----

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** UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-QSB**

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

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

**or**

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

**For      the transition period from ______to______.**

**                                                                        Commission      file number 000-52186**

**Kandi      Technologies, Corp.**

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

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

**Jinhua      City Industrial Zone**

**Jinhua,      Zhejiang Province**

**People’s      Republic of China**

**Post      Code 321016**

** (Address      of Principal Executive Offices)**

**___________**

**(86      - 0579) 82239700**

** (Issuer      Telephone number)**

**___________**

**Stone      Mountain Resources, Inc**

**701      North Green Valley Parkway #200**

**Henderson,      Nevada 89074**

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

| Large                accelerated filero |   | Accelerated                filero |   | Non-accelerated                filer o |
|-------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------------|

----

**TABLE      OF CONTENTS**

| **PART              I-- FINANCIAL INFORMATION** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **Page** |
| Item                1.                          | Condensed                Consolidated Financial                Statements                                                                                                                                                                                                                                                                                                | 3 |
|                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item                2.                          | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 19 |
|                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item                3.                          | Controls                and                Procedures                                                                                             | 24 |

| **PART              II-- OTHER INFORMATION** |
|----------------------------------------------|
|                                         |   |   |
|  Item                1.                 | Unregistered                Sales of Equity Securities and Use of Proceeds | 25 |
|                                         |   |   |
|  Item                2.                 | Defaults                Upon Senior                Securities                                        | 25 |
|                                         |   |   |
|  Item                3.                 | Submission                of Matters to a Vote of Security Holders | 25 |
|                                         |   |   |
|  Item                4.                 | Other                Information                                    | 25 |
|                                         |   |   |
|  Item                5.                 | Exhibits                and Reports on Form 8-K | 25 |
|                                         |   |   |
| **SIGNATURE**                                |   | **26** |

----

**PART      I-- FINANCIAL INFORMATION**

**Item      1. Financial Statements**

| **KANDI                TECHNOLOGIES, CORP.**                                                                                                                                                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **(FORMERLY                STONE MOUNTAIN RESOURCES, INC.)**                                                                                                                                                                                             |   |
| **AND                SUBSIDIARIES**                                                                                                                                                                                                                      |   |
| **CONDENSED                CONSOLIDATED BALANCE SHEET**                                                                                                                                                                                                  |   |
|                                                                                                                                                                                                                                                     |   | **June                30,** |   |
|                                                                                                                                                                                                                                                     |   | **2007** |   |
| **                                                     ASSETS** |   | **(Unaudited)** |   |
| **CURRENT                ASSETS**                                                                                                                                                                                                                        |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                               |   | $ | 1,603,871 |   |
| Restricted                cash                                                                                                                                                                                                                           |   |   | 12,852,796 |   |
| Accounts                  receivable                                                                                                                                                                                                                     |   |   | 12,104,410 |   |
| Inventories                                                                                                                                                                                                                                              |   |   | 4,585,697 |   |
| Notes                  receivables                                                                                                                                                                                                                       |   |   | 4,091,178 |   |
| Other                receivables                                                                                                                                                                                                                         |   |   | 2,635,401 |   |
| Prepayment                  for goods and deposits                                                                                                                                                                                                       |   |   | 677,947 |   |
| Due                from employees                                                                                                                                                                                                                        |   |   | 44,293 |   |
| Deferred                  tax assets                                                                                                                                                                                                                     |   |   | 9,964 |   |
| Total                Current Assets                                                                                                                                                                                                                      |   |   | 38,605,557 |   |
| **NON                  CURRENT ASSETS**                                                                                                                                                                                                                  |   |   |   |   |
| Plant                and equipment, net                                                                                                                                                                                                                  |   |   | 9,139,128 |   |
| Land                  use rights, net                                                                                                                                                                                                                    |   |   | 391,555 |   |
| Construction                in progress                                                                                                                                                                                                             |   |   | 469,007 |   |
| Deferred                  tax assets                                                                                                                                                                                                                     |   |   | 3,888 |   |
| Total                Non Current Assets                                                                                                                                                                                                                  |   |   | 10,003,578 |   |
|                          TOTAL ASSETS                                                                                                                                                                                 |   | $ | 48,609,135 |   |
|                                                                                                                                                                                                                                                     |   |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**                                                                                                                                                                                                |   |
|                                                                                                                                                                                                                                                     |   |   |   |   |
| **CURRENT                  LIABILITIES**                                                                                                                                                                                                                 |   |   |   |   |
| Accounts                payable and accrued expenses                                                                                                                                                                                                     |   | $ | 8,580,780 |   |
| Short-term                  bank loans                                                                                                                                                                                                                   |   |   | 13,034,060 |   |
| Notes                payable                                                                                                                                                                                                                             |   |   | 15,068,594 |   |
| Advance                  from customers                                                                                                                                                                                                                  |   |   | 1,211,348 |   |
| Due                to related parties                                                                                                                                                                                                                    |   |   | 2,438 |   |
| Deferred                  tax liabilities                                                                                                                                                                                                                |   |   | 12,809 |   |
| Total                Current Liabilities                                                                                                                                                                                                                 |   |   | 37,910,029 |   |
| **NON                  CURRENT LIABILITIES**                                                                                                                                                                                                             |   |   |   |   |
| Deferred                tax liabilities                                                                                                                                                                                                                  |   |   | 3,357 |   |
|                         Total Non Current Liabilities                                                                                                                                                                      |   |   | 3,357 |   |
|                       TOTAL LIABILITIES                                                                                                                                                                                    |   |   | 37,913,386 |   |
|                                                                                                                                                                                                                                                     |   |   |   |   |
|  **CONTINGENCIES**                                                                                                                                                                                                                                  |   |   |   |   |
|                                                                                                                                                                                                                                                     |   |   |   |   |
| **SHAREHOLDERS'                EQUITY**                                                                                                                                                                                                                  |   |   |   |   |
| Common                  stock, $0.001 par value, 100,000,000 shares                  authorized;                                                                                                                                                         |   |   | 19,961 |   |
|       19,961,000 shares                issued and outstanding at June 30, 2007                                                                                                                                        |   |   |   |   |
| Additional                  paid-in capital                                                                                                                                                                                                              |   |   | 7,138,105 |   |
| Retained                earnings                                                                                                                                                                                                                         |   |   | 2,941,660 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                  |   |   | 596,023 |   |
| Total                Shareholders' Equity                                                                                                                                                                                                                |   |   | 10,695,749 |   |
|                          TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                             |   | $ | 48,609,135 |   |
|                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                     |   |

----

| **KANDI                TECHNOLOGIES, CORP.**                                                                         |
|----------------------------------------------------------------------------------------------------------------------|
| **(FORMERLY                STONE MOUNTAIN RESOURCES, INC.)**                                                         |
| **AND                SUBSIDIARIES**                                                                                  |
| **CONDENSED                CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME                (LOSS)** |
| **(UNAUDITED)**                                                                                                      |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                 |   | **Three                Months Ended June 30,** |   |   | **Six                Months Ended June 30,** |
|                                                                                                                 |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| **REVENUES**                                                                                                         |   | $ | 11,155,508 |   |   | $ | 2,859,686 |   |   | $ | 17,148,966 |   |   | $ | 4,756,821 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **COST                  OF GOODS SOLD**                                                                              |   |   | 8,445,862 |   |   |   | 2,620,490 |   |   |   | 13,292,442 |   |   |   | 4,283,201 |   |   |
| **GROSS                PROFIT**                                                                                      |   |   | 2,709,646 |   |   |   | 239,196 |   |   |   | 3,856,524 |   |   |   | 473,620 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and marketing                                                                                 |   |   | 202,538 |   |   |   | 39,989 |   |   |   | 366,578 |   |   |   | 85,035 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General                and administrative                                                                            |   |   | 170,936 |   |   |   | 101,031 |   |   |   | 342,320 |   |   |   | 219,175 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research                and development                                                                              |   |   | 40,749 |   |   |   | 25,948 |   |   |   | 52,615 |   |   |   | 49,608 |   |   |
| Total                  operating expenses                                                                            |   |   | 414,223 |   |   |   | 166,968 |   |   |   | 761,513 |   |   |   | 353,818 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INCOME                  FROM OPERATIONS**                                                                          |   |   | 2,295,423 |   |   |   | 72,228 |   |   |   | 3,095,011 |   |   |   | 119,802 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **FORFEITURE                  OF CUSTOMER DEPOSIT**                                                                  |   |   | - |   |   |   | - |   |   |   | 267,673 |   |   |   | - |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **GOVERNMENT                  GRANT**                                                                                |   |   | 12,191 |   |   |   | - |   |   |   | 12,132 |   |   |   | 65,946 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INTEREST                  EXPENSES, NET**                                                                          |   |   | (361,748 | ) |   |   | (156,309 | ) |   |   | (450,441 | ) |   |   | (275,007 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                  INCOME (EXPENSES), NET**                                                                    |   |   | (72,228 | ) |   |   | 422 |   |   |   | (76,851 | ) |   |   | 565 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INCOME                  (LOSS) BEFORE INCOME TAXES**                                                               |   |   | 1,873,638 |   |   |   | (83,659 | ) |   |   | 2,847,524 |   |   |   | (88,694 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **INCOME                  TAXES**                                                                                    |   |   | 33,412 |   |   |   | - |   |   |   | (1,888 | ) |   |   | - |   |   |
| **NET                INCOME (LOSS)**                                                                                 |   |   | 1,907,050 |   |   |   | (83,659 | ) |   |   | 2,845,636 |   |   |   | (88,694 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME**                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation gain (loss)                                                            |   |   | 112,502 |   |   |   | (4,492 | ) |   |   | 203,560 |   |   |   | 45,780 |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  tax expense related to other comprehensive                   income                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                                                                                                               |   |   | (37,126 | ) |   |   | - |   |   |   | (67,175 | ) |   |   | (15,107 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME (LOSS), NET**                                                            |   |   | 75,376 |   |   |   | (4,492 | ) |   |   | 136,385 |   |   |   | 30,673 |   |   |
| **OF                  TAX**                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME (LOSS)**                                                                     |   | $ | 1,982,426 |   |   | $ | (88,151 | ) |   | $ | 2,982,021 |   |   | $ | (58,021 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ** NET                  INCOME (LOSS) PER SHARE**                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **          BASIC                AND DILUTED**                     |   | $ | 0.16 |   |   | $ | (0.01 | ) |   | $ | 0.24 |   |   | $ | (0.01 | ) |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                AVERAGE NUMBER OF SHARES OUTSTANDING**                                                     |
| **          BASIC                  AND DILUTED**                   |   |   | 12,176,911 |   |   |   | 12,000,000 |   |   |   | 12,088,456 |   |   |   | 12,000,000 |   |   |
|                                                                                                                 |

----

| **KANDI                TECHNOLOGIES, CORP.**                                                                 |
|--------------------------------------------------------------------------------------------------------------|
| **(FORMERLY                STONE MOUNTAIN RESOURCES, INC.)**                                                 |
| **AND                SUBSIDIARIES**                                                                          |
| **CONDENSED                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’                EQUITY** |
| **FOR                THE SIX MONTHS ENDED JUNE 30, 2007**                                                    |
| **(UNAUDITED)**                                                                                              |

|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |
|----------------------------------------------------|--------|---------------------------------|------------|--------|------------------------------|--------|--------|--------------|--------|--------|-------------------|--------|--------|------------|-----------|
|                                               |   |                            |       |   |                         |   |   |         |   |   | **Accumulated**   |   |   |       |      |
|                                               |   |                            |       |   | **Additional**               |   |   |         |   |   | **Other**         |   |   |       |      |
|                                               |   | **Common                Stock** |       |   | **Paid-in**                  |   |   | **Retained** |   |   | **Comprehensive** |   |   |       |      |
|                                               |   | **Shares**                      |       |   | **Par                Value** |   |   | **Capital**  |   |   | **Earnings**      |   |   | **Income** |      |   | **Total** |   |
| **BALANCE                AT JANUARY 1, 2007**      |   |                            | 12,000,000 |   |                         | $      | 12,000 |         |   | $      | 7,154,193         |   |   | $          | 96,024    |   |   | $ | 392,463 |   |   | $ | 7,654,680 |   |
|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |   |   |   |   |   |   |   |   |   |
| Recapitalization                                   |   |                            | 7,961,000  |   |                         |   | 7,961  |         |   |   | (16,088           | )      |   |       | -         |   |   |   | - |   |   |   | (8,127 | ) |
|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation gain |   |                            | -          |   |                         |   | -      |         |   |   | -                 |   |   |       | -         |   |   |   | 203,560 |   |   |   | 203,560 |   |
|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |   |   |   |   |   |   |   |   |   |
| Net                  Income                        |   |                            | -          |   |                         |   | -      |         |   |   | -                 |   |   |       | 2,845,636 |   |   |   | - |   |   |   | 2,845,636 |   |
| **BALANCE                AT JUNE 30, 2007**        |   |                            | 19,961,000 |   |                         | $      | 19,961 |         |   | $      | 7,138,105         |   |   | $          | 2,941,660 |   |   | $ | 596,023 |   |   | $ | 10,695,749 |   |
|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |   |   |   |   |   |   |   |   |   |
|                                               |   |                            |       |   |                         |   |   |         |   |   |              |   |   |       |      |   |   |   |   |   |   |   |   |   |

----

| **KANDI                TECHNOLOGIES, CORP.**                                                                                                                                                                                              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **(FORMERLY                STONE MOUNTAIN RESOURCES, INC.)**                                                                                                                                                                              |   |
| **AND                SUBSIDIARIES**                                                                                                                                                                                                       |   |
| **CONDENSED                CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                                                                        |   |
| **(UNAUDITED)**                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                      |   | **Six                Months Ended June 30,** |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                                                                                                                                                  |   | **2007** |   |   | **2006** |   |
| Net                  income (loss)                                                                                                                                                                                                        |   | $ | 2,845,636 |   |   | $ | (88,694 | ) |
| Adjustments                to reconcile net income (loss) to net cash provided by operating                activities:                                                                                                                    |   |   |   |   |   |   |   |   |
| Depreciation                  and amortization                                                                                                                                                                                            |   |   | 622,848 |   |   |   | 471,768 |   |
| Deferred                taxes                                                                                                                                                                                                             |   |   | 1,920 |   |   |   | - |   |
| Forfeiture                  of customer deposit                                                                                                                                                                                           |   |   | (267,673 | ) |   |   | - |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Changes                  in operating assets and liabilities:                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| (Increase)                Decrease in:                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                                                                      |   |   | (4,531,844 | ) |   |   | (604,459 | ) |
| Inventories                                                                                                                                                                                                                               |   |   | 877,482 |   |   |   | (293,808 | ) |
| Other                  receivables                                                                                                                                                                                                        |   |   | 352,614 |   |   |   | 42,097 |   |
| Prepayment                for goods and deposits                                                                                                                                                                                          |   |   | (345,392 | ) |   |   | (385,732 | ) |
| Due                  from employees                                                                                                                                                                                                       |   |   | 139,928 |   |   |   | 845 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Increase                  (Decrease) in:                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Accounts                payable and accrued expenses                                                                                                                                                                                      |   |   | 1,638,004 |   |   |   | 1,397,929 |   |
| Advance                  from customers                                                                                                                                                                                                   |   |   | 877,853 |   |   |   | 263,893 |   |
| Taxes                payable                                                                                                                                                                                                              |   |   | (2,953 | ) |   |   | - |   |
| Net                  cash provided by operating activities                                                                                                                                                                                |   |   | 2,208,423 |   |   |   | 803,839 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**                                                                                                                                                                                |   |   |   |   |   |   |   |   |
| Purchases                of fixed assets and construction in progress                                                                                                                                                                     |   |   | (694,519 | ) |   |   | (962,623 | ) |
| Reverse                  merger, net of cash acquired                                                                                                                                                                                     |   |   | 373 |   |   |   | - |   |
| Restricted                cash                                                                                                                                                                                                            |   |   | (3,760,374 | ) |   |   | 1,982,603 |   |
| Issuances                  of notes receivable                                                                                                                                                                                            |   |   | (5,759,844 | ) |   |   | (609,310 | ) |
| Repayments                of notes receivable                                                                                                                                                                                             |   |   | 2,099,477 |   |   |   | 52,117 |   |
| Grant                  received for land use right                                                                                                                                                                                        |   |   | - |   |   |   | 171,609 |   |
| Net                cash (used in) provided by investing activities                                                                                                                                                                        |   |   | (8,114,887 | ) |   |   | 634,396 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Proceeds                  from short term bank loans                                                                                                                                                                                      |   |   | 8,863,589 |   |   |   | 7,493,911 |   |
| Repayments                of short term bank loans                                                                                                                                                                                        |   |   | (6,914,200 | ) |   |   | (4,483,242 | ) |
| Proceeds                  from notes payable                                                                                                                                                                                              |   |   | 14,331,485 |   |   |   | 99,919 |   |
| Repayments                of notes payable                                                                                                                                                                                                |   |   | (10,042,454 | ) |   |   | (3,899,978 | ) |
| Advance                  from related parties                                                                                                                                                                                             |   |   | 34,338 |   |   |   | - |   |
| Repayment                of advances to related parties                                                                                                                                                                                   |   |   | - |   |   |   | (1,433,472 | ) |
| Net                  cash provided by (used in) financing activities                                                                                                                                                                      |   |   | 6,272,758 |   |   |   | (2,222,862 | ) |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|  **NET                  INCREASE (DECREASE) IN CASH AND CASH                  EQUIVALENTS**                                                                                                                                          |   |   | 366,294 |   |   |   | (784,627 | ) |
|         Effect                of exchange rate changes on cash                                                                                                                                    |   |   | 203,560 |   |   |   | 45,780 |   |
|         Cash                  and cash equivalents, beginning                                                                                                                                     |   |   | 1,034,017 |   |   |   | 876,989 |   |
| **CASH                AND CASH EQUIVALENTS, END OF PERIOD**                                                                                                                                                                               |   | $ | 1,603,871 |   |   | $ | 138,142 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| **SUPPLEMENTARY                CASH FLOW INFORMATION**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|          Income                  taxes paid                                                                                                                                                  |   | $ | 2,988 |   |   | $ | - |   |
|          Interest                paid                                                                                                                                                        |   | $ | 1,895,643 |   |   | $ | 296,147 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                NON-CASH DISCROSURES:**                                                                                                                                                                                |   |   |   |   |   |   |   |   |
| For                  the six months ended June 30, 2007 and 2006, $12,117 and $811,063                  were                  transferred from construction in progress to plants and                  equipment, respectively. |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                      |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR      THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      1. ORGANIZATION AND PRINCIPAL ACTIVITIES**

**NOTE      2. BASIS OF PRESENTATION**

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

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

|                                                 |   | **June                30, 2007** |   |   | **June                30, 2006** |   |
|------------------------------------------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|
| Period                end RMB: US$ exchange rate     |   |                             | 7.6248 |   |                             |   | 8.0065 |   |
| Average                period RMB: US$ exchange rate |   |                             | 7.7168 |   |                             |   | 8.0384 |   |

* ,*

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

**NOTE 4.      NEW ACCOUNTING PRONOUNCEMENTS**

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      5. CONCENTRATIONS**

|                               |   | **Sales**                                                 |   | **Accounts                Receivable**                    |
|------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------------------------------|
|                               |   |                                                      |   |                                                      |   |   |
| **Major                Customers** |   | **For                the Six Months Ended June 30, 2007** |   | **For                the Six Months Ended June 30, 2006** |   | **June                30, 2007** |
| Company                A           |   | 47%                                                       |   | 55%                                                       |   | 23% |
| Company                B           |   | 20%                                                       |   | 21%                                                       |   | 23% |
| Company                C           |   | 6%                                                        |   | 6%                                                        |   | 22% |
| Company                D           |   | 3%                                                        |   | 3%                                                        |   | 15% |
|                               |   |                                                      |   |                                                      |   |   |
|                               |   |                                                      |   |                                                      |   |   |
|                               |   | **Purchases**                                             |   | **Accounts                Payable**                       |
|                               |   |                                                      |   |                                                      |   |   |
| **Major  Suppliers**     |   | **For                the Six Months Ended June 30, 2007** |   | **For                the Six Months Ended June 30, 2006** |   | **June                30, 2007** |
| Company                E           |   | 6.9%                                                      |   | 8.35%                                                     |   | 23.59% |
| Company                F           |   | 4.46%                                                     |   | 4.75%                                                     |   | 3.33% |
| Company                G           |   | 4.19%                                                     |   | 4.49%                                                     |   | 3.01% |
| Company                H           |   | 3.26%                                                     |   | 2.64%                                                     |   | 2.07% |
|                               |   |                                                      |   |                                                      |   |   |
|                               |   |                                                      |   |                                                      |   |   |

**NOTE      6.  INVENTORIES**

|                       |   | **June                30, 2007** |      |
|---------------------------------|--------|----------------------------------|-----------|
|                            |   | (Unaudited)                      |      |
| Raw                materials    |   | $                                | 851,937   |   |
| Work                in progress |   |                             | 3,455,333 |   |
| Finished                goods   |   |                             | 278,427   |   |
| Total                           |   | $                                | 4,585,697 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      7.  NOTES RECEIVABLE**

|                                                                                                     |   | **June                30, 2007** |      |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|
|                                                                                                     |   | (Unaudited)                      |      |
|                                                                                                     |   |                             |      |
| Due                September 30, 2007, quarterly interest only payments at 6.0% per                annum |   | $                                | 3,226,552 |   |
| Due                March 8, 2008,                                                                        |   |                             | 77,720    |   |
| Due                December 20, 2007                                                                     |   |                             | 13,115    |   |
| Due                July 3, 2007 (subsequently settled at its due date)                                   |   |                             | 209,842   |   |
| Due                August 6, 2007 (subsequently settled at its due date)                                 |   |                             | 262,302   |   |
| Due                July 25, 2007 (subsequently settled at its due date)                                  |   |                             | 301,647   |   |
| Total                                                                                                    |   | $                                | 4,091,178 |   |

**NOTE      8.  PLANT AND      EQUIPMENT**

|                           |   | **June                30, 2007** |       |
|-----------------------------------------------|--------|----------------------------------|------------|
| At                cost:                       |   | (Unaudited)                      |       |
| Buildings                                     |   | $                                | 3,554,626  |   |
| Machinery                and equipment        |   |                             | 8,233,009  |   |
| Motor                vehicles                 |   |                             | 98,791     |   |
| Office                equipment               |   |                             | 734,260    |   |
|                                          |   |                             | 12,620,686 |   |
| Less:                accumulated depreciation |   |                             |       |   |
| Buildings                                     |   |                             | (354,593   | ) |
| Machinery                and equipment        |   |                             | (2,971,923 | ) |
| Motor                vehicles                 |   |                             | (54,243    | ) |
| Office                equipment               |   |                             | (100,799   | ) |
|                                          |   |                             | (3,481,558 | ) |
| Plant                and equipment, net       |   | $                                | 9,139,128  |   |
|                                          |   |                             |       |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      9.    LAND USE RIGHTS**

|                                          |   | **June                30, 2007** |    |
|-----------------------------------------------|--------|----------------------------------|---------|
|                                          |   | (Unaudited)                      |    |
|                                          |   |                             |    |
| Cost                of land use rights        |   | $                                | 460,943 |   |
| Less:                Accumulated amortization |   |                             | (69,388 | ) |
| Land                use rights, net           |   | $                                | 391,555 |   |

|                                     |   | **June                30, 2007** |    |
|------------------------------------------|--------|----------------------------------|---------|
|                                     |   | (Unaudited)                      |    |
|                                     |   |                             |    |
| 2007                (remaining 6 months) |   | $                                | 4,371   |   |
| 2008                                     |   |                             | 8,742   |   |
| 2009                                     |   |                             | 8,742   |   |
| 2010                                     |   |                             | 8,742   |   |
| 2011                                     |   |                             | 8,742   |   |
| Thereafter                               |   |                             | 352,216 |   |
| Total                                    |   | $                                | 391,555 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      10.    SHORT TERM BANK LOANS**

|                                                                                                                                                                                                                              |   | **June                30, 2007** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                                                                                                                                                   |   | (Unaudited)                           |       |
| **Loans                from Industrial and Commercial Bank of China-Exploration Zone Branch                :**                                                                                                                         |   |                                  |       |
| Monthly                interest only payments at 5.85% per annum, due July 24, 2007, secured                by a                land use right and plant and equipment owned by the Company. (subsequently                settled)     |   | $                                     | 393,453    |   |
| Monthly                interest only payments at 6.12% per annum, due September 7, 2007,                secured                by a land use right and plant and equipment owned by the Company.                (subsequently settled) |   |                                  | 354,108    |   |
| Monthly                interest only payments at 6.12% per annum, due October 17, 2007,                secured                by a land use right and plant and equipment owned by the                Company.                         |   |                                  | 891,827    |   |
| Monthly                interest only payments at 6.12% per annum, due November 1, 2007,                secured                by a land use right and plant and equipment owned by the                Company.                         |   |                                  | 459,028    |   |
| Monthly                interest only payments at 6.12% per annum, due November 27, 2007,                secured                by a land use right and plant and equipment owned by the                Company.                        |   |                                  | 524,604    |   |
| Monthly                interest only payments at 6.57% per annum, due April 10, 2008, secured                by                a land use right and plant and equipment owned by the                Company.                           |   |                                  | 655,755    |   |
| Monthly                interest only payments at 6.57% per annum, due June 5, 2008, secured                by a                land use right and plant and equipment owned by the                Company.                             |   |                                  | 655,755    |   |
| **Loans                from Commercial Bank -- Jiangnan Branch:**                                                                                                                                                                      |   |                                  |       |   |
| Monthly                interest only payments at 7.56% per annum, due January 10, 2008,                secured                by a land use right and plant and equipment owned by the                Company.                         |   |                                  | 2,623,020  |   |
| Monthly                interest only payments at 7.605% per annum, due May 10, 2008. And                secured                by a land use right and plant and equipment owned by the                Company                         |   |                                  | 1,311,510  |   |
| **Loan                from Agricultural Bank:**                                                                                                                                                                                        |   |                                  |       |   |
| Monthly                interest only payments at 7.7% per annum, due July 27,                2008.                                                                                                                                     |   |                                  | 574,715    |   |
| **Loan                from Shanghai Pudong Development Bank:**                                                                                                                                                                         |   |                                  |       |   |
| Monthly                interest only payments at 5.61 % per annum, due August 12, 2008,                guaranteed by Nan Long Group                                                                                                    |   |                                  | 2,623,020  |   |
| **Loan                from Huaxia Bank Hangzhou Jianguo Branch:**                                                                                                                                                                      |   |                                  |       |   |
| Quarterly                interest only payments at 6.336 % per annum, due November 22, 2007,                guaranteed by a land use right and plant and equipment owned by the                Company                                 |   |                                  | 1,967,265  |   |
| Total                                                                                                                                                                                                                                  |   | $                                     | 13,034,060 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      11. NOTES PAYABLE**

|                                                                                                  |   | **June                30, 2007** |       |
|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                  |   | (Unaudited)                           |       |
| Bank                acceptance notes:                                                                 |   |                                  |       |
| Due                  July 23, 2007 (subsequently settled)                                             |   | $                                     | 2,623,020  |   |
| Due                July 23, 2007 (subsequently settled)                                               |   |                                  | 786,906    |   |
| Due                  July 25, 2007 (subsequently settled)                                             |   |                                  | 655,755    |   |
| Due                July 25, 2007 (subsequently settled)                                               |   |                                  | 655,755    |   |
| Due                  July 22, 2007 (subsequently settled)                                             |   |                                  | 1,049,208  |   |
| Due                July 22, 2007 (subsequently settled)                                               |   |                                  | 918,057    |   |
| Due                  September 8, 2007 (subsequently settled)                                         |   |                                  | 1,311,510  |   |
| Due                September 9, 2007 (subsequently settled)                                           |   |                                  | 1,311,510  |   |
| Due                  September 28, 2007                                                               |   |                                  | 983,632    |   |
| Due                September 28, 2007                                                                 |   |                                  | 983,632    |   |
| Due                  September 15, 2007                                                               |   |                                  | 918,056    |   |
| Due                December 27, 2007                                                                  |   |                                  | 655,755    |   |
| Subtotal                                                                                              |   | $                                     | 12,852,796 |   |
|                                                                                                  |   |                                  |       |   |
| Notes                  payable (interest-free and unsecured) to unrelated                  companies: |   |                                  |       |   |
| Due                November 8, 2007                                                                   |   | $                                     | 104,921    |   |
| Due                  November 19, 2007                                                                |   |                                  | 632,188    |   |
| Due                December 31, 2007                                                                  |   |                                  | 655,755    |   |
| Due                  February 22, 2008                                                                |   |                                  | 822,934    |   |
| Subtotal                                                                                              |   | $                                     | 2,215,798  |   |
|                                                                                                  |   |                                  |       |   |
| Total                                                                                                 |   | $                                     | 15,068,594 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      12. INCOME TAXES**

|                              |   | **For                the Six Months Ended June 30,** |   |
|-----------------------------------|--------|------------------------------------------------------|--------|
|                              |   | **2007**                                             |   |   | **2006** |   |
|                              |   | (Unaudited)                                          |   |
| Current:                          |   |                                                 |   |   |   |   |
| Provisions                for CIT |   | $                                                    | 32     |   |   | $ | - |   |
|                              |   |                                                 |   |   |   |   |   |   |
| Deferred:                         |   |                                                 |   |   |   |   |   |   |
| Provisions                for CIT |   | $                                                    | (1,920 | ) |   | $ | - |   |
|                              |   |                                                 |   |   |   |   |   |   |
| Income                tax expense |   | $                                                    | (1,888 | ) |   | $ | - |   |

|                              |   | **For                the Six Months Ended June 30,** |     |
|-----------------------------------|--------|------------------------------------------------------|----------|
|                              |   | **2007**                                             |     |   | **2006** |   |
|                              |   | (Unaudited)                                          |     |
| Provisions                for CIT |   | $                                                    | (939,683 | ) |   | $ | - |   |
| Tax                exemption      |   | $                                                    | 937,795  |   |   |   | - |   |
|                              |   |                                                 |     |   |   |   |   |   |
| Income                tax expense |   | $                                                    | (1,888   | ) |   | $ | - |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      12.    INCOME TAXES (CONTINUED)**

|                                                                                                                                                                  |   | **June                30, 2007** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                                                                  |   | (Unaudited)                      |   |
|     Deferred                  tax assets:                                                                                                         |   |                             |   |
|     Current                portion:                                                                                                               |   |                             |   |
|     Other                                                                                                                                         |   | $                                | 9,964  |   |
|     Subtotal                                                                                                                                      |   |                             | 9,964  |   |
|                                                                                                                                                                  |   |                             |   |   |
|     Non-current                portion:                                                                                                           |   |                             |   |   |
|     Depreciation                                                                                                                                  |   |                             | 3,888  |   |
|     Subtotal                                                                                                                                      |   |                             | 3,888  |   |
|                                                                                                                                                                  |   |                             |   |   |
|     Total                deferred tax assets                                                                                                      |   |                             | 13,852 |   |
|                                                                                                                                                                  |   |                             |   |   |
|     Deferred                tax liabilities:                                                                                                      |   |                             |   |   |
|     Current                  portion:                                                                                                             |   |                             |   |   |
|     Other                                                                                                                                         |   |                             | 12,809 |   |
|     Subtotal                                                                                                                                      |   |                             | 12,809 |   |
|                                                                                                                                                                  |   |                             |   |   |
|     Deferred                  tax liabilities:                                                                                                    |   |                             |   |   |
|     Non-current                portion:                                                                                                           |   |                             |   |   |
|     Others                                                                                                                                        |   |                             | 3,357  |   |
|     Subtotal                                                                                                                                      |   |                             | 3,357  |   |
|                                                                                                                                                                  |   |                             |   |   |
|                                                                                                                                                                  |   |                             |   |   |
|     Total                  deferred tax liabilities                                                                                               |   |                             | 16,166 |   |
|                                                                                                                                                                  |   |                             |   |   |
|                     Net                  deferred tax liabilities |   | $                                | (2,314 | ) |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**NOTE      13.  CONTINGENCIES**

|   | (I)                In 2006, the Company brought                a legal action against Zhejiang Yuegong steel Structure Co. and Zhejiang                Jinhua   No.1 Construction Co., Ltd. for their delay in the                contruction 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 won 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 the date                this                report is filed. Considering the uncertainties of the legal proceeding,                the Company did not record a contingent gain for this at June 30,                2007. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (II)                In 2006, the Company brought                a legal action against Weifang Rongda Automobile Trading Co.,                Ltd.(“Rongda”) for goods returned from Rongda 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 won 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 the                date                this report is filed. Considering the uncertainties of the legal                proceeding, the Company did not record a contingent gain for this                at June                30, 2007. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE      14. FORFEITURE OF CUSTOMER DEPOSIT**

----

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

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

**Overview**

**Results      of Operations**

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

|                                          |   | **For                the Three Months Ended** |       |   |                            |
|-----------------------------------------------|--------|-----------------------------------------------|------------|--------|---------------------------------|
|                                          |   | **June                30,**                   |       |   |                            |
|                                          |   | **2007****(Unaudited)**                       |       |   | **2006****(Unaudited)**         |   |   | **Comparisons** |
|                                          |   | **Amount**                                    |       |   | **%                of Revenue** |   |   | **Amount** |   |   | **%                of Revenue** |   |   | **Growth                in Amount** |   |   | Increase                in % |
| **REVENUES**                                  |   |                                          | 11,155,508 |   |                            |   | 100.00 | % |   |   | 2,859,686 |   |   |   | 100.00 | % |   |   | 8,295,822 |   |   |   | 290.10 | % |
| **COST                OF GOODS SOLD**         |   |                                          | 8,445,862  |   |                            |   | 75.71 | % |   |   | 2,620,490 |   |   |   | 91.64 | % |   |   | 5,825,372 |   |   |   | 222.30 | % |
| **GROSS                  PROFIT**             |   |                                          | 2,709,646  |   |                            |   | 24.29 | % |   |   | 239,196 |   |   |   | 8.36 | % |   |   | 2,470,450 |   |   |   | 1,032.81 | % |
| Selling                and Marketing          |   |                                          | 202,538    |   |                            |   | 1.82 | % |   |   | 39,989 |   |   |   | 1.40 | % |   |   | 162,549 |   |   |   | 406.48 | % |
| General                  and Administrative   |   |                                          | 170,936    |   |                            |   | 1.53 | % |   |   | 101,031 |   |   |   | 3.53 | % |   |   | 69,905 |   |   |   | 69.19 | % |
| Research                and Development       |   |                                          | 40,749     |   |                            |   | 0.37 | % |   |   | 25,948 |   |   |   | 0.91 | % |   |   | 14,801 |   |   |   | 57.04 | % |
| **INCOME                  FROM OPERATIONS**   |   |                                          | 2,295,423  |   |                            |   | 20.58 | % |   |   | 72,228 |   |   |   | 2.53 | % |   |   | 2,223,195 |   |   |   | 3,078.02 | % |
| Government                Grants              |   |                                          | 12,191     |   |                            |   | 0.11 | % |   |   | - |   |   |   | 0.00 | % |   |   | 12,191 |   |   |   | 100.00 | % |
| Interest                  Expense, Net        |   |                                          | (361,748   | )      |                            |   | (3.24 | %) |   |   | (156,309 | ) |   |   | (5.47 | %) |   |   | (205,439 | ) |   |   | 131.43 | % |
| Other                Income (Expense), Net    |   |                                          | (72,228    | )      |                            |   | (0.65 | %) |   |   | 422 |   |   |   | 0.01 | % |   |   | (72,650 | ) |   |   | (17,215.64 | % |
| **INCOME                  BEFORE INCOME TAX** |   |                                          | 1,873,638  |   |                            |   | 16.80 | % |   |   | (83,659 | ) |   |   | (2.93 | %) |   |   | 1,957,297 |   |   |   | 2,339.61 | % |
| **INCOME                TAX**                 |   |                                          | 33,412     |   |                            |   | 0.30 | % |   |   | - |   |   |   | 0.00 | % |   |   | 33,412 |   |   |   | 100.00 | % |
| **NET                  INCOME**               |   |                                          | 1,907,050  |   |                            |   | 17.10 | % |   |   | (83,659 | ) |   |   | (2.93 | %) |   |   | 1,990,709 |   |   |   | 2,279.55 | % |

----

*** Revenues.***

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

***Gross      Profit.***

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***        Income Tax Provision***

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

***Comparison      of Six Months Ended June 30, 2007 and June 30, 2006.***

|                                          |   | **For                the Six Months Ended** |         |            |                            |            |
|-----------------------------------------------|--------|---------------------------------------------|--------------|-----------------|---------------------------------|-----------------|
|                                          |   | **June                30,**                 |         |          |                          |          |
|                                          |   | **2007**                                    |         | **2006**        |                            |            |   |   |
|                                          |   | **(Unaudited)**                             |         | **(Unaudited)** |                            | **Comparisons** |
|                                          |   | **Amount**                                  | ** ** |            | **%                of Revenue** |            | **Amount** |   | **%                of Revenue** |   | **Growth                in Amount** | **Increase                in %** |
| **REVENUES**                                  |   | 17,148,966                                  |         |            | 100                             | %               |   |   | 4,756,821 |   |   | 100 | % |   | 12,392,145 |   | 260.51 | % |
| **COST                OF GOODS SOLD**         |   | 13,292,442                                  |         |            | 77.51                           | %               |   |   | 4,283,201 |   |   | 90.04 | % |   | 9,009,241 |   | 210.34 | % |
| **GROSS                  PROFIT**             |   | 3,856,524                                   |         |            | 22.49                           | %               |   |   | 473,620 |   |   | 9.96 | % |   | 3,382,904 |   | 714.27 | % |
| Selling                and Marketing          |   | 366,578                                     |         |            | 2.14                            | %               |   |   | 85,035 |   |   | 1.79 | % |   | 281,543 |   | 331.09 | % |
| General                  and Administrative   |   | 342,320                                     |         |            | 2.00                            | %               |   |   | 219,175 |   |   | 4.61 | % |   | 123,145 |   | 56.19 | % |
| Research                and Development       |   | 52,615                                      |         |            | 0.31                            | %               |   |   | 49,608 |   |   | 1.04 | % |   | 3,007 |   | 6.06 | % |
| **INCOME                  FROM OPERATIONS**   |   | 3,095,011                                   |         |            | 18.05                           | %               |   |   | 119,802 |   |   |  2.52 | % |   | 2,975,209 |   | 2,483.44 | % |
| Forfeiture                of Customer Deposit |   | 267,673                                     |         |            | 1.56                            | %               |   |   | - |   |   | 0.00 | % |   | 267,673 |   | 100.00 | % |
| Government                  Grants            |   | 12,132                                      |         |            | 0.07                            | %               |   |   | 65,946 |   |   | 1.39 | % |   | (53,814 | )  | (81.60 | %) |
| Interest                Expense, Net          |   | (450,441                                    | )            |            | (2.63                           | %)              |   |   | (275,007 | )  |   | (5.78 | %) |   | (175,434 | )  | 63.79 | % |
| Other                  Income (Expense), Net  |   | (76,851                                     | )            |            | (0.45                           | %)              |   |   | 565 |   |   | 0.01 | % |   | (77,416 | )  | (13,701.95 | %) |
| **INCOME                BEFORE INCOME TAX**   |   | 2,847,524                                   |         |            | 16.60                           | %               |   |   | (88,694 | )  |   | (1.86 | %) |   | 2,936,218 |   | 3,310.50 | % |
| **INCOME                  TAX**               |   | (1,888                                      | )            |            | 0.01                            | %               |   |   | - |   |   | 0.00 | % |   | (1,888 | ) | 100.00 | % |
| **NET                INCOME**                 |   | 2,845,636                                   |         |            | 16.59                           | %               |   |   | (88,694 | )  |   | (1.86 | %) |   | 2,934,330 |   | 3,308.37 | % |

----

***Revenues***
*.      *

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

***Gross      Profit.***

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***        Income Tax Provision***

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

**Liquidity      and Capital Resources**

***Cash      Flows***

*Six      Months ended June 30, 2007and 2006*

----

*Working      Capital*

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

*Contractual      Obligations*

|                                          |   | **Payments                Due by Period** |       |
|-----------------------------------------------|--------|-------------------------------------------|------------|
|                                          |   | **Total**                                 |       |   | **Less                than 1 year** |   |   | **1-3                Years** |   |   | **3-5                Years** |   |   | **5                Years +** |   |
| Contractual                Obligations:       |   |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                  Indebtedness            |   | $                                         | 13,034,060 |   |   | $ | 13,034,060 |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Other                Indebtedness             |   | $                                         | 15,068,594 |   |   | $ | 15,068,594 |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Capital                  Lease Obligations    |   | $                                         | --         |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Operating                Leases               |   | $                                         | --         |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Purchase                  Obligations         |   | $                                         | --         |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
| Total                Contractual Obligations: |   | $                                         | 28,102,654 |   |   | $ | 28,102,654 |   |   | $ | - |   |   | $ | -- |   |   | $ | -- |   |

*Off-balance      Sheet Arrangements*

----

**Accounting      Policies**

*Revenue      Recognition*

| ooo | Persuasive                evidence of an arrangement exists,                        |
|-----|-------------------------------------------------------------------------------------|
| ooo | Delivery                has occurred or services have been                rendered, |

| ooo | The                seller's price to the buyer is fixed or determinable,                and |
|-----|---------------------------------------------------------------------------------------------|
| ooo | Collectibility                is reasonably assured.                                        |

*Use      of Estimates*

**Recent      Accounting Pronouncements**

----

**Item      3. Controls and Procedures**

----

**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

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

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

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

**Item      5. Other Information.**

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

----

**SIGNATURES**

|                                          | **STONE                MOUNTAIN RESOURCES, INC.** |                                                       |
|-----------------------------------------------|---------------------------------------------------|------------------------------------------------------------|
|                                          |                                              |                                                       |
| Date:                September 21, 2007  | By:                                     | */s/                Hu Xiaoming*                      |   |
|                                          |                                              | Hu                Xiaoming                                 |   |
|                                          |                                              | President                and Chief Executive Officer  |   |
|                                          |
|                                          |                                              |                                                       |
| Date:                September 21, 2007  | By:                                     | */s/                Zhu Xiaoying*                     |   |
|                                          |                                              | Zhu                Xiaoying                                |   |
|                                          |                                              | Chief                Financial Officer                |   |
|                                          |