BALQON CORP.

Basic loss per share has been computed using the weighted average number of common shares outstanding and issuable during the period. Diluted loss per share is computed based on the weighted average number of common shares and all common equivalent shares outstanding during the period in which they are dilutive. Common equivalent shares consist of shares issuable upon the exercise of stock options, warrants or other convertible securities such as convertible notes. For the nine months ended September 30, 2014 and 2013 and the three months ended September 30, 2013, common stock equivalent shares have been excluded from the calculation of loss per share as their effect is anti-dilutive. For the three months ended September 30, 2014, the effect of potentially dilutive securities is not reflected in diluted net income per share as the exercise prices of common stock equivalents were higher than the average fair market value of common shares during the reporting period.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.  The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.  The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statement presentation and disclosures.

In September 2014, we delivered 300 lithium batteries to a large manufacturer of residential solar storage systems. In addition, we released three new models of energy storage systems incorporating our proprietary battery management system for residential storage applications.

In September 2014, we completed a prototype of 10 Kw, Tier 4 certified generator for use as a range extender on our on-road and off-road products. Our range extender has the capability of charging lithium batteries between 300 volts to 700 volts and seamlessly integrates with our current vehicle control systems.

In August 2014, we installed five fast chargers at two of the largest marine terminals located at the Port of Los Angeles to begin testing of six model XRE20 lithium battery powered electric yard tractors. We anticipate field testing to begin at both of the marine terminals in early 2015.

Our product mix during the third quarter of 2014 varied slightly from our product mix during the third quarter of 2013. Sales of our vehicles accounted for 73% of our total sales during the third quarter of 2014 as compared to no vehicle sales during the third quarter of 2013. Sales of our energy storage systems accounted for 7% of our total sales during the third quarter of 2014 as compared to no energy storage systems sales in the third quarter of 2013. Sales of our lithium batteries accounted for 16% of our total sales during the third quarter of 2014 as compared to 93% of our total sales in 2013.