| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Delaware                                                      |   | 90-0363723                           |
|---------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. Employer Identification No.) |

----

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

----

|                                |                                                                                        |   | Page   |   |
|-------------------------------------|---------------------------------------------------------------------------------------------|--------|--------|--------|
|                                |                                                                                        |   |   |   |
| Explanatory Note                    |                                                                                        |   | 1      |   |
|                                |                                                                                        |   |   |   |
| PART I— FINANCIAL INFORMATION |                                                                                        |   |   |
|                                |                                                                                        |   |   |   |
| Item 1.                             | Condensed Consolidated Financial Statements                                                 |   |   | 2      |   |
|                                |                                                                                        |   |   |   |   |
| Item 2.                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   |   | 34     |   |
|                                |                                                                                        |   |   |   |   |
| Item 3.                             | Quantitative and Qualitative Disclosures about Market Risk                                  |   |   | 49     |   |
|                                |                                                                                        |   |   |   |   |
| Item 4.                             | Controls and Procedures                                                                     |   |   | 50     |   |
|                                |                                                                                        |   |   |   |   |
| PART II— OTHER INFORMATION    |                                                                                        |   |   |   |
|                                |                                                                                        |   |   |   |   |
| Item 1.                             | Legal Proceedings                                                                           |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 1A.                            | Risk Factors                                                                                |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 2.                             | Unregistered Sales of Equity Securities and Use of Proceeds                                 |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 3.                             | Defaults Upon Senior Securities                                                             |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 4.                             | Removed and Reserved                                                                        |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 5.                             | Other information                                                                           |   | II-1   |   |
|                                |                                                                                        |   |   |   |   |
| Item 6.                             | Exhibits                                                                                    |   | II-2   |   |

----

----

|                                                                                                                                           |   | September 30,2010 |       |   | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------|-----------------------|--------|
|                                                                                                                                           |   | (Unaudited)            |       |   | (Audited)             |   |
|                                                                                                                                           |   |                   |       |   |                  |   |
| CURRENT ASSETS                                                                                                                                 |   |                   |       |   |                  |   |
| Cash and cash equivalents                                                                                                                      |   | $                      | 3,411,842  |   |                  | $      | 218,207 |   |
| Restricted cash                                                                                                                                |   |                   | 9,857,822  |   |                  |   | 5,704,984 |   |
| Accounts receivable, net of allowance for doubtful accounts of $0 as of September 30, 2010 and December 31, 2009                               |   |                   | 14,156,701 |   |                  |   | 14,879,968 |   |
| Inventories, net of reserve for slow moving inventories of $155,441 and $152,278 as of September, 30, 2010 and December 31, 2009, respectively |   |                   | 10,993,840 |   |                  |   | 5,382,760 |   |
| Notes receivable                                                                                                                               |   |                   | 13,864,424 |   |                  |   | 2,267,599 |   |
| Other receivables                                                                                                                              |   |                   | 911,130    |   |                  |   | 321,336 |   |
| Prepayments and prepaid expenses                                                                                                               |   |                   | 30,708     |   |                  |   | 30,083 |   |
| Due from employees                                                                                                                             |   |                   | 42,452     |   |                  |   | 28,228 |   |
| Advances to suppliers                                                                                                                          |   |                   | 350,525    |   |                  |   | 1,164,672 |   |
| Total Current Assets                                                                                                                           |   |                   | 53,619,444 |   |                  |   | 29,997,837 |   |
|                                                                                                                                           |   |                   |       |   |                  |   |   |   |
| LONG-TERM ASSETS                                                                                                                               |   |                   |       |   |                  |   |   |   |
| Plant and equipment, net                                                                                                                       |   |                   | 21,669,805 |   |                  |   | 23,146,833 |   |
| Land use rights, net                                                                                                                           |   |                   | 10,755,939 |   |                  |   | 10,719,528 |   |
| Deferred tax asset                                                                                                                             |   |                   | 219,351    |   |                  |   | 207,747 |   |
| Total Long-Term Assets                                                                                                                         |   |                   | 32,645,095 |   |                  |   | 34,074,108 |   |
|                                                                                                                                           |   |                   |       |   |                  |   |   |   |
| TOTAL ASSETS                                                                                                                                   |   | $                      | 86,264,539 |   |                  | $      | 64,071,945 |   |

----

|                                                                                                                                                                         |   | September, 30, |       |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|--------|-------------------|--------|
|                                                                                                                                                                         |   | 2010                |       |   | 2009              |   |
|                                                                                                                                                                         |   | (Unaudited)         |       |   | (Audited)         |   |
| CURRENT LIABILITIES                                                                                                                                                          |   |                |       |   |              |   |
| Accounts payable                                                                                                                                                             |   | $                   | 10,159,908 |   |              | $      | 4,738,543 |   |
| Other payables and accrued expenses                                                                                                                                          |   |                | 1,414 ,921 |   |              |   | 1,871,020 |   |
| Short-term bank loans                                                                                                                                                        |   |                | 23,887,371 |   |              |   | 26,326,566 |   |
| Customer deposits                                                                                                                                                            |   |                | 4,257      |   |              |   | 39,371 |   |
| Notes payable                                                                                                                                                                |   |                | 14,105,767 |   |              |   | 7,931,540 |   |
| Income tax payable                                                                                                                                                           |   |                | 95,439     |   |              |   | 201,564 |   |
| Due to employees                                                                                                                                                             |   |                | 10,748     |   |              |   | 88,306 |   |
| Due to related party                                                                                                                                                         |   |                | 841,251    |   |              |   | 841,251 |   |
| Deferred tax liability                                                                                                                                                       |   |                | 54,808     |   |              |   | 62,544 |   |
| Total Current Liabilities                                                                                                                                                    |   |                | 50,574,470 |   |              |   | 42,100,705 |   |
|                                                                                                                                                                         |   |                |       |   |              |   |   |   |
| LONG TERM LIABILITIES                                                                                                                                                        |   |                |       |   |              |   |   |   |
| Note payable,  net of discount of $3,302,508 and $0 as of September, 30, 2010 and December 31, 2009, respectively                                                  |   |                | 807,278    |   |              |   | - |   |
| Warrant liabilities                                                                                                                                                          |   |                | 5,737,418  |   |              |   | - |   |
| Total Long-Term Liabilities                                                                                                                                                  |   |                | 6,544,696  |   |              |   | - |   |
|                                                                                                                                                                         |   |                |       |   |              |   |   |   |
| TOTAL LIABILITIES                                                                                                                                                            |   |                | 57,119,166 |   |              |   | 42,100,705 |   |
|                                                                                                                                                                         |   |                |       |   |              |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                |   |                |       |   |              |   |   |   |
|                                                                                                                                                                         |   |                |       |   |              |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                   |   |                |       |   |              |   |   |   |
| Common stock, $0.001 par value; 100,000,000 shares authorized;  22,960,266 and 19,961,000 shares outstanding at September, 30, 2010 and December 31, 2009, respectively |   |                | 22,960     |   |              |   | 19,961 |   |
| Additional paid-in capital                                                                                                                                                   |   |                | 16,120,761 |   |              |   | 8,967,012 |   |
| Retained earnings (the restricted portion is $890,912 at September, 30, 2010 and December 31, 2009)                                                                          |   |                | 10,337,673 |   |              |   | 11,046,999 |   |
| Accumulated other comprehensive income                                                                                                                                       |   |                | 2,663,979  |   |              |   | 1,937,268 |   |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                             |   |                | 29,145,373 |   |              |   | 21,971,240 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                             |   | $                   | 86,264,539 |   |              | $      | 64,071,945 |   |

----

|                                              |   | Three Months Ended |       |   | Nine Months Ended |   |
|---------------------------------------------------|--------|------------------------------|------------|--------|-----------------------------|--------|
|                                              |   | September 30,2010       |       |   | September 30,2009      |   |   | September 30,2010 |   |   | September 30,2009 |   |
| REVENUES, NET                                     |   | $                            | 10,478,224 |   |                        | $      | 9,626,593 |   |   | $ | 28,637,863 |   |   | $ | 19,114,049 |   |
| COST OF GOODS SOLD                                |   |                         | (8,140,771 | )      |                        |   | (7,266,052 | ) |   |   | (22,098,905 | ) |   |   | (14,329,404 | ) |
|                                              |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                      |   |                         | 2,337,453  |   |                        |   | 2,360,541 |   |   |   | 6,538,958 |   |   |   | 4,784,645 |   |
| Research and development                          |   |                         | 459,935    |   |                        |   | 660,108 |   |   |   | 1,203,270 |   |   |   | 1,767,081 |   |
| Selling and distribution expenses                 |   |                         | 58,121     |   |                        |   | 79,310 |   |   |   | 1,000,187 |   |   |   | 263,304 |   |
| General and administrative expenses               |   |                         | 516,929    |   |                        |   | 510,212 |   |   |   | 2,315,088 |   |   |   | 1,966,422 |   |
| INCOME (LOSS) FROM OPERATIONS                     |   |                         | 1,302,468  |   |                        |   | 1,110,911 |   |   |   | 2,020,413 |   |   |   | 787,838 |   |
|                                              |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interest income (expense), net                    |   |                         | (572,032   | )      |                        |   | (442,315 | ) |   |   | (2,015,516 | ) |   |   | (860,872 | ) |
| Change of fair value of financial instruments     |   |                         | (2,578,693 | )      |                        |   | - |   |   |   | (802,884 | ) |   |   | - |   |
| Government grants                                 |   |                         | 191,934    |   |                        |   | 3,312 |   |   |   | 266,911 |   |   |   | 127,317 |   |
| Other income, net                                 |   |                         | 33,249     |   |                        |   | 9,800 |   |   |   | 91,088 |   |   |   | 311,984 |   |
| (LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES |   |                         | (1,623,074 | )      |                        |   | 681,708 |   |   |   | (439,988 | ) |   |   | 366,267 |   |
|                                              |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| INCOME TAX (EXPENSE) BENEFIT                      |   |                         | (94,282    | )      |                        |   | (105,558 | ) |   |   | (269,338 | ) |   |   | (146,642 | ) |
|                                              |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM CONTINUING OPERATIONS          |   |                         | (1,717,356 | )      |                        |   | 576,150 |   |   |   | (709,326 | ) |   |   | 219,625 |   |
|                                              |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                 |   |                         | (1,717,356 | )      |                        |   | 576,150 |   |   |   | (709,326 | ) |   |   | 219,625 |   |

----

|                                                            |   | Three Months Ended |       |   | Nine Months Ended |   |
|-----------------------------------------------------------------|--------|------------------------------|------------|--------|-----------------------------|--------|
|                                                            |   | September 30,2010       |       |   | September 30,2009      |   |   | September 30,2010 |   |   | September 30,2009 |   |
| OTHER COMPREHENSIVE INCOME                                      |   |                         |       |   |                        |   |   |   |   |   |   |   |
| Foreign currency translation                                    |   |                         | 595,771    |   |                        |   | (2,070 | ) |   |   | 726,711 |   |   |   | 26,349 |   |
| COMPREHENSIVE (LOSS) INCOME                                     |   |                         | (1,121,585 | )      |                        |   | 574,080 |   |   |   | 17,385 |   |   |   | 245,974 |   |
|                                                            |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE SHARES OUTSTANDING BASIC                       |   |                         | 22,570,140 |   |                        |   | 19,961,000 |   |   |   | 21,139,827 |   |   |   | 19,961,000 |   |
| WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED                     |   |                         | 22,570,140 |   |                        |   | 21,155,595 |   |   |   | 21,139,827 |   |   |   | 20,856,082 |   |
|                                                            |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS, BASIC   |   | $                            | (0.08      | )      |                        | $      | 0.03 |   |   | $ | (0.03 | ) |   | $ | 0.01 |   |
| NET INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS, DILUTED |   | $                            | (0.08      | )      |                        | $      | 0.03 |   |   | $ | (0.03 | ) |   | $ | 0.01 |   |
|                                                            |   |                         |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER SHARE, BASIC                              |   | $                            | (0.08      | )      |                        | $      | 0.03 |   |   | $ | (0.03 | ) |   | $ | 0.01 |   |
| NET INCOME (LOSS) PER SHARE, DILUTED                            |   | $                            | (0.08      | )      |                        | $      | 0.03 |   |   | $ | (0.03 | ) |   | $ | 0.01 |   |

----

|                                                                                               |   | Nine Months Ended September, 30 |        |
|----------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|-------------|
|                                                                                               |   | 2010                                                |        |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |   |                                                |        |   |   |   |
| Net (loss) income                                                                                  |   | $                                                   | (709,326    | ) |   | $ | 219,625 |   |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |   |                                                |        |   |   |   |   |   |
| Depreciation and amortization                                                                      |   |                                                | 3,105,355   |   |   |   | 2,529,981 |   |
| Deferred taxes                                                                                     |   |                                                | (10,549     | ) |   |   | 41,085 |   |
| Option and warrant expense                                                                         |   |                                                | 2,198,961   |   |   |   | 840,468 |   |
| Change of financial instrument’s fair value                                                  |   |                                                | 2,434,909   |   |   |   | - |   |
|                                                                                               |   |                                                |        |   |   |   |   |   |
| Changes in operating assets and liabilities:                                                       |   |                                                |        |   |   |   |   |   |
| (Increase) Decrease In:                                                                            |   |                                                |        |   |   |   |   |   |
| Accounts receivable                                                                                |   |                                                | 1,014,365   |   |   |   | 652,827 |   |
| Inventories                                                                                        |   |                                                | (5,403,855  | ) |   |   | (11,232,447 | ) |
| Other receivables                                                                                  |   |                                                | (573,000    | ) |   |   | 172,147 |   |
| Due from employees                                                                                 |   |                                                | (91,416     | ) |   |   | 50,393 |   |
| Prepayments and prepaid expenses                                                                   |   |                                                | 823,785     |   |   |   | (596,614 | ) |
|                                                                                               |   |                                                |        |   |   |   |   |   |
| Increase (Decrease) In:                                                                            |   |                                                |        |   |   |   |   |   |
| Accounts payable                                                                                   |   |                                                | 5,230,579   |   |   |   | 1,225,909 |   |
| Other payables and accrued liabilities                                                             |   |                                                | (480,855    | ) |   |   | 1,404,305 |   |
| Customer deposits                                                                                  |   |                                                | (35,308     | ) |   |   | (650,636 | ) |
| Income tax payable                                                                                 |   |                                                | (108,396    | ) |   |   | 105,558 |   |
| Net cash provided by (used in) operating activities                                                |   | $                                                   | 7,395,249   |   |   | $ | (5,237,399 | ) |
|                                                                                               |   |                                                |        |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |   |                                                |        |   |   |   |   |   |
| Purchases of plant and equipment                                                                   |   |                                                | (750,553    | ) |   |   | (3,059,687 | ) |
| Purchase of construction in progress                                                               |   |                                                | -           |   |   |   | (553,545 | ) |
| Issuance of notes receivable                                                                       |   |                                                | (13,623,804 | ) |   |   | (10,011,535 | ) |
| Repayments of notes receivable                                                                     |   |                                                | 2,274,519   |   |   |   | 19,330,289 |   |
| Net cash (used in) provided by investing activities                                                |   | $                                                   | (12,099,838 | ) |   | $ | 5,705,522 |   |

----

|                                                 |   | Nine Months Ended September, 30 |        |
|------------------------------------------------------|--------|-----------------------------------------------------|-------------|
|                                                 |   | 2010                                                |        |   | 2009 |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                |   |                                                |        |   |   |   |
| Restricted cash                                      |   | $                                                   | (3,964,344  | ) |   | $ | 4,680,286 |   |
| Proceeds from short-term bank loans                  |   |                                                | 23,619,506  |   |   |   | 24,216,260 |   |
| Repayments of short-term bank loans                  |   |                                                | (26,553,606 | ) |   |   | (22,900,953 | ) |
| Proceeds from notes payable                          |   |                                                | 23,860,959  |   |   |   | 14,468,375 |   |
| Repayments of notes payable                          |   |                                                | (7,955,742  | ) |   |   | (20,410,634 | ) |
| Option exercise and Note conversion                  |   |                                                | (932,425    | ) |   |   | - |   |
| Repayments of advances to related parties            |   |                                                | -           |   |   |   | 217,484 |   |
| Net cash provided by financing activities            |   |                                                | 8,074,348   |   |   |   | 270,818 |   |
|                                                 |   |                                                |        |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |   |                                                | 3,369,759   |   |   |   | 738,942 |   |
| Effect of exchange rate changes on cash              |   |                                                | (176,124    | ) |   |   | 1,163 |   |
| Cash and cash equivalents at beginning of period     |   |                                                | 218,207     |   |   |   | 141,380 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD           |   | $                                                   | 3,411,842   |   |   | $ | 881,485 |   |
|                                                 |   |                                                |        |   |   |   |   |   |
| SUPPLEMENTARY CASH FLOW INFORMATION                  |   |                                                |        |   |   |   |   |   |
| Income taxes paid                                    |   | $                                                   | 388,351     |   |   | $ | - |   |
| Interest paid                                        |   | $                                                   | 1,331,792   |   |   | $ | 1,354,460 |   |

----

----

----

| (i) | Continental Development Ltd. (“Continental”), a wholly-owned subsidiary of the Company; |
|-----|-----------------------------------------------------------------------------------------------------|

| (ii) | Zhejiang Kandi Vehicles Co. Ltd. (“Kandi”), a wholly-owned subsidiary of Continental; and |
|------|-------------------------------------------------------------------------------------------------------|

| (iii) | Kandi Special Vehicles Co., Ltd. (“KSV”, formerly known as Kandi New Energy Vehicles Co. Ltd. “KNE”), a wholly-owned subsidiary of the Company. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | Level 1—defined as observable inputs such as quoted prices in active markets; |
|--------|-------------------------------------------------------------------------------------|

| · | Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

| · | Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|                      |   | Fair Value Measurements at Reporting Date Using Quoted Prices in |      |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------|-----------|
|                      |   | Carrying valueas of September                                                                  |      |   | Active Marketsfor IdenticalAssets |   |   | Significant OtherObservableInputs |   |   | SignificantUnobservableInputs |   |
|                      |   | 30, 2010                                                                                                 |      |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Cash and cash equivalents |   | $                                                                                                             | 3,411,842 |   |   | $ | 3,411,842 |   |   |   | - |   |   |   | - |   |
| Restricted cash           |   | $                                                                                                             | 9,857,822 |   |   | $ | 9,857,822 |   |   |   | - |   |   |   | - |   |
| Conversion features       |   | $                                                                                                             | 2,553,237 |   |   |   | - |   |   | $ | 2,553,237 |   |   |   | - |   |
| Warrants                  |   | $                                                                                                             | 3,184,181 |   |   |   | - |   |   | $ | 3,184,181 |   |   |   | - |   |

----

----

| Buildings               | 30 years            |
|-------------------------|---------------------|
| Machinery and equipment | 10 years            |
| Office equipment        |   5 years |
| Motor vehicles          |   5 years |
| Moulds                  |   5 years |

----

|   | · | Persuasive evidence of an arrangement exists; |
|--------|--------|-----------------------------------------------|

|   | · | Delivery has occurred or services have been rendered; |
|--------|--------|-------------------------------------------------------|

|   | · | The seller’s price to the buyer is fixed or determinable; and |
|--------|--------|---------------------------------------------------------------------|

|   | · | Collectability is reasonably assured. |
|--------|--------|---------------------------------------|

----

|                                      |   | September 30, 2010 |   |   | December 31,2009 |   |   | September 30,2009 |   |
|-------------------------------------------|--------|------------------------------|--------|--------|-----------------------|--------|--------|------------------------|--------|
| Period end RMB : USD exchange rate        |   |                         | 6.6981 |   |                  |   | 6.8372 |                   |   |   | 6.8376 |   |
| Average quarterly RMB : USD exchange rate |   |                         | 6.8164 |   |                  |   | 6.8409 |                   |   |   | 6.8425 |   |

----

----

----

----

|           |   | Sales                                        |   |   | Accounts Receivable                     |   |
|----------------|--------|----------------------------------------------|--------|--------|----------------------------------------------|--------|
| MajorCustomers |   | Nine MonthsEndedSeptember, 30,2010 |   |   | Nine MonthsEndedSeptember, 30,2009 |   |   | September, 30,2010 |   |   | December 31,2009 |   |
| Company A      |   |                                         | 42     | %      |                                         |   | 89 | % |   |   | 9 | % |   |   | 92 | % |
| Company B      |   |                                         | 38     | %      |                                         |   | - |   |   |   | 61 | % |   |   | - |   |
| Company C      |   |                                         | 13     | %      |                                         |   | 14 | % |   |   | 23 | % |   |   | 7 | % |
| Company D      |   |                                         | 2      | %      |                                         |   | - |   |   |   | 1 | % |   |   | - |   |
| Company E      |   |                                         | 2      | %      |                                         |   | - |   |   |   | 5 | % |   |   | - |   |

|           |   | Purchases                                    |   |   | Accounts Payable                        |   |
|----------------|--------|----------------------------------------------|--------|--------|----------------------------------------------|--------|
| MajorSuppliers |   | Nine MonthsEndedSeptember, 30,2010 |   |   | Nine MonthsEndedSeptember, 30,2009 |   |   | September, 30,2010 |   |   | December 31,2009 |   |
| Company F      |   |                                         | 82     | %      |                                         |   | 77 | % |   |   | 54 | % |   |   | - |   |
| Company G      |   |                                         | 2      | %      |                                         |   | 1 | % |   |   | 2 | % |   |   | 5 | % |
| Company H      |   |                                         | 1      | %      |                                         |   | 1 | % |   |   | - |   |   |   | - |   |
| Company I      |   |                                         | 1      | %      |                                         |   | 1 | % |   |   | 2 | % |   |   | 4 | % |
| Company J      |   |                                         | 1      | %      |                                         |   | 1 | % |   |   | 1 | % |   |   | 3 | % |

----

| Nine months Ended September 30,    |   | 2010   |       |   | 2009   |   |
|-------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Net (loss) income                                           |   | $      | (709,326   | )      |   | $      | 219,625 |   |
| Weighted – average shares of common stock outstanding |   |   |       |   |   |   |   |   |
| Basic                                                       |   |   | 21,139,827 |   |   |   | 19,961,000 |   |
| Dilutive shares                                             |   |   | -          |   |   |   | 895,082 |   |
| Diluted                                                     |   |   | 21,139,827 |   |   |   | 20,856,082 |   |
| Basic (loss) earning per share                              |   | $      | (0.03      | )      |   | $      | 0.01 |   |
| Diluted (loss) earning per share                            |   | $      | (0.03      | )      |   | $      | 0.01 |   |

|                                      |   | September 30, 2010(Unaudited) |       |   | December 31, 2009 |   |
|-------------------------------------------|--------|-----------------------------------------|------------|--------|-----------------------------|--------|
| Raw material                              |   | $                                       | 1,250,589  |   |                        | $      | 956,378 |   |
| Work-in-progress                          |   |                                    | 9,251,710  |   |                        |   | 3,785,506 |   |
| Finished goods                            |   |                                    | 646,982    |   |                        |   | 793,154 |   |
|                                      |   |                                    | 11,149,281 |   |                        |   | 5,535,038 |   |
| Less: reserve for slow moving inventories |   |                                    | (155,441   | )      |                        |   | (152,278 | ) |
| Inventories, net                          |   | $                                       | 10,993,840 |   |                        | $      | 5,382,760 |   |

----

|                                               |   | September 30,2010(Unaudited) |       |   | December 31,2009 |   |
|----------------------------------------------------|--------|-----------------------------------|------------|--------|-----------------------|--------|
| Notes receivable from unrelated companies:         |   |                              |       |   |                  |   |
| Due February 24, 2010, interest at 5.0% per annum  |   | $                                 | -          |   |                  | $      | 1,146,574 |   |
| Due February 24, 2010, interest at 5.0% per annum  |   |                              | -          |   |                  |   | 389,731 |   |
| Due April 29, 2010, interest at 5.31% per annum    |   |                              | -          |   |                  |   | 731,294 |   |
| Due December 30, 2010, interest at 8.0% per annum  |   |                              | 8,211,284  |   |                  |   | - |   |
| Due March 3, 2011, interest at 6.0% per annum      |   |                              | 1,189,501  |   |                  |   | - |   |
| Due March 5, 2011, interest at 6.0% per annum      |   |                              | 417,716    |   |                  |   | - |   |
| Due April 29, 2011, interest at 5.31% per annum    |   |                              | 746,480    |   |                  |   | - |   |
| Due September 30, 2011, interest at 8.0% per annum |   |                              | 3,299,443  |   |                  |   | - |   |
| Notes receivable from unrelated companies          |   |                              | 13,864,424 |   |                  |   | 2,267,599 |   |
|                                               |   |                              |       |   |                  |   |   |   |
| Bank acceptance notes:                             |   |                              |       |   |                  |   |   |   |
| Bank acceptance notes                              |   |                              | -          |   |                  |   | - |   |
| Notes receivable                                   |   | $                                 | 13,864,424 |   |                  | $      | 2,267,599 |   |

|                           |   | September 30,2010(Unaudited) |       |   | December 31, 2009 |   |
|--------------------------------|--------|-----------------------------------|------------|--------|-----------------------------|--------|
| Cost of land use rights        |   | $                                 | 11,427,222 |   |                        | $      | 11,168,397 |   |
| Less: Accumulated amortization |   |                              | (671,283   | )      |                        |   | (448,869 | ) |
| Land use rights, net           |   | $                                 | 10,755,939 |   |                        | $      | 10,719,528 |   |

----

| 2010 (three months) |   | $      | 62,067     |   |
|---------------------|--------|--------|------------|--------|
| 2011                |   |   | 248,270    |   |
| 2012                |   |   | 248,270    |   |
| 2013                |   |   | 248,270    |   |
| 2014                |   |   | 248,270    |   |
| Thereafter          |   |   | 9,700,792  |   |
| Total               |   | $      | 10,755,939 |   |

|                            |   | September 30,2010(Unaudited) |        |   | December 31, 2009 |   |
|---------------------------------|--------|-----------------------------------|-------------|--------|-----------------------------|--------|
| At cost:                        |   |                              |        |   |                        |   |
| Buildings                       |   | $                                 | 12,905,331  |   |                        | $      | 12,413,935 |   |
| Machinery and equipment         |   |                              | 9,516,442   |   |                        |   | 9,252,390 |   |
| Office equipment                |   |                              | 135,991     |   |                        |   | 114,380 |   |
| Motor vehicles                  |   |                              | 176,134     |   |                        |   | 166,616 |   |
| Moulds                          |   |                              | 11,371,213  |   |                        |   | 10,715,666 |   |
|                            |   |                              | 34,105,111  |   |                        |   | 32,662,987 |   |
| Less : Accumulated depreciation |   |                              |        |   |                        |   |   |   |
| Buildings                       |   | $                                 | (1,310,857  | )      |                        | $      | (970,725 | ) |
| Machinery and equipment         |   |                              | (6,429,983  | )      |                        |   | (5,601,424 | ) |
| Office equipment                |   |                              | (101,824    | )      |                        |   | (95,295 | ) |
| Motor vehicles                  |   |                              | (113,634    | )      |                        |   | (95,697 | ) |
| Moulds                          |   |                              | (4,479,008  | )      |                        |   | (2,753,013 | ) |
|                            |   |                              | (12,435,306 | )      |                        |   | (9,516,154 | ) |
| Plant and equipment, net        |   | $                                 | 21,669,805  |   |                        | $      | 23,146,833 |   |

----

|                                                                                                                                                                                                                   |   | September 30,2010(Unaudited) |   |   | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------|------------------|--------|
| Loans from ICBC-Exploration Zone Branch                                                                                                                                                                                |   |                         |   |   |             |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |
| Monthly interest only payments at 6.43% per annum, due April 6, 2010, secured by the assets of the Company.                                                                                                            |   | $                            | -      |   |             | $      | 731,294 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due April 15, 2010.  Collateralized by a time deposit.                                                                                                    |   |                         | -      |   |             |   | 1,316,328 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due June 3, 2010, secured by the assets of the Company.                                                                                                             |   |                         | -      |   |             |   | 731,294 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due August 10, 2010, secured by the assets of the Company (repaid before its due date).                                                                             |   |                         | -      |   |             |   | 394,899 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due August 11, 2010, secured by the assets of the Company (repaid before its due date).                                                                             |   |                         | -      |   |             |   | 438,776 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due October 11, 2010, secured by the assets of the Company (repaid before its due date).                                                                            |   |                         | -      |   |             |   | 658,164 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due October 13, 2010, secured by the assets of the Company (repaid before its due date).                                                                            |   |                         | -      |   |             |   | 702,042 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due November 12, 2010, secured by the assets of the Company (repaid before its due date).                                                                           |   |                         | -      |   |             |   | 146,259 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.31% per annum, due December 3, 2010, secured by the assets of the Company (repaid before its due date).                                                                            |   |                         | -      |   |             |   | 585,035 |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Loans from Huaxia Bank                                                                                                                                                                                                 |   |                         |   |   |             |   |   |   |
|                                                                                                                                                                                                                   |   |                         |   |   |             |   |   |   |
| Monthly interest only payments at 5.58% per annum, due September 21, 2010, secured by the assets of the Company, guaranteed by Mr. Hu Xiaoming, Yongkang Kangli Metal Manufacturing Co. and Kandi Investment Group Co. |   |                         | -      |   |             |   | 3,948,985 |   |

----

|                                                                                                                                                                                                                                                               |   | September 30,2010(Unaudited) |      |   | December 31,2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|-----------------------|--------|
| Loans from Commercial Bank-Jiangnan Branch                                                                                                                                                                                                                         |   |                              |      |   |                  |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |
| Monthly interest only payments at 5.84% per annum, due January 5, 2010, guaranteed by Yongkang Kangli Metal Manufacturing Co. and pledged by Jingdezhen De'er Industrial Investment Co., Ltd.                                                                      |   |                              | -         |   |                  |   | 2,925,174 |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.84% per annum, due May 5, 2010, secured by the assets of the Company, and guaranteed by Mr. Hu Xiaoming and Ms. Ling Yueping.                                                                                                  |   |                              | -         |   |                  |   | 1,462,587 |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.10% per annum, due October 15, 2010, secured by the assets of the Company (repaid on its due date).                                                                                                                            |   |                              | 1,492,961 |   |                  |   | - |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.10% per annum, due December 10, 2010, secured by the assets of the Company, and guaranteed by Mr. Hu Xiaoming and Ms. Ling Yueping.                                                                                            |   |                              | 746,481   |   |                  |   | - |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.84% per annum, due January 5, 2011, guaranteed by Mr. Hu Xiaoming, Mr. Lu Qinjiang, Mr. Lu Qinbo, Ms. Ling Yueping and Yongkang Kangli Metal Manufacturing Co. and pledged by Jingdezhen De'er Industrial Investment Co., Ltd. |   |                              | 2,985,921 |   |                  |   | - |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Loans from China Ever-bright Bank                                                                                                                                                                                                                                  |   |                              |      |   |                  |   |   |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.58% per annum, due February 22, 2010, pledged office building of Mr. Hu Xiaoming and Ms. Ling Yueping, guaranteed by Nanlong Group Co., Ltd., and Yongkang Kangli Metal Manufacturing Co.                                      |   |                              | -         |   |                  |   | 4,387,761 |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.35% per annum, due October 13, 2010, secured by the assets of the Company, and guaranteed by Nanlong Group Co., Ltd., Zhejiang Mengdeli Electric Company Mr. Hu Xiaoming and Ms. Ling Yueping (repaid on its due date).        |   |                              | 4,478,882 |   |                  |   | - |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 4.86% per annum, due October 15, 2010, secured by the Company’s account receivables (repaid on its due date).                                                                                                              |   |                              | 2,985,921 |   |                  |   | - |   |
|                                                                                                                                                                                                                                                               |   |                              |      |   |                  |   |   |   |
| Monthly interest only payments at 5.84% per annum, due April.7, 2011, pledged office building of Mr. Hu Xiaoming and Ms. Ling Yueping, guaranteed by Nanlong Group Co., Ltd., and Zhejiang Mengdeli Electric Company.                                              |   |                              | 4,478,882 |   |                  |   | - |   |

----

|                                                                                                                                                                                            |   | September 30,2010(Unaudited) |       |   | December 31,2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|--------|-----------------------|--------|
| Loans from Shanghai Pudong Development Bank                                                                                                                                                     |   |                              |       |   |                  |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |
| Monthly interest only payments at 4.78% per annum, due April 28, 2010, collateralized by a time deposit.                                                                                        |   |                              | -          |   |                  |   | 1,316,328 |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Monthly interest only payments at 5.58% per annum, due December 8, 2010, pledged house of Hu Xiaoming and Ms. Ling Yueping, guaranteed by Nanlong Group Co., Ltd. and Mr. Hu Xiaoming.          |   |                              | 2,985,921  |   |                  |   | 2,925,174 |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Loans from China Ever-growing Bank                                                                                                                                                              |   |                              |       |   |                  |   |   |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Monthly interest only payments at 5.84% per annum, due October 27, 2010, guaranteed by Zhejiang Shuguang Industrial Co., Ltd., and Zhejiang Mengdeli Electric Company (repaid on its due date). |   |                              | 2,985,921  |   |                  |   | 2,925,173 |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Loans from ChinaCommunication Bank-Jinhua Branch                                                                                                                                                |   |                              |       |   |                  |   |   |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Monthly interest only payments at 5.58% per annum, due February 15, 2010, guaranteed by Zhejiang Shuguang Industrial Co., Ltd. and Mr. Hu Xiaoming.                                             |   |                              | -          |   |                  |   | 731,293 |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Monthly interest only payments at 5.84% per annum, due February 4, 2011, guaranteed by  Mr. Hu Xiaoming, Mr. Yan Guanwei and Zhejiang Shuguang industrial Co., Ltd.                   |   |                              | 746,481    |   |                  |   | - |   |
|                                                                                                                                                                                            |   |                              |       |   |                  |   |   |   |
| Total                                                                                                                                                                                           |   | $                                 | 23,887,371 |   |                  | $      | 26,326,566 |   |

----

|                                           |   | September 30,2010(Unaudited) |       |   | December 31,2009 |   |
|------------------------------------------------|--------|-----------------------------------|------------|--------|-----------------------|--------|
| Bank acceptance notes:                         |   |                              |       |   |                  |   |
| Due March 8, 2010                              |   | $                                 | -          |   |                  | $      | 1,462,587 |   |
| Due March 24, 2010                             |   |                              | -          |   |                  |   | 1,462,587 |   |
| Due April 14, 2010                             |   |                              | -          |   |                  |   | 1,316,328 |   |
| Due October 26, 2010 (repaid on its due date)  |   |                              | 2,239,441  |   |                  |   |   |   |
| Due November 5, 2010 (repaid on its due date)  |   |                              | 746,480    |   |                  |   |   |   |
| Due November 5, 2010 (repaid on its due date)  |   |                              | 1,492,961  |   |                  |   |   |   |
| Due November 12, 2010 (repaid on its due date) |   |                              | 1,492,961  |   |                  |   |   |   |
| Due January 13, 2011                           |   |                              | 1,492,961  |   |                  |   |   |   |
| Due March 2, 2011                              |   |                              | 1,194,368  |   |                  |   |   |   |
| Due March 13, 2011                             |   |                              | 1,492,961  |   |                  |   |   |   |
| Due March 16, 2011                             |   |                              | 1,194,368  |   |                  |   | - |   |
| Subtotal                                       |   | $                                 | 11,346,501 |   |                  | $      | 4,241,502 |   |
|                                           |   |                              |       |   |                  |   |   |   |
| Notes payable to unrelated companies:          |   |                              |       |   |                  |   |   |   |
| Due December 1, 2010                           |   | $                                 | -          |   |                  | $      | 3,690,038 |   |
| Due December 31, 2010                          |   |                              | 128,395    |   |                  |   | - |   |
| Due December 31, 2010                          |   |                              | 2,630,871  |   |                  |   | - |   |
| Due January 20, 2012                           |   |                              | 807,278    |   |                  |   | - |   |
| Subtotal                                       |   |                              | 3,566,544  |   |                  |   | 3,690,038 |   |
| Total                                          |   | $                                 | 14,913,045 |   |                  | $      | 7,931,540 |   |

| Due October 26, 2010 (repaid on its due date)  |   |   | 2,239,441  |   |
|------------------------------------------------|--------|--------|------------|--------|
| Due November 5, 2010 (repaid on its due date)  |   |   | 746,480    |   |
| Due November 5, 2010 (repaid on its due date)  |   |   | 1,492,961  |   |
| Due November 12, 2010 (repaid on its due date) |   |   | 1,492,961  |   |
| Due January 13, 2011                           |   |   | 1,492,961  |   |
| Due March 2, 2011                              |   |   | 1,194,368  |   |
| Due March 13, 2011                             |   |   | 1,492,961  |   |
| Due March 16, 2011                             |   |   | 1,194,368  |   |
| Subtotal                                       |   | $      | 11,346,501 |   |

----

----

|                         |   | For the Nine Months EndedSeptember 30, |    |
|------------------------------|--------|-----------------------------------------------------------------|---------|
|                    |   | (Unaudited)                                                     |    |
|                    |   | 2010                                                            |    |   | 2009 |   |
| Current:                     |   |                                                            |    |   |   |   |
| Provision for CIT            |   | $                                                               | 279,955 |   |   | $ | - |   |
|                         |   |                                                            |    |   |   |   |   |   |
| Deferred:                    |   |                                                            |    |   |   |   |   |   |
| Provision for CIT            |   |                                                            | (10,617 | ) |   |   | 146,642 |   |
| Income tax expense (benefit) |   | $                                                               | 269,338 |   |   | $ | 146,642 |   |

|                                  |   | For the Nine Months EndedSeptember 30, |     |
|--------------------------------------------|--------|-----------------------------------------------------------------|----------|
|                                  |   | (Unaudited)                                                     |     |
|                                  |   | 2010                                                            |     |   | 2009 |   |
| Computed "expected" (benefit) expense |   | $                                                               | (109,997 | ) |   | $ | 91,567 |   |
| Favorable tax rate                         |   |                                                            | 236,834  |   |   |   | 18,326 |   |
| Permanent differences                      |   |                                                            | 58,159   |   |   |   | 30,118 |   |
| Valuation allowance                        |   |                                                            | 84,342   |   |   |   | 6,631 |   |
| Income tax expense (benefit)               |   | $                                                               | 269,338  |   |   | $ | 146,642 |   |

----

|                                                   |   | September 30,2010(Unaudited) |     |   | December 31,2009   |   |
|--------------------------------------------------------|--------|-----------------------------------|----------|--------|-----------------------------------|--------|
| Current portion:                                  |   |                              |     |   |                              |   |
| Deferred tax assets:                                   |   |                              |     |   |                              |   |
| Expense                                                |   | $                                 | (285,813 | )      |                              | $      | 23,028 |   |
| Subtotal                                               |   |                              | (285,813 | )      |                              |   | 23,028 |   |
|                                                   |   |                              |     |   |                              |   |   |   |
| Deferred tax liabilities:                              |   |                              |     |   |                              |   |   |   |
| Sales cut-off                                          |   |                              | 231,005  |   |                              |   | (85,572 | ) |
| Other                                                  |   |                              | -        |   |                              |   | - |   |
| Subtotal                                               |   |                              | 231,005  |   |                              |   | (85,572 | ) |
|                                                   |   |                              |     |   |                              |   |   |   |
| Total deferred tax liabilities – current portion |   |                              | (54,808  | )      |                              |   | (62,544 | ) |
|                                                   |   |                              |     |   |                              |   |   |   |
| Non-current portion:                                   |   |                              |     |   |                              |   |   |   |
| Deferred tax assets:                                   |   |                              |     |   |                              |   |   |   |
| Depreciation                                           |   |                              | 515,930  |   |                              |   | 504,258 |   |
| Loss carried forward                                   |   |                              | 160,399  |   |                              |   | 75,397 |   |
| Valuation allowance                                    |   |                              | (160,399 | )      |                              |   | (75,397 | ) |
| Subtotal                                               |   |                              | 515,930  |   |                              |   | 504,258 |   |
|                                                   |   |                              |     |   |                              |   |   |   |
| Deferred tax liabilities:                              |   |                              |     |   |                              |   |   |   |
| Accumulated other comprehensive gain                   |   |                              | (296,579 | )      |                              |   | (296,511 | ) |
| Subtotal                                               |   |                              | (296,579 | )      |                              |   | (296,511 | ) |
|                                                   |   |                              |     |   |                              |   |   |   |
| Total deferred tax assets – non-current portion  |   |                              | 219,351  |   |                              |   | 207,747 |   |
|                                                   |   |                              |     |   |                              |   |   |   |
| Net deferred tax assets                                |   | $                                 | 164,543  |   |                              | $      | 145,203 |   |

|                                     |   | For the Nine Months EndedSeptember 30(Unaudited) |     |
|------------------------------------------|--------|---------------------------------------------------------------------------|----------|
|                                |   | 2010                                                                      |     |   | 2009 |   |
| Tax holiday credit             |   | $                                                                         | (236,834 | ) |   | $ | (18,326 | ) |
| Basic net (loss) income per share effect |   | $                                                                         | (0.01    | ) |   | $ | (0.00 | ) |

----

|                            |   | Activity |      |   | Weighted AverageExercise Price |   |
|--------------------------------------|--------|----------|-----------|--------|------------------------------------------|--------|
| Outstanding as of January 1, 2010    |   |     | 2,950,000 |   |                                     | $      | 0.88 |   |
| Granted                              |   |     | -         |   |                                     |   | - |   |
| Exercised                            |   |     | 1,116,696 |   |                                     |   | 0.96 |   |
| Cancelled                            |   |     | -         |   |                                     |   | - |   |
| Outstanding as of September 30, 2010 |   |     | 1,833,304 |   |                                     | $      | 0.84 |   |

| Options Outstanding |      |   | Options Exercisable |   |
|--------------------------|-----------|--------|--------------------------|--------|
| Number ofshares     |      |   | ExercisePrice            |   |   | RemainingContractual life(in years) |   |   | Number ofshares |   |   | ExercisePrice |   |
|                     | 1,733,304 |   |                     | $      | 0.80 |   |   |   | 8.5 |   |   |   | 1,733,304 |   |   | $ | 0.80 |   |
|                     | 100,000   |   |                     |   | 1.50 |   |   |   | 9 |   |   |   | 100,000 |   |   |   | 1.50 |   |

----

----

| Guarantee provided to              |   | Amount |       |
|----------------------------------------------|--------|--------|------------|
| Yongkang Kangli Metal Manufacturing Co. |   | $      | 4,478,882  |   |
| Zhejiang Mengdeli Electric Company           |   |   | 2,538,033  |   |
| Zhejiang Shuguang industrial Co., Ltd.       |   |   | 2,985,921  |   |
| Zhejiang Yiran Auto Sales Company            |   |   | 1,940,849  |   |
| Wuyi Qilong Vehicle Co., Ltd.                |   |   | 1,343,665  |   |
| Zhejiang Taiping Trade Co., Ltd              |   |   | 3,433,810  |   |
| Total                                        |   | $      | 16,721,160 |   |

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----

----

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| · | Persuasive evidence of an arrangement exists; |
|--------|-----------------------------------------------|

| · | Delivery has occurred or services have been rendered; |
|--------|-------------------------------------------------------|

| · | The seller’s price to the buyer is fixed or determinable; and |
|--------|---------------------------------------------------------------------|

| · | Collectability is reasonably assured. |
|--------|---------------------------------------|

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----

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|                                              |   | For NineMonths EndedSeptember 30, 2010 |        |   | % OfRevenue |   |   | For NineMonths EndedSeptember 30,2009 |   |   | % OfRevenue |   |   | Change InAmount |   |   | ChangeIn % |   |
|---------------------------------------------------|--------|------------------------------------------------------------|-------------|--------|------------------|--------|--------|------------------------------------------------------|--------|--------|------------------|--------|--------|----------------------|--------|--------|-----------------|--------|
| REVENUES, NET                                     |   | $                                                          | 28,637,863  |   |             |   | 100.0  | %                                                    |   | $      | 19,114,049       |   |   |                 | 100.0  | %      |            | $      | 9,523,814 |   |   |   | 49.8 | % |
| COST OF GOODS SOLD                                |   |                                                       | (22,098,905 | )      |             |   | (77.2  | )%                                                   |   |   | (14,329,404      | )      |   |                 | (75.0  | )%     |            |   | (7,769,501 | ) |   |   | 54.2 | % |
| GROSS PROFIT                                      |   |                                                       | 6,538,958   |   |             |   | 22.8   | %                                                    |   |   | 4,784,645        |   |   |                 | 25.0   | %      |            |   | 1,754,313 |   |   |   | 36.7 | % |
| Research and development                          |   |                                                       | 1,203,270   |   |             |   | 4.2    | %                                                    |   |   | 1,767,081        |   |   |                 | 9.2    | %      |            |   | (563,811 | ) |   |   | (31.9 | )% |
| Selling and distribution expenses                 |   |                                                       | 1,000,187   |   |             |   | 3.5    | %                                                    |   |   | 263,304          |   |   |                 | 1.4    | %      |            |   | 736,883 |   |   |   | 279.9 | % |
| General and administrative expenses               |   |                                                       | 2,315,088   |   |             |   | 8.1    | %                                                    |   |   | 1,966,422        |   |   |                 | 10.3   | %      |            |   | 348,666 |   |   |   | 17.7 | % |
| INCOME (LOSS) FROM OPERATIONS                     |   |                                                       | 2,020,413   |   |             |   | 7.1    | %                                                    |   |   | 787,838          |   |   |                 | 4.1    | %      |            |   | 1,232,575 |   |   |   | 156.5 | % |
| Interest income (expense), net                    |   |                                                       | (2,015,516  | )      |             |   | (7.0   | )%                                                   |   |   | (860,872         | )      |   |                 | (4.5   | )%     |            |   | (1,154,644 | ) |   |   | 134.1 | % |
| Change of fair value of financial instruments     |   |                                                       | (802,884    | )      |             |   | (2.8   | )%                                                   |   |   | -                |   |   |                 | -      |   |            |   | (802,884 | ) |   |   | 100 | % |
| Government grants                                 |   |                                                       | 266,911     |   |             |   | 0.9    | %                                                    |   |   | 127,317          |   |   |                 | 0.7    | %      |            |   | 139,594 |   |   |   | 109.6 | % |
| Other income, net                                 |   |                                                       | 91,088      |   |             |   | 0.3    | %                                                    |   |   | 311,984          |   |   |                 | 1.6    | %      |            |   | (220,896 | ) |   |   | (70.8 | )% |
| (LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES |   |                                                       | (439,988    | )      |             |   | (1.5   | )%                                                   |   |   | 366,267          |   |   |                 | 1.9    | %      |            |   | (806,255 | ) |   |   | (220.1 | )% |
| INCOME TAX BENEFIT (EXPENSE)                      |   |                                                       | (269,338    | )      |             |   | (0.9   | )%                                                   |   |   | (146,642         | )      |   |                 | (0.8   | )%     |            |   | (122,696 | ) |   |   | 83.7 | % |
|                                              |   |                                                       |        |   |             |   |   |                                                 |   |   |             |   |   |                 |   |   |            |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM CONTINUING OPERATIONS          |   |                                                       | (709,326    | )      |             |   | (2.5   | )%                                                   |   |   | 219,625          |   |   |                 | 1.1    | %      |            |   | (928,951 | ) |   |   | (423.0 | )% |
|                                              |   |                                                       |        |   |             |   |   |                                                 |   |   |             |   |   |                 |   |   |            |   |   |   |   |   |   |   |
| NET (LOSS) INCOME                                 |   |                                                       | (709,326    | )      |             |   | (2.5   | )%                                                   |   |   | 219,625          |   |   |                 | 1.1    | %      |            |   | (928,951 | ) |   |   | (423.0 | )% |

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|                                        |   | Nine Months Ended September 30 |   |
|---------------------------------------------|--------|----------------------------------------------------|--------|
|                                   |   | 2010                                               |   |   | 2009 |   |
|                                   |   | Unit                                               |   |   | Sales |   |   | Unit |   |   | Sales |   |
| ATV                                         |   |                                               | 2,756  |   |   | $ | 1,985,008 |   |   |   | 3,098 |   |   | $ | 1,623,635 |   |
| CoCo                                        |   |                                               | 1,592  |   |   |   | 6,635,008 |   |   |   | 1,141 |   |   |   | 3,563,550 |   |
| GoKart                                      |   |                                               | 14,943 |   |   |   | 15,064,736 |   |   |   | 7,061 |   |   |   | 5,650,243 |   |
| Utility vehicles (“UTVs”)       |   |                                               | 1,397  |   |   |   | 2,970,300 |   |   |   | 2,864 |   |   |   | 6,468,654 |   |
| Three-wheeled motorcycle (“TT”) |   |                                               | 862    |   |   |   | 1,982,811 |   |   |   | 1,061 |   |   |   | 1,803,603 |   |
| Pick - up                                   |   |                                               | -      |   |   |   | - |   |   |   | 1 |   |   |   | 4,364 |   |

|          |   | Nine Months Ended September 30 |       |
|---------------|--------|----------------------------------------------------|------------|
|     |   | 2010                                               |       |   | 2009 |   |
|     |   | Sales                                              |       |   | Percentage |   |   | Sales |   |   | Percentage |   |
| North America |   | $                                                  | 3,391,508  |   |   |   | 12 | % |   | $ | 2,321,372 |   |   |   | 12 | % |
| China         |   |                                               | 24,908,400 |   |   |   | 87 | % |   |   | 16,518,443 |   |   |   | 86 | % |
| Europe        |   |                                               | 337,955    |   |   |   | 1 | % |   |   | 274,234 |   |   |   | 2 | % |
| Total         |   | $                                                  | 28,637,863 |   |   |   | 100 | % |   | $ | 19,114,049 |   |   |   | 100 | % |

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|                                    |   | For ThreeMonths EndedSeptember 30,2010 |       |   | % OfRevenue |   |   | For ThreeMonths EndedSeptember 30,2009 |   |   | % OfRevenue |   |   | Change InAmount |   |   | Change In % |   |
|---------------------------------------------------|--------|-------------------------------------------------------|------------|--------|------------------|--------|--------|-------------------------------------------------------|--------|--------|------------------|--------|--------|----------------------|--------|--------|-----------------------|--------|
| REVENUES, NET                                     |   | $                                                     | 10,478,224 |   |             |   | 100.0  | %                                                     |   | $      | 9,626,593        |   |   |                 | 100.0  | %      |                  | $      | 851,631 |   |   |   | 8.8 | % |
| COST OF GOODS SOLD                                |   |                                                  | (8,140,771 | )      |             |   | (77.7  | )%                                                    |   |   | (7,266,052       | )      |   |                 | (75.5  | )%     |                  |   | (874,719 | ) |   |   | 12.0 | % |
| GROSS PROFIT                                      |   |                                                  | 2,337,453  |   |             |   | 22.3   | %                                                     |   |   | 2,360,541        |   |   |                 | 24.5   | %      |                  |   | (23,088 | ) |   |   | (1.0 | )% |
| Research and development                          |   |                                                  | 459,935    |   |             |   | 4.4    | %                                                     |   |   | 660,108          |   |   |                 | 6.9    | %      |                  |   | (200,173 | ) |   |   | (30.3 | )% |
| Selling and distribution expenses                 |   |                                                  | 58,121     |   |             |   | 0.6    | %                                                     |   |   | 79,310           |   |   |                 | 0.8    | %      |                  |   | (21,189 | ) |   |   | (26.7 | )% |
| General and administrative expenses               |   |                                                  | 516,929    |   |             |   | 4.9    | %                                                     |   |   | 510,212          |   |   |                 | 5.3    | %      |                  |   | 6,717 |   |   |   | 1.3 | % |
| INCOME FROM OPERATIONS                            |   |                                                  | 1,302,468  |   |             |   | 12.4   | %                                                     |   |   | 1,110,911        |   |   |                 | 11.5   | %      |                  |   | 191,557 |   |   |   | 17.2 | % |
| Interest (expense) income, net                    |   |                                                  | (572,032   | )      |             |   | (5.5   | )%                                                    |   |   | (442,315         | )      |   |                 | (4.6   | )%     |                  |   | (129,717 | ) |   |   | (29.3 | )% |
| Change of fair value of financial instruments     |   |                                                  | (2,578,693 | )      |             |   | (24.6  | )%                                                    |   |   | -                |   |   |                 | -      |   |                  |   | (2,578,693 | ) |   |   | 100 | % |
| Government grants                                 |   |                                                  | 191,934    |   |             |   | 1.8    | %                                                     |   |   | 3,312            |   |   |                 | 0      | %      |                  |   | 188,622 |   |   |   | 5,696.1 | % |
| Other income, net                                 |   |                                                  | 33,249     |   |             |   | 0.3    | %                                                     |   |   | 9,800            |   |   |                 | 0.1    | %      |                  |   | 23,449 |   |   |   | 239.3 | % |
| (LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES |   |                                                  | (1,623,074 | )      |             |   | (25.6  | )%                                                    |   |   | 681,708          |   |   |                 | 7.0    | %      |                  |   | (2,304,782 | ) |   |   | (338.1 | )% |
| INCOME TAX (EXPENSE) BENEFIT                      |   |                                                  | (94,282    | )      |             |   | (0.9   | )%                                                    |   |   | (105,558         | )      |   |                 | (1.1   | )%     |                  |   | 11,276 |   |   |   | (10.7 | )% |
|                                              |   |                                                  |       |   |             |   |   |                                                  |   |   |             |   |   |                 |   |   |                  |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM CONTINUING OPERATIONS          |   |                                                  | (1,717,356 | )      |             |   | (16.4  | )%                                                    |   |   | 576,150          |   |   |                 | 6.0    | %      |                  |   | (2,293,506 | ) |   |   | (398.1 | )% |
|                                              |   |                                                  |       |   |             |   |   |                                                  |   |   |             |   |   |                 |   |   |                  |   |   |   |   |   |   |   |
| NET (LOSS) INCOME                                 |   |                                                  | (1,717,356 | )      |             |   | (16.4  | )%                                                    |   |   | 576,150          |   |   |                 | 6.0    | %      |                  |   | (2,293,506 | ) |   |   | (398.1 | )% |

----

|                                        |   | Three Months Ended September 30 |   |
|---------------------------------------------|--------|-----------------------------------------------------|--------|
|                                   |   | 2010                                                |   |   | 2009 |   |
|                                   |   | Unit                                                |   |   | Sales |   |   | Unit |   |   | Sales |   |
| ATV                                         |   |                                                | 572    |   |   | $ | 387,587 |   |   |   | 561 |   |   | $ | 570,002 |   |
| CoCo                                        |   |                                                | 215    |   |   |   | 812,996 |   |   |   | 495 |   |   |   | 1,859,525 |   |
| GoKart                                      |   |                                                | 8,556  |   |   |   | 8,182,472 |   |   |   | 4,329 |   |   |   | 3,270,019 |   |
| Utility vehicles (“UTVs”)       |   |                                                | 345    |   |   |   | 665,908 |   |   |   | 1,306 |   |   |   | 2,796,892 |   |
| Three-wheeled motorcycle (“TT”) |   |                                                | 184    |   |   |   | 429,261 |   |   |   | 570 |   |   |   | 1,125,791 |   |
| Pick-up                                     |   |                                                | -      |   |   |   | - |   |   |   | 1 |   |   |   | 4,364 |   |

|          |   | Three Months Ended September 30 |       |
|---------------|--------|-----------------------------------------------------|------------|
|     |   | 2010                                                |       |   | 2009 |   |
|     |   | Sales                                               |       |   | Percentage |   |   | Sales |   |   | Percentage |   |
| North America |   | $                                                   | 1,027,131  |   |   |   | 10 | % |   | $ | 1,058,865 |   |   |   | 11 | % |
| China         |   |                                                | 9,338,775  |   |   |   | 89 | % |   |   | 8,446,800 |   |   |   | 88 | % |
| Europe        |   |                                                | 112,318    |   |   |   | 1 | % |   |   | 120,928 |   |   |   | 1 | % |
| Total         |   | $                                                   | 10,478,224 |   |   |   | 100 | % |   | $ | 9,626,593 |   |   |   | 100 | % |

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| Capital requirements                                                                                                                                                                       |   | Nine months EndedSeptember 30, 2010(In thousands) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|
| Purchase of plant and equipment                                                                                                                                                                 |   | $                                                                          | 751    |   |
| Purchase of construction in progress                                                                                                                                                            |   |                                                                       | -      |   |
| Issuance of notes receivable                                                                                                                                                                    |   |                                                                       | 13,624 |   |
| Repayments of short-term bank loans                                                                                                                                                             |   |                                                                       | 26,554 |   |
| Repayments of notes payable                                                                                                                                                                     |   |                                                                       | 7,956  |   |
| Increase in restricted cash                                                                                                                                                                     |   |                                                                       | 3,964  |   |
| Increase in cash                                                                                                                                                                                |   |                                                                       | 3,194  |   |
| Other financing activities                                                                                                                                                                      |   |                                                                       | 932    |   |
| Total capital requirements                                                                                                                                                                      |   | $                                                                          | 56,975 |   |
|                                                                                                                                                                                            |   |                                                                       |   |   |
| Capital provided                                                                                                                                                                                |   |                                                                       |   |   |
| Internal cash provided by operation                                                                                                                                                             |   |                                                                       | 7,395  |   |
| Proceeds from short-term bank loan                                                                                                                                                              |   |                                                                       | 23,620 |   |
| Proceeds from notes payable                                                                                                                                                                     |   |                                                                       | 23,861 |   |
| Repayments of notes receivable                                                                                                                                                                  |   |                                                                       | 2,275  |   |
| Other financing activities                                                                                                                                                                      |   |                                                                       | -      |   |
| Total capital provided                                                                                                                                                                          |   | $                                                                          | 57,151 |   |
|                                                                                                                                                                                            |   |                                                                       |   |   |
|  For further information, see the Statement of Cash Flows.The difference between capital provided and capital requirement is the effect of exchange rate changes over the past nine months |

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| Exhibit Number |         | Description                                                                                                                                                      |
|---------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1                |         | Joint Venture Agreement, dated September 28, 2010, by and among Jinhua Bada Group, Zhejiang Kandi Vehicles Co., Ltd., and Tianneng Power International Co., Ltd. |
| 31.1                |         | Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934*                                                                    |
| 31.2                |         | Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934*                                                                    |
| 32.1                |    | Certification of CEO and CFO pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002*                        |

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|               |   | Kandi Technologies, Corp.                                           |
|--------------------|--------|---------------------------------------------------------------------|
| Date: June 8, 2011 | By:    | /s/ Hu Xiaoming                                                     |
|               |   | Hu Xiaoming                                                         |
|               |   | President and Chief Executive Officer(Principal Executive Officer)  |
|               |   |                                                                |
| Date: June 8, 2011 | By:    | /s/ Zhu Xiaoying                                                    |
|               |   | Zhu Xiaoying                                                        |
|               |   | Chief Financial Officer(Principal Financial and Accounting Officer) |

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