Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. These forward-looking statements represent Management's belief as to the future of Advanced Battery Technologies. Whether those beliefs become reality will depend on many factors that are not under Management's control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section of our Annual Report on Form 10-K for the year ended December 31, 2008 entitled "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Overview

Near the end of 2004, ZQ Power-Tech obtained the financing needed to complete additional factory facilities at ZQ Power-Tech's campus in Heilongjiang. Since 2004, the number of employees at our facility has increased from 300 to 851 as of September 30 2009. The increase has occurred because we more than doubled our battery production capacity and we acquired an electric vehicle manufacturer in May 2009.

In 2008 our battery production capacity was $45 million per year with two buildings ("A" and "B") in full production. As our revenues in 2008 reached $45 million and continue to grow, the need to outfit buildings "C" and "D" so as to double our production capacity became apparent. Toward that end, during 2008 we completed an equity placement to obtain the capital necessary for the expansion. In July 2009, the two new production lines, "C" and "D", became operational with automated equipment. In August 2009, we decided to upgrade the capacity of "A" and "B" with further investment in automated equipments.

On April 28, 2009, the Company, through Cashtech, a wholly-owned subsidiary of ABAT, entered into a Share Purchase Agreement with the shareholders of Wuxi Angell Autocycle Co., Ltd. Pursuant to the Agreement, the Company acquired a 100% ownership interest in the registered capital of Wuxi Angell and issued three million shares of the Company's common stock to the sellers. Immediately after the completion of acquisition on May 4, 2009, Wuxi Angell Autocycle Co. Ltd. was renamed as Wuxi Zhongqiang Autocycle Co., Ltd. ("Wuxi ZQ"). In June and October 2009, in order to support the future growth of our newly acquired electric vehicle business and battery production, we completed additional equity placements, obtaining net proceeds of approximately $16,041,861 in June and $18,017,482 in October.

Results of Operations

The following tables present certain consolidated statement of operations
information. Financial information is presented for the three months and nine
months ended September 30, 2009 and 2008 respectively.

                                     For the Three Months Ended September 30,
                                2009             2008                  Change
                                                                 Amount           %
       Revenues             $ 17,714,278     $ 12,662,585     $  5,051,693        39.9 %
       Cost of Goods Sold     10,087,228        6,776,437        3,310,791        48.9 %
       Gross Profit            7,627,050        5,886,148        1,740,902        29.6 %
       Operating Expenses      2,382,938          795,336        1,587,602       199.6 %
       Operating Income        5,244,112        5,090,812          153,300         3.0 %
       Net Income           $  4,816,077     $  4,371,960     $    444,117        10.2 %


                                     For the Nine Months Ended September 30,
                                 2009             2008                 Change
                                                                 Amount           %
       Revenues             $ 42,171,598     $ 34,442,838     $  7,728,760        22.4 %
       Cost of Goods Sold     23,197,017       17,542,233        5,654,784        32.2 %
       Gross Profit           18,974,581       16,900,605        2,073,976        12.3 %
       Operating Expenses      7,207,808        1,947,200        5,260,608       270.2 %
       Operating Income       11,766,773       14,953,405       (3,186,632 )     -21.3 %
       Net Income           $ 16,406,478     $ 12,895,709     $  3,510,769        27.2 %

We had total revenues of $17,714,278 for the three months ended September 30, 2009, an increase of $5,051,693 or 39.9%, compared to $12,662,585 for the three months ended September 30, 2008. The increase in revenues was primarily due to the contribution of sales from the electric vehicle business, which the Company acquired on May 4, 2009.

For the nine months ended September 30, 2009 our revenue reached $42,171,598, an increase of $7,728,760 or 22.4% compared to $34,442,838 for the nine months ended September 30, 2008. The increase in revenues was primarily due to the contribution of sales from the electric vehicle business, which the Company acquired on May 4, 2009.

Sales of batteries to Wuxi ZQ are included in our 2008 financial results and excluded from our 2009 financial results, since we acquired ownership of Wuxi ZQ in May 2009. If sales to Wuxi ZQ are excluded from our 2008 results, our revenue from battery sales increased in the nine months ended September 30, 2009, compared to the same period in 2008. The growth in our battery business has been accompanied by a reorientation in the relative importance of different battery sizes. When we first entered the battery business in 2003 and during the following years, the bulk of our sales were small capacity batteries, primarily those used in consumer electronic devices. Our growth, however, has been propelled by customers for our medium capacity batteries (used for electric scooters, electric bicycles, power tools, miners' lamps, searchlights, etc.) and large capacity batteries (used for electric sanitation vehicles, stationary applications, and other large scale battery applications). In the three and nine months ended September 30, 2009, the contribution of batteries in these categories as well as the contribution of electric vehicles to our total revenues was:

                                                                  % (of total
       Three months ended September 30, 2009   Amount (US$)        revenue)
       Small Capacity Battery                      1,085,202              6.13 %
       Medium Capacity Battery                     1,564,630              8.83 %
       Large Capacity Battery                      3,270,765             18.46 %
       Miner's Lamp                                5,074,095             28.64 %
       Electric Vehicle                            6,719,586             37.93 %
       Total                                      17,714,278            100.00 %



                                                                  % (of total
        Nine months ended September 30, 2009   Amount (US$)        revenue)
        Small Capacity Battery                     3,323,184              7.88 %
        Medium Capacity Battery                    7,976,003             18.91 %
        Large Capacity Battery                    10,855,478             25.74 %
        Miner's Lamp                               9,670,016             22.93 %
        Electric Vehicle                          10,346,916             24.54 %
        Total                                     42,171,598            100.00 %

At October 30, 2009 we had a backlog of over $66.8 million for delivery throughout the next 12 months, including a battery backlog of approximately $55 million. Therefore we expect to expand on the level of operations that we achieved during 2008 and the first nine months of the current year.

Our cost of revenues consists of the cost of raw materials, labor costs and production overhead. In the three months ended September 30, 2009, our revenue increased by 39.9% and our cost of goods sold increased by 48.9%, from $6,776,437 to $10,087,228, compared to the same period of 2008. This disparate growth in cost of sales is mainly attributable to the higher proportion of sales from lower margin products, i.e. electrical vehicles. The result of the growth in cost of goods sold was a deterioration in our gross margin from 46.5% in the three months ended September 30, 2008 to 43.1% in the same period of 2009.

For the same reason, in the nine months ended September 30, 2009 our revenue increased by 22.4% and our cost of goods sold increased by 32.2%, from $17,542,233 to $23,197,017, compared to the same period of 2008. The result was a deterioration in our gross margin from 49.1% in the nine months ended September 30, 2008 to 45.0% in the same period of 2009.

The Company's operating expenses increased by 199.6%, from $795,336 in the three months ended September 30, 2008 to $2,382,938 in the same period of 2009. The Company incurred operating expenses of $7,207,808 during the nine months ended September 30, 2009, an increase of $5,260,608 or approximately 270.2%, compared to $1,947,200 during the nine months ended September 30, 2008. These increases are primarily due to Wuxi ZQ's high selling and administration expenses (approximately $3.1 million) after the acquisition on May 4 2009. Wuxi ZQ's administrative expenses included a bad debt allowance of approximately $980,000. The Wuxi ZQ expenses also include satisfaction of approximately $1,200,000 in debts that were incurred in prior periods but were not previously recorded. Our operating expenses also increased because our US office incurred higher administration expenses in the three and nine months ended September 30, 2009, including salaries, legal fee and marketing expense related to our financing and our annual meeting activities. The Company also recognized higher noncash stock and option compensation amortization expense in the three and nine months ended September 30, 2009. However, considering only the operating expenses in Heilongjiang ZQPT, our main battery production base in China, our operating expenses increased by approximately $0.23 and $0.49 million during the three and nine month periods ended September 30, 2009. Those increases were mainly attributable to our expanded operation.

Included in our general and administrative expense during the three and nine months ended September 30, 2009 were $540,344 and $1,455,238 attributable to amortization of the market value of stock and options that we granted to employees or consultants. This non-cash expense resulted from our use of stock during our early years to incentivize key individuals. The market value of the stock at the time it was issued is being amortized over the term of the employee's or consultant's services, thus:

· In the case of employees, the period of amortization is based on a vesting schedule included in the employees' contracts. The average vesting period for the employees is 10.6 years. To date, only one employee of the Company who received stock awards has terminated employment; so the amortization has been proportional to that schedule.

· In the case of consultants, the period of amortization is based on the term of the consulting contracts, although amortization will be accelerated if the consulting relationship ceases. Again, to date, the consultants who received stock have remained involved in the Company's affairs, so there has been no acceleration of amortization.

At September 30, 2009 there remained $6,688,540 in unamortized stock compensation on the Company's books. The amortization of this sum will contribute to our operating expenses as described above.

In the three and nine months ended September 30 2009, we realized $43,576 and $79,249 in net interest expenses. The $326,636that we incurred in interest on Wuxi ZQ's $7,333,674 short-term bank loan was partially offset by $120,000 in the interest income due to our $1.6 million lending to a non-related company, Harbin Jinhuida Investment Consulting Limited, at an interest rate of 10% per annum, and by interest on our cash deposited in Chinese banks. Additionally, in the three and nine months ended September 30 2009, we recognized $336,849 income due to the forgiveness of interest payable on our existing short-term loans. Finally, for the nine months ended September 30 2009, we recognized a $62,470 investment loss from our 49% equity investment in Beyond E-Tech, Inc., a Texas corporation recently organized to engage in distributing cellular telephones in the United States. The acquisition has been recorded as an "investment in unconsolidated entity" on our balance sheet, and our participation in that business will be accounted for through the equity method. Because Beyond E-Tech incurred a net loss of $127,490 in the nine months ended September 30, 2009, the value of our investment was reduced on our balance sheet by 49% of that sum -
i.e. $62,470 - and we incurred "equity loss" in that amount.

Our acquisition of Wuxi ZQ in May 2009 resulted in a $9,909,320 gain on bargain purchase. This occurred because the fair value of the net assets of Wuxi ZQ was $19,779,320, but the 3,000,000 common shares that we paid to acquire Wuxi ZQ had a market value of only $9,870,000. We recorded the $9,909,320 difference as "other income."

Net Income

The Company's revenue less expenses produced pre-tax income of $5,542,414 and $21,884,770 for the three and nine months ended September 30, 2009 respectively, representing increases of $399,677 and $6,863,328 from the same periods of 2008, respectively. In the three and nine months ended September 30 2009, domestic (U.S.) pre-tax losses were $759,549 and $2,795,887, respectively; foreign
(China) pre-tax incomes were $6,301,963 and $24,680,657, respectively, which includes $9,909,320 gain on bargin purchase recognized in the second quarter of 2009. The deferred income tax because of gain on bargain purchase for the three and nine months were $0 and $3,468,262, respectively. As a result of Chinese tax laws that reward foreign investment in China, currently and through 2010, ZQ Power-Tech is entitled to a 50% tax abatement, which results in an effective corporate tax rate of approximately 12.5%. After taxes of $726,337 and $5,478,292 realized in the three and nine months ended September 30 2009, our net income were $4,816,077 and $16,406,478, respectively, representing 10.2% and 27.2% increases over the same periods of 2008.

Liquidity and Capital Resources

At September 30, 2009 the Company had a working capital balance of $56,907,530, an improvement from our working capital balance of $49,991,602 at December 31, 2008. From the cash reserve perspective, we had $33,839,657 cash (including a $0.89 million other receivable from a PRC bank due to the local wire transfer practice), an increase from our cash balance of $32,746,155 at December 31, 2008. The primary reason for the improvement in working capital and cash was the preferred stock placement we completed in June 2009, partially offset by further investment in our facilities With the sufficient cash available, we believe we are able to fund the current debt obligations when due.

Wuxi ZQ has a total of $7,324,773 in loans due to Huaxia Bank, currently bearing interest at 9.708% per annum. Both loans are in default, and we are currently negotiating renewal. If those negotiations fail to yield a satisfactory result, however, we have sufficient cash available to us to enable us to satisfy the debts. We have no other bank debt.

ZQ Power-Tech and Wuxi ZQ have sufficient liquidity to fund their near-term operations and to fund the working capital demands of future expansion. If we determine that additional funds are needed for other attractive growth opportunities or for the full implementation of our long term expansion plans for Wuxi ZQ, we have available over $18 million in property, plant and equipment that ZQ Power-Tech owns free of liens, for potential collateral loans. On October 30, 2009 our backlog of firm orders was approximately $66.8 million. Based on that backlog of orders, we believe that secured financing will be available on favorable terms if needed.

Given the financial resources available to the Company, management believes that it has sufficient capital and liquidity to sustain operations for the foreseeable future.

Impact of Accounting Pronouncements

There were no recent accounting pronouncements that have had a material effect on the Company's financial position or results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.