**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

----

**FORM      10-Q**

**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**

**Kandi      Technologies, Corp.**

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

**Jinhua      City Industrial Zone**

**Jinhua,      Zhejiang Province**

**People’s      Republic of China**

**Post      Code 321016**

----

**(86      - 0579) 82239700**

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

----

**TABLE      OF CONTENTS**

|                                                      |   |   |                                                                                                       | **Page** |   |
|-----------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------|----------|--------|
|                                                      |   |   |                                                                                                       |     |   |
| **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 |     |   | 24 |   |
|                                                      |   |   |                                                                                                       |     |   |   |   |
| Item 4T.                                             |   |   | Controls                and Procedures                                                                     |     |   | 30 |   |
|                                                      |   |   |                                                                                                       |
|  **PART                II— OTHER INFORMATION** |   |   |                                                                                                       |
|                                                      |   |   |                                                                                                       |     |   |   |   |
| Item 1A.                                             |   |   | Risk                Factors                                                                                |     |   | II-1 |   |
|                                                      |   |   |                                                                                                       |     |   |   |   |
| Item 6.                                              |   |   | Exhibits                                                                                                   |     |   | II-1 |   |

----

**PART      I— FINANCIAL INFORMATION**

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

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

|                                                                                                                                                                                       |   | **September 30,** |       |                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|-----------------------|--------|
|                                                                                                                                                                                       |   | **2008**               |       | **December 31,** |   |
|                                                                                                                                                                                       |   | **(Unaudited)**        |       | **2007**              |   |
|                                                                                                                                                                                       |   |                   |       |                  |   |
| CURRENT                ASSETS                                                                                                                                                              |   |                   |       |                  |   |   |   |
| Cash                and cash equivalents                                                                                                                                                   |   | $                      | 3,277,089  |                  | $      | 1,149,140 |   |
| Restricted                cash                                                                                                                                                             |   |                   | 11,086,636 |                  |   | 1,367,222 |   |
| Accounts                receivable, net of allowance for doubtful accounts of $1,638 and                $3,701 as                of September 30, 2008 and December 31, 2007, respectively |   |                   | 11,236,454 |                  |   | 11,401,367 |   |
| Inventories                                                                                                                                                                                |   |                   | 8,558,637  |                  |   | 3,293,529 |   |
| Notes                receivable, net of discount of $43,350 and $0 as of September 30,                2008 and                December 31, 2007, respectively                              |   |                   | 4,189,008  |                  |   | 47,853 |   |
| Other                receivables                                                                                                                                                           |   |                   | 221,190    |                  |   | 416,454 |   |
| Prepayments                and prepaid expenses                                                                                                                                            |   |                   | 111,658    |                  |   | 17,774 |   |
| Due                from employees                                                                                                                                                          |   |                   | -          |                  |   | 9,932 |   |
| Discontinued                operation                                                                                                                                                      |   |                   | -          |                  |   | 14,158,890 |   |
| Total                Current Assets                                                                                                                                                        |   |                   | 38,680,672 |                  |   | 31,862,161 |   |
|                                                                                                                                                                                       |   |                   |       |                  |   |   |   |
| LONG-TERM                ASSETS                                                                                                                                                            |   |                   |       |                  |   |   |   |
| Plant                and equipment, net                                                                                                                                                    |   |                   | 17,534,685 |                  |   | 10,427,176 |   |
| Land                use rights, net                                                                                                                                                        |   |                   | 9,422,789  |                  |   | 385,539 |   |
| Construction                in progress                                                                                                                                                    |   |                   | 861,497    |                  |   | 1,321,832 |   |
| Deposit                for acquisition                                                                                                                                                     |   |                   | -          |                  |   | 12,270,859 |   |
| Deferred                taxes                                                                                                                                                              |   |                   | 488,761    |                  |   | 405,006 |   |
| Discontinued                operation                                                                                                                                                      |   |                   | -          |                  |   | 506,526 |   |
| Total                Long-Term Assets                                                                                                                                                      |   |                   | 28,307,732 |                  |   | 25,316,938 |   |
|                                                                                                                                                                                       |   |                   |       |                  |   |   |   |
| TOTAL                ASSETS                                                                                                                                                                |   | $                      | 66,988,404 |                  | $      | 57,179,099 |   |

----

**KANDI      TECHNOLOGIES, CORP.**

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

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**LIABILITIES      AND STOCKHOLDERS’ EQUITY**

|                                                                                                                                                                                                                                         |   | **September 30,** |       |                  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|-----------------------|--------|
|                                                                                                                                                                                                                                         |   | **2008**               |       | **December 31,** |   |
|                                                                                                                                                                                                                                         |   | **(Unaudited)**        |       | **2007**              |   |
| CURRENT                LIABILITIES                                                                                                                                                                                                           |   |                   |       |                  |   |   |   |
| Accounts                payable                                                                                                                                                                                                              |   | $                      | 9,127,294  |                  | $      | 6,333,057 |   |
| Other                payables and accrued expenses                                                                                                                                                                                           |   |                   | 477,639    |                  |   | 378,675 |   |
| Short-term                bank loans                                                                                                                                                                                                         |   |                   | 26,111,946 |                  |   | 20,869,862 |   |
| Customer                deposits                                                                                                                                                                                                             |   |                   | 1,439,234  |                  |   | 483,320 |   |
| Notes                payable                                                                                                                                                                                                                 |   |                   | 11,404,531 |                  |   | 1,476,600 |   |
| Due                to employees                                                                                                                                                                                                              |   |                   | 9,553      |                  |   | 310 |   |
| Due                to related party                                                                                                                                                                                                          |   |                   | 180,659    |                  |   | - |   |
| Discontinued                operation                                                                                                                                                                                                        |   |                   | -          |                  |   | 14,296,572 |   |
| Total                Current Liabilities                                                                                                                                                                                                     |   |                   | 48,750,856 |                  |   | 43,838,396 |   |
|                                                                                                                                                                                                                                         |   |                   |       |                  |   |   |   |
| LONG-TERM                LIABILITIES                                                                                                                                                                                                         |   |                   |       |                  |   |   |   |
| Deferred                taxes                                                                                                                                                                                                                |   |                   | 296,511    |                  |   | 296,511 |   |
| Discontinued                operation                                                                                                                                                                                                        |   |                   | -          |                  |   | 2,651 |   |
| Total                Long-Term Liabilities                                                                                                                                                                                                   |   |                   | 296,511    |                  |   | 299,162 |   |
|                                                                                                                                                                                                                                         |   |                   |       |                  |   |   |   |
| TOTAL                LIABILITIES                                                                                                                                                                                                             |   |                   | 49,047,367 |                  |   | 44,137,558 |   |
|                                                                                                                                                                                                                                         |   |                   |       |                  |   |   |   |
| COMMITMENTS                AND CONTINGENCIES                                                                                                                                                                                                 |   |                   | -          |                  |   |   |   |
|                                                                                                                                                                                                                                         |   |                   |       |                  |   |   |   |
| STOCKHOLDERS’                EQUITY                                                                                                                                                                                                    |   |                   |       |                  |   |   |   |
| Common                stock, $0.001 par value; 100,000,000 shares authorized; 19,961,000                and                19,961,000 shares issued and outstanding at September 30, 2008 and                December 31, 2007, respectively |   |                   | 19,961     |                  |   | 19,961 |   |
| Additional                paid-in capital                                                                                                                                                                                                    |   |                   | 7,138,105  |                  |   | 7,138,105 |   |
| Retained                earnings (the restricted portion is $534,040 and $0 at September                30, 2008                and December 31, 2007, respectively)                                                                         |   |                   | 9,620,184  |                  |   | 5,125,120 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                        |   |                   | 1,162,787  |                  |   | 758,355 |   |
| TOTAL                STOCKHOLDERS’ EQUITY                                                                                                                                                                                              |   |                   | 17,941,037 |                  |   | 13,041,541 |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                              |   | $                      | 66,988,404 |                  | $      | 57,179,099 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES **

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

**(UNAUDITED)**

|                                                                             |   | **Three Months Ended** |       | **Nine Months Ended** |   |
|----------------------------------------------------------------------------------|--------|----------------------------------|------------|---------------------------------|--------|
|                                                                             |   | **September 30,****2008**   |       | **September 30,****2007**  |   | **September 30,****2008** |   | **September 30,****2007** |   |
| **REVENUES,                NET**                                                 |   | $                                | 9,261,033  |                            | $      | 8,808,836 |   | $ | 30,767,280 |   | $ | 25,293,958 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **COST                OF GOODS SOLD**                                            |   |                             | (6,966,103 | )                               |   | (7,315,162 | ) |   | (23,098,186 | ) |   | (20,158,923 | ) |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **GROSS                PROFIT**                                                  |   |                             | 2,294,930  |                            |   | 1,493,674 |   |   | 7,669,094 |   |   | 5,135,035 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| Research                and development                                          |   |                             | 230,023    |                            |   | 12,033 |   |   | 487,755 |   |   | 64,888 |   |
| Selling                and marketing                                             |   |                             | 229,795    |                            |   | 179,386 |   |   | 632,132 |   |   | 366,879 |   |
| General                and administrative                                        |   |                             | 324,672    |                            |   | 228,603 |   |   | 1,019,385 |   |   | 536,731 |   |
| **INCOME                FROM CONTINUING OPERATIONS**                             |   |                             | 1,510,440  |                            |   | 1,073,652 |   |   | 5,529,822 |   |   | 4,166,537 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| Interest                expense, net                                             |   |                             | (547,511   | )                               |   | (373,467 | ) |   | (1,540,631 | ) |   | (666,704 | ) |
| Government                grants                                                 |   |                             | 17,484     |                            |   | - |   |   | 57,533 |   |   | - |   |
| Forfeiture                of customer deposits                                   |   |                             | -          |                            |   | 233,585 |   |   | - |   |   | 500,304 |   |
| Other,                net                                                        |   |                             | 26,551     |                            |   | 548 |   |   | 39,599 |   |   | (69,672 | ) |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**         |   |                             | 1,006,964  |                            |   | 934,318 |   |   | 4,086,323 |   |   | 3,930,465 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **INCOME                TAX BENEFIT**                                            |   |                             | 7,581      |                            |   | - |   |   | 81,042 |   |   | - |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM CONTINUING OPERATIONS**                             |   |                             | 1,014,545  |                            |   | 934,318 |   |   | 4,167,365 |   |   | 3,930,465 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **DISCONTINUED                OPERATION**                                        |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| Loss                from discontinued operation                                  |   |                             | -          |                            |   | (62,820 | ) |   | (33,396 | ) |   | (203,272 | ) |
| Gain                from disposition of discontinued operation                   |   |                             | -          |                            |   | - |   |   | 361,096 |   |   | - |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| **NET                GAIN (LOSS) FROM****DISCONTINUED                OPERATION** |   |                             | -          |                            |   | (62,820 | ) |   | 327,700 |   |   | (203,272 | ) |
| **NET                INCOME**                                                    |   |                             | 1,014,545  |                            |   | 871,498 |   |   | 4,495,065 |   |   | 3,727,193 |   |
|                                                                             |   |                             |       |                            |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation                                      |   |                             | 51,770     |                            |   | 30,276 |   |   | 404,432 |   |   | 166,661 |   |

----

**KANDI        TECHNOLOGIES, CORP.**

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

**AND        SUBSIDIARIES **

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

**(UNAUDITED)**

|                                                                                                                              |   | **Three Months Ended**     |       | **Nine Months Ended**      |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|--------------------------------------|--------|
|                                                                                                                              |   | **September 30, ****2008** |       | **September 30, ****2007** |   | **September 30, ****2008** |   | **September 30, ****2007** |   |
| **COMPREHENSIVE                INCOME**                                                                                           |   | $                                    | 1,066,315  |                                 | $      | 901,774 |   | $ | 4,899,497 |   | $ | 3,893,854 |   |
| **WEIGHTED                AVERAGE SHARES OUTSTANDING BASIC AND DILUTED**                                                          |   |                                 | 19,961,000 |                                 |   | 19,961,000 |   |   | 19,961,000 |   |   | 14,653,667 |   |
| **INCOME                PER SHARE FROM CONTINUING OPERATIONS, BASIC AND                DILUTED**                                  |   | $                                    | 0.05       |                                 | $      | 0.04 |   | $ | 0.21 |   | $ | 0.27 |   |
| **NET                INCOME (LOSS) PER SHARE FROM NET GAIN (LOSS) FROM DISCONTINUED OPERATION,                BASIC AND DILUTED** |   | $                                    | -          |                                 | $      | (0.00 | ) | $ | 0.02 |   | $ | (0.01 | ) |
| **NET                INCOME PER SHARE, BASIC AND DILUTED**                                                                        |   | $                                    | 0.05       |                                 | $      | 0.04 |   | $ | 0.23 |   | $ | 0.25 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                            |   | **Nine Months****Ended September 30,** |       |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|------------|
|                                                                                                            |   | **2008**                                              |       | **2007** |   |
| **CASH FLOWS                FROM OPERATING ACTIVITIES:**                                                   |   |                                                  |       |   |   |   |   |
| Net                income                                                                                       |   | $                                                     | 4,495,065  |   | $ | 3,727,193 |   |
| Net                (gain) loss from discontinued operation                                                      |   |                                                  | (327,700   | ) |   | 203,272 |   |
| Income                from continuing operations                                                                |   |                                                  | 4,167,365  |   |   | 3,930,465 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |                                                  |       |   |   |   |   |
| Depreciation                and amortization                                                                    |   |                                                  | 1,318,510  |   |   | 894,102 |   |
| Deferred                taxes                                                                                   |   |                                                  | (83,755    | ) |   | - |   |
| Forfeiture                of customer deposits                                                                  |   |                                                  | -          |   |   | (500,304 | ) |
|                                                                                                            |   |                                                  |       |   |   |   |   |
| **Changes                in operating assets and liabilities, net of effects of                acquisition:**   |   |                                                  |       |   |   |   |   |
| **(Increase)                Decrease In:**                                                                      |   |                                                  |       |   |   |   |   |
| Accounts                receivable                                                                              |   |                                                  | 164,913    |   |   | (6,613,613 | ) |
| Inventories                                                                                                     |   |                                                  | (5,265,108 | ) |   | 2,084,702 |   |
| Other                receivables                                                                                |   |                                                  | 195,263    |   |   | 47,278 |   |
| Due                to employees                                                                                 |   |                                                  | 19,175     |   |   | 139,695 |   |
| Prepayments                and prepaid expenses                                                                 |   |                                                  | (93,885    | ) |   | (327,502 | ) |
|                                                                                                            |   |                                                  |       |   |   |   |   |
| **Increase                (Decrease) In:**                                                                      |   |                                                  |       |   |   |   |   |
| Accounts                payable                                                                                 |   |                                                  | 2,794,238  |   |   | 1,556,622 |   |
| Other                payables and accrued liabilities                                                           |   |                                                  | 98,964     |   |   | 3,074 |   |
| Customer                deposits                                                                                |   |                                                  | 955,914    |   |   | 810,631 |   |
| Net                cash provided by operating activities from continuing                operations              |   |                                                  | 4,271,594  |   |   | 2,025,150 |   |
| Net                cash provided by operating activities from discontinued                operation             |   |                                                  | 739,378    |   |   | 1,231,574 |   |
| Net                cash provided by operating activities                                                        |   |                                                  | 5,010,972  |   |   | 3,256,724 |   |
|                                                                                                            |   |                                                  |       |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                        |   |                                                  |       |   |   |   |   |
| Purchases                of plant and equipment                                                                 |   |                                                  | (2,767,161 | ) |   | (1,082,511 | ) |
| Purchases                of construction in progress                                                            |   |                                                  | (1,049,862 | ) |   | (757,697 | ) |
| Reverse                merger with SMOU, net of cash acquired                                                   |   |                                                  | -          |   |   | 373 |   |
| Purchase                of a subsidiary, net of cash acquired                                                   |   |                                                  | (44,129    | ) |   | - |   |
| Issuance                of notes receivable                                                                     |   |                                                  | (6,493,209 | ) |   | (4,992,142 | ) |
| Repayment                of notes receivable                                                                    |   |                                                  | 2,352,054  |   |   | 5,182,405 |   |
| Deposit                for acquisition                                                                          |   |                                                  | -          |   |   | (9,740,470 | ) |
| Net                cash used in investing activities from continuing                operations                  |   |                                                  | (8,002,307 | ) |   | (11,390,042 | ) |
| Net                cash provided by investing activities from discontinued operation                            |   |                                                  | -          |   |   | 72,490 |   |
| Net                cash used in investing activities                                                            |   |                                                  | (8,002,307 | ) |   | (11,317,552 | ) |

----

**KANDI          TECHNOLOGIES, CORP. **

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

**AND          SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                               |   | **Nine Months****Ended September 30, ** |        |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|-------------|
|                                                                                               |   | **2008**                                                    |        | **2007** |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                           |   |                                                        |        |   |   |   |   |
| Restricted                cash                                                                     |   |                                                        | (9,719,414  | ) |   | (656,556 | ) |
| Proceeds                from short-term bank loans                                                 |   |                                                        | 29,170,492  |   |   | 17,918,020 |   |
| Repayments                of short-term bank loans                                                 |   |                                                        | (23,928,409 | ) |   | (9,574,362 | ) |
| Proceeds                from notes payable                                                         |   |                                                        | 11,386,698  |   |   | 2,405,635 |   |
| Repayments                of notes payable                                                         |   |                                                        | (1,458,768  | ) |   | (907,128 | ) |
| Repayment                of advances to related parties                                            |   |                                                        | 180,659     |   |   | 17,288 |   |
| Net                cash provided by financing activities from continuing                operations |   |                                                        | 5,631,258   |   |   | 9,202,897 |   |
| Net                cash used in financing activities from discontinued                operation    |   |                                                        | -           |   |   | (1,319,677 | ) |
| Net                cash provided by financing activities                                           |   |                                                        | 5,631,258   |   |   | 7,883,220 |   |
|                                                                                               |   |                                                        |        |   |   |   |   |
| **NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                            |   |                                                        | 2,639,923   |   |   | (177,608 | ) |
| Effect                of exchange rate changes on cash                                             |   |                                                        | (511,974    | ) |   | 248,747 |   |
| Cash                and cash equivalents at beginning of period                                    |   |                                                        | 1,149,140   |   |   | 365,567 |   |
| **CASH                AND CASH EQUIVALENTS AT END OF PERIOD**                                      |   | $                                                           | 3,277,089   |   | $ | 436,706 |   |
|                                                                                               |   |                                                        |        |   |   |   |   |
| **SUPPLEMENTARY                CASH FLOW INFORMATION**                                             |   |                                                        |        |   |   |   |   |
| Income                taxes paid                                                                   |   | $                                                           | -           |   | $ | - |   |
| Interest                paid                                                                       |   | $                                                           | 1,612,853   |   | $ | 682,093 |   |

**SUPPLEMENTAL      NON-CASH DISCLOSURES:**

| 1. | During                the nine months ended September 30, 2008 and 2007, $1,510,197 and                $12,132                were transferred from construction in progress to plant and equipment,                respectively. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

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

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

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

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

|  | (iii) | Kandi                Special Vehicle Co. Ltd. (100% subsidiary of the                Company) |
|--|-------|-----------------------------------------------------------------------------------------------|

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

**NOTE      5 – **
**CONCENTRATIONS**

|                     |   | **Sales**                                                   |   | **Accounts Receivable**                                |   |
|--------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| **Major****Customers**   |   | **Nine Months****Ended****September 30,****2008** |   | **Nine Months****Ended****September 30,****2007** |   | **September 30,****2008** |   | **December 31,****2007** |   |
| Company                A |   |                                                        | 87     | %                                                           |   | 29 | % |   | 73 | % |   | 20 | % |
| Company                B |   |                                                        | 6      | %                                                           |   | 18 | % |   | 24 | % |   | 19 | % |
| Company                C |   |                                                        | 3      | %                                                           |   | 13 | % |   | 0 | % |   | 13 | % |
| Company                D |   |                                                        | 3      | %                                                           |   | 14 | % |   | 1 | % |   | 12 | % |
| Company                E |   |                                                        | 0      | %                                                           |   | 10 | % |   | 2 | % |   | 9 | % |

|                     |   | **Purchases**                                               |   | **Accounts                Payable**                         |   |
|--------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| **Major****Suppliers**   |   | **Nine Months****Ended****September 30,****2008** |   | **Nine Months****Ended****September 30,****2007** |   | **September 30,****2008** |   | **December 31,****2007** |   |
| Company                F |   |                                                        | 63     | %                                                           |   | 9 | % |   | 12 | % |   | 7 | % |
| Company                G |   |                                                        | 2      | %                                                           |   | 10 | % |   | 3 | % |   | 5 | % |
| Company                H |   |                                                        | 2      | %                                                           |   | 6 | % |   | 3 | % |   | 5 | % |
| Company                I |   |                                                        | 2      | %                                                           |   | 6 | % |   | 0 | % |   | 4 | % |
| Company                J |   |                                                        | 1      | %                                                           |   | 0 | % |   | 0 | % |   | 0 | % |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

**NOTE      6 – **
**FOREIGN      CURRENCY TRANSLATION**

|                                                   |   | **September 30,****2008** |   | **December 31,****2007** |   | **September 30,****2007** |   |
|--------------------------------------------------------|--------|--------------------------------|--------|-------------------------------|--------|--------------------------------|--------|
| Period end                RMB : US$ exchange rate |   |                           | 6.8551 |                          |   | 7.3141                         |   |   | 7.6155 |   |
| Average                period RMB : US$ exchange rate  |   |                           | 7.0846 |                          |   | 7.5614                         |   |   | 7.6598 |   |

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

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

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

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

**NOTE      10 – **
**INVENTORIES**

|                             |   | **September 30,****2008** |      | **December 31,****2007** |   |
|----------------------------------|--------|--------------------------------|-----------|-------------------------------|--------|
|                             |   | **(Unaudited)**                |      |                          |   |
| Raw                materials     |   | $                              | 1,369,646 |                          | $      | 1,534,448 |   |
| Work-in-progress                 |   |                           | 5,724,838 |                          |   | 1,402,073 |   |
| Finished                goods    |   |                           | 1,464,153 |                          |   | 357,008 |   |
| Total                inventories |   | $                              | 8,558,637 |                          | $      | 3,293,529 |   |

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

|                                                      |   | **September 30,****2008** |      | **December 31,****2007** |   |
|-----------------------------------------------------------|--------|--------------------------------|-----------|-------------------------------|--------|
|                                                      |   | **(Unaudited)**                |      |                          |   |
| Notes                receivable from unrelated companies: |   |                           |      |                          |   |   |   |
| Due                January 1, 2009                        |   | $                              | 189,348   |                          | $      | - |   |
| Due                March 2, 2009                          |   |                           | 2,548     |                          |   | - |   |
| Due                March 30, 2009                         |   |                           | 649,275   |                          |   | - |   |
| Due                March 31, 2009                         |   |                           | 2,661,803 |                          |   | - |   |
| Due                April 29, 2009                         |   |                           | 729,384   |                          |   | - |   |
| Subtotal                                                  |   |                           | 4,232,358 |                          |   | 47,853 |   |
| Notes                receivable discount                  |   |                           | (43,350   | )                             |   | - |   |
| Notes                receivable, net                      |   | $                              | 4,189,008 |                          | $      | 47,853 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                          |   | **September 30, ****2008** |      | **December 31,****2007** |   |
|-----------------------------------------------|--------|--------------------------------------|-----------|-------------------------------|--------|
|                                          |   | **(Unaudited)**                      |      |                          |   |
| Cost                of land use rights        |   | $                                    | 9,588,012 |                          | $      | 460,943 |   |
| Less:                Accumulated amortization |   |                                 | (165,223  | )                             |   | (75,404 | ) |
| Land                use rights, net           |   | $                                    | 9,422,789 |                          | $      | 385,539 |   |

| 2008                within one year |   | $      | 56,198    |   |
|-------------------------------------|--------|--------|-----------|--------|
| 2009                                |   |   | 224,794   |   |
| 2010                                |   |   | 224,794   |   |
| 2011                                |   |   | 224,794   |   |
| 2012                                |   |   | 224,794   |   |
| Thereafter                          |   |   | 8,467,415 |   |
| Total                               |   | $      | 9,422,789 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                           |   | **September 30,****2008** |       | **December 31,****2007** |   |
|------------------------------------------------|--------|--------------------------------|------------|-------------------------------|--------|
|                                           |   | **(Unaudited)**                |       |                          |   |
| At                cost:                        |   |                           |       |                          |   |   |   |
| Buildings                                      |   | $                              | 7,674,567  |                          | $      | 3,911,944 |   |
| Machinery                and equipment         |   |                           | 9,182,466  |                          |   | 8,572,451 |   |
| Transportation                                 |   |                           | 4,424,856  |                          |   | 93,840 |   |
| Office                equipment                |   |                           | 107,299    |                          |   | 254,885 |   |
| Patterns                                       |   |                           | 1,854,256  |                          |   | 1,742,125 |   |
|                                           |   |                           | 23,243,444 |                          |   | 14,575,245 |   |
| Less                : Accumulated depreciation |   |                           |       |                          |   |   |   |
| Buildings                                      |   |                           | (599,765   | )                             |   | (428,834 | ) |
| Machinery                and equipment         |   |                           | (4,449,244 | )                             |   | (3,520,084 | ) |
| Transportation                                 |   |                           | (202,004   | )                             |   | (64,427 | ) |
| Office                equipment                |   |                           | (82,794    | )                             |   | (43,765 | ) |
| Patterns                                       |   |                           | (374,952   | )                             |   | (90,959 | ) |
|                                           |   |                           | (5,708,759 | )                             |   | (4,148,069 | ) |
| Plant                and equipment, net        |   | $                              | 17,534,685 |                          | $      | 10,427,176 |   |

** **

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                                                                                                                                                                                                                                    |   | **September 30,****2008** |    | **December 31,****2007** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|-------------------------------|--------|
|                                                                                                                                                                                                                                                    |   | **(Unaudited)**                |    |                          |   |
| **Loans                from ICBC-Development Zone Branch**                                                                                                                                                                                              |   |                           |    |                          |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due April 10, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date). |   | $                              | -       |                          | $      | 683,611 |   |
|                                                                                                                                                                                                                                                    |   |                           |    |                          |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due June 5, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).   |   |                           | -       |                          |   | 683,611 |   |
| Monthly                interest only payments at 8.75% per annum, due October 10, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).              |   |                           | 437,630 |                          |   | 410,167 |   |
| Monthly                interest only payments at 8.75% per annum, due October 16, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).              |   |                           | 554,332 |                          |   | 369,150 |   |
| Monthly                interest only payments at 8.75% per annum, due October 23, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).              |   |                           | 510,569 |                          |   | 410,167 |   |
| Monthly                interest only payments at 8.75% per annum, due November 24, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                                  |   |                           | 583,507 |                          |   | 519,544 |   |
| Monthly                interest only payments at 9.41% per annum, due April 7, 2009, secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                      |   |                           | 729,384 |                          |   | 478,528 |   |
| Monthly                interest only payments at 7.88% per annum, due June 4, 2009, secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                       |   |                           | 729,384 |                          |   | 546,889 |   |
| Monthly                interest only payments at 7.47% per annum, due September                2, 2009, secured by the assets of the Company. Also see Notes 12                and                13.                                                   |   |                           | 393,867 |                          |   | - |   |
| Monthly                interest only payments at 6.22% per annum, due March 18, 2009,                collateralized by a time deposit.                                                                                                                  |   |                           | 656,446 |                          |   | - |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                                                                                                                                                                                                                                  |   | **September 30,****2008** |      | **December 31,****2007** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|-------------------------------|--------|
|                                                                                                                                                                                                                                                  |   | **(Unaudited)**                |      |                          |   |
| **Loans                from ICBC-Development Zone Branch**                                                                                                                                                                                            |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.22% per annum, due March 23, 2009,                collateralized by a time deposit.                                                                                                                |   |                           | 656,446   |                          |   | **-** |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.47% per annum, due August 4, 2009, secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                   |   |                           | 437,630   |                          |   | **-** |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| **Loans                from Commercial Bank-Jiangnan Branch**                                                                                                                                                                                         |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.58% per annum, due January 10, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).            |   |                           | -         |                          |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.67% per annum, due May 10, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date). |   |                           | -         |                          |   | 1,367,222 |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 8.22% per annum, due January 10, 2009 secured                by                the assets of the Company. Also see Notes 12 and 13.                                                                  |   |                           | 2,917,536 |                          |   | - |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 8.22% per annum, due May 9, 2009 secured                by the                assets of the Company. Also see Notes 12 and 13.                                                                       |   |                           | 1,458,768 |                          |   | - |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| **Loans                from ICBC-Jinhua Branch**                                                                                                                                                                                                      |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.88% per annum, due January 18, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).            |   |                           | -         |                          |   | 189,753 |   |
|                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.58% per annum, due February 1, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).            |   |                           | -         |                          |   | 948,766 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                                                                                                                                                                                                                                                                                                              |   | **September 30,****2008** |      | **December 31,****2007** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|-------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                              |   | **(Unaudited)**                |      |                          |   |
| **Loans                from ICBC-Jinhua Branch**                                                                                                                                                                                                                                                                                  |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.88% per annum, due March 3, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).                                                                            |   |                           | -         |                          |   | 858,883 |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due March 21, 2008, secured                by                the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid                on its due date).                                                                           |   |                           | -         |                          |   | 1,098,571 |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| **Loans                from Huaxia Bank**                                                                                                                                                                                                                                                                                         |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.92% per annum, due September 12, 2009,                guaranteed by Kandi Investment Group and Kandi Metal Co. Ltd. and                secured                by the assets owned by Jinydezhen Deer Investement Co. and the Company.                Also see Notes 12 and 13. |   |                           | 2,479,905 |                          |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| **Loans                from China Everybright Bank**                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.23% per annum, due February 5, 2009,                secured                by the assets of Lin Yue Ping, a related party of the Company and                guaranteed by Nanlong Group Co., Ltd and Zhejiang Mengdeli Electronics                Co., Ltd.                    |   |                           | 4,376,304 |                          |   | 4,101,668 |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| **Loans                from Shanghai Pudong Development Bank**                                                                                                                                                                                                                                                                    |   |                           |      |                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.33 % per annum, due February 14, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date).                                                                                      |   |                           | -         |                          |   | 2,734,444 |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 7.84 % per annum, due October 1, 2008,                guaranteed by Nanlong Group Co., Ltd & Zhejiang Mengdeli Electric                Company (subsequently repaid on its due date).                                                                                        |   |                           | 2,917,536 |                          |   | - |   |
|                                                                                                                                                                                                                                                                                                                              |   |                           |      |                          |   |   |   |
| Monthly                interest only payments at 6.72 % per annum, due April 8, 2009,                collateralized by a time deposit.                                                                                                                                                                                            |   |                           | 2,625,782 |                          |   | - |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                                                                                                                                                                                                                       |   | **September 30,****2008** |       | **December 31,****2007** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|-------------------------------|--------|
|                                                                                                                                                                                                                                       |   | **(Unaudited)**                |       |                          |   |
| **Loans                from Bank of Communication**                                                                                                                                                                                        |   |                           |       |                          |   |   |   |
|                                                                                                                                                                                                                                       |   |                           |       |                          |   |   |   |
| Monthly                interest only payments at 8.96% per annum, due February 18, 2009,                secured                by the assets of the Company. Also see Notes 12 and 13.                                                     |   |                           | 729,384    |                          |   | - |   |
|                                                                                                                                                                                                                                       |   |                           |       |                          |   |   |   |
| **Loans                from HengFeng Bank**                                                                                                                                                                                                |   |                           |       |                          |   |   |   |
|                                                                                                                                                                                                                                       |   |                           |       |                          |   |   |   |
| Monthly                interest only payments at 7.88% per annum, due October 24, 2008,                secured                by the assets of the Company. Also see Notes 12 and 13 (subsequently                repaid on its due date). |   |                           | 2,917,536  |                          |   | - |   |
|                                                                                                                                                                                                                                       |   |                           |       |                          |   |   |   |
| Total                short-term bank loans                                                                                                                                                                                                 |   | $                              | 26,111,946 |                          | $      | 20,869,862 |   |

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

|                                                                                                    |   | **September 30,****2008** |       | **December 31,****2007** |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|-------------------------------|--------|
|                                                                                                    |   | **(Unaudited)**                |       |                          |   |
| Notes                payable to unrelated companies:                                                    |   |                           |       |                          |   |   |   |
| Due                April 17, 2008 (subsequently repaid on its due date)                                 |   | $                              | -          |                          | $      | 683,611 |   |
| Due                September 19, 2008 (subsequently repaid on its due date)                             |   |                           | -          |                          |   | 683,611 |   |
| Due                November 8, 2008 (subsequently repaid on its due date)                               |   |                           | 116,701    |                          |   | 109,378 |   |
| Due                November 10, 2008 (subsequently repaid on its due date)                              |   |                           | 218,815    |                          |   | - |   |
| Due                December 18, 2008                                                                    |   |                           | 437,630    |                          |   | - |   |
| Due                January 18, 2009                                                                     |   |                           | 1,458,768  |                          |   | - |   |
| Due                January 31, 2009                                                                     |   |                           | 875,261    |                          |   | - |   |
| Due                March 17, 2009                                                                       |   |                           | 4,376,304  |                          |   | - |   |
| Due                March 18, 2009                                                                       |   |                           | 729,384    |                          |   | - |   |
| Due                March 23, 2009                                                                       |   |                           | 1,458,768  |                          |   | - |   |
| Due                March 27, 2009                                                                       |   |                           | 1,458,768  |                          |   | - |   |
| Due                September 24, 2009, monthly interest only payments at 7.00% per                annum |   |                           | 274,132    |                          |   | - |   |
| Total                                                                                                   |   | $                              | 11,404,531 |                          | $      | 1,476,600 |   |

----

**KANDI      TECHNOLOGIES, CORP. **

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

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER      30, 2008**

**(UNAUDITED)**

|                                                                        |   | **September 30,****2008** |       | **December 31,****2007** |   |
|-----------------------------------------------------------------------------|--------|--------------------------------|------------|-------------------------------|--------|
|                                                                        |   | **(Unaudited)**                |       |                          |   |
| Due                April 17, 2008 (subsequently repaid on its due date)     |   | $                              | -          |                          | $      | 683,611 |   |
| Due                September 19, 2008 (subsequently repaid on its due date) |   |                           | -          |                          |   | 683,611 |   |
| Due                January 18, 2009                                         |   |                           | 1,458,768  |                          |   | - |   |
| Due                January 31, 2009                                         |   |                           | 875,261    |                          |   | - |   |
| Due                March 17, 2009                                           |   |                           | 2,188,152  |                          |   | - |   |
| Due                March 18, 2009                                           |   |                           | 729,384    |                          |   | - |   |
| Due                March 18, 2009                                           |   |                           | 729,384    |                          |   | - |   |
| Due                March 23, 2009                                           |   |                           | 729,384    |                          |   | - |   |
| Due                March 23, 2009                                           |   |                           | 729,384    |                          |   | - |   |
| Due                March 27, 2009                                           |   |                           | 729,384    |                          |   | - |   |
| Due                April 8, 2009                                            |   |                           | 2,917,535  |                          |   | - |   |
| Total                                                                       |   | $                              | 11,086,636 |                          | $      | 1,367,222 |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

**NOTE      16 – **
**TAXES**

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

**NOTE        16 – **
**TAXES        (CONTINUED**

|                              |   | **Nine                Months Ended****September                30,****(Unaudited)** |    |
|-----------------------------------|--------|-------------------------------------------------------------------------------------|---------|
|                              |   | **2008**                                                                            |    | **2007** |   |
| Current:                          |   |                                                                                |    |   |   |
| Provision                for CIT  |   | $                                                                                   | -       |   | $ | - |   |
|                              |   |                                                                                |    |   |   |   |   |
| Deferred:                         |   |                                                                                |    |   |   |   |   |
| Provision                for CIT  |   |                                                                                | (81,042 | ) |   | - |   |
|                              |   |                                                                                |    |   |   |   |   |
| Income                tax benefit |   | $                                                                                   | (81,042 | ) | $ | - |   |

|                                                   |   | **Nine                Months Ended****September                30,****(Unaudited)** |       |
|--------------------------------------------------------|--------|-------------------------------------------------------------------------------------|------------|
|                                                   |   | **2008**                                                                            |       | **2007** |   |
| Computed                “expected” expense |   | $                                                                                   | 1,021,581  |   | $ | 1,230,670 |   |
| Permanent                difference                    |   |                                                                                | 90,692     |   |   | 2,185 |   |
| Tax                exemption                           |   |                                                                                | (1,193,315 | ) |   | (1,232,855 | ) |
| Income                tax benefit                      |   | $                                                                                   | (81,042    | ) | $ | - |   |

----

**KANDI        TECHNOLOGIES, CORP. **

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

**AND        SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER        30, 2008**

**(UNAUDITED)**

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

|                                                |   | **September 30,****2008****(Unaudited) ** |     | **December 31,****2007** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------|----------|-------------------------------|--------|
| Deferred                tax assets:                 |   |                                                |     |                          |   |
| Non-current                portion:                 |   |                                                |     |                          |   |
| Depreciation                                        |   | $                                                   | 778,267  |                          | $      | 694,512 |   |
| Valuation                allowance                  |   |                                                | (289,506 | )                             |   | (289,506 | ) |
| Subtotal                                            |   |                                                | 488,761  |                          |   | 405,006 |   |
| Total                deferred tax assets            |   |                                                | 488,761  |                          |   | 405,006 |   |
|                                                |   |                                                |     |                          |   |   |   |
| Deferred                tax liabilities:            |   |                                                |     |                          |   |   |   |
| Non-current                portion:                 |   |                                                |     |                          |   |   |   |
| Accumulated                other comprehensive gain |   |                                                | (296,511 | )                             |   | (296,511 | ) |
| Subtotal                                            |   |                                                | (296,511 | )                             |   | (296,511 | ) |
| Total                deferred tax liabilities       |   |                                                | (296,511 | )                             |   | (296,511 | ) |
|                                                |   |                                                |     |                          |   |   |   |
| Net                deferred tax assets              |   | $                                                   | 192,250  |                          | $      | 108,495 |   |

|                                             |   | **Nine                Months Ended****September                30,****(Unaudited)** |      |
|--------------------------------------------------|--------|-------------------------------------------------------------------------------------|-----------|
|                                             |   | **2008**                                                                            |      | **2007** |   |
| Tax                holiday effect                |   | $                                                                                   | 1,193,315 |   | $ | 1,230,744 |   |
| Basic                net income per share effect |   | $                                                                                   | 0.06      |   | $ | 0.08 |   |

----

**KANDI            TECHNOLOGIES, CORP. **

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

**AND            SUBSIDIARIES**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER            30, 2008**

**(UNAUDITED)**

**NOTE      17 – **
**CONTINGENCIES**

**NOTE      18 – **
**COMMITMENT**

**NOTE      19 – **
**BUSINESS      COMBINATION **

| Fair                value of assets acquired     |   | $      | 12,314,988 |   |
|--------------------------------------------------|--------|--------|------------|--------|
| Fair                value of liabilities assumed |   |   | -          |   |
| Net                assets acquired               |   | $      | 12,314,988 |   |
| Total                consideration paid          |   | $      | 12,314,988 |   |

----

**KANDI          TECHNOLOGIES, CORP. **

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

**AND          SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER          30, 2008**

**(UNAUDITED)**

**NOTE      19 - BUSINESS COMBINATION (CONTINUED)**

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

**NOTE      20 – **
**DISCONTINUED      OPERATION **

----

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

----

**Results      of Operations**

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

|                                                                     |   | **Three                Month Comparison**                        |      |
|--------------------------------------------------------------------------|--------|------------------------------------------------------------------|-----------|
|                                                                     |   |  **Three****Months****Ended****September****30, 2008** |      | **% of****Revenue** |   | **Three****Months****Ended ****September****30, 2007** |   | **% of****Revenue** |   | **Increase/****(Decrease)** |   | **Increase/****(Decrease)****in %** |   |
| **REVENUES**                                                             |   | $                                                                | 9,261,033 |   |   | 100.0 | % | $ | 8,808,836 |   |   | 100.0 | % |   |   |   | $ | 452,197 |   |   | 5.1 | % |
| **COST                OF GOODS SOLD**                                    |   |                                                             | 6,966,103 |   |   | 75.2 | % |   | 7,315,162 |   |   | 83.0 | % |   |  |   |   | (349,059 | ) |   | (4.8 | )% |
| **GROSS                PROFIT**                                          |   |                                                             | 2,294,930 |   |   | 24.8 | % |   | 1,493,674 |   |   | 17.0 | % |   |  |   |   | 801,256 |   |   | 53.6 | % |
| Selling                and Marketing                                     |   |                                                             | 229,795   |   |   | 2.5 | % |   | 179,386 |   |   | 2.0 | % |   |  |   |   | 50,409 |   |   | 28.1 | % |
| General                and Administrative                                |   |                                                             | 324,672   |   |   | 3.5 | % |   | 228,603 |   |   | 2.6 | % |   |  |   |   | 96,069 |   |   | 42.0 | % |
| Research                and Development                                  |   |                                                             | 230,023   |   |   | 2.5 | % |   | 12,033 |   |   | 0.1 | % |   |  |   |   | 217,990 |   |   | 1,811.6 | % |
| **INCOME                FROM CONTINUING OPERATIONS**                     |   |                                                             | 1,510,440 |   |   | 16.3 | % |   | 1,073,652 |   |   | 12.2 | % |   |  |   |   | 436,788 |   |   | 40.7 | % |
| Government                Grants                                         |   |                                                             | 17,484    |   |   | 0.2 | % |   | - |   |   | 0.0 | % |   |  |   |   | 17,484 |   |   | 100 | % |
| Interest                Expense, Net                                     |   |                                                             | (547,511  | ) |   | (5.9 | )% |   | (373,467 | ) |   | (4.2 | )% |   |  |   |   | (174,044 | ) |   | 46.6 | % |
| Forfeiture                of Customer Deposits                           |   |                                                             | -         |   |   | 0.0 | % |   | 233,585 |   |   | 2.7 | % |   |   |   |   | (233,585 | ) |   | (100.0 | )% |
| Other,                Net                                                |   |                                                             | 26,551    |   |   | 0.3 | % |   | 548 |   |   | 0.0 | % |   |  |   |   | 26,003 |   |   | 4,745.1 | % |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAXES** |   |                                                             | 1,006,964 |   |   | 10.9 | % |   | 934,318 |   |   | 10.6 | % |   |  |   |   | 72,646 |   |   | 7.8 | % |
| **INCOME                TAX BENEFIT/EXPENSE**                            |   |                                                             | 7,581     |   |   | 0.1 | % |   | - |   |   | 0.0 | % |   |  |   |   | 7,581 |   |   | 100 | % |
| **NET                INCOME FROM CONTINUING OPERATIONS**                 |   |                                                             | 1,014,545 |   |   | 11.0 | % |   | 934,318 |   |   | 10.6 | % |   |   |   |   | 80,227 |   |   | 8.6 | % |
| **INCOME                FROM DISCONTINUED OPERATION**                    |   |                                                             | -         |   |   | 0.0 | % |   | (62,820 | ) |   | (0.7 | )% |   |   |   |   | 62,820 |   |   | (100.0 | )% |
| **NET                INCOME**                                            |   | $                                                                | 1,014,545 |   |   | 11.0 | % | $ | 871,498 |   |   | 9.9 | % |   |   |   | $ | 143,047 |   |   | 16.4 | % |

*** ***
***Revenues***
*** ***

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

***Gross      Profit***

----

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***Discontinued      Operation***

***Income      Tax Provision***

***Net      Income***

----

***Comparison      of Nine Months Ended September 30, 2008 and September 30,      2007***

|                                                                   |   | **Nine                Month Comparison**                    |       |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|
|                                                                   |   | **Nine Months****Ended****September 30,****2008** |       | **% of****Revenue** |   |  **Nine Months****Ended ****September****30, 2007** |   | **% of****Revenue** |   | **Increase/****(Decrease)** |   | **Increase/****(Decrease)****in %** |   |
| **REVENUES**                                                           |   | $                                                           | 30,767,280 |   |   | 100.0 | % | $ | 25,293,958 |   |   | 100.0 | % |   |   |   | $ | 5,473,322 |   |   | 21.6 | % |
| **COST                OF GOODS SOLD**                                  |   |                                                        | 23,098,186 |   |   | 75.1 | % |   | 20,158,923 |   |   | 79.7 | % |   |  |   |   | 2,939,263 |   |   | 14.6 | % |
| **GROSS                PROFIT**                                        |   |                                                        | 7,669,094  |   |   | 24.9 | % |   | 5,135,035 |   |   | 20.3 | % |   |  |   |   | 2,534,059 |   |   | 49.3 | % |
| Selling                and Marketing                                   |   |                                                        | 632,132    |   |   | 2.1 | % |   | 366,879 |   |   | 1.5 | % |   |  |   |   | 265,253 |   |   | 72.3 | % |
| General                and Administrative                              |   |                                                        | 1,019,385  |   |   | 3.3 | % |   | 536,731 |   |   | 2.1 | % |   |  |   |   | 482,654 |   |   | 89.9 | % |
| Research                and Development                                |   |                                                        | 487,755    |   |   | 1.6 | % |   | 64,888 |   |   | 0.3 | % |   |  |   |   | 422,867 |   |   | 651.7 | % |
| **INCOME                FROM CONTINUING OPERATIONS**                   |   |                                                        | 5,529,822  |   |   | 18.0 | % |   | 4,166,537 |   |   | 16.5 | % |   |  |   |   | 1,363,285 |   |   | 32.7 | % |
| Government                Grants                                       |   |                                                        | 57,533     |   |   | 0.2 | % |   | - |   |   | 0.0 | % |   |  |   |   | 57,532 |   |   | 100 | % |
| Interest                Expense, Net                                   |   |                                                        | (1,540,631 | ) |   | (5.0 | )% |   | (666,704 | ) |   | (2.6 | )% |   |  |   |   | (873,927 | ) |   | (131.1 | )% |
| Forfeiture                of Customer Deposits                         |   |                                                        | -          |   |   | 0.0 | % |   | 500,304 |   |   | 2.0 | % |   |   |   |   | (500,304 | ) |   | (100.0 | )% |
| Other,                Net                                              |   |                                                        | 39,599     |   |   | 0.1 | % |   | (69,672 | ) |   | (0.3 | )% |   |  |   |   | 109,271 |   |   | 156.8 | % |
| **INCOME                FROM CONTINUING OPERATIONS BEFORE INCOME TAX** |   |                                                        | 4,086,323  |   |   | 13.3 | % |   | 3,930,465 |   |   | 15.5 | % |   |  |   |   | 155,858 |   |   | 4.0 | % |
| **INCOME                TAX BENIFET/EXPENSE**                          |   |                                                        | 81,042     |   |   | 0.3 | % |   | - |   |   | 0.0 | % |   |  |   |   | 81,042 |   |   | 100 | % |
| **NET                INCOME FROM CONTINUING OPERATIONS**               |   |                                                        | 4,167,365  |   |   | 13.5 | % |   | 3,930,465 |   |   | 15.5 | % |   |   |   |   | 236,900 |   |   | 6.0 | % |
| **INCOME                FROM DISCONTINUED OPERATION**                  |   |                                                        | 327,700    |   |   | 1.1 | % |   | (203,272 | ) |   | (0.8 | )% |   |   |   |   | 530,972 |   |   | 261.2 | % |
| **NET                INCOME**                                          |   | $                                                           | 4,495,065  |   |   | 14.6 | % | $ | 3,727,193 |   |   | 14.7 | % |   |   |   | $ | 767,872 |   |   | 20.6 | % |

*** ***
***Revenues***
*** ***

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

----

***Gross      Profit***
*.*

***Selling      and Marketing Expenses***

***General      and Administrative Expenses***

***Research      and Development Expenses***

***Discontinued      Operation***
*.*

***Income      Tax Provision***

***Net      Income***

**Liquidity      and Capital Resources**

***Cash      Flows***

***Nine      Months ended September 30, 2008 and 2007***

----

***Working      Capital***

**Accounting      Policies**

*Revenue      Recognition*

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

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

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

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

*Use      of Estimates*

*Fair      Value of Financial Instruments*

**Recent      Accounting Pronouncements**

----

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

*Evaluation      of Disclosure Controls and Procedures *

* *

*Changes      in Internal Controls Over Financial Reporting *

----

**PART      II - OTHER INFORMATION**

**Item      1A. Risk Factors.**

**Item      6. Exhibits.**

| 31.1                Certifications pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the                Securities Exchange Act of 1934 by Hu Xiaoming, President and Chief                Executive Officer. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                         |
| 31.2                Certifications pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the                Securities Exchange Act of 1934 by Zhu Xiaoying, Chief Financial                Officer.              |
|                                                                                                                                                                                                         |
| 32.1                Certifications of CEO and CFO pursuant to 18 U.S.C. § 1350, as adopted                pursuant to § 906 of the Sarbanes-Oxley Act of                2002.                      |

**Items      1, 2, 3, 4, and 5 are not applicable and have been      omitted. **

----

**SIGNATURES**

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

----