Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, including the following "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements that are based on the beliefs of our management, and involve risks and uncertainties, as well as assumptions, that, if they ever materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors and risks mentioned in the "Risk Factors" sections of our Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent SEC filings, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are based on information available to us on the date of this report. We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

Certain Terms

Except as otherwise indicated by the context, all references in this quarterly report to (i) "Ritar," the "Company," "we," "us" or "our" are to China Ritar Power Corp., a Nevada corporation, and its direct and indirect subsidiaries;
(ii) "Ritar BVI" are to our subsidiary Ritar International Group Limited, a British Virgin Islands corporation, and/or its operating subsidiaries, as the case may be; (iii) "Shenzhen Ritar" are to our subsidiary Shenzhen Ritar Power Co., Ltd., a corporation incorporated in the People's Republic of China; (iv) "Hengyang Ritar" are to our subsidiary Hengyang Ritar Power Co., Ltd., a corporation incorporated in the People's Republic of China; (v) "Securities Act" are to the Securities Act of 1933, as amended; (vi) "Exchange Act" means the Securities Exchange Act of 1934, as amended; (vii) "RMB" are to Renminbi, the legal currency of China; (viii) "U.S. dollar," "$" and "US$" are to the legal currency of the United States; (ix) "China" and "PRC" are to the People's Republic of China; (x) "BVI" are to the British Virgin Islands; and (xi) "SEC" are to the United States Securities and Exchange Commission.

Overview of Our Business

We are a holding company that only operates through our indirect Chinese subsidiaries. Through our Chinese subsidiaries, we design, develop, manufacture and sell environmentally friendly lead-acid batteries with a wide range of applications and capacities, especially in the LEV segment, in China. We market, sell and service our 6 series and 197 models of "Ritar" branded, cadmium-free, VRLA batteries in China and internationally.

Our revenue increased from $40.9 million in fiscal year 2006 to $73.3 million in fiscal year 2007 and $112.3 million in fiscal year 2008 and decreased to $98.6 million in fiscal year 2009, representing an overall compounded annual growth rate of approximately 34.1%. These significant increases reflect our success in expanding our production lines and our increasing market penetration. We continually seek to broaden our market reach by introducing new production lines and improving our profit margin through increased vertical integration. Through our manufacturing facilities located in Shenzhen and Hengyang, we currently have 19 lead acid battery production lines that are operational. Eight of them are located at Hengyang Ritar, eleven production lines are located at Shenzhen Ritar. Our current annual designed production capacity of lead acid battery is approximately 2.51 million kilowatt-hours. We have completed construction of the first phase of our new technical and manufacturing complex in Hengyang City, Hunan Province and Lead acid battery production at this facility began in April 2008. In addition, in July of 2008, production of lead plates began at the Hengyang facility. We sold all of our ownership interest in Shanghai Ritar on October 15, 2009 and no longer maintain any manufacturing facility in Shanghai.

Our Current Organizational Structure

The following chart reflects our current organizational structure:

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Third Quarter Financial Performance Highlights

The following are some financial highlights for the third quarter of 2010:

Revenues: Our revenues were $31.55 million for the third quarter of 2010, a decrease of 4.76 % from the same quarter of 2009.

Gross Margin: Gross margin was 16.37% for the third quarter of 2010, as compared to 18.88% for the same period in 2009.

Operating Profit: Operating profit was $2.63 million for the third quarter of 2010, a decrease of 38.47% from $4.27 million of the same period last year.

Net Income: Net income was $1.69 million for the third quarter of 2010, a decrease of 48.2% from $3.26 million of the same period in 2009.

Fully diluted earnings per share was $0.08 for the third quarter of 2010, a decrease of 52.94% from the same period in 2009.

Cost of Revenue

Cost of revenue includes our direct costs to manufacture our products, including the cost of our raw materials, employee remuneration for staff engaged in production activity, and related expenses that are directly attributable to the production of products.

Gross Profit and Gross Margin

Between fiscal years 2008 and 2009, we were able to maintain gross margins between approximately 19% and 21%. Gross margins in such years for domestic and international sales were approximately 18% and 22%, respectively. Changes in our gross margins are primarily driven by changes in cost of goods sold as a percentage of revenues due to changes in raw materials cost per unit product and direct labor used per unit product.

To gain market penetration, we price our products at levels that we believe are competitive. Through our continuous efforts to improve manufacturing efficiencies and reduce our production costs, we believe that we offer products of comparable quality to our Chinese and international competitors at lower prices. General economic conditions, cost of raw materials as well as supply and demand of lead-acid batteries within our markets influence sales prices. Our high-end, value-added products generally tend to have higher profit margins.

Operating Expenses

Our operating expenses consist of salaries, sales commission, shipping and handling cost and other selling expense and general and administrative expenses. We expect most components of our operating expenses will increase as we incur increased costs related to being a public company.

Provision for Income Taxes

United States

The Company was incorporated in the United States of America and is subject to United States of America tax law. No provisions for income taxes have been made as the Company has no taxable income for the third quarter of 2010.

British Virgin Islands

Ritar International was incorporated in the British Virgin Islands and is not subject to income taxes under the current laws of the British Virgin Islands.

PRC

Shenzhen Ritar is subject to PRC enterprises income tax ("EIT") at the applicable tax rates on the taxable income as reported in its Chinese statutory accounts in accordance with the relevant enterprises income tax laws applicable to foreign enterprises. Pursuant to the same enterprises income tax laws, being classified as a high technology company, Shenzhen Ritar was allowed preferential tax treatment - full exemption from PRC enterprises income tax for two fiscal years 2003 and 2004, which were its first profit-making years, and 50% reduction in its EIT rates for the ensuing three years, 2005 through 2007.

On March 16, 2007, the PRC government promulgated a new tax law, China's Unified Enterprise Income Tax Law ("New EIT Law"), which took effect from January 1, 2008. Under the New EIT Law, foreign-owned enterprises as well as domestic companies are subject to a uniform tax rate of 25%. The New EIT Law provides for a grandfathering and five-year transition period from its effective date for those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential EIT treatment. Accordingly, Shenzhen Ritar was subject to an EIT rate of 22%, 20% and 18% for the years ended December 31, 2010, 2009 and 2008, respectively, under the New EIT Law.

Hengyang Ritar commenced its business on April 27, 2008 and is subject to an income tax rate of 25%.

We use the asset and liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.

Results of Operations

Three Months Ended September 30, 2010 Compared to Three Months Ended September
30, 2009

The following table sets forth key components of our results of operations for
the periods indicated, both in dollars and as a percentage of our revenue.

                                                  Three Months Ended                    Three Months Ended
                                                  September 30, 2010                    September 30, 2009
                                                                 As a                                   As a
                                                             Percentage of                         Percentages of
                                              Amount           Revenues             Amount            Revenues
Net revenue                                $ 31,547,686                 100 %    $ 33,123,343                  100 %
Cost of sales                                26,383,879                83.6 %      26,871,015                 81.1 %
Gross profit                                  5,163,807                16.4 %       6,252,328                 18.9 %

Operating expenses:
Salaries                                        623,267                1.98 %         356,138                  1.1 %
Sales commission                                468,006                1.48 %         210,519                 0.64 %
Shipping and handling cost                      380,648                1.21 %         266,459                  0.8 %
Other selling and administrative
expenses                                      1,066,781                3.38 %       1,153,048                  3.5 %
Total operating expenses                      2,538,702                 8.0 %       1,986,164                  6.0 %

Operating profit                              2,625,105                 8.3 %       4,266,164                 12.9 %

Other income and (expenses):
Interest income                                  22,295                0.07 %           5,419                 0.02 %
Other income                                      9,567                0.03 %          31,097                 0.09 %
Interest expenses                              (155,780 )              0.49 %        (187,018 )               0.56 %
Foreign currency exchange loss                 (323,965 )              1.03 %         (21,766 )               0.07 %
Other expenses                                     (456 )             0.001 %          (5,536 )               0.02 %

Other expenses, net                            (448,339 )              1.42 %        (177,804 )                0.5 %

Income from continuing operations before
income taxes                                  2,176,766                 6.9 %       4,088,360                 12.3 %

Income taxes                                   (487,377 )              1.54 %        (786,779 )                2.4 %

Income from continuing operations             1,689,389                 5.4 %       3,301,581                 10.0 %

Loss from discontinued operation, net of
taxes                                                 -                   0 %         (40,218 )                0.1 %

Net income                                    1,689,389                 5.4 %       3,261,363                  9.8 %
Loss from discontinued operations
attributable to noncontrolling interest               -                   0 %           2,009                    0 %

Net income attributable to China Ritar
shareholders                                  1,689,389                 5.4 %       3,263,372                  9.9 %

Other comprehensive income attributable
to noncontrolling interest                            -                   0  %              8              0.00002 %
Foreign currency translation adjustment         738,630                 2.3 %          23,301                 0.07 %
Comprehensive income attributable to
China Ritar shareholders                      2,428,019                 7.7 %       3,286,681                  9.9 %
Comprehensive loss (income) attributable
to non-controlling interest                           -                   0 %          (2,020 )              0.006 %
 Comprehensive income                      $  2,428,019                 7.7 %    $  3,284,661                  9.9 %

Revenues. Revenues decreased approximately $1.6 million, or 4.76% to approximately $31.55 million for the three months ended September 30, 2010 from approximately $33.12 million for the same period in 2009. Several large customers requested delivery of goods after the National holiday in October 2010. Accordingly sales to these customers decreased during the quarter ended September 30, 2010.

Cost of Sales. Our cost of sales decreased approximately $0.49 million, or 1.81%, to approximately $26.38 million for the three months ended September 30, 2010, from approximately $26.87 million for the same period in 2009. This decrease was due to the decrease of our sales volume. As a percentage of revenues, the cost of sales increased to 83.63% during the three months ended September 30, 2010 from 81.12% for the same period of 2009.

Gross Profit. Our gross profit decreased approximately $1.09 million, or 17.41% to approximately $5.16 million for the three months ended September 30, 2010 from approximately $6.25 million for the same period in 2009. This decrease was due to the decrease in our sales volume. Gross profit as a percentage of revenues was 16.37% for the three months ended September 30, 2010, a decrease of 2.51% from 18.88% for the same period of 2009. Such decrease was mainly due to the increase in the price of main raw materials, and the increase of unit manufacturing cost as a result of the relatively low capacity utilization of our new factory in Hengyang.

Salaries. Salaries increased approximately $0.27 million, or 75% to approximately $0.62 million for the three months ended September 30, 2010 from $0.36 million for the same period in 2009. As a percentage of revenues, salaries increased to 1.98% for the three months ended September 30, 2010 from 1.08% for the same period of 2009 .The increase was mainly attributable to the increased number of employees as a result of a larger sales team and the expansion of our new factory. We also increased salaries and fringe benefits of our staff so that we could motivate the core team to contribute more to our company.

Sales Commission. Sales commission increased $0.26 million, or 122.31% to $0.47 million for the three months ended September 30, 2010 from $0.21 million for the same period of 2009. As a percentage of revenues, sales commission increased to 1.48% for the three months ended September 30, 2010 from 0.64% for the same period of 2009. The increase was mainly because lesser sales were made to large customers during this quarter. Generally we paid a comparatively low commission rate to our sales agents for large clients.

Shipping and Handling Cost. Shipping and handling cost increased $0.11 million, or 42.85% to $0.38 million for the three months ended September 30, 2010 from $0.27 million for the same period of 2009. As a percentage of revenues, shipping and handling cost increased to 1.21% for the three months ended September 30, 2010 from 0.8% for the same period of 2009. Such increase was mainly attributable to the rising shipping costs due to inflation.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses have decreased by $0.09 million, or 7.48% to $1.07 million for the three months ended September 30, 2010 from $1.15 million for the same period of 2009. The decrease was mainly attributable to our efforts to control expenses. As a percentage of revenues, other selling, general and administrative expenses decreased to 3.38% for the three months ended September 30, 2010 from 3.48% for the same period of 2009.

Income From Continuing Operations Before Income Taxes. Income before income taxes decreased $1.91 million or 46.8% to $2.18 million for the three months ended September 30, 2010 from $4.09 million for the same period of 2009. Income before income taxes as a percentage of revenues decreased to 6.9% for the three months ended September 30, 2010 from 12.34% for the same period of 2009. Such decrease was mainly attributable to the decreased gross margin and increased operating expenses as discussed above.

Income Taxes. Income taxes decreased $0.3 million to $0.49 million for the three months ended September 30, 2010 from $0.79 million for the same period of 2009. We paid less tax in the third quarter of 2010 mostly because of the decreased income before income taxes during this period compared to the same period of 2009.

Net Income. Net income decreased $1.57 million, or 48.2% to $1.69 million for the three months ended September 30, 2010 from $3.26 million for the same period of 2009. Net income as a percentage of revenues decreased to 5.36% for the three months ended September 30, 2010 from 9.85% for the same period of 2009. The decrease was mainly attributable to the decreased gross profit and increased operating expenses as discussed above.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our revenue.

                                                 Nine Months Ended                  Nine Months Ended
                                                 September 30, 2010                 September 30, 2009
                                                                As a                               As a
                                                             Percentage                         Percentage
                                              Amount         of revenues         Amount         of revenues
Net revenue                                $ 89,910,434               100 %   $ 70,904,378               100 %
Cost of sales                                74,484,047              82.8 %     57,295,863              80.8 %
Gross profit                                 15,426,387              17.2 %     13,608,515              19.2 %

Operating expenses:
Salaries                                      1,759,840               2.0 %      1,209,472               1.7 %
Sales commission                              1,259,840               1.4 %      1,137,101               1.6 %
Shipping and handling cost                    1,056,488               1.2 %        773,936               1.1 %
Other selling and administrative
expenses                                      3,240,680               3.6 %      2,817,086               4.0 %
Total operating expenses                      7,316,848               8.1 %      5,937,595               8.4 %

Operating profit                              8,109,539               9.0 %      7,670,920              10.8 %

Other income and (expenses):
Interest income                                  85,110              0.09 %         71,268               0.1 %
Other income                                     15,969              0.02 %         34,374              0.05 %
Interest expenses                              (442,354 )            0.49 %       (500,512 )             0.7 %
Foreign currency exchange loss                 (565,985 )            0.63 %        (16,677 )            0.02 %
Other expenses                                   (3,507 )           0.004 %         (7,200 )            0.01 %

Other expenses, net                            (910,767 )             1.0 %       (418,747 )             0.6 %

Income from continuing operations before
income taxes                                  7,198,772               8.0 %      7,252,173              10.2 %

Income taxes                                 (1,648,285 )             1.8 %     (1,315,258 )             1.9 %

Income from continuing operations             5,550,487               6.2 %      5,936,915               8.4 %

Loss from discontinued operation, net of
taxes                                                 -                           (354,642 )             0.5 %

Net income                                    5,550,487               6.2 %      5,582,273               7.9 %
Loss from discontinued operations
attributable to noncontrolling interest               -                             17,731              0.03 %

Net income attributable to China Ritar
shareholders                                  5,550,487               6.2 %      5,600,004               7.9 %

Other comprehensive income attributable
to noncontrolling interest                            -                                 11           0.00002 %
Foreign currency translation adjustment       1,031,269              1.15 %        141,239               0.2 %
Comprehensive income attributable to
China Ritar shareholders                      6,581,756               7.3 %      5,741,254               8.1 %
Comprehensive loss (income) attributable
to non-controlling interest                           -                            (17,742 )            0.03 %
 Comprehensive income                      $  6,581,756               7.3 %   $  5,723,512               8.1 %

Revenues. Revenues increased $19.01 million, or 26.81% to $89.91 million for the nine months ended September 30, 2010 from $70.90 million for the same period in 2009. This increase was due to the increase of our sales volume and the increase of our average selling price which was caused by the increase in the prices of main raw materials, as a result of the global economic recovery in 2010.

Cost of Sales. Our cost of sales increased $17.19 million or 30% to $74.48 million for the nine months ended September 30, 2010 from $57.30 million for the same period in 2009. This increase was due to the increase of our sales volume and the increase in prices of main raw materials. As a percentage of revenues, the cost of sales increased to 82.84% during the nine months ended September 30, 2010 from 80.81% for the same period of 2009.

Gross Profit. Our gross profit increased $1.82 million, or 13.36% to $15.43 million for the nine months ended September 30, 2010 from $13.61 million for the same period in 2009. This increase was due to the increase in our sales volume. Gross profit as a percentage of revenues was 17.16% for the nine months ended September 30, 2010, a decrease of 2.03% from 19.19% for the same period of 2009. Such decrease was mainly due to the increase in the price of main raw materials and the increase of unit manufacturing cost as a result of the relatively low capacity utilization of our new factory in Hengyang.

Salaries. Salaries increased $0.55 million, or 45.5% to $1.76 million for the nine months ended September 30, 2010 from $1.21 million for the same period in 2009. As a percentage of revenues, salaries increased to 1.96% for the nine months ended September 30, 2010 from 1.71% for the same period of 2009.The increase of salaries was mainly attributable to the increased number of employees as a result of a larger sales team and the expansion of our new factory. We also increased salaries and fringe benefits of our staff so that we could motivate the core team to contribute more to our company.

Sales Commission. Sales commission increased $0.12 million, or 10.79% to $1.26 million for the nine months ended September 30, 2010 from $1.14 million for the same period of 2009. This dollar increase was mainly attributable to the increase in sales revenue. As a percentage of revenues, sales commission decreased to 1.4% for the nine months ended September 30, 2010 from 1.6% for the same period of 2009. The slight decrease was mainly because more sales were made to large customers during the nine months ended September 30, 2010. Generally we paid a comparatively low commission rate to our sales agents for large clients.

Shipping and Handling Cost. Shipping and handling cost increased $0.28 million, or 36.5%, to $1.06 million for the nine months ended September 30, 2010, from $0.77 million for the same period of 2009. This increase was due to the increase in our sales volume. As a percentage of revenues, shipping and handling cost increased to 1.18% for the nine months ended September 30, 2010 from 1.09% for the same period of 2009. Such increase was mainly attributable to the rising shipping costs due to inflation.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses increased $0.42 million, or 15.04% to $3.24 million for the nine months ended September 30, 2010 from $2.82 million for the same period of 2009. The dollar increase was mainly attributable to the increased number of employees as a result of a larger sales team and the expansion of our new factory. As a percentage of revenues, other selling, general and administrative expenses decreased to 3.6% for the nine months ended September 30, 2010 from 3.97% for the same period of 2009 as a result of economies of scale.

Income From Continuing Operations Before Income Taxes. Income before income taxes decreased $0.05 million or 0.74% to $7.20 million for the nine months ended September 30, 2010 from $7.25 million for the same period of 2009. Such decrease was mainly attributable to increase in salaries. Income before income taxes as a percentage of revenues decreased to 8% for the nine months ended September 30, 2010 from 10.23% for the same period of 2009. Such decrease was mainly attributable to the decreased gross margin as discussed above.

Income Taxes. Income taxes increased $0.33 million to $1.65 million for the nine months ended September 30, 2010 from $1.32 million for the same period of 2009. We paid more taxes mostly because our income tax rate of Shenzhen Ritar increased to 22% since January 1, 2010 while during the same period of 2009 it was 20%.

Net Income. Net income decreased $0.03 million, or 0.57% to $5.55 million for the nine months ended September 30, 2010 from $5.58 million for the same period of 2009. Net income as a percentage of revenues decreased to 6.17% for the nine . . .