
**PRINCIPLES      OF CONSOLIDATION**

|  | (i) | Continental                Development Ltd., (“Continental”) (100% subsidiary of the                Company) |
|--|-----|--------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | Zhejiang                Kandi Vehicles Co. Ltd., (“Kandi”) (100% subsidiary of                Continental) |
|--|------|------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | Zhejiang                Yongkong Import and Export Co. Ltd., (“Dingji”) (100% subsidiary of                Kandi)(see                below) |
|--|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iv) | Kandi                Special Vehicle Co. Ltd., (“KSV”) (100% subsidiary of the                Company) |
|--|------|--------------------------------------------------------------------------------------------------------------------|

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      4 – **
**USE      OF ESTIMATES **

**NOTE      5 – **
**CONCENTRATIONS**

|                       |   | **Sales**                                    |   |                                         |   |
|----------------------------|--------|----------------------------------------------|--------|----------------------------------------------|--------|
|                       |   | **For the Six **              |   | **For the Six **              |   | **Accounts Receivable ** |   |
| **MajorCustomers**         |   | **Months EndedJune 30, 2008** |   | **Months EndedJune 30, 2007** |   | **June 30,2008** |   | **December 31,2007** |   |
| Company                  A |   |                                         | 73     | %                                            |   | 47 | % |   | 59 | % |   | 40 | % |
| Company                  B |   |                                         | 7      | %                                            |   | 20 | % |   | 17 | % |   | 19 | % |
| Company                  C |   |                                         | 4      | %                                            |   | 6 | % |   | 0 | % |   | 11 | % |
| Company                  D |   |                                         | 4      | %                                            |   | 3 | % |   | 15 | % |   | 8 | % |
| Company                  E |   |                                         | 1      | %                                            |   | - |   |   | 3 | % |   | 7 | % |

|                       |   | **Purchases**                                    |   |                                             |   |
|----------------------------|--------|--------------------------------------------------|--------|--------------------------------------------------|--------|
|                       |   | **For the Six **                  |   | **For the Six **                  |   | **Accounts Payable** |   |
| **Major****Suppliers**     |   | **Months Ended****June 30, 2008** |   | **Months Ended****June 30, 2007** |   | **June 30,****2008** |   | **December 31,****2007** |   |
| Company F             |   |                                             | 7      | %                                                |   | 7 | % |   | - |   |   | 7 | % |
| Company                  G |   |                                             | 7      | %                                                |   | 5 | % |   | 1 | % |   | 6 | % |
| Company                  H |   |                                             | 7      | %                                                |   | 4 | % |   | - |   |   | 5 | % |
| Company                  I |   |                                             | 6      | %                                                |   | 3 | % |   | 2 | % |   | 5 | % |
| Company                  J |   |                                             | 55     | %                                                |   | - |   |   | 29 | % |   | 4 | % |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      6—FOREIGN CURRENCY TRANSLATION**

|                                                  |   | **June                30,2008** |   | **December                31,2007** |   | **June                30,****2007** |   |
|-------------------------------------------------------|--------|---------------------------------|--------|-------------------------------------|--------|-------------------------------------|--------|
| Period                end RMB : US$ exchange rate     |   |                            | 6.8718 |                                |   | 7.3141                              |   |   | 7.6155 |   |
| Average                period RMB : US$ exchange rate |   |                            | 7.0882 |                                |   | 7.5614                              |   |   | 7.7121 |   |

**NOTE      7 – **
**EARNINGS      PER SHARE**

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE        30, 2008**

**(UNAUDITED)**

**NOTE      8 – **
**FAIR      VALUE OF FINANCIAL INSTRUMENTS**

**NOTE      9 – **
**NEW      ACCOUNTING PRONOUNCEMENTS**

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE        30, 2008**

**(UNAUDITED)**

**NOTE      9 – **
**NEW      ACCOUNTING PRONOUNCEMENTS (CONTINUED)**

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      10 – **
**INVENTORIES**

|                             |   | **June 30,****2008** |      | **December 31,****2007** |   |
|----------------------------------|--------|---------------------------|-----------|-------------------------------|--------|
|                             |   | **(Unaudited)**           |      |                          |   |
| Raw                materials     |   | $                         | 1,712,892 |                          | $      | 1,534,448 |   |
| Work-in-progress                 |   |                      | 3,218,822 |                          |   | 1,402,073 |   |
| Finished                goods    |   |                      | 494,205   |                          |   | 357,008 |   |
| Total                inventories |   | $                         | 5,425,919 |                          | $      | 3,293,529 |   |

**NOTE      11 – **
**NOTES      RECEIVABLE**

|                                                      |   | **June 30,****2008** |      | **December 31,****2007** |   |
|-----------------------------------------------------------|--------|---------------------------|-----------|-------------------------------|--------|
|                                                      |   | **(Unaudited)**           |      |                          |   |
| Notes                receivable from unrelated companies: |   |                      |      |                          |   |
| Due                June 27, 2008                          |   | $                         | -         |                          | $      | 47,853 |   |
| Due                January 1, 2009                        |   |                      | 188,888   |                          |   | - |   |
| Due                March 2, 2009                          |   |                      | 654,695   |                          |   | - |   |
| Due                March 30, 2009                         |   |                      | 647,698   |                          |   | - |   |
| Due                March 31, 2009                         |   |                      | 3,918,934 |                          |   | - |   |
| Due                April 29, 2009                         |   |                      | 727,611   |                          |   | - |   |
| Due                May 12, 2009                           |   |                      | 436,567   |                          |   | - |   |
| Subtotal                                                  |   |                      | 6,574,393 |                          |   | 47,853 |   |
| Notes                receivable-discount                  |   |                      | (68,285   | )                             |   | - |   |
| Notes                receivable, net                      |   | $                         | 6,506,108 |                          | $      | 47,853 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE        30, 2008**

**(UNAUDITED)**

**NOTE      12 – **
**LAND      USE RIGHTS**

|                                          |   | **June 30, ****2008** |      | **December 31,****2007** |   |
|-----------------------------------------------|--------|---------------------------------|-----------|-------------------------------|--------|
|                                          |   | **(Unaudited)**                 |      |                          |   |
| Cost                of land use rights        |   | $                               | 9,606,486 |                          | $      | 460,943 |   |
| Less:                Accumulated amortization |   |                            | (129,292  | )                             |   | (75,404 | ) |
| Land                use rights, net           |   | $                               | 9,477,194 |                          | $      | 385,539 |   |

| 2008                within one year |   | $      | 112,125   |   |
|-------------------------------------|--------|--------|-----------|--------|
| 2009                                |   |   | 224,247   |   |
| 2010                                |   |   | 224,247   |   |
| 2011                                |   |   | 224,247   |   |
| 2012                                |   |   | 224,247   |   |
| Thereafter                          |   |   | 8,468,081 |   |
| Total                               |   | $      | 9,477,194 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      13 – **
**PLANT      AND EQUIPMENT**

** **

|                                           |   | **June 30,****2008** |       | **December 31,****2007** |   |
|------------------------------------------------|--------|---------------------------|------------|-------------------------------|--------|
|                                           |   | **(Unaudited)**           |       |                          |   |
| At                cost:                        |   |                      |       |                          |   |
| Buildings                                      |   | $                         | 7,669,736  |                          | $      | 3,911,944 |   |
| Machinery                and equipment         |   |                      | 9,125,979  |                          |   | 8,572,451 |   |
| Office                equipment                |   |                      | 2,663,624  |                          |   | 93,840 |   |
| Transportation                                 |   |                      | 107,299    |                          |   | 254,885 |   |
| Patterns                                       |   |                      | 1,854,256  |                          |   | 1,742,125 |   |
|                                           |   |                      | 21,420,894 |                          |   | 14,575,245 |   |
| Less                : Accumulated depreciation |   |                      |       |                          |   |   |   |
| Buildings                                      |   |                      | (535,851   | )                             |   | (428,834 | ) |
| Machinery                and equipment         |   |                      | (4,205,788 | )                             |   | (3,520,084 | ) |
| Office                equipment                |   |                      | (72,635    | )                             |   | (64,427 | ) |
| Transportation                                 |   |                      | (78,688    | )                             |   | (43,765 | ) |
| Patterns                                       |   |                      | (282,239   | )                             |   | (90,959 | ) |
|                                           |   |                      | (5,175,201 | )                             |   | (4,148,069 | ) |
| Plant                and equipment, net        |   | $                         | 16,245,693 |                          | $      | 10,427,176 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      14 – **
**SHORT      TERM BANK LOANS**

** **

|                                                                                                                                                                                                                                                    |   | **June                30,****2008** |    | **December                31,****2007** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                    |   | **(Unaudited)**                     |    |                                    |   |
| **Loans                from ICBC-Development Zone Branch**                                                                                                                                                                                              |   |                                |    |                                    |   |   |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due April 10, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date). |   | $                                   | -       |                                    | $      | 683,611 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due June 5, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).   |   |                                | -       |                                    |   | 683,611 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due August 5, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date). |   |                                | 436,567 |                                    |   | 410,167 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due September 5, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                  |   |                                | 392,910 |                                    |   | 369,150 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due October 10, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                   |   |                                | 436,567 |                                    |   | 410,167 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due October 16, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                   |   |                                | 552,985 |                                    |   | 519,544 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due October 23, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                   |   |                                | 509,328 |                                    |   | 478,528 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.75% per annum, due November 24, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                  |   |                                | 582,089 |                                    |   | 546,889 |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 8.28% per annum, due September                17, 2008, secured by the assets of the Company. Also see Notes 12                and                13.                                                  |   |                                | 654,850 |                                    |   | - |   |
|                                                                                                                                                                                                                                                    |   |                                |    |                                    |   |   |   |
| Monthly                interest only payments at 6.90% per annum, due September 19, 2008,                impawned by time deposit.                                                                                                                      |   |                                | 654,850 |                                    |   | - |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      14 – **
**SHORT      TERM BANK LOANS (CONTINUED)**

|                                                                                                                                                                                                                                                   |   | **June                30,****2008** |      | **December                31,****2007** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                   |   | **(Unaudited)**                     |      |                                    |   |
| **Loans                from ICBC-Development Zone Branch**                                                                                                                                                                                             |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.90% per annum, due September 24, 2008,                impawned by time deposit.                                                                                                                     |   |                                | 654,850   |                                    |   | **-** |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.47% per annum, due June 4, 2009, secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                      |   |                                | 727,611   |                                    |   | **-** |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.84% per annum, due April 7, 2009, secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                     |   |                                | 727,611   |                                    |   | **-** |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| **Loans                from Commercial Bank-Jiangnan Branch**                                                                                                                                                                                          |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.58 % per annum, due January 10, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).            |   |                                | -         |                                    |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.67 % per annum, due May 10, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date). |   |                                | -         |                                    |   | 1,367,222 |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 8.22% per annum, due January 10, 2009 secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                   |   |                                | 2,910,446 |                                    |   | - |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.67% per annum, due May 9, 2009 secured                by the                assets of the Company. Also see Notes 12 and 13.                                                                        |   |                                | 1,455,223 |                                    |   | - |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| **Loans                from ICBC-Jinhua Branch**                                                                                                                                                                                                       |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.88% per annum, due January 18, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).             |   |                                | -         |                                    |   | 189,753 |   |
|                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.58% per annum, due February 1, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).             |   |                                | -         |                                    |   | 948,766 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      14 – **
**SHORT      TERM BANK LOANS (CONTINUED)**

|                                                                                                                                                                                                                                                                                                        |   | **June                30,****2008** |      | **December                31,****2007** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                        |   | **(Unaudited)**                     |      |                                    |   |
| **Loans                from ICBC-Jinhua Branch**                                                                                                                                                                                                                                                            |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.88% per annum, due March 3, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).                                                      |   |                                | -         |                                    |   | 858,883 |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due March 21, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).                                                     |   |                                | -         |                                    |   | 1,098,571 |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| **Loans                from Huaxia Bank**                                                                                                                                                                                                                                                                   |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 9.86% per annum, due December 24, 2008.                Guaranteed by Yongkang Tangxian Colour Metal Die-casting                Company.                                                                                                                    |   |                                | 2,910,446 |                                    |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| **Loans                from China Everybright Bank**                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 8.22% per annum, due August 9, 2008, secured                by                the assets of the Company. Guaranteed by Nanlong Group Co.,Ltd &                Zhejiang Mengdeli Electric Company (subsequently repaid on its due                date). |   |                                | 4,365,668 |                                    |   | 4,101,668 |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| **Loans                from Shanghai Pudong Development Bank**                                                                                                                                                                                                                                              |   |                                |      |                                    |   |   |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.33 % per annum, due February 14, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).                                                                |   |                                | -         |                                    |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 7.84 % per annum, due October 1, 2008,                guaranteed by Nanlong Group Co.,Ltd & Zhejiang Mengdeli Electric                Company.                                                                                                         |   |                                | 2,910,446 |                                    |   | - |   |
|                                                                                                                                                                                                                                                                                                        |   |                                |      |                                    |   |   |   |
| Monthly                interest only payments at 6.72 % per annum, due April 9, 2009, impawned                by                time deposit.                                                                                                                                                               |   |                                | 2,619,401 |                                    |   | - |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      14 – **
**SHORT      TERM BANK LOANS (CONTINUED)**

|                                                                                                                                                                                   |   | **June                30,****2008** |       | **December                31,****2007** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|-----------------------------------------|--------|
|                                                                                                                                                                                   |   | **(Unaudited)**                     |       |                                    |   |
| **Loans                from Bank of Communication**                                                                                                                                    |   |                                |       |                                    |   |   |   |
|                                                                                                                                                                                   |   |                                |       |                                    |   |   |   |
| Monthly                interest only payments at 8.96% per annum, due February 18, 2009,                secured                by the assets of the Company. Also see Notes 12 and 13. |   |                                | 727,611    |                                    |   | - |   |
|                                                                                                                                                                                   |   |                                |       |                                    |   |   |   |
| **Loans                from HengFeng Bank**                                                                                                                                            |   |                                |       |                                    |   |   |   |
|                                                                                                                                                                                   |   |                                |       |                                    |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due October 24, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.  |   |                                | 2,910,446  |                                    |   | - |   |
|                                                                                                                                                                                   |   |                                |       |                                    |   |   |   |
| Total                short-term bank loans                                                                                                                                             |   | $                                   | 27,139,905 |                                    | $      | 20,869,862 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      15 – **
**NOTES      PAYABLE**

|                                                                    |   | **June                31,****2008** |      | **December                31,****2007** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------|--------|
|                                                                    |   | **(Unaudited)**                     |      |                                    |   |
| Notes                payable to unrelated companies:                    |   |                                |      |                                    |   |   |   |
| Due                April 17, 2008 (subsequently repaid on its due date) |   | $                                   | -         |                                    | $      | 683,611 |   |
| Due                August 26, 2008                                      |   |                                | 1,455,223 |                                    |   | - |   |
| Due                September 19, 2008                                   |   |                                | 1,455,223 |                                    |   | 683,611 |   |
| Due                November 8, 2008                                     |   |                                | 116,418   |                                    |   | 109,378 |   |
| Due                December 18, 2008                                    |   |                                | 436,566   |                                    |   | - |   |
| Total                                                                   |   | $                                   | 3,463,430 |                                    | $      | 1,476,600 |   |

|                                                                    |   | **June                30,****2008** |      | **December                31,****2007** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------|--------|
|                                                                    |   | **(Unaudited)**                     |      |                                    |   |
| Due                April 17, 2008 (subsequently repaid on its due date) |   | $                                   | -         |                                    | $      | 683,611 |   |
| Due                September 19, 2008                                   |   |                                | 727,611   |                                    |   | 683,611 |   |
| Due                September 19, 2008                                   |   |                                | 727,611   |                                    |   | - |   |
| Due                August 26, 2008                                      |   |                                | 727,611   |                                    |   | - |   |
| Due                September 24, 2008                                   |   |                                | 727,611   |                                    |   | - |   |
| Due                November 1, 2008                                     |   |                                | 727,611   |                                    |   | - |   |
| Due                April 9, 2009                                        |   |                                | 2,910,448 |                                    |   | - |   |
| Total                                                                   |   | $                                   | 6,548,503 |                                    | $      | 1,367,222 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      16 – **
**INCOME      TAXES**

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

|                              |   | **For The Six Months Ended****June 30,****(Unaudited)** |    |
|-----------------------------------|--------|----------------------------------------------------------------------------------|---------|
|                              |   | **2008**                                                                         |    | **2007** |   |
| Current:                          |   |                                                                             |    |   |   |   |   |
| Provision                for CIT  |   | $                                                                                | -       |   | $ | - |   |
|                              |   |                                                                             |    |   |   |   |   |
| Deferred:                         |   |                                                                             |    |   |   |   |   |
| Provision                for CIT  |   |                                                                             | (73,660 | ) |   | - |   |
|                              |   |                                                                             |    |   |   |   |   |
| Income                tax benefit |   | $                                                                                | (73,660 | ) | $ | - |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      16 – **
**INCOME      TAXES (CONTINUED)**

|                                                   |   | **For The Six Months Ended****June 30,****(Unaudited)** |     |
|--------------------------------------------------------|--------|----------------------------------------------------------------------------------|----------|
|                                                   |   | **2008**                                                                         |     | **2007** |   |
| Computed                “expected” expense |   | $                                                                                | 767,791  |   | $ | 937,795 |   |
| Permanent                difference                    |   |                                                                             | (41,417  | ) |   | - |   |
| Tax                exemption                           |   |                                                                             | (800,034 | ) |   | (937,795 | ) |
| Income                tax benefit                      |   | $                                                                                | (73,660  | ) | $ | - |   |

|                                                |   | **June                30,****2008** |     |  **December                31,****2007** |   |
|-----------------------------------------------------|--------|-------------------------------------|----------|-----------------------------------------------|--------|
|                                                |   | **(Unaudited)**                     |     |
| Deferred                tax assets:                 |   |                                |     |                                          |   |   |   |
| Non-current                portion:                 |   |                                |     |                                          |   |   |   |
| Depreciation                                        |   | $                                   | 770,492  |                                          | $      | 694,512 |   |
| Valuation                allowance                  |   |                                | (289,506 | )                                             |   | (289,506 | ) |
| Subtotal                                            |   |                                | 480,986  |                                          |   | 405,006 |   |
| Total                deferred tax assets            |   |                                | 480,986  |                                          |   | 405,006 |   |
|                                                |   |                                |     |                                          |   |   |   |
| Deferred                tax liabilities:            |   |                                |     |                                          |   |   |   |
| Non-current                portion:                 |   |                                |     |                                          |   |   |   |
| Accumulated                other comprehensive gain |   |                                | (296,511 | )                                             |   | (296,511 | ) |
| Subtotal                                            |   |                                | (296,511 | )                                             |   | (296,511 | ) |
| Total                deferred tax liabilities       |   |                                | (296,511 | )                                             |   | (296,511 | ) |
|                                                |   |                                |     |                                          |   |   |   |
| Net                deferred tax assets              |   | $                                   | 184,475  |                                          | $      | 108,495 |   |

| (b) | Tax                Holiday Effect |
|-----|-----------------------------------|

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      16 – **
**INCOME      TAXES (CONTINUED)**

|                                             |   | **For The Six Months Ended****June 30,****(Unaudited)** |    |
|--------------------------------------------------|--------|----------------------------------------------------------------------------------|---------|
|                                             |   | **2008**                                                                         |    | **2007** |   |
| Tax                holiday effect                |   | $                                                                                | 800,034 |   | $ | 937,795 |   |
| Basic                net income per share effect |   | $                                                                                | 0.04    |   | $ | 0.08 |   |

**NOTE      17 – **
**CONTINGENCIES**

| (a) | In                2006, the Company brought a legal action against Weifang Rongda Automobile                Trading Co., Ltd. for returned goods that were damaged. As the plaintiff,                the Company has claimed for compensation. According to the judge's                report                from the local court in Jinhua, PRC, on December 8, 2006, the Company                prevailed in the lawsuit and Weifang Rongda Automobile Trading Co.,                Ltd.                was required to pay approximately $26,408 as compensation to the                Company.                However, the defendant appealed the ruling to a higher level court                and the                Company has not received the compensation as of June 30, 2008. Considering                the uncertainties of the legal proceeding, the Company did not record                a                contingent gain for this at June 30,                2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | In                2006, the Company brought a legal action against Zhejiang Yuegong                Steel                Structure Co. Ltd. and Zhejiang Jinhua No.1 Construction Co., Ltd.                for                their delay in the construction in Jinhua Industrial district. As                the                plaintiff, the Company claimed for compensation. According to the                judge's                report from the local court in Jinhua, PRC, on December 5, 2006,                the                Company prevailed in the lawsuit and Zhejiang Yuegong steel Structure                Co.                and Zhejiang Jinhua No.1 Construction Co., Ltd. will be required                to pay                $186,331 as compensation to the Company. However, the two defendants                appealed the ruling to a higher level court and the Company has not                received the compensation as of June 30, 2008. Considering the                uncertainties of the legal proceeding, the Company did not record                a                contingent gain for this at June 30,                2008 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE      18 – **
**BUSINESS      COMBINATION**

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE      30, 2008**

**(UNAUDITED)**

**NOTE      18 – **
**BUSINESS      COMBINATION (CONTINUED)**

|                                                                        |   | **Pro Forma Combined**** (Unaudited)** |      |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------------|-----------|
|                                                                        |   |                                                  |      |
| **REVENUES**                                                                |   | $                                                     | 9,487,285 |   |
|                                                                        |   |                                                  |      |   |
| **GROSS                PROFIT**                                             |   | $                                                     | 2,182,008 |   |
|                                                                        |   |                                                  |      |   |
| **INCOME                FROM OPERATIONS**                                   |   | $                                                     | 1,640,502 |   |
|                                                                        |   |                                                  |      |   |
| **NET                INCOME**                                               |   | $                                                     | 1,110,176 |   |
|                                                                        |   |                                                  |      |   |
| **NET                INCOME PER SHARE****BASIC                AND DILUTED** |   | $                                                     | 0.07      |   |

**NOTE      19 – **
**DISCONTINUED      OPERATION **

----

**Item      2. Management’s Discussion and Analysis of Financial Condition and Result of      Operations. **

----

**Results      of Operations**

***Comparison      of Three Months Ended June 30, 2008 and June 30,      2007.***

|                                                                     |   | **Three                Month Comparison**                                                           |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|------------|
|                                                                     |   |                                                                                                |       |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   | **For                the****three****months****ended****June                30,****2008****Amount** |       |                  **%                of****Revenue** |   | **For                the****t****hree****months****ended****June                30,****2007****Amount** |   |                  **%                of****Revenue** |   | **Growth                in****Amount** |   |                  **Increase****in %** |   |
| **REVENUES**                                                             |   | $                                                                                                   | 12,424,373 |   |   | 100.0 | % | $ | 11,109,555 |   |   | 100.0 | % | $ | 1,314,818 |   |   | 11.8 | % |
| **COST                OF GOODS SOLD**                                    |   |                                                                                                | 9,139,131  |   |   | 73.6 | % |   | 8,468,179 |   |   | 76.2 | % |   | 670,952 |   |   | 7.9 | % |
| **GROSS                PROFIT**                                          |   |                                                                                                | 3,285,242  |   |   | 26.4 | % |   | 2,641,376 |   |   | 23.8 | % |   | 643,866 |   |   | 24.4 | % |
| Selling                and Marketing                                     |   |                                                                                                | 180,596    |   |   | 1.5 | % |   | 107,756 |   |   | 0.4 | % |   | 72,840 |   |   | 67.6 | % |
| General                and Administrative                                |   |                                                                                                | 432,238    |   |   | 3.5 | % |   | 142,060 |   |   | 1.0 | % |   | 295,178 |   |   | 204.3 | % |
| Research                and Development                                  |   |                                                                                                | 224,146    |   |   | 1.8 | % |   | 40,749 |   |   | 1.3 | % |   | 183,397 |   |   | 450.1 | % |
| **INCOME                FROM CONTINUING OPERATIONS**                     |   |                                                                                                | 2,448,262  |   |   | 19.6 | % |   | 2,350,811 |   |   | 21.2 | % |   | 92,451 |   |   | 4.1 | % |
| Government                Grants                                         |   |                                                                                                | 17,274     |   |   | 0.1 | % |   | - |   |   | 0.0 | % |   | 17,274 |   |   | 100 | % |
| Interest                Expense, Net                                     |   |                                                                                                | (395,087   | ) |   | -3.2 | % |   | (160,938 | ) |   | -1.4 | % |   | (234,149 | ) |   | 145.5 | % |
| Other,                Net                                                |   |                                                                                                | (1,948     | ) |   | 0.0 | % |   | (70,254 | ) |   | -0.6 | % |   | 68,305 |   |   | -97.2 | % |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAXES** |   |                                                                                                | 2,068,501  |   |   | 16.5 | % |   | 2,119,619 |   |   | 19.1 | % |   | (56,119 | ) |   | -2.4 | % |
| **INCOME                TAX BENEFIT**                                    |   |                                                                                                | 33,920     |   |   | 0.3 | % |   | - |   |   | 0.0 | % |   | 33,920 |   |   | 100 | % |
| **NET                INCOME FROM CONTINUING OPERATIONS**                 |   |                                                                                                | 2,102,421  |   |   | 16.8 | % |   | 2,119,619 |   |   | 19.1 | % |   | (17,198 | ) |   | -0.1 | % |
| **INCOME                FROM DISCONTINUED OPERATION**                    |   |                                                                                                | 334,030    |   |   | 2.7 | % |   | (212,568 | ) |   | -1.9 | % |   | 546,598 |   |   | 257.1 | % |
| **NET                INCOME**                                            |   | $                                                                                                   | 2,436,451  |   |   | 19.5 | % | $ | 1,907,052 |   |   | 17.2 | % | $ | 524,399 |   |   | 27.8 | % |

*** ***
***Revenues.***

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

***Gross      Profit.***

***Selling      and Marketing Expenses***

----

***General      and Administrative Expenses***

***Research      and Development Expenses***

***Discontinued      Operation***

***Income      Tax Provision***

***Net      Income***

***Comparison      of Six Months Ended June 30, 2008 and June 30, 2007.***

|                                                                   |   | **Six                Month Comparison**                                                        |       |
|------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|------------|
|                                                                   |   | **For                the six****months****ended****June                30,****2008****Amount** |       |                  **%                of****Revenue** |   | **For                the six****months****ended****June                30,****2007****Amount** |   |                  **%                of****Revenue** |   | **Growth                in****Amount** |   | **Increase in****%** |   |
| **REVENUES**                                                           |   | $                                                                                              | 21,753,075 |   |   | 100.0 | % | $ | 16,471,019 |   |   | 100.0 | % | $ | 5,282,056 |   |   | 32.1 | % |
| **COST                OF GOODS SOLD**                                  |   |                                                                                           | 16,316,178 |   |   | 75.0 | % |   | 12,861,099 |   |   | 78.1 | % |   | 3,455,079 |   |   | 26.9 | % |
| **GROSS                PROFIT**                                        |   |                                                                                           | 5,436,897  |   |   | 25.0 | % |   | 3,609,920 |   |   | 21.9 | % |   | 1,826,977 |   |   | 50.6 | % |
| Selling                and Marketing                                   |   |                                                                                           | 409,102    |   |   | 1.9 | % |   | 188,354 |   |   | 1.1 | % |   | 220,748 |   |   | 117.2 | % |
| General                and Administrative                              |   |                                                                                           | 704,682    |   |   | 3.2 | % |   | 285,346 |   |   | 1.7 | % |   | 419,336 |   |   | 147.0 | % |
| Research                and Development                                |   |                                                                                           | 264,816    |   |   | 1.2 | % |   | 52,615 |   |   | 0.3 | % |   | 212,201 |   |   | 403.3 | % |
| **INCOME                FROM CONTINUING OPERATIONS**                   |   |                                                                                           | 4,058,297  |   |   | 18.7 | % |   | 3,083,605 |   |   | 18.7 | % |   | 974,692 |   |   | 31.6 | % |
| Government                Grants                                       |   |                                                                                           | 40,574     |   |   | 0.2 | % |   | - |   |   | 0.0 | % |   | 40,574 |   |   | 100 | % |
| Interest                Expense, Net                                   |   |                                                                                           | (1,009,699 | ) |   | -4.6 | % |   | (295,748 | ) |   | -1.8 | % |   | (713,951 | ) |   | 241.4 | % |
| Forfeiture                of customer deposits                         |   |                                                                                           | -          |   |   | 0.0 | % |   | 267,673 |   |   | 1.6 | % |   | (267,673 | ) |   | -100.0 | % |
| Other                Income (Expense), Net                             |   |                                                                                           | 20,047     |   |   | 0.1 | % |   | (69,694 | ) |   | -0.4 | % |   | 89,741 |   |   | -128.8 | % |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAX** |   |                                                                                           | 3,109,219  |   |   | 14.3 | % |   | 2,985,836 |   |   | 18.1 | % |   | 123,383 |   |   | 4.1 | % |
| **INCOME                TAX BENEFIT**                                  |   |                                                                                           | 73,660     |   |   | 0.3 | % |   | - |   |   | 0.0 | % |   | 73,660 |   |   | 100 | % |
| **NET                INCOME FROM CONTINUING OPERATIONS**               |   |                                                                                           | 3,182,879  |   |   | 14.7 | % |   | 2,985,836 |   |   | 18.1 | % |   | 197,043 |   |   | 6.60 | % |
| **GAIN                (LOSS) FROM DISCONTINUED OPERATIONS**            |   |                                                                                           | 327,534    |   |   | 1.5 | % |   | (140,200 | ) |   | -0.9 | % |   | 467,734 |   |   | 333.6 | % |
| **NET                INCOME**                                          |   | $                                                                                              | 3,510,413  |   |   | 16.1 | % | $ | 2,845,636 |   |   | 17.3 | % | $ | 664,777 |   |   | 23.4 | % |

----

***Revenues***
*.      *

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

***Gross      Profit.***

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***Discontinued      Operation***

***Income      Tax Provision***

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

**Liquidity      and Capital Resources**

***Cash      Flows***

***Six      Months ended June 30, 2008 and 2007***

----

***Working      Capital***

**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*

*Fair      Value of Financial Instruments*

----

**Recent      Accounting      Pronouncements**

----

**Item      4T. Controls and Procedures.**

**Management’s      Report on Internal Control over Financial Reporting **

----

**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

**Item      1A. Risk Factors.**

**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.**

----

**SIGNATURES**

|                                      |            | **Kandi              Technologies, Corp.**                                                                     |
|-------------------------------------------|-----------------|----------------------------------------------------------------------------------------------------------------|
|                                      |            |                                                                                                           |
| Date:                August 14, 2008 | By:   | /s/                Hu Xiaoming                                                                       |
|                                      |            | Hu                Xiaoming                                                                                |
|                                      |            | President                and Chief Executive Officer (Principal                Executive Officer)    |
|                                      |            |                                                                                                           |
| Date:                August 14, 2008 | By:   | /s/                Zhu Xiaoying                                                                      |
|                                      |            | Zhu                Xiaoying                                                                               |
|                                      |            | Chief                Financial Officer  (Principal                Financial and Accounting Officer)  |

----