Chisen Electric Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Chisen Electric Corp	Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 - Chisen Electric Corp	v231135_ex31-1.htm
EX-32.2 - EXHIBIT 32.2 - Chisen Electric Corp	v231135_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - Chisen Electric Corp	v231135_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - Chisen Electric Corp	v231135_ex32-1.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to __________

COMMISSION FILE NUMBER: 333-128532

CHISEN ELECTRIC CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		20-2190950
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

No. 1188, Taihu Avenue, Changxing Economic Development Zone, Changxing, Zhejiang Province,

The People’s Republic of China

(Address of principal executive offices)

(86) 572-6267666

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer ¨

Accelerated Filer x

Non-Accelerated Filer ¨

Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 8, 2011, the registrant had 50,000,000 shares of common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS		1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		22

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		30

ITEM 4. CONTROLS AND PROCEDURES		31

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		32

ITEM 1A. RISK FACTORS		32

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		48

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		48

ITEM 4. (Removed and Reserved).		48

ITEM 5. OTHER INFORMATION		48

ITEM 6. EXHIBITS		49

SIGNATURES		57

EXHIBIT 31.1

EXHIBIT 31.2

EXHIBIT 32.1

EXHIBIT 32.2

Chisen Electric Corporation

Index to Consolidated Financial Statements

For the three months ended June 30, 2011

		Page
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income		1 – 2

Unaudited Condensed Consolidated Balance Sheets		3 – 4

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity		5

Unaudited Condensed Consolidated Statements of Cash Flows		6 – 7

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements		8 – 21

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Chisen Electric Corporation

Unaudited Condensed Consolidated Statements of Operations and

Other Comprehensive Income

For the three months ended June 30, 2011 and 2010

			Three months ended June 30,
			2011			2010
	Note		US$’000			US$’000

Operating revenues:
Net sales to third parties				35,399			50,429

Cost of sales				(33,464	)		(45,392	)

Gross income				1,935			5,037

Operating expenses:
Sales, marketing and distribution				(2,520	)		(2,512	)
General and administrative				(1,705	)		(684	)

Operating (loss) income				(2,290	)		1,841

Other (expense) income, net				(12	)		503
Interest income				303			96
Interest expense				(1,282	)		(685	)

(Loss) Income before income taxes				(3,281	)		1,755

Income taxes benefit (expense)		4		449			(249	)

(Loss) Income before extraordinary items				(2,832	)		1,506

Extraordinary gain (less applicable income taxes of US$0)		19(a)		12,963			-
Extraordinary loss (less applicable income taxes of US$0)		19(b)		(1,827	)		-

Net income including non-controlling interests				8,304			1,506

Less: Net income attributable to non-controlling interests				-			-

Net income attributable to CIEC common stockholders				8,304			1,506

Other comprehensive income
Foreign currency translation adjustment				493			121

Comprehensive income				8,797			1,627

The financial statements should be read in conjunction with the accompanying notes.

- 1 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Statements of Operations and

Other Comprehensive Income

For the three months ended June 30, 2011 and 2010

			Three months ended June 30,
			2011			2010
	Note		US$’000			US$’000


			Shares			Shares
Earnings per share		3
Weight average number of common stock outstanding
- basic and diluted				50,000,000			50,000,000

			US$			US$

Net (loss) income per share of common stock outstanding before extraordinary items
- basic and diluted				(0.06	)		0.03

Net income per share of common stock outstanding after extraordinary items
- basic and diluted				0.17			0.03

The financial statements should be read in conjunction with the accompanying notes.

- 2 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Balance Sheets

As of June 30, 2011 and March 31, 2011

			As of June 30,			As of March 31,
				2011		2011
ASSETS	Note			US$’000		US$’000

Current assets:
Cash and cash equivalents					5,454		7,630
Restricted bank balances		5			50,859		44,289
Other financial assets		6			6,074		4,662
Trade receivables, net					61,202		65,233
Other receivables					3,812		4,618
Compensation receivable		19(a)			11,709		-
Prepayments					7,239		6,564
Due from a related party		14(b)			5		8
Inventories		7			22,160		25,173
Assets classified as held for sale					-		2,582
Deferred tax assets		4(c)			484		-

Total current assets					168,998		160,759

Available-for-sale financial assets		8			2,799		2,761
Long-term land lease prepayments, net		10			5,018		4,249
Property, plant and equipment, net		9			22,318		16,633
Deposit for acquisition of land and property, plant and equipment					1,269		3,838

Total assets					200,402		188,240

The financial statements should be read in conjunction with the accompanying notes.

- 3 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Balance Sheets

As of June 30, 2011 and March 31, 2011

			As of June 30,			As of March 31
				2011		2011
	Note			US$’000		US$’000
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Trade payables					18,086		15,765
Notes payable		11			43,450		48,640
Accrued expenses and other accrued liabilities					12,521		11,065
Due to related parties		14(b)			2,949		4,126
Income taxes payable					994		955
Short-term bank borrowings		12			71,979		65,159
Liabilities directly associated with assets classified as held for sale					-		1,109

Total current liabilities					149,979		146,819

Government subsidies		13			84		95
Deferred tax liabilities		4(c)			460		460

Total non-current liabilities					544		555

Total liabilities					150,523		147,374

Commitments and contingencies		15			-		-

Stockholders’ equity:
Preferred stock, US$0.001 par value each: 10,000,000 shares authorized and no shares issued and outstanding					-		-
Common stock, US$0.001 par value each: 100,000,000 shares authorized
50,000,000 shares issued and outstanding					50		50
Capital reserves					144		144
Statutory reserves					4,724		3,704
Accumulated other comprehensive income					2,984		2,491
Retained earnings					41,665		34,381

Total CIEC stockholders’ equity					49,567		40,770

Non-controlling interests					312		96

Total stockholders’ equity					49,879		40,866

Total liabilities and stockholders’ equity					200,402		188,240

The financial statements should be read in conjunction with the accompanying notes.

- 4 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

For the three months ended June 30, 2011

	Common stock issued
	Number of shares		Amount		Capital reserves		Statutory reserves		Accumulated other comprehensive income		Retained earnings			Total CIEC stockholders’ equity		Non- controlling interests		Total stockholders’ equity
			US$’000		US$’000		US$’000		US$’000		US$’000			US$’000		US$’000		US$’000


Balance as of April 1, 2011		50,000,000		50		144		3,704		2,491		34,381			40,770		96		40,866

Net income		-		-		-		-		-		8,304			8,304		-		8,304

Transfer to statutory reserves		-		-		-		1,020		-		(1,020	)		-		-		-

Foreign currency translation adjustment		-		-		-		-		493		-			493		-		493

Capital contributed by non-controlling interests		-		-		-		-		-		-			-		216		216

Balance as of June 30, 2011		50,000,000		50		144		4,724		2,984		41,665			49,567		312		49,879

The financial statements should be read in conjunction with the accompanying notes.

- 5 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

For the three months ended June 30, 2011 and 2010

			Three months ended June 30,
	Note		2011			2010
			US$’000			US$’000
Cash flows from operating activities
Net income including non-controlling interests				8,304			1,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment				304			252
Impairment loss on plant and machinery and leasehold improvement		19(b)		1,827			-
Net compensation gain on disposal of land use rights and buildings		19(a)		(12,963	)		-
Amortization of long-term land lease prepayments				22			4
Reversal of provision for inventories				(188	)		-
Exchange differences				(60	)		7
Provision for warranty costs				139			325
Government grant recognized				(12	)		(12	)
Deferred taxes				(484	)		-
Changes in assets and liabilities:
Other financial assets				(1,349	)		(237	)
Trade receivables, net				4,910			(4,845	)
Other receivables				868			(79	)
Prepayment				(587	)		2,254
Due from a related party				3			(3	)
Inventories				3,541			(4,957	)
Trade payables				2,108			3,699
Notes payable				(5,846	)		1,473
Accrued expenses and other accrued liabilities				1,167			(108	)
Due to related parties				(1,233	)		951
Income taxes payable				26			-

Net cash provided by operating activities				497			230

Cash flows from investing activities
Purchase of property, plant and equipment				(4,973	)		(1,056	)
Addition of long-term land lease prepayments				(733	)		-
Compensation received for loss on disposal of plant and machinery and leasehold improvement				2,747			-
Investment in restricted bank balances, net				(5,972	)		(1,105	)
Acquisition of available-for-sale financial assets				-			(1,779	)

Net cash used in investing activities				(8,931	)		(3,940	)

The financial statements should be read in conjunction with the accompanying notes.

- 6 -

Chisen Electric Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

For the three months ended June 30, 2011 and 2010

	Three months ended June 30,
	2011			2010
	US$’000			US$’000
Cash flows from financing activities
Proceeds from short-term bank loans		12,378			6,334
Repayment of short-term bank loans		(8,201	)		(5,671	)
Proceeds from bills financing		31,549			-
Repayment of bills financing		(29,785	)		-
Capital contributed by non-controlling interests		216			-

Net cash provided by financing activities		6,157			663

Net decrease in cash and cash equivalents		(2,277	)		(3,047	)

Cash and cash equivalents, beginning of period		7,630			6,019

Effect on exchange rate changes		101			24

Cash and cash equivalents, end of period		5,454			2,996

Supplemental disclosure of cash flow information
Interest received		303			96
Interest paid		1,282			685
Tax paid		-			274

The financial statements should be read in conjunction with the accompanying notes.

- 7 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

Chisen Electric Corporation (“Chisen Electric”), formerly known as World Trophy Oufitters, Inc., was formed as a Nevada corporation on January 13, 2005. Its common stocks are currently trading on the Over-The-Counter Quote Board under the symbol “CIEC”.

Chisen Electric is an investment holding company with no operations. The principal activities of its subsidiaries (together with Chisen Electric, collectively referred as “the Company”) are the manufacture and sales of sealed lead-acid battery products and investment holding.

As of May 27, 2011, Chisen Electric has fully disposed its interest in Chisen Technology Holdings Corporation (“Chisen Technology”) for a cash consideration of US$10. Chisen Technology has no operation since the date of incorporation. The fair value of Chisen Technology at the date of disposal was net liabilities of US$496. The disposal of Chisen Technology has no significant impact on the value of the Group’s assets, operating cash flows as well as earnings per share.

Details of Chisen Electric’s subsidiaries as of June 30, 2011 are as follows:

Name	Place and date of establishment / incorporation	Percentage of effective equity interest / voting right attributable to the Company	Principal activities

Fast More Limited (“Fast More”)	Hong Kong December 17, 2007	100%	Investment holding

Zhejiang Chisen Electric Co., Limited * (“Zhejiang Chisen”) (Formerly known as Changxing Chisen Electric Co., Limited)	Zhejiang, the People’s Republic of China (“PRC”) February 25, 2002	100%	Manufacture and sales of sealed lead-acid battery products

Chisen Electric Jiangsu Co., Limited * (“Chisen Jiangsu”)	Jiangsu, PRC August 23, 2010	98%	Manufacture and sales of sealed lead-acid battery products

These are direct translation of the name in Chinese for identification purpose only and are not the official name in English.

- 8 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentations

The accompanying unaudited condensed consolidated financial statements as of June 30, 2011 have been prepared based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the financial position, results of operations and cash flows as of June 30, 2011 and for all periods presented. Information as of March 31, 2011 was derived from the audited consolidated financial statements of the Company for the year ended March 31, 2011.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“USGAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Chisen Electric's Form 10-K filed on June 14, 2011 for the year ended March 31, 2011. The results of operations for the three months ended June 30, 2011 are not necessarily indicative of the operating results to be expected for the full year ending March 31, 2012.

The condensed consolidated financial statements and accompanying notes are presented in United States dollars and prepared in conformity with USGAAP which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of consolidation

The consolidated financial statements include the financial information of Chisen Electric and its subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Recent accounting pronouncement

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in USGAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in USGAAP and in IFRSs and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. The Company believes that the adoption of ASU 2011-04 will not have a material impact on the Company's consolidated results of operation and financial condition.

- 9 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent accounting pronouncement (Continued)

In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, the reporting entity must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011 with early adoption permitted. The Company believes that the adoption of ASU 2011-05 will not have a material impact on the Company's consolidated results of operation and financial condition.

3.	EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common stocks outstanding during the year. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common stocks that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive securities for the three months ended June 30, 2011 and 2010.

4.	INCOME TAXES

Chisen Electric had a net operating loss carry-forward for income tax reporting purposes that might be offset against future taxable income. No tax benefit has been reported in the financial statements, because Chisen Electric believes that it is more likely than not that the carry-forwards will finally expire and therefore cannot be used. Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.

Chisen Electric’s subsidiaries are subject to income taxes on an entity basis on income arising in or derived from the tax jurisdictions in which each entity domiciles and operates.

Hong Kong Profits Tax has not been provided as Fast More had no assessable profit for the period.

Zhejiang Chisen and Chisen Jiangsu are subject to state and local enterprise income taxes in the PRC at a standard rate of 25%. Since January 1, 2011, Zhejiang Chisen has been designated by the local tax authority as “New and High Technology Enterprises”. As a result, the effective tax rate applicable to Zhejiang Chisen was 15% commencing on January 1, 2011.

Dividends payable by a foreign invested enterprise in the PRC to its foreign investors in Hong Kong are subject to a 10% withholding tax. No deferred tax expenses on undistributed profits were charged to the statement of operations for the three months ended June 30, 2011 and 2010.

- 10 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

4.	INCOME TAXES (CONTINUED)

(a)

Income tax benefits (expenses) are comprised of the following:

	Three months ended June 30,
	2011			2010
	US$’000			US$’000

Current taxes arising in the PRC:
Corporate income tax		(35	)		(249	)

Deferred taxes arising in the PRC:
Benefit of tax loss recognized		484			-

		449			(249	)

The FASB ASC Topic 740 “Income Taxes” clarifies the accounting and disclosure for uncertainty in tax positions, as defined, and prescribes the measurement process and a minimum recognition threshold for a tax position, taken or expected to be taken in a tax return, that is required to be met before being recognized in the financial statements. Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the tax authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.

Subject to the provision of ASC 740, the Company has analyzed its filing positions in all of the jurisdictions where it is required to file income tax returns. As of June 30, 2011 and 2010, the Company has identified the following jurisdictions as “major” tax jurisdictions, as defined, in which it is required to file income tax returns namely the United States, Hong Kong and the PRC. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements.

As of June 30, 2011 and March 31, 2011, the Company had no unrecognized tax benefits or accruals for the potential payment of interest and penalties. The Company’s policy is to record interest and penalties in this connection as a component of the provision for income tax expense. For the three months ended June 30, 2011 and 2010, no interest or penalties were recorded.

- 11 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

4.	INCOME TAXES (CONTINUED)

(b)

Reconciliation from the expected income tax (benefit) expenses calculated with reference to the statutory tax rate in the PRC of 25% (2010: 25%) is as follows:

	Three months ended June 30,
	2011			2010
	US$’000			US$’000

Expected income tax expenses		(736	)		571
Effect on tax incentives / holiday		322			(203	)
Non-taxable income		(70	)		(165	)
Others		35			46

Income tax (benefit) expenses		(449	)		249

(c)

The following is the analysis of major deferred taxation (liabilities) assets recognised by the Company and movement thereon:

	Withholding tax on undistributed earnings of a PRC subsidiary			Tax loss of a PRC subsidiary		Total
	US$’000			US$’000		US$’000

As of March 31, 2011 and 2010		(460	)		-		(460	)
Credited to consolidated statement of operations and other comprehensive income		-			484		484

As of June 30, 2011		(460	)		484		24

- 12 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

5.	RESTRICTED BANK BALANCES

Restricted bank balances represented time deposits with original maturity within six months to secure banking facilities granted by various financial instruments as follows:

			As of June 30,		As of March 31,
	Note		2011		2011
			US$’000		US$’000

Notes payable		11		35,666		30,167
Bills financing		12		15,193		14,122

				50,859		44,289

6.	OTHER FINANCIAL ASSETS

Other financial assets represented notes receivable from customers for the settlement of trade receivable balances. As of June 30, 2011 and March 31, 2011, all notes receivable were guaranteed by established banks in the PRC and had maturities of 6 months or less from the date of issue. The fair value of the notes receivable approximated their carrying value.

7.	INVENTORIES

Inventories consisted of the following:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000

Raw materials		4,386		3,669
Work-in-progress and semi-finished goods		8,947		7,473
Finished goods		8,827		14,031

		22,160		25,173

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets as of June 30, 2011 and March 31, 2011 represented investment in unlisted equity securities and are recorded at cost. The management has estimated that the recoverable amount of the assets exceed their carrying value.

- 13 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

9.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment is summarized as follows:

	As of June 30,			As of March 31,
	2011			2011
	US$’000			US$’000

Buildings		8,471			3,001
Leasehold improvements		1,281			1,016
Plant and machinery		10,610			4,638
Motor vehicles		1,417			1,398
Furniture, fixtures and office equipment		1,892			1,743
Construction in progress		2,920			6,939

		26,591			18,735

Accumulated depreciation and impairment loss		(4,273	)		(2,102	)

		22,318			16,633

Depreciation expenses were approximately US$304,000 and US$252,000 for the three months ended June 30, 2011 and 2010, respectively.

10.	LONG-TERM LAND LEASE PREPAYMENTS, NET

	As of June 30,			As of March 31,
	2011			2011
	US$’000			US$’000

Prepaid land use rights		5,043			4,252
Accumulated amortization		(25	)		(3	)

		5,018			4,249

Lease prepayment as of June 30, 2011 and March 31, 2011 represented the land use rights located in the PRC, which are amortized over the leasehold periods.

Amortization expense for the three months period ended June 30, 2011 and 2010 were US$22,000 and US$4,000 respectively.

- 14 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

11.	NOTES PAYABLE

Notes payable were issued by the Company to creditors with the banker’s acceptance payable at the maturity date for the purchase of raw materials for production exclusively. The Company has to repay the notes within nine months from date of issuance and service fees would be charged by banks for the issuance of the notes. The notes payable were collateralized by restricted bank balances.

In addition, various parties have issued guarantee against these notes payable as follows:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000

Corporate and personal guarantees issued by related parties (Note 14(d))		14,126		17,557
Corporate guarantees issued by third parties		1,547		3,435
Corporate guarantees issued by related parties and third parties (Note 14(d))		2,321		-

As of June 30, 2011 and March 31, 2011, the Group had unutilized banking facilities of approximately US$15,458,000 and US$4,809,000 to meet the liquidity needs.

12.	SHORT-TERM BANK BORROWINGS

Short-term bank borrowings comprise of the followings:

		As of June 30,		As of March 31,
	Note	2011		2011
		US$’000		US$’000

Short-term bank loans	(i)		40,430		35,770
Bills financing	(ii)		31,549		29,389

			71,979		65,159

- 15 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

12.	SHORT-TERM BANK BORROWINGS (CONTINUED)

(i)

Short-term bank loans

Short-term bank loans represent amounts due to various banks which are due within 12 months, and these loans can normally be renewed with the banks upon expiry/maturity.

The loans are collateralized by assets of the Company with carrying values as follows:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000

Trade receivables		12,378		5,038

Various parties have also issued guarantee against these short-term bank loans as follows:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000

Corporate and personal guarantees issued by related parties (Note 14(d))		22,637		25,389
Corporate guarantees issued by third parties		5,415		5,343

The weighted average annual interest rates of the short-term bank loans were 5.85% and 5.05% as of June 30, 2011 and March 31, 2011 respectively.

(ii)

Bills financing

Bill financing represents amounts due to various banks which are repayable within six months from the date of issue. As of June 30, 2011 and March 31, 2011, the bills are collateralized by certain restricted bank balances of the Company with carrying value of US$15,193,000 and US$14,122,000 and guaranteed by certain related parties and third parties to the extent of US$16,354,000 and US$15,267,000, respectively.

The weighted average annual interest rates of the bills financing were 3.97% and 3.31% as of June 30, 2011 and March 31, 2011, respectively.

- 16 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

13.	GOVERNMENT SUBSIDIES

During the year ended March 31, 2008, the Company received a government grant of approximately US$231,000 for the purpose of subsidising its acquisition of property, plant and equipment, of which approximately US$12,000 and US$12,000 were credited to the statement of operations for the three months ended June 30, 2011 and 2010 respectively.

14.	RELATED PARTY TRANSACTIONS

(a)

Names and relationship of related parties:


Name of related party	Existing relationships with the Company

Mr. Xu Kecheng	Director and controlling stockholder of Chisen Electric

Zhejiang Chisen Glass Company Limited (“Chisen Glass”)*	A company controlled by a close family member of Mr. Xu Kecheng

Mr. Xu Keyong	A close family member of Mr. Xu Kecheng

Ms. Zhou Fang Qin	Spouse of Mr. Xu Kecheng

Changxing Chisen Xinguangyuan Company Limited (“Xinguangyuan”)*	A company controlled by a close family member of Mr. Xu Kecheng

Zhejiang Ai Ge Organism Products Company Limited (“Ai Ge Organism”)*	A company controlled by Mr. Xu Kecheng

Zhejiang Changxing Nuo Wan Te Ke Glass Company Limited (“Nuo Wan Te Ke”)*	A company controlled by a close family member of Mr. Xu Kecheng

Zhejiang Changxing Ruilang Electronic Company Limited (“Ruilang Electronic”)*	A company controlled by a close family member of Mr. Xu Kecheng

These are direct translation of the name in Chinese for identification purpose only and are not the official names in English.

- 17 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

14.	RELATED PARTY TRANSACTIONS (CONTINUED)

(b)

Summary of balances with related parties:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000
Due from a related party:
Ms. Zhou Fang Qin		5		8

Due to related parties:
Mr. Xu Keyong		2		2
Chisen Glass		884		1,201
Ruilang Electronic		1,752		2,616
Ai Ge Organism		308		304
Nuo Wan Te Ke		-		3
Xinguangyuan		3		-

		2,949		4,126

All amounts due from / to related parties represent unsecured advances which are interest-free and repayable on demand.

(c)

Summary of related party transactions:

		Three months ended June 30,
Name of related party	Nature of transactions	2011		2010
		US$’000		US$’000

Ruilang Electronic	Purchase of raw materials		869		1,933

Chisen Glass	Purchase of raw materials		378		660

- 18 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

14.	RELATED PARTY TRANSACTIONS (CONTINUED)

(d)

Other arrangements:

As of June 30, 2011, Chisen Glass provided guarantees, in aggregate, amounting to US$4,642,000, US$4,533,000 and US$108,000 to secure the short-term bank loans, notes payable and bills financing of the Company, respectively.

As of June 30, 2011, US$1,083,000 of the Company’s notes payable was guaranteed by Ruilang Electronic, Mr. Xu Kecheng and Ms. Zhou Fang Qin.

As of June 30, 2011, Mr. Xu Kecheng, Ms. Zhou Fang Qin and a third party provided guarantees, in aggregate, amounting to US$12,378,000 and US$2,321,000 to secure the bills financing and notes payable of the Company.

As of June 30, 2011, Xinguangyuan, Mr. Xu Kecheng and Ms. Zhou Fang Qin, provided guarantees, in aggregate, amounting to US$17,995,000 to secure the short-term bank loans of the Company.

As of June 30, 2011, Chisen Glass, Mr. Xu Kecheng and Ms. Zhou Fang Qin provided guarantees, in aggregate, amounting to US$1,547,000 and US$2,321,000 to secure the notes payable and bills financing of the Company, respectively.

As of June 30, 2011, Chisen Glass, Mr. Xu Kecheng, Ms. Zhou Fang Qin and Ruilang Electronic provided guarantees, in aggregate, amounting to US$6,963,000 to secure the notes payable of the Company.

As of June 30, 2011, Xinguangyuan provided guarantees, in aggregate, amounting to US$1,547,000 to secure the bills financing of the Company, respectively.

15.	COMMITMENTS AND CONTINGENCIES

(a)

Operating lease commitments

The following table summarizes the approximate future minimum rental payments under non-cancelable operating leases in effect as of June 30, 2011 and March 31, 2011:

	As of June 30,		As of March 31,
	2011		2011
	US$’000		US$’000

Within one year		669		655
One to two years		703		688
Two to three years		391		508
Three to four years		75		120

Total		1,838		1,971

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Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

15.	COMMITMENTS AND CONTINGENCIES (CONTINUED)

(b)

Capital commitments

As of June 30, 2011 and March 31, 2011, the Company had outstanding capital expenditure commitments relating to various construction projects and purchase of land and machineries for an aggregate amount of approximately US$146,977,000 and US$150,448,000 respectively.

16.	PROVISION FOR WARRANTY

Estimated warranty costs are recognised at the time when the Company sells its products and are included in sale, marketing and distribution expenses. The Company uses historical failure rates and costs to repair product defects during the warranty period to estimate warranty costs while are reviewed periodically in light of actual experience. The reconciliation of the changes in the warranty obligation is as follows:

	Three months ended June 30,
	2011			2010
	US$’000			US$’000

Balance as of April 1,		301			226
Exchange realignment		4			1
Accrual for warranties issued during the period		139			324
Settlement made during the period		(77	)		(268	)

Balance as of June 30,		367			283

17.	RETIREMENT PLAN COSTS

Contributions to defined contribution retirement schemes are charged to cost of sales, sales, marketing and distribution costs and general and administrative expenses in the consolidated statements of operations and other comprehensive income as and when the related employee services are provided. Retirement plan costs were US$113,000 and US$129,000 for the three months ended June 30, 2011 and 2010 respectively.

18.	SEGMENTAL INFORMATION

During the three months ended June 30, 2011 and 2010 all revenue of the Company represented income from sales of sealed lead-acid battery and therefore no financial information by business segment is presented. Furthermore, as all income is derived from the PRC, no geographical segment is presented.

- 20 -

Chisen Electric Corporation

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the three months ended June 30, 2011 and 2010

19.	EXTRAORDINARY ITEMS

(a)

Extraordinary gain

During the three months ended June 30, 2011, Zhejiang Chisen has completed the relocation of production plant in Jiangyi Road. Pursuant to the Compensation Agreement on Relocation and Acquisition entered into by Zhejiang Chisen and Administrative Committee of Changxing Economic Development Zone (“ACC”), ACC shall pay Zhejiang Chisen a compensation in the amount of RMB98,514,000 (US$15,174,000) for the loss on long-term land lease prepayment and buildings located in Jiangyi Road. In May 2011, the Company wrote off the long-term land lease prepayment and buildings in Jiangyi Road with net book value of approximately RMB14,354,000 (US$2,211,000) and therefore net compensation income of RMB84,160,000 (US$12,963,000) was recognised for the period. As of June 30, 2011, the compensation of US$11,709,000 has not been received and was recorded as current assets in the consolidated balance sheet.

As a result, the Company recorded an extraordinary gain of US$12,963,000 in the consolidated statements of operations and other comprehensive income for the three months ended June 30, 2011.

(b)

Extraordinary loss

During the three months ended June 30, 2011, and without advance notice to the Company, the PRC Central Government tightened its environment protection policy which applies to all lead-acid battery manufacturers. Pursuant to the newly tightened policy, a 500 meters quarantined isolated area must be maintained between production facilities, including assembly facilities, and residential areas.

The Company’s Jing’er Road plant was mainly utilized for assembly activities and it cannot comply with the tightened policy. Management plans to gradually scale down the operation of Jing’er Road plant and estimates that it will relocate such production facilities to the plant in Xuyi Country, Jiangsu Province prior to December 31, 2011. After evaluating the plant and machinery at Jing’er Road plant, some of them cannot fit into the plant in Jiangsu Xuyi. The Company decided to impair the value of plant and machinery as well as leasehold improvement of Jing’er Road plant down to its recoverable amount. The impairment loss was recorded as follows:

	Three months ended June 30,
	2011		2010
	US$’000		US$’000

Leasehold improvement		1,004		-
Plant and machinery		823		-

		1,827		-

The management considered that this government behavior is very unusual and rare to happen, and thus the relevant impairment loss of plant and machinery was classified as an extraordinary item.

- 21 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

As used in this report, unless otherwise indicated, the terms “we”, “our”, “us”, the “Company”, the “Registrant” and “Chisen” refer to Chisen Electric Corporation, a Nevada corporation. We conduct our business through our subsidiaries, which include our wholly-owned subsidiary, Fast More Limited, a Hong Kong investment holding company (“Fast More”), its 100% owned and chief operating subsidiary, Zhejiang Chisen Electric Co., Ltd., a wholly foreign owned entity (“WFOE”) organized under the laws of the PRC (f/k/a Changxing Chisen Electric Co., Ltd. and hereinafter referred to as “CCEC”) and CCEC’s subsidiary, Chisen Electric Jiangsu Co., Ltd. (“CEJC”). “China” or “PRC” refers to the People’s Republic of China. “RMB” or “Renminbi” refers to the legal currency of China and “$”, “US$” or “U.S. Dollars” refers to the legal currency of the United States.

The following discussion of our financial condition and results of operations of the Company is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this report. This report contains forward-looking statements. Generally, the words “believes”, “anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

Company Overview

We are one of the leading producers of sealed lead-acid motive batteries, also known as valve regulated lead-acid motive batteries (“VRLA batteries”), in China's personal transportation device market. Our motive battery products, sold under our own brand name “Chisen”, are predominantly used in electric bicycles and are distributed and sold in China. Among all types of batteries for electric bicycles, the lead-acid motive battery is the preferred choice of electric bicycle manufacturers in China, accounting for 95% of the market share because of its cost efficiency. Currently, we manufacture over 19,800,000 sealed lead-acid motive batteries each year, have more than 2,500 employees and are one of China's largest manufacturers of sealed lead-acid motive batteries for electric-powered bicycles (LABEBs). For the three months ended June 30, 2011 and 2010, sales revenues were US$35,399,000 and US$50,429,000, respectively, and our net income during the same periods amounted to US$8,304,000 and US$1,506,000, respectively.

Corporate Information

Our offices are located in the Changxing Economic Development Zone at the bank of the Taihu Lake in the County of Changxing in Zhejiang Province, in close proximity to major national transportation systems, including National Highways 104 and 318, the Shanghai – Jiangsu – Zhejiang – Anhui – Hangzhou – Nanjing Expressway, the Changxing – Huzhou – Shanghai Channel, the Xuancheng – Hangzhou Railway and the Xinyi – Changxing Railway. Our registered office is located at No. 1188, Taihu Avenue, Economic Development Zone, Changxing County, Zhejiang Province, PRC, where the office building is under construction. Our executive office was therefore temporarily moved to No. 559, Jing’er Road, Economic Development Zone, Changxing County, Zhejiang Province, PRC. Our telephone number is (86) 572-6267666 and our corporate website in English is located at www.chisenelectric.com.

We are a reporting company under Section 13 of the Securities Exchange Act of 1934, as amended. Our shares of common stock are not currently listed on any national securities exchange however our common stock is quoted under the symbol “CIEC” on the OTCQB.

On May 27, 2011, Chisen fully disposed of its interest in Chisen Technology Holdings Corporation, the Nevada corporation (“Chisen Technology”) for a cash consideration of US$10. Chisen Technology had no operations since its date of incorporation. The disposal of Chisen Technology has had no significant impact on the value of the Company’s assets, operating cash flows or earnings per share.

- 22 -

Development Strategy of the Company

We strive to create an international first-class brand and become the one of the leaders in providing “green” energy in the global electric bicycle market. Through our continuous researching and developing of new chemical energy technologies, we intend to provide energy-saving and highly-effective energy solutions to our customers for improving the quality of life while maintaining a sustainable ecological environment. Our goal is to become the largest battery developer and producer with a first-class sales and service network in China. With one of the leading positions in the LABEB battery product market in China, our expansion plans in Changxing County (Zhejiang Province) and Jiangsu Province, our product research and development capability and our cooperative partnerships with clients, we believe that we are well positioned to capture additional business opportunities in China's personal transportation device markets. In light of the prevailing economic trends for developing alternative transportation devices that reduce the reliance on oil and produce lesser emissions, we plan to explore the motive battery market for electric-powered motorcycles and electric cars. Leveraging our experience and expertise in producing lead-acid motive battery products for electric bicycles, our product mix will be expanded to include valve regulated lead-acid back-up batteries, the lithium-ion battery, lead-acid power storage batteries dedicated for solar and wind power and lead-acid motive batteries for electric cars.

Production Capacity

Pursuant to a Project Investment Contract and a Supplemental Agreement to the Project Investment Contract entered into by and between CEJC and the Jiangsu Xuyi Economic Development Zone Administrative Committee on September 6, 2010, CEJC shall invest, in the aggregate, approximately RMB1,200,000,000 (approximately US$177,000,000) in three stages to build the Chisen Circular Economy Industry Park (“Plant D”) to manufacture VRLA batteries , as well as our newest product, lithium-ion batteries, and other related products in the Jiangsu Xuyi Economic Development Zone. In the first stage, CEJC will invest in the production of VRLA batteries only and shall invest approximately RMB422,000,000 (approximately US$62,000,000), including approximately RMB150,000,000 (approximately US$22,000,000) in fixed assets for the production of VRLA batteries only. The project will be operated primarily by the cash generated from our operating profit and short term bank loans.

During the three months ended June 30, 2011 and without advance notice to the Company, the PRC Central Government tightened its environmental protection policy which applies to all lead-acid battery manufacturers. Pursuant to the newly tightened policy, a 500 meter quarantined isolated area must be maintained between production facilities and residential areas.

From the beginning of May, Zhejiang Environmental Protection Bureau (the “ZEPB”) conducted an environmental sanitation investigation on our Plant B at Jing’er Road of Changxing County, Zhejiang Province. The results showed that the sewage and exhaust complied with the national standards, however, the Company fails to maintain the 500 meter quarantined isolated area between production facilities and residential areas. The ZEPB requires Plant B to comply with and meet the tightened environmental policy prior to July 15, 2011. Management considers the residential area nearby Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. After discussion with the Government, we decided to scale down the operation at Plant B, only charging and packing activities will be operated until December 31, 2011.

As of the date of this report, the Government prelimarily agreed to re-designate the land in Changxing County to us for redevelopment. Prior to the new plant in Changxing County being built, our lead-acid batteries production will be relocated to Plant D in Xuyi County, Jiangsu Province. However, Plant D is still under a trial production stage, we believe our production capacity will not rebound in a short time.

Pursuant to an Investment Agreement entered into by and between CCEC and the Administrative Committee of Changxing Economic Development Zone, we terminated our operations at Plant A at Jingyi Road in Changxing County, Zhejiang Province. We are investing in the construction of a factory at Jingsi Road in Changxing County, Zhejiang Province, where we are planning to develop and produce lithium-ion batteries.

- 23 -

Expand Offering of Highly Efficient Battery Products

For future market development, we intend to focus on the lithium-ion battery, which is a new product trend in the European, US and Japanese markets, on electric vehicle power batteries and on energy storage batteries dedicated to solar and wind power. We are currently committed to investing in and constructing new production facilities in Changxing County (Zhejiang Province) and in Xuyi County (Jiangsu Province). Since the Company is experienced in producing motive batteries for powering electric bicycles, the Company intends to bring the lithium-ion battery to market by focusing first on the market for lithium-ion batteries in electric bicycles. We estimate that our lithium-ion batteries will be launched and distributed into the marketplace within two years from March 31, 2011. The Company intends to cooperate with manufacturers of electric bicycles and to deliver small lots of pre-launch lithium-ion batteries to them in order to explore the market, as well as to obtain feedback from electric bicycle customers to further improve our production technology of lithium-ion batteries. We are currently monitoring and studying the market development of lithium-ion batteries including, but not limited to, technology development, market demand and relevant supporting facilities. We will continue monitor the development of our lithium-ion project in Changxing County (Zhejiang Province), and to adjust our execution plan accordingly. Until these products are formally launched and distributed into the marketplace, their effects on our business are uncertain. We do not have any specific timetable for this strategy as we consider expanding our offering of highly efficient battery products to be part of our core business, and the amounts we decide to allocate to this strategy will be funded by our operating cash flows.

Augment Marketing and Promotion Efforts to Increase Brand Awareness

The Company works with leading national brand designing companies to establish a complete plan for scientific branding, which use cartoon image endorsements to promote its corporate image, products and brand awareness, through television and printed advertisements. Furthermore, we believe CCEC has established for us a positive social image across China as the official batteries supplier for electric bicycles used in the Beijing Olympic and Paralympics Games in 2008 and the alternative power source sponsor of the 2010 Shanghai World Expo. We do not have any specific timetable for this strategy as we consider augmenting our marketing and promotional efforts to increase brand awareness to be part of our core business, and the amounts we decide to allocate to this strategy will be funded by our operating cash flows.

Expand Sales Network and Distribution Channels

We intend to put in more resources to expand our sales and distribution networks by: (1) adding new distributors in key sales regions in China; (2) developing new marketing strategies in different channels; (3) improving communication between sales teams and distributors; and (4) improving our brand awareness and promotion effort. We do not have any specific timetable for this strategy as we consider expanding our sales network and distribution channels to be part of our core business, and the amounts we decide to allocate to this strategy will be funded by our operating cash flows.

Build Partnerships with New and Existing Clients

We continue to build a close, mutually beneficial and harmonious partnership with our existing factory customers. We aim to establish a win-win long-term partnership with all of our new customers. We intend to continue to utilize our customer relationship management to provide tailor-made management policies that focus the needs of different customers. We do not have any specific timetable for this strategy as we consider building partnerships with new and existing clients to be part of our core business, and the amounts we decide to allocate to this strategy will be funded by our operating cash flows.

Critical Accounting Policies, Estimates and Assumptions

For the three months ended June 30, 2011, there were no changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

- 24 -

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”).” Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRSs and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual period beginning after December 15, 2011. Early adoption by public entities is not permitted. The Company believes that the adoption of ASU 2011-04 will not have a material impact on the Company’s consolidated results of operation and financial condition.

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive income,” (“ASU 2011-05”) which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the reporting entity must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011 with early adoption permitted. The Company believes that adoption of ASU 2011-05 will not have a material impact on the Company’s consolidated results of operations or financial condition.

- 25 -

Results of Operations for the Three Months Ended June 30, 2011 Compared With the Three Months Ended June 30, 2010

The following table sets forth a summary of certain key components of our results of operations for periods indicated, in dollars and as a percentage of revenues.

	For The Three Months ended June 30 (Unaudited)
	2011 (US$)	2010 (US$)	2011		2010
Revenues	35,399,000	50,429,000	100.00	%	100.00	%
Cost of sales	(33,464,000)	(45,392,000)	94.53	%	90.01	%
Gross income	1,935,000	5,037,000	5.47	%	9.99	%
Sales, marketing and distribution	(2,520,000)	(2,512,000)	7.12	%	4.98	%
General and administrative expenses	(1,705,000)	(684,000)	4.82	%	1.36	%
Operating (loss) income	(2,290,000)	1,841,000	6.47	%	3.65	%
Other (expense) income, net	(12,000)	503,000	0.03	%	1.00	%
Interest income	303,000	96,000	0.86	%	0.19	%
Net (loss) income from operations before interest and tax expenses	(1,999,000)	2,440,000	5.65	%	4.84	%
Interest expenses	(1,282,000)	(685,000)	3.62	%	1.36	%
(Loss) Income before income taxes	(3,281,000)	1,755,000	9.27	%	3.48	%
Income taxes benefits (expenses)	449,000	(249,000)	1.27	%	0.49	%
(Loss) Income before extraordinary items	(2,832,000)	1,506,000	8.00	%	2.99	%
Extraordinary gain (less applicable taxes of US$0)	12,963,000	-	36.62	%	-	%
Extraordinary loss (less applicable taxes of US$0)	(1,827,000)	-	5.16	%	-	%
Net income including non-controlling interest	8,304,000	1,506,000	23.46	%	2.99	%
Net income attributable to non-controlling interest	-	-	-	%	-	%
Net income attributable to CIEC common shareholders	8,304,000	1,506,000	23.46	%	2.99	%
Other comprehensive income	493,000	121,000	1.39	%	0.24	%
Comprehensive income	8,797,000	1,627,000	24.85	%	3.23	%

Revenues and Cost of Sales

Revenues decreased by US$15,030,000, or 29.80%, to US$35,399,000 for the three months ended June 30, 2011 compared with US$50,429,000 for the three months ended June 30, 2010. This decrease was mainly driven by the decrease of production activities resulting from an unexpected tightening of an environmental protection policy enforced on all lead-acid battery manufacturers implemented by the PRC Central Government during the period ended June 30, 2011. Pursuant to the newly tightened policy, a 500 meter quarantined isolated area must be maintained between production facilities and residential areas. All production facilities must comply with this policy on or before December 31, 2011. Our production facilities in Plant B at Jing’er Road cannot comply with and meet the tightened environmental policy in light of the fact that a residential area nearby Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. Our management decided to gradually scale down the operations of Plant B and relocate such production facilities to Plant D. We estimated that the relocation activities will be completed prior to December 31, 2011.

- 26 -

Cost of sales for the three months ended June 30, 2011 and 2010 were US$33,464,000 and US$45,392,000, respectively. The decrease in cost of sales of US$11,928,000, or 26.28%, was mainly due to a decrease in sales volume resulting from the unexpected tightening of an environmental protection policy implemented by the PRC Central Government as stated above.

Our gross profit ratio decreased by 4.52% to 5.47% for the three months ended June 30, 2011 when comparing the same period in prior year. The decrease in gross profit ratio was mainly attributable to increase in the cost of our major raw material, lead, as well as the processing fee charged on lead plate.

Depreciation and Amortization

Depreciation and amortization expenses were US$304,000 and US$252,000 for the three months ended June 30, 2011 and 2010, respectively. The increase of US$52,000, or 20.63%, was mainly attributable to the increase of the cost of US$7,856,000 of our property, plant and machinery as compared with the same period of 2010.

General and Administrative Expenses

General and administrative expenses were US$1,705,000 and US$684,000 for the three months ended June 30, 2011 and 2010, respectively. Such expenses mainly consisted of research and development, staff salaries and benefits, consultancy, taxes and depreciation expenses.

The increase of our general and administrative expenses by US$1,021,000, or 149.27%, for the three months ended June 30, 2011 as compared to the same period in 2010 was mainly attributable to (a) an increase in research and development expenses of US$173,000, which was mainly attributable to the increase in resources invested in improving the quality of our products and the development of new products, (b) the increase in consultancy fees of US$195,000, which was mainly attributable to consultancy services paid for the review of internal control procedures in order to comply with the requirements of SOX 404, the review of our registration statement and corresponding prospectus and the training provided to our staff for administration and production processes, (c) the increase in incorporation fees of US$164,000, which was mainly attributable to preparation activities performed for the operation of CEJC and (d) the increase in salaries of US$87,000, which was mainly attributable to the employment of new staff at CEJC for administration and production.

Sales, Marketing and Distribution

Sales, marketing and distribution expenses were US$2,520,000 and US$2,512,000 for the three months ended June 30, 2011 and 2010, respectively. The increase of sales marketing and distribution expenses of US$8,000, or 0.32%, was mainly attributable to the increase of advertisement expenses, after sales services expenses and other expenses of US$560,000 offset by a decrease in transportation expenses and warranties of US$552,000.

Other (Expense) Income, Net

Other (expense) income, net included a gain from disposal of a wholly owned subsidiary of US$506. As of May 27, 2011, Chisen Electric has fully disposed its interest in Chisen Technology Holdings Corporation (“Chisen Technology”) for a cash consideration of US$10. Chisen Technology has no operation since the date of incorporation. The fair value of Chisen Technology at the date of disposal was net liabilities of US$496. The disposal of Chisen Technology has no significant impact on the value of the Group’s assets, operating cash flows as well as earnings per share.

Interest Income

Interest income was US$303,000 and US$96,000 for the three months ended June 30, 2011 and 2010, respectively. The increase of US$207,000, or 215.62%, was mainly attributable to the increase in the deposit interest rate from 1.71% to 2.85% as well as an increase in restricted cash pledged for notes granted by banks.

- 27 -

(Loss) Income before Interest and Income Tax Expenses

Loss before interest and income tax expenses were US$1,999,000 for the three months ended June 30, 2011 as compared with income before interest and income tax expenses of US$2,440,000 for the three months ended June 30, 2010. This loss was mainly attributable to the decrease in sales from US$50,429,000 during the three months ended June 30, 2010 to US$35,399,000 during the three months ended June 30, 2011.

Interest Expense

Interest expense was US$1,282,000 and US$685,000 for the three months ended June 30, 2011 and 2010, respectively. The interest expense increase of US$597,000, or 87.15%, was mainly attributable to the increase in the interest rate from 5.41% to 5.85% as well as the increase in average borrowing amount of US$37,119,000.

Income Taxes Benefit (Expense)

The income taxes benefit was US$499,000 for the three months ended June 30, 2011 and income taxes expenses of US$249,000 for the three months ended June 30, 2010. The taxes benefit was mainly attributable to the recognition of deferred tax assets on the operating tax loss which occurred during the period ended June 30, 2011.

Extraordinary Gain

During the three months ended June 30, 2011, we completed the relocation of Plant A at Jiangyi Road. Pursuant to the Compensation Agreement on Relocation and Acquisition entered into by CCEC and the Administrative Committee of Changxing Economic Development Zone ("ACC"), ACC shall pay us compensation in the amount of RMB98,514,000 (US$15,174,000) for the loss on long-term land lease prepayment and buildings located at Jiangyi Road. In May 2011, the Company wrote-off the long-term land lease prepayment and buildings at Jiangyi Road with a net book value of approximately RMB14,354,000 (US$2,211,000) and therefore, net compensation income of RMB$84,160,000 (US$12,963,000) was recognized for the period.

The transaction of relocation was considered as an involuntary conversion of a non-monetary asset into a monetary asset. According to ASC605-40-25, to the extent the cost of a nonmonetary asset differs from the amount of monetary assets received, the result of the realization of a gain from the transaction is recognized.

The relocation activity is abnormal and significantly different from the ordinary and typical activities of the Company and is not expected to recur in the foreseeable future. According to ASC225-20, the Company classified the gain as an extraordinary item.

Pursuant to the Implementation Regulations to the EIT law of the PRC, only the portion of compensation income exceeding the reinvestment amount related to the relocation was taxable. All compensation income received by the Company would be reinvested into the fixed assets and long-term land lease prepayment of Plant C at Jingsi Road and therefore, no income tax was applicable.

Extraordinary Loss

From the beginning of May 2011, Zhejiang Environmental Protection Bureau (the “ZEPB”) conducted an environmental sanitation investigation on our Plant B at Jing’er Road of Changxing County, Zhejiang Province. The results showed that the sewage and exhaust complied with the national standards, however, the Company fails to maintain a 500 meter quarantined isolated area between production facilities and residential areas. The ZEPB requires Plant B to comply with and meet the tightened environmental policy prior to July 15, 2011. Management considers the residential area nearby Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. After discussion with the Government, management decided to scale down the operation at Plant B, only charging and packing activities will be operated until December 31, 2011. Management also decided to relocate our production facilities to our facilities at Plant D in Xuyi County, Jiangsu Province. As such, the impairment loss of some fixed assets, including plant and machinery together with a leasehold improvement of US$1,827,000, were recognized as an extraordinary loss.

The management considered that this government behavior is very unusual and rare to happen, and thus the relevant impairment loss of plant and machinery was classified as an extraordinary item.

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Pursuant to the Implementation Regulations to the EIT law of the PRC, the impairment loss can only be recognized when the relevant assets were disposed. Since the actual amount of loss in the future cannot be assessed accurately, no tax benefit was recognized.

Net Income Including Non-Controlling Interest

Net income was US$8,304,000 and US$1,506,000 for the three months ended June 30, 2011 and 2010, respectively, representing an increase of US$6,798,000, or 451.39%. Net income was mainly derived from an increase in the extraordinary gain of US$12,963,000, offset by an operating loss of US$2,290,000 (as compared with operating income of US$1,841,000 for the three months ended June 30, 2010) and the addition of an extraordinary loss of US$1,827,000.

Liquidity and Capital Resources

The Company generally finances its operations through operating activities and borrowings from banks.

During the reporting periods, the Company entered into a number of short-term bank loans to satisfy its financing needs. As of the date of this report, we have not experienced any difficulty in raising funds by bank loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they fall due.

The following table sets forth the summary of our cash flows, in U.S. dollars, for the periods indicated:

	Three Months Ended June 30,
	2011(US$)			2010(US$)
Net cash provided by operating activities		497,000			230,000
Net cash used in investing activities		(8,931,000	)		(3,940,000	)
Net cash provided by financing activities		6,157,000			663,000
Net decrease in cash and cash equivalents		(2,277,000	)		(3,047,000	)
Cash and cash equivalents, beginning of period		7,630,000			6,019,000
Effect on exchange rate changes		101,000			24,000
Cash and cash equivalents at end of period		5,454,000			2,996,000

Operating Activities

Net cash provided by operating activities was approximately US$497,000 for the three months ended June 30, 2011, as compared to approximately of US$230,000 for the three months ended June 30, 2010.

This increase in cash flow of US$267,000 was mainly attributable to cash inflow generated from the decrease in trade receivables of US$4,910,000 and an increase in accrued expenses and other accrued liabilities of US$1,167,000, offset by the cash outflow used in the settlement of notes payable of US$5,846,000.

Investing Activities

Net cash used in investing activities was approximately US$8,931,000 and US$3,940,000 for the three months ended June 30, 2011 and 2010, respectively.

The increase in net cash outflow of US$4,991,000, or 126.68%, was mainly attributable to an increase in acquisitions of property, plant and equipment of US$3,917,000, investments in restricted bank balances of US$4,867,000 and acquisitions of long-term land lease prepayments of US$733,000, offset by cash inflow of US$2,747,000 from compensation received for loss on disposal of plant and machinery and leasehold improvements and the decrease in the acquisition of available-for-sale financial assets of US$1,779,000.

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Financing Activities

Net cash provided by financing activities was approximately US$6,157,000 and US$663,000 for the three months ended June 30, 2011 and 2010, respectively. The net increase of cash inflow of US$5,494,000, or 828.66%, was mainly attributable to a net increase of short-term bank loans and bills financing of US$3,514,000 and US$1,764,000, respectively during the three months ended June 30, 2011 as compared with the same period in 2010.

Working Capital

Our working capital increased approximately US$5,079,000, or 36.43%, to approximately US$19,019,000 for the three months ended June 30, 2011 as compared to working capital of approximately US$13,940,000 as of March 31, 2011. This increase is mainly attributable to the increase in a compensation receivable on the relocation from Jingyi Road of US$11,709,000, offset by the increase in short-term bank loans of approximately US$6,820,000.

Capital Commitment

As of June 30, 2011 and March 31, 2011, the Company had outstanding capital expenditure commitments of approximately US$146,977,000 and US$150,448,000, respectively. The slight decrease in capital commitments was mainly attributable to the payment of outstanding capital expenditures relating to various construction projects and the purchase of land and machinery pursuant to the Project Investment Contract entered with the Jiangsu Xuyi Economic Development Zone Administrative Committee on September 6, 2010 and the Investment Agreement entered with the Administrative Committee of Changxing Economic Development Zone on August 20, 2010.

Off-Balance Sheet Arrangements

We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions of foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates Risk

Our exposure to interest rate risk for changes in interest rates relates primarily to the interest-bearing bank loans and interest income generated by our bank deposits. We have not used any derivative financial instruments in our investment portfolio or for cash management purposes. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. Nevertheless, our future interest expense or interest income may expect to be decreased due to changes in interest rates in the PRC.

Foreign Exchange Rates Risk

We do not hold any derivative instruments and do not engage in any hedging activities. Because most of our purchases and sales are made in RMB, any exchange rate change affecting the value of the RMB relative to the U.S. Dollar could have an effect on our financial results as reported in U.S. Dollars. If the RMB were to depreciate against the U.S. Dollar, amounts reported in U.S. Dollars would be correspondingly reduced. If the RMB were to appreciate against the U.S. Dollar, amounts reported in U.S. Dollars would be correspondingly increased.

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Contractual Obligations

	Payments Due By Period
Contractual Obligations (US$)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Bank Indebtedness	(SEE TABLE BELOW)
Other Indebtedness		0		0		0		0		0
Capital Lease Obligations		0		0		0		0		0
Operating Lease Obligations	(SEE TABLE BELOW)
Purchase Obligations	(SEE TABLE BELOW)
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under US GAAP		0		0		0		0		0
Total:		0		0		0		0		0

Bank indebtedness (US$)	June 30, 2011		March 31, 2011
Short-term bank borrowings	US$	71,979,000	US$	65,159,000
Notes payable (within (1) year)	US$	43,450,000	US$	48,640,000
Total	US$	115,429,000	US$	113,799,000

Purchase Obligations (US$)	June 30, 2011		March 31, 2011
Construction projects and purchase of machinery	US$	146,977,000	US$	150,448,000
Total	US$	146,977,000	US$	150,448,000

Operating Lease Obligations (US$)	June 30, 2011		March 31, 2011
Within one (1) year	US$	669,000	US$	655,000
1-3 years	US$	1,094,000	US$	1,196,000
3-5 years	US$	75,000	US$	120,000
Over five (5) years	US$	-	US$	-
Total	US$	1,838,000	US$	1,971,000

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our management, including our principal executive officer and our principal financial officer, concluded that our disclosure controls and procedures were effective as of the fiscal quarter covered by this report, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time period specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow appropriate decisions on a timely basis regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are named as defendant in lawsuits in which claims are asserted against us. In our opinion, the liabilities, if any, which may ultimately result from such lawsuits, are not expected to have a material adverse effect on our financial position, results of operations or cash flows. As of June 30, 2011, there was no pending or outstanding material litigation with the Company.

ITEM 1A. RISK FACTORS

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this report before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. Our shares of common stock are not currently listed on any national securities exchange, however it is currently quoted under the symbol “CIEC” on the OTCQB. If and when our common stock is traded, the trading price could decline due to any of these risks, and an investor may lose all or part of his or her investment. Some of these factors have affected our financial condition and operating results in the past or are currently affecting our company. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this report.

RISKS RELATED TO OUR OPERATIONS

We have depended on a small number of customers for the vast majority of our sales. A reduction in business from any of these customers could cause a significant decline in our sales and profitability.

The vast majority of our sales are generated from a small number of customers. During the three months ended June 30, 2011 and 2010, we had two and three customers that each generated revenues of at least 10% of our total revenues, respectively, with our largest customer accounting for 22% and 21% of our revenues for each respective period. A total of approximately 36% and 49% of our revenues for the three months ended June 30, 2011 and 2010, respectively, were attributable to customers that each individually accounted for at least 10% of our sales. We believe that we may depend upon a small number of customers for a significant majority of our sales in the future, and the loss or reduction in business from any of these customers, including, without limitation, any material disruption of slowdown suffered by such customers, could cause a significant decline in our sales and profitability.

A substantial portion of our assets has been comprised of trade receivables representing amounts owed by a small number of customers. If any of these customers fails to timely pay us amounts owed, we could suffer a significant decline in cash flow and liquidity which, in turn, could cause us to be unable to pay our liabilities and purchase an adequate amount of inventory to sustain or expand our sales volume.

Our trade receivables represented approximately 36% and 41% of our total current assets as of June 30, 2011 and March 31, 2011, respectively. As of June 30, 2011, 87% of our trade receivables were owed to us by three customers, each of which represented over 10% of the total amount of our trade receivables. As a result of the substantial amount and concentration of our trade receivables, if any of our major customers fails to timely pay us amounts owed, we could suffer a significant decline in cash flow and liquidity which could adversely affect our ability to pay our liabilities and to purchase inventory to sustain or expand our current sales volume.

Furthermore, working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. In general, our credit term grant to customers is 90 days from the time we sell our products. The credit periods for some of our business partners can be longer after an evaluation of the risk of collection. We cannot assure you that system problems, industry trends or other issues will not extend our collection period and adversely impact our working capital.

In addition, we typically need to place certain deposits and advances with our suppliers on a portion of the purchase price in advance and for some suppliers we must maintain a deposit for future orders. Because our payment cycle is shorter than our receivable cycle, we may experience working capital shortages.

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Risk of fluctuations in the prices of raw materials could adversely affect our business.

The raw material for our battery products consist primarily of electrolytic lead. Our success significantly depends on our ability to secure sufficient and constant supply of electrolytic lead for our production at acceptable price levels. Electrolytic lead represents our largest cost item in our lead-acid motive battery production. During the three months ended June 30, 2011 and 2010, the average selling price of electrolytic lead by our suppliers was approximately US$2,600 and approximately US$2,300 per ton, respectively. For the three months ended June 30, 2011 and 2010, costs of lead-related material accounted for approximately 80% and 80% of our total cost of sales, respectively. We do not have long-term contracts with any of our electrolytic lead suppliers, nor have we entered into any arrangement to mitigate the effect of price fluctuations of electrolytic lead. Therefore, any significant increase in the cost of electrolytic lead in the future could adversely affect our results if we cannot transfer the price increment to our customers.

We choose to rely on a limited number of suppliers for our raw materials and have short term supply agreements with such suppliers, and any unanticipated loss, disruptions or slowdowns by such suppliers, shipping companies and our distribution centers could adversely affect our ability to deliver our products and services to our customers which could materially and adversely affect our relationships with our customers and our revenues.

Our ability to provide high quality customer service, to process and fulfill orders and to manage inventory depends on the timely and uninterrupted performance of our suppliers and shipping companies and the efficient and uninterrupted operation of our distribution centers. As of June 30, 2011 and March 31, 2011, we had one and three suppliers each of which accounted for at least 10% of our total raw material purchases, respectively, with our largest supplier accounting for approximately 71% and 31% of our raw material purchases for each respective period. A total of approximately 59% and 35% of our raw material purchases for the three months ended June 30, 2011 and 2010, respectively, were attributable to suppliers that each individually accounted for at least 10% of our raw material purchases. We choose to rely on a small number of suppliers in order to stabilize the quality of the raw materials we purchase, and we believe that we may continue to depend upon a small number of suppliers for our raw materials in the future, and the loss or reduction in business from any of these suppliers could have an adverse effect on our business. We also generally have supply agreements that are no longer than one year and we cannot guarantee that such suppliers will continue to do business with us. In the event that our suppliers stop doing business with us, or if our suppliers suffer any material disruption or slowdown including, without limitation, being forced to shut down operations as a result of a material lead pollution event, we would be forced to find replacement suppliers with comparable quality of raw materials, which could take time to locate and secure. Any material disruption or slowdown in the operations of our suppliers, or any material disruption or slowdown at our distribution centers, manufacturing facilities or with our management information systems could cause delays in our ability to receive, process and fulfill customer orders and may cause orders to be cancelled, lost or delivered late, goods to be returned or receipt of goods to be refused. As a result, our revenues and operating results could be materially and adversely affected.

We currently rely on short term bank loans and non-interest bearing credits granted by banks for the issuance of notes payable, however we expect that we will need additional capital to implement our current business strategy of expansion of our production facilities in Changxing County, Zhejiang Province and in Xuyi County, Jiangsu Province, and we will need to find new sources of financing, which may not be available to us.

We will need new sources of financing and additional capital in order to implement our current business strategy of expansion of our production facilities in Changxing County, Zhejiang Province and in Xuyi County, Jiangsu Province. Also the Company has short term bank loans and non-interest bearing credits granted by banks for the issuance of notes payable at our disposal, most of such short term loans and notes payable expire in the next six months, and there is no assurance that we will obtain any new loans or notes payable, or that such short term loans and notes payable will be renewed or that the terms of any renewals of such short term loans or notes payable will be on terms that are as favorable as our current instruments. As of June 30, 2011, we had an aggregate of US$71,979,000 of short-term loans outstanding. Furthermore the Chinese government is taking steps to tighten the availability of credit including ordering banks to increase the amount of reserves they hold and to reduce or limit their lending. Such governmental actions in the PRC may make it more difficult for us to obtain additional loans from other banking institutions if we need such additional capital, in which case we will be forced to seek other sources of funding.

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We face a risk of non-compliance with the terms of our notes payable, bill financing and short-term bank loans, which are secured by a significant amount of our assets and could have an adverse affect on our business.

We have notes payable, bill financing and short-term bank loans which are collateralized by a significant amount of our assets, including 100% of our restricted bank balances, amounting to US$50,859,000, and trades receivable, amounting to US$12,378,000 as of June 30, 2011. Specifically, our notes payable and bill financing are secured by US$35,666,000 and US$15,193,000, respectively of our restricted bank balances as of June 30, 2011. Such financial instruments contain customary events of default, and upon the occurrence and during the continuation of an event of default, amounts due under such financial instruments may be accelerated by our creditors. If we are unable to comply with the terms of such financial instruments, events of default could occur. Upon the occurrence and during the continuance of an event of default under such financial instruments, our creditors have available a range of remedies customary in these circumstances, including declaring all outstanding debt, together with any accrued and unpaid interest thereon, to be due and payable, foreclosing on the aforementioned assets securing the financial instruments and/or ceasing to provide additional loans, which could have a material adverse effect on our business.

In light of recent trends in Europe and the U.S., lead-acid motive battery products may be substituted by other battery products which could have an adverse effect on our business.

It is a general market trend to develop motive battery products which are more environmentally friendly with increased power output and less weight. It is also a new product trend in Europe, the United States and Japan to use primarily a lithium-ion battery. There can be no assurance that manufacturers of electric bicycles will continue to use lead-acid motive battery products as the principal source of motive power for electric bicycles. In the event that the market prefers to use other forms of battery product and if we are not able to develop new motive battery products to meet the future demand, our business could be adversely affected.

Lead pollution in China is subject to more attention from the government, which may cause the Chinese government to increase the environmental compliance standards for lead-acid batteries production. As a result, our costs of environmental compliance may increase in order to meet any heightened standards.

Recently one of our former lead plate suppliers, Anqing Borui Power Co., Ltd., was found to be involved in a material lead pollution event, where more than 20 children affected by lead pollution were reported having blood lead above normal standards, and has been required to close its operations by the local government. Accordingly, blood lead pollution in China is now subject to greater scrutiny from both the press and the government. In the event that the Chinese government increases the environmental compliance standards for lead-acid batteries production as a result of these events, our costs of environmental compliance may increase in order to meet the heightened standards. In addition, if we cannot comply with standards, we may not be permitted to produce lead-acid battery products.

We may be affected by changes in the policies adopted by the PRC government in relation to the electric bicycle industry and the use of electric bicycles.

Our operations and financial results could be adversely affected by changes in the political, economic and social conditions in China or the relevant policies of the PRC government in respect of the use of electric bicycles. The “Law of People’s Republic of China on Road Traffic Safety” categorizes the electric bicycle as a non-motor vehicle. However, certain local governments in China may prohibit the use of electric bicycles. In the event that there is any unfavorable policy on the electric bicycle industry and the use of electric bicycles, sales of electric bicycles may decrease, and this could have a significant adverse impact on our business.

Competition in the motive battery industry in China could have an adverse effect on our business.

As of June 30, 2011, we only conduct our business in one segment of the battery industry, the manufacture and sale of lead-acid motive batteries. We face competition from the domestic and foreign producers in China, which move into the motive battery industry in view of the growth potential. New entrants will continue to emerge. Any intensification in competition could dilute our market share and may lead to price reductions and increased expenses in marketing and product development. Any of these events could have an adverse impact on our profitability.

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Our sales are dominated by sales in China, which could have an adverse effect on our business.

For each of the two financial years ended March 31, 2011 and 2010 and for the three months ended June 30, 2011, all of our sales were derived from customers in China. We expect that the domestic market in China will continue to be our major market. Our business is therefore heavily dependent on the demand for motive battery products in China and the domestic market prices of these products. In the event that there is any material adverse change in the level of the demand for motive battery products in China or if there are a significant price fluctuations in China, our performance could be adversely affected.

We do not carry any business interruption insurance, products liability insurance or any other insurance policy except for property insurance. As a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company.

We could be exposed to liabilities or other claims for which we would have no insurance protection. We do not currently maintain any business interruption insurance, products liability insurance, or any other comprehensive insurance policy except for property insurance policies with limited coverage. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business. There can be no guarantee that we will be able to obtain additional insurance coverage in the future, and even if we are able to obtain additional coverage, we may not carry sufficient insurance coverage to satisfy potential claims. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.

Because we do not carry products liability insurance, a failure of any of the products marketed by us may subject us to the risk of product liability claims and litigation arising from injuries allegedly caused by the improper functioning or design of our products. We cannot assure that we will have enough funds to defend or pay for liabilities arising out of a products liability claim. To the extent we incur any product liability or other litigation losses, our expenses could materially increase substantially. There can be no assurance that we will have sufficient funds to pay for such expenses, which could end our operations and you would lose your entire investment.

Our future performance is dependent on researching and developing new products, the inability to do so could have an adverse effect on our business.

Our performance in the future is dependent on our ability to develop and launch new products. Changes in technologies may render our products obsolete and our performance in the future is thus significantly dependent on our ability to develop and launch new products. There can be no assurance that our research and development efforts will be successful or completed within the anticipated timeframe and results. Moreover, there can be no assurance that any research and development project undertaken by us will result in commercially viable products. Unsuccessful development and release of new products could adversely affect our performance and our ability to compete.

We intend to make significant investments in research and development and new products that may not be profitable.

Companies in our industry are under pressure to develop new designs and product innovations to support changing consumer tastes and regulatory requirements. We have engaged in research and development activities and we believe that substantial additional research and development activities are necessary to allow us to offer technologically-advanced products. We expect that our research and development budget will increase significantly as we attempt to create new products. However, research and development and investments in new technology are inherently speculative and commercial success depends on many factors including technological innovation, novelty, service and support, and effective sales and marketing. We may not achieve significant revenue from new product investments for a number of years, if at all. Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may be minimal.

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Our failure to effectively manage growth could harm our business.

We have expanded the number and types of products we sell, and we will endeavor to further expand our product portfolio. We must continually introduce new products and technologies, enhance existing products, and effectively stimulate customer demand for new products and upgraded versions of our existing products in order to remain competitive.

This expansion of our products places a significant strain on our management, operations and engineering resources. Specifically, the areas that are strained most by our growth include the following:

• New Battery Product Launch: With the growth of our product portfolio, we experience increased complexity in coordinating product development, manufacturing and shipping. As this complexity increases, it places a strain on our ability to accurately coordinate the commercial launch of our products for distribution into the marketplace with adequate supply to meet anticipated customer demand and effective marketing to stimulate demand and market acceptance. If we are unable to scale and improve our product launch coordination, we could frustrate our customers and lose retail shelf space and product sales;

• Forecasting, Planning and Supply Chain Logistics: With the growth of our product portfolio, we also experience increased complexity in forecasting customer demand, planning for production, and transportation and logistics management. If we are unable to scale and improve our forecasting, planning and logistics management, we could frustrate our customers, lose product sales or accumulate excess inventory; and

• Support Processes: To manage the growth of our operations, we will need to continue to improve our transaction processing, operational and financial systems, and procedures and controls to effectively manage the increased complexity. If we are unable to scale and improve these areas, the consequences could include delays in shipment of products, degradation in levels of customer support, lost sales, decreased cash flows, and increased inventory. These difficulties could harm or limit our ability to expand.

Our products could contain defects or they may be installed or operated incorrectly, which could result in claims against us or reduce sales of those products.

Despite quality control testing by us, errors have been found and may be found in the future in our existing or future products. This could result in, among other things, a delay in the recognition or loss of revenue, loss of market share or failure to achieve market acceptance. These defects could cause us to incur significant warranty, support and repair costs, divert the attention of our personnel from our product development efforts and harm our relationship with our customers. The occurrence of these problems could result in the delay or loss of market acceptance of our battery products and would likely harm our business. Defects, integration issues or other performance problems in our battery products could result in personal injury or financial or other damages to end-users or could damage market acceptance of our products. Our customers and end-users could also seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend.

Environmental claims brought against us in connection with the production of battery products could adversely affect our business.

Solid waste, sewage and fumes are generated during the production process of battery products. We are required to comply with the environmental laws, rules and regulations promulgated by the PRC government. These laws, rules and regulations govern, among other things, the level of fees payable to the government entities providing environmental services and setting out the requirements in relation to the installation of ventilation equipment to ensure the appropriate treatment of lead dust and particles generated during production of lead-acid motive battery products. They also prescribe the standards for the discharge of solid waste, sewage and fumes. In addition, these laws, rules, and regulations empower the local PRC governments to impose sanctions on enterprises failing to comply with such laws, rules and regulations. We are also required by the laws and regulations governing health and safety at work in China to provide our employees exposed to lead dust or particles with protective clothing and accessories, such as gloves, goggles and masks. We also arrange all our employees engaging in the lead-related production process to receive medical checks at least twice a year.

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Although we have adopted these preventive measures, inherent risks involved in our production activities cannot be completely eliminated. As our production may cause pollution to the environment and may affect the health of our employees and the residents nearby, we may be subject to civil claims for compensation or administrative sanctions such as fines or discontinuation of production activities. If there is any legal action initiated against us on any alleged violation of environmental protection laws and regulations, or that our production discharge results in any harmful impact on any person, our business could be materially and adversely affected. There can be no assurance that the relevant governmental authorities and other people would not take actions against us for our past, present and future business operations. We have not maintained any insurance coverage for these possible claims due to environmental related matters, as our Directors are not aware of such type of insurance to be available in China. Any environmental actions taken against us could adversely affect our business.

If we are unable to maintain our Zhejiang Province Pollution Discharge Certificate, we may lose our ability to continue conducting our manufacturing operations.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. The manufacturing facilities in which we operate are subject to the PRC’s environmental laws and requirements. We are required to have and do have a valid Zhejiang Province Pollution Discharge Certificate issued by the Environment Protection Bureau of Changxing County and we are responsible for the disposal of the waste in accordance with applicable environmental regulations. If we fail to comply with the provisions of the permit and environmental laws, we could be subject to sanctions by regulators, including the suspension or termination of our Certificate, which would result in the suspension or termination of our manufacturing operations, which would have a material adverse effect on our results of operations.

We believe that mandatory and voluntary certification and compliance issues are critical to adoption of our battery product systems and for the retention of our customers, and failure to obtain such certification or compliance would harm our business.

We are required to comply with certain legal requirements governing the materials in our products. Although we are not aware of any efforts to amend any existing legal requirements or implement new legal requirements in a manner with which we cannot comply, our revenue might be materially harmed if such an amendment or implementation were to occur.

Moreover, although we are not legally required to do so, we strive to obtain a broad range of certifications (such as ISO 9001, ISO 14001 and ISO 18001) for substantially all our products which the Company believes helps make our products more saleable and which contributes to the retention of existing customers and the obtainment of future customers. The failure to obtain voluntary certifications for our products could result in a loss of current customers or could impair the marketability of our products which could result in the failure for us to obtain new customers, which could have a materially adverse effect on our business.

We may adopt an equity incentive plan under which we may grant securities to compensate employees and other services providers, which would result in increased share-based compensation expenses and, therefore, reduce net income.

We may adopt an equity incentive plan under which we may grant shares or options to qualified employees. Under current accounting rules, we would be required to recognize share-based compensation as compensation expense in our statement of income, based on the fair value of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required to provide service in exchange for the equity award. We have not made any such grants in the past, and accordingly our results of operations have not contained any share-based compensation charges. The additional expenses associated with share-based compensation may reduce the attractiveness of issuing stock options under an equity incentive plan that we may adopt in the future. If we grant equity compensation to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income. However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the shareholders’ ownership interests in our company.

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Our business may be adversely affected by the global economic downturn, in addition to the continuing uncertainties in the financial markets which could impair our ability and the ability of our customers to access capital in the current economic climate and therefore could have an adverse effect on our business.

The global economy is currently in a pronounced economic downturn. Global financial markets are continuing to experience disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Given these uncertainties, there is no assurance that there will not be further deterioration in the global economy, the global financial markets and consumer confidence. If economic conditions deteriorate further, our business and results of operations could be materially and adversely affected.

Additionally, the inability of our customers and suppliers to access capital efficiently, or at all, may have other adverse effects on our financial condition. For example, financial difficulties experienced by our customers or suppliers could result in product delays; increase trade receivables defaults; and increase our inventory exposure. The impact of tightening credit conditions may impair our customers’ ability to effectively access capital markets. The inability of our customers to borrow money to fund construction of electric bicycles reduces the demand for our products and services and may adversely affect our results from operations and cash flow. These risks may increase if our customers and suppliers do not adequately manage their business or do not properly disclose their financial condition to us.

Although we believe we have adequate liquidity and capital resources to fund our operations internally, in light of current market conditions, our inability to access the capital markets on favorable terms, or at all, may adversely affect our financial performance. The inability to obtain adequate financing from debt or capital sources could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.

We may not be able to effectively recruit and retain skilled employees, particularly scientific, technical and management professionals.

Our ability to compete effectively depends largely on our ability to attract and retain certain key personnel, including scientific, technical and management professionals. We anticipate that we will need to hire additional skilled personnel in all areas of our business. Industry demand for such employees, however, exceeds the number of personnel available, and the competition for attracting and retaining these employees is intense. Because of this intense competition for skilled employees, we may be unable to retain our existing personnel or attract additional qualified employees to keep up with future business needs. If this should happen, our business, operating results and financial condition could be adversely affected.

Our labor costs are likely to increase as a result of changes in Chinese labor laws.

We expect to experience an increase in our cost of labor due to recent changes in Chinese labor laws which are likely to increase costs further and impose restrictions on our relationship with our employees. In June 2007, the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law and more strictly enforced existing labor laws. The new law, which became effective on January 1, 2008, amended and formalized workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of labor unions. As a result of the new law, we have had to increase the salaries of our employees, provide additional benefits to our employees, and revise certain other of our labor practices. The increase in labor costs has increased our operating costs, which increase we have not always been able to pass through to our customers. In addition, under the new law, employees who either have worked for us for 10 years or more or who have had two consecutive fixed-term contracts must be given an “open-ended employment contract” that, in effect, constitutes a lifetime, permanent contract, which is terminable only in the event the employee materially breaches our rules and regulations or is in serious dereliction of his or her duties. Such non-cancelable employment contracts will substantially increase our employment related risks and limit our ability to downsize our workforce in the event of an economic downturn. No assurance can be given that we will not in the future be subject to labor strikes or that we will not have to make other payments to resolve future labor issues caused by the new laws. Furthermore, there can be no assurance that the labor laws will not change further or that their interpretation and implementation will vary, which may have a negative effect upon our business and results of operations.

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Our business could be materially adversely affected if we cannot protect our intellectual property rights or if we infringe on the intellectual property rights of others.

Our ability to compete effectively will depend on our ability to maintain and protect our proprietary rights, including patents that we use in our business and our brand name. Third parties may seek to challenge, invalidate, circumvent or render unenforceable any proprietary rights owned by or licensed to us. Our inability to protect our proprietary rights could materially adversely affect the ability to sell our products. Litigation may be necessary to:

enforce our intellectual property rights;

protect our trade secrets; and

determine the scope and validity of such intellectual property rights.

Any such litigation, whether or not successful, could result in substantial costs and diversion of resources and management’s attention from the operation of our business.

We may receive notice of claims of infringement of other parties’ proprietary rights. Such actions could result in litigation and we could incur significant costs and diversion of resources in defending such claims. The party making such claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief. Such relief could effectively block our ability to make, use, sell, distribute or market our products and services in certain jurisdictions. We may also be required to seek licenses to such intellectual property. We cannot predict, however, whether such licenses would be available or, if available, could be obtained on terms that are commercially reasonable and acceptable to us. The failure to obtain the necessary licenses or other rights could delay or preclude the sale, manufacture or distribution of our products and could result in increased costs to us.

We may pursue future growth through strategic acquisitions and alliances which may not yield anticipated benefits and may adversely affect our operating results, financial condition and existing business.

We may seek to grow in the future through strategic acquisitions in order to complement and expand our business. The success of our acquisition strategy will depend on, among other things:

the availability of suitable candidates;

competition from other companies for the purchase of available candidates;

our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;

the availability of funds to finance acquisitions;

the ability to establish new informational, operational and financial systems to meet the needs of our business;

the ability to achieve anticipated synergies, including with respect to complementary products or services; and

the availability of management resources to oversee the integration and operation of the acquired businesses.

If we are not successful in integrating acquired businesses and completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all, investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be materially adversely affected.

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We currently relied on the production in Plant D in Xuyi County, Jiangsu Province, which is under the trial production stage and has not yet completed the inspection processes by the Jiangsu Environment Protect Bureau. If Plant D fails to pass the final inspection, the Company may not continue to conduct our manufacturing operations.

Our Plant D in Xuyi County, Jiangsu Province is currently under the trail production stage and has not yet completed the inspection processes by the Environmental Protection Bureau. Management has bewared of the risk from the tightened environment protection policy. The Company negotiated with the Government of Xuyi, which committed to assure there is no residential areas within 800 meters surround the production facilities of Plant D. Also, the Company fully complies with the national environmental protection policies on building construction, plant design as well as the environmental protection equipment selection and installation. Although all the environmental protection measures have been made, the management cannot assure Plant D would pass through the final inspection. If Plant D fails to pass through the final inspection, we may be required to terminate our manufacturing operations, which would have a material adverse effect on our results of operations.

RISKS RELATED TO US DOING BUSINESS IN CHINA

If the land use rights of our landlord are revoked, we would be forced to relocate operations, which could have an adverse affect on our financial condition and results of operations.

Under Chinese law land is owned by the state or rural collective economic organizations. The state issues to the land users a land use right certificate. Land use rights shall not be revoked before the expiration of the period thereof. However, under special circumstances, land use rights can be revoked and land users forced to vacate when redevelopment of the land is in the public interest, provided that corresponding compensation is given to the land users. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. With the exception of our property at Jingyi Road and Jingsi Road in Changxing County, Zhejiang Province and Xuyi County, Jiangsu Province, we do not have any land use rights and our manufacturing facilities rely on land use rights of our landlord, and the loss of such rights would require us to identify and relocate new manufacturing and other facilities, which could be time consuming have a material adverse effect on our financial condition and results of operations.

Substantially all of our assets are located in the PRC and a substantial portion of our revenues are derived from our operations in China, and changes in the political and economic policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.

The PRC’s legal system is a civil law system based on written statutes. Unlike the common law system prevalent in the United States, decided legal cases have little value as precedent in China. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to, governmental approvals required for conducting business and investments, laws and regulations governing the battery industry and battery product safety, national security-related laws and regulations, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, and financial and business taxation laws and regulations.

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The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.

Our principal operating subsidiary, CCEC, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would deal with such a violation in accordance with PRC laws and regulations, including, without limitation:

levying fines;

revoking our business license, or other licenses;

requiring that we restructure our operations; and

requiring that we discontinue any portion or all of our business.

Recent changes in the PRC’s environmental protection policy that mandatorily enforces a quarantined isolated area between production facilities and residential areas could disrupt and adversely affect our business.

In 2011, the PRC Central Government tightened its environmental protection policy which applies to all lead-acid battery manufacturers. Pursuant to the tightened policy, a 500 meter quarantined isolated area must be maintained between lead-acid battery production facilities and residential areas. As a result, we have to scale back, or relocate, certain of our production facilities in the event that residential areas expand too close in proximity to them. We encountered this dilemma in May 2011 when, following a governmental report that showed that our Plan B at Jing’er Road of Changxing County, Zhejiang Province failed to maintain the required distance between production facilities and nearby residential areas, our management decided to scale down operations at Plant B and relocate the production facilities to our facilities at Plan D in Xuyi County, Jiangsu Province. To the extent that the tightened policies cause any further scale downs or relocations, our business would likely be disrupted and, ultimately, could be adversely affected.

Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management.

Most of our current operations, including the manufacturing and distribution of our products, are conducted in China. Moreover, all of our directors and officers are nationals and residents of China. All or substantially all of the assets of these persons are located outside the United States and in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these persons. In addition, uncertainty exists as to whether the courts of China would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof.

The scope of our business license in China is limited, and we may not expand or continue our business without government approval and renewal, respectively.

Our principal operating subsidiary, CCEC, is a wholly foreign-owned enterprise, commonly known as a WFOE. A WFOE can only conduct business within its approved business scope, which ultimately appears on its business license. Our license permits us to produce lighting appliances, glass products for daily use, sanitary glass bath equipment, valve regulated lead-acid batteries and to sell such products, and other than production and sales of valve regulated lead-acid batteries, we have not engaged in any other business activity since the date of CCEC’s incorporation. Any amendment to the scope of our business requires further application and government approval. In order for us to expand our business beyond the scope of our license, we will be required to enter into a negotiation with the PRC authorities for the approval to expand the scope of our business. We cannot assure investors that CCEC will be able to obtain the necessary government approval for any change or expansion of its business. If we are unable to obtain the approval from the government to amend our business license to include lithium-ion batteries, this could have a materially adverse effect on our business.

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We are subject to a variety of environmental laws and regulations related to our manufacturing operations. Our failure to comply with environmental laws and regulations may have a material adverse effect on our business and results of operations.

We are subject to various environmental laws and regulations in China. We cannot assure you that at all times we will be in compliance with the environmental laws and regulations or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws and regulations. Additionally, these regulations may change in a manner that could have a material adverse effect on our business, results of operations and financial condition. We have made and will continue to make capital and other expenditures to comply with environmental requirements.

Furthermore, our failure to comply with applicable environmental laws and regulations worldwide could harm our business and results of operations. The manufacturing, assembling and testing of our products require the use of hazardous materials that are subject to a broad array of environmental, health and safety laws and regulations. Our failure to comply with any of these applicable laws or regulations could result in:

regulatory penalties, fines and legal liabilities;

suspension of production;

alteration of our fabrication, assembly and test processes; and

curtailment of our operations or sales.

In addition, our failure to manage the use, transportation, emission, discharge, storage, recycling or disposal of hazardous materials could subject us to increased costs or future liabilities. Existing and future environmental laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs or incur other expenses associated with such laws and regulations. Many new materials that we are evaluating for use in our operations may be subject to regulation under existing or future environmental laws and regulations that may restrict our use of one or more of such materials in our manufacturing, assembly and test processes or products. Any of these restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our manufacturing processes.

Contract drafting, interpretation and enforcement in China involve significant uncertainty.

We have entered into numerous contracts governed by PRC law, which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.

We could be liable for damages for defects in our products pursuant to the Tort Liability Law of the PRC.

The Tort Liability Law of the People’s Republic of China, which was passed during the 12th Session of the Standing Committee of the 11th National People’s Congress on December 26, 2009, states that manufacturers are liable for damages caused by defects in their products and sellers are liable for damages attributable to their fault. If the defects are caused by the fault of third parties such as the transporter or storekeeper, manufacturers and sellers are entitled to claim for compensation from these third parties after paying the compensation amount.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises’ Share Transfer (“Circular 698”) that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation (“SAT”) released a circular (Guoshuihan No. 698 – Circular 698) on December 10, 2009 that addresses the transfer of shares by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the execution of the transfer contract. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes.

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There is uncertainty as to the application of Circular 698. For example, while the term “indirectly transfer” is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

The foreign currency exchange rate between the U.S. Dollar and Renminbi could adversely affect our financial condition.

To the extent that we need to convert U.S. Dollars into Renminbi for our operational needs, our financial position and the price of our common stock may be adversely affected should the Renminbi appreciate against the U.S. Dollar at that time. Conversely, if we decide to convert our Renminbi into U.S. Dollars for our operational needs or paying dividends on our common stock, the dollar equivalent of our earnings from our subsidiaries in China would be reduced should the dollar appreciate against the Renminbi. We currently do not hedge our exposure to fluctuations in currency exchange rates.

Until 1994, the Renminbi experienced a gradual but significant devaluation against most major currencies, including dollars, and there was a significant devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. Dollar has remained stable and has appreciated slightly against the U.S. Dollar. Countries, including the United States, have argued that the Renminbi is artificially undervalued due to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. In July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the dollar. Under the new policy the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of designated foreign currencies. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further and more significant appreciation of the Renminbi against the dollar.

Inflation in the PRC could negatively affect our profitability and growth.

While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. According to the National Bureau of Statistics of China, the change in China’s Consumer Price Index increased to 6.40% in June 2011. If prices for our products and services rise at a rate that is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our profitability.

Furthermore, in order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. In January 2010, the Chinese government took steps to tighten the availability of credit including ordering banks to increase the amount of reserves they hold and to reduce or limit their lending. The implementation of such policies may impede economic growth. For the period from October 2010 to April 2011, the People’s Bank of China raised the interest rate 4 times. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand for our products and services.

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Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.

Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with banks in the PRC, including, without limitation, our restricted bank balances which secure certain notes payable and bill financing and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

As our ultimate holding company is a Nevada corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

If we make equity compensation grants to persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for our directors and employees and other parties under PRC law.

On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options. For any plans which are so covered and are adopted by a non-PRC listed company after April 6, 2007, Circular 78 requires all participants who are PRC citizens to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6, 2007. We intend to adopt an equity compensation plan in the future and make option grants to our officers and directors, most of whom are PRC citizens. Circular 78 may require our officers and directors who receive option grants and are PRC citizens to register with SAFE. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants of our equity incentive plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant equity compensation to our PRC employees. In that case, our ability to compensate our employees and directors through equity compensation would be hindered and our business operations may be adversely affected.

Our operating subsidiary, CCEC, has enjoyed certain preferential tax concessions and the loss of these preferential tax concessions may cause our tax liabilities to increase and our profitability to decline.

Under the tax laws of the PRC, CCEC has had tax advantages granted by local government for enterprise income taxes commencing from 2006. CCEC has been entitled to be exempt from enterprise income tax for two years commencing from the first profitable year in 2006, followed by a 50% reduction for the next 3 years. On March 16, 2007, the National People’s Congress of China enacted a new PRC Enterprise Income Tax Law, under which foreign invested enterprises and domestic companies will be subject to enterprise income tax at a uniform rate of 25%. The new law became effective on January 1, 2008. CCEC’s income tax rate for the taxable years ended December 31, 2008 and 2009 was 12.5%, and CCEC’s income tax rate for the taxable year ended December 31, 2010 was 12.5%. CCEC was deemed to be a “High-Technology Enterprise” commencing on January 1, 2011 and as a result, the Company enjoys preferential income tax rate at 15%. If CCEC cannot maintain its status as a “High-Technology Enterprise”, then the expiration of the preferential tax treatment will increase our tax liabilities and reduce our profitability.

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Under the New Enterprise Income Tax Law, we and Fast More may be classified as “resident enterprises” of China for tax purposes, which may subject us and Fast More to PRC income tax on taxable global income.

Under the new PRC Enterprise Income Tax Law (the “New EIT Law”) and its implementing rules, both of which became effective on January 1, 2008. Under the New EIT Law, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management bodies” located within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company such as us and Fast More. Both our and Fast More’s members of management are located in China. If the PRC tax authorities determine that we or Fast More is a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, the New EIT Law provides that dividend paid between “qualified resident enterprises” is exempted from enterprise income tax. A recent circular issued by the State Administration of Taxation regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC shareholders. It is unclear whether the dividends that we or Fast More receives from CCEC will constitute dividends between “qualified resident enterprises” and would therefore qualify for tax exemption, because the definition of qualified resident enterprises is unclear and the relevant PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible. As a result of the New EIT Law, our historical operating results will not be indicative of our operating results for future periods and the value of our common stock may be adversely affected.

Downturn in the economy of the PRC may slow our growth and profitability.

All of our revenues are generated from sales in China. The growth of the Chinese economy has been uneven across geographic regions and economic sectors, in large part due to the recent downturn in the global economy, which resulted in slow growth of the China economy. While the Chinese economy has recently begun to show signs of improvement, there can be no assurance that growth of the Chinese economy will be steady or that there will not be further deterioration in the global economy as a whole or the Chinese economy in particular. If economic conditions deteriorate further, our business and results of operations could be materially and adversely affected, especially if such conditions result in a decreased use of our products or in pressure on us to lower our prices.

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Because our business is located in the PRC, we currently lack sufficient in-house expertise in U.S. GAAP reporting and we may have difficulty establishing adequate management, legal and financial controls, which we are required to do in order to comply with U.S. GAAP and securities laws, and which could cause a materially adverse impact on our financial statements, the trading of our common stock and our business.

PRC companies have historically not adopted a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and, computer, financial and other control systems. Currently, we do not have sufficient in-house expertise in U.S. GAAP reporting. Instead, we rely on the expertise and knowledge of external consultants and advisors in U.S. GAAP conversion. These external consultants assist us in the preparation and review of our consolidated financial statements. In fact, most of our middle and top management staff are not educated and trained in the Western system, and we may continue to have difficulty hiring and retaining qualified employees in the PRC with experience and expertise relating to U.S. GAAP and U.S. public-company reporting requirements. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, material weaknesses or lack of compliance could result in restatements of our historical financial information, cause investors to lose confidence in our reported financial information, have an adverse impact on the trading price of our common stock, adversely affect our ability to access the capital markets and our ability to recruit personnel, lead to the delisting of our securities from the stock exchange on which they are traded, lead to litigation claims, thereby diverting management’s attention and resources, and which may lead to the payment of damages to the extent such claims are not resolved in our favor, lead to regulatory proceedings, which may result in sanctions, monetary or otherwise, and have a materially adverse effect on our reputation and business.

RISKS RELATED TO YOUR OWNERSHIP OF OUR COMMON STOCK

Because we became public by means of a “reverse merger,” we may not be able to attract the attention of major brokerage firms.

Additional risks may exist because we became public through a “reverse merger”. Security analysts of major brokerage firms may not cover us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on our behalf in the future.

The market price and trading volume of shares of our common stock may be volatile.

When and if a market develops for our securities, the market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

One of our Stockholders, Which is 100% Controlled By our President, Chief Executive Officer and Chairman of the Board, Exercises Significant Control Over Matters Requiring Stockholder Approval.

One of our stockholders (Cheer Gold) has voting power equal to 65.8% of our voting securities. Moreover, such stockholder is 100% controlled by Xu Kecheng, our President, Chief Executive Officer and Chairman of the Board. As a result, Xu Kecheng, through such stock ownership, can exercise control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in Cheer Gold may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by our other stockholders.

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With the exception of our Chairman/CEO, Xu Kecheng, the members of our senior management do not directly or indirectly own shares of Common Stock and thus their interests may not be aligned with the interests of the Company's stockholders, which could be a detriment to the Company's stockholders.

While the members of our senior management have significant influence over our business, including decisions regarding operations, pursuing mergers and acquisitions, the disposition of the Company's assets, and other significant corporate actions, none of them, with the exception of Xu Kecheng, directly or indirectly own shares of Common Stock. Since they are not personally exposed to the same risk of investment loss with respect to ownership of Common Stock that the Company's shareholders face, these individuals may not share a common perspective with our shareholders regarding the benefits (or detriments) of contemplated corporate actions and they may not analyze potential corporate actions and opportunities in the same manner that they would if they were shareholders. To the extent that the Company's senior management may lack "shareholder perspective" in its decision making process, management may make decisions that ultimately do not benefit the Company's shareholders.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and the standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting, or disclosure of our public accounting firm’s report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and attention away from revenue generating activities.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. For example, on January 30, 2009, the SEC adopted rules requiring companies to provide their financial statements in interactive data format using the eXtensible Business Reporting Language, or XBRL. We will have to comply with these rules by June 15, 2011. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities which could have an adverse effect on our business.

Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.

Our common stock, which is currently quoted on the OTCQB, may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Securities Exchange Act for 1934, as amended (the “Exchange Act”). Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than US$5.00 per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on the NYSE Amex, or even if so, has a price less than US$5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than US$5 million.

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The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us the trading price for our common stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline.

We do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.

We do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their shares of our common stock at or above the price they paid for them.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended June 30, 2011, the Company had no unregistered sales of equity securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (Removed and Reserved).

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits

EXHIBIT NO.		DESCRIPTION		LOCATION

2.1	Share Exchange Agreement, dated November 12, 2008, by and among World Trophy Outfitters, Inc., Fast More Limited, Cheer Gold Development Ltd. and Floster Investment Limited	Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

3.1	Articles of Incorporation of World Trophy Outfitters, Inc. (n/k/a Chisen Electric Corporation)	Incorporated by reference to Exhibit 3(i).1 to the Registrant’s Registration Statement on Form SB-2 as filed with the SEC on September 23, 2005

3.2	Certificate of Amendment to Articles of Incorporation of Chisen Electric Corporation (name change)	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

3.3	Amended and Restated Bylaws of Chisen Electric Corporation	Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

3.4	Certificate of Incorporation of Fast More Limited, dated December 17, 2007	Incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

3.5	Memorandum and Articles of Association of Fast More Limited, dated as of December 17, 2007	Incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

3.6	Certificate of Incorporation of Changxing Chisen Electric Co., Ltd.	Incorporated by reference to Exhibit 3.5 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

3.7	Articles of Association of Changxing Chisen Electric Co., Ltd.	Incorporated by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

3.8	Business Registration Certificate of Changxing Chisen Electric Co., Ltd. (English Translated Version and Mandarin Version)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.1	Agreement on Establishment of Changxing Chisen Physical Chemistry Power Research and Development Center, dated April 30, 2008	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.2	Form of Labor Contract	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.3	Lease Agreement, dated March 30, 2008, by and between Changxing Chisen Electric Co., Ltd. and Changxing Xiangyi Industrial Park Investment Co., Ltd.	Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.4	Contract For Loan on Guarantee, by and among Zhejiang Changxing Agricultural Cooperative Bank, Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd.	Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.5	Renminbi Loan Contract, dated January 11, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Corporation (Changxing Branch)	Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.6	Renminbi Loan Contract, dated April 11, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Corporation (Changxing Branch)	Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.7	Renminbi Loan Contract, dated March 31, 2008, by and between Changxing Chisen Electric Co., Ltd. and Bank of China (Hong Kong) Limited Shanghan Branch	Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.8	Loan Contract (Short Term), dated August 15, 2008, by and between Changxing Chisen Electric Co., Ltd. and Bank of China Changxing Branch	Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.9	Acceptance Agreement, dated August 25, 2008, by and between Changxing Chisen Electric Co., Ltd. and Industrial Bank Co., Ltd. Hangzhou Branch	Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.10	Acceptance Agreement of Commercial Bill, dated September 18, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Bank Co., Ltd. Changxing Branch	Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.11	Cooperation Agreement, dated April 20, 2008, by and between Changxing Chisen Electric Co., Ltd. and Xiamen University	Included by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K as filed with the SEC on June 28, 2010

10.11	Acceptance Agreement of Commercial Bill, dated July 29, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Changxing Branch Co., Ltd.	Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.12	Acceptance Agreement of Commercial Bill, dated September 9, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Changxing Branch Co., Ltd.	Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.13	Components Purchase Contract, effective as of January 1, 2008, by and between Changxing Chisen Electric Co., Ltd. and Jiansu Xinri Electric Bicycle Co., Ltd.	Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.14	Supply Contract, dated April 22, 2008, by and between Changxing Chisen Electric Co., Ltd. And Jiangsu Yadea Science & Technology Development Co., Ltd.	Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.15	Sales Contract of Battery, dated November 10, 2007, by and between Changxing Chisen Electric Co., Ltd. and Hu Qinzhong, Yancheng Office	Incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.16	Sales Contract of Battery, dated February 17, 2008, by and between Changxing Chisen Electric Co., Ltd. and Song Chunwei	Incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

10.17	Compensation Agreement of Corporate Relocation Acquisition, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.

10.18	Investment Agreement, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang	Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.

10.19	Supplemental Agreement, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang	Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.

10.20	Xuyi Economic Development Zone Project Investment Contract, dated September 6, 2010, by and between Chisen Electric Jiangsu Co., Ltd. and Jiangsu Xuyi Economic Development Zone Administrative Committee	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on September 13, 2010.

10.21	Xuyi Economic Development Zone Project Investment Contract Supplemental Agreement, dated September 6 2010, by and between Chisen Electric Jiangsu Co., Ltd. and Jiangsu Xuyi Economic Development Zone Administrative Committee	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on September 13, 2010.

10.22	Electrode Purchase Contract, dated August 2, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu XiangFa Electric Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.25	Sales Contract, dated August 31, 2009, by and between Changxing Chisen Electric Co., Ltd. and Anqing Burui Power Supply Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.26	Contract, dated November 24, 2009, by and between Changxing Chisen Electric Co., Ltd. and Anyang City Yubei Gold and Lead Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.27	Parts Acquisition Contract, dated January 1, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu Xinri E-Vehicle Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.29	Contract, dated August 1, 2010, by and between Changxing Chisen Electric Co., Ltd. and Tianjin Aima Technology Company Limited (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.30	Supplementary Agreement of Changxing Chisen Electric Co., Ltd. Relocation Project (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.31	Contract of Guaranty of Maximum Amount, dated on our about February 10, 2010, by and between Agricultural Bank of China (Changxing County Branch) and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.32	Guarantee Contact, dated on or about April 2, 2010, by and between China Construction Bank Corporation (Changxing Branch) and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.33	Contract Guarantee of Maximum Amount, dated on or about April 14, 2009, by and between Shanghai Pudong Development Bank (Huzhou Branch) and Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.34	Guarantee Contract, dated on or about January 12, 2010, by and between Changxing Economic Development Zone and Zhejiang Changxing Ruilang Electric Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.35	Contract of Guarantee with a Maximum Amount, dated on or about July 1, 2008, by and between Bank of China (Changxing Branch) and Mr. Xu Kecheng (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.36	Contract of Guarantee, undated, by and between CITIC Trust Co., Ltd. and Zhejiang Changxing Xinguangyuan Co., Ltd. (RMB40,000,000) (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.37	Contact of Guarantee, undated, by and between CITIC Trust Co., Ltd. and Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. (RMB60,000,000) (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.38	Guarantee Contract (64720012302010005), dated January 13, 2010, by and among China Construction Bank Corporation, on the one hand, and Mr. Xu Kecheng and Ms. Zho Fangqin, on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.39	Guarantee Contract (64720012302010004), dated January 13, 2010, by and among China Construction Bank Corporation, on the one hand, and Mr. Xu Kecheng and Ms. Zho Fangqin, on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.40	Contract of Guarantee of Maximum Amount (33905201000030826), undated, by and between Agricultural Bank of China Changxing County Sub-branch, on the one hand, and Zhejiang Chisen Glass Co., Ltd., on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.41	Contract of Guarantee with a Maximum Amount (BOC 130), dated October 25, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and Bank of China Ltd., on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.42	Contract of Guarantee (3350012010AM00077300), dated November 16, 2010, by and between Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. and Bank of Communication (Huzhou Branch) (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.43	Contract of Guarantee (3350012010AM00077301), dated November 16, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and Bank of Communication (Huzhou Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.44	Guarantee Contract (6435009992012194), dated September 27, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.45	Guarantee Contract (64720012302010012), dated April 19, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.46	Guarantee Contract (647200123020100201), dated October 9, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.47	Guarantee Contract (64720092302010036), dated October 18, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.48	Guarantee Contract (647200923020100381), dated November 10, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.49	Contract of Guarantee (P2009M17SZJZH0001JF14-0081-1) under Trust Loan Contract No. P2009M17SZJZH0001JF14-0081-1 , undated, by and between Xu Kecheng and CITIC Trust Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.50	Contract of Guarantee (P2009M17SZJZH0001JF14-0081-2) under Trust Loan Contract No. P2009M17SZJZH0001JF14-0081-2), undated, by and between Xu Kecheng and CITIC Trust Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.51	Contract of Guarantee (003), by and between Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. and the Bank of China (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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EXHIBIT NO.		DESCRIPTION		LOCATION

10.52	Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd. dated March 8, 2010 (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.53	Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd., dated December 20, 2010 (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.54	Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Changxing Ruilang Electronic Company Limited dated October 18, 2010 (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.55	Summary of Oral Loan Agreement with Ai Ge Organism Products Company Limited	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.56	Electrode Purchase Contract, dated August 2, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu XiangFa Electric Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.57	Electrode Plate Supply Contract, by and between Changxing Chisen Electric Co., Ltd. and Anqing Borui Power Supply Co., Ltd., dated August 2, 2010 (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.58	Guarantee Contract (6472009992011036), dated March 31, 2011, by and between Xu Kecheng, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.59	Shanghai Pudong Development Bank Contract of Guarantee of Maximum Amount, dated March 31, 2011, by and between Shanghai Pudong Development Bank Huzhou Sub-branch and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

10.60	Shanghai Pudong Development Bank Contract of Guarantee of Maximum Amount, dated March 31, 2011, by and between Shanghai Pudong Development Bank Huzhou Sub-branch and Zhejiang Changxing Chisen Xingguangyuan Co., Ltd. (English Translated and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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EXHIBIT NO.		DESCRIPTION		LOCATION

14.1	Code of Business Conduct and Ethics	Incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

16.1	Letter to SEC from Pritchett, Siler & Hardy, P.C.	Incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2009

17	Resignation of Mathew Evans, dated November 12, 2008	Incorporated by reference to Exhibit 17 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

21	List of Subsidiaries	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

31.1	Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith

31.2	Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith

32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith

32.2	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith


99.1	Audit Committee Charter, dated January 15, 2009	Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

99.2	Compensation Committee Charter, dated January 15, 2009	Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

99.3	Corporate Governance and Nominating Committee Charter, dated January 15, 2009	Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

99.4	China Battery Industry Association Certificate of Ranking (English Translated Version)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

99.5	China News Article entitled “Electric Bicycles are Involved in Government’s Subsidy Program” (English and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

99.6	Subsidize Policy on New Energy Vehicle (English and Mandarin Versions)	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 9, 2011	By:	/s/ Xu Kecheng
		Name: Xu Kecheng
		Its: President, Chief Executive Officer and Principal Executive Officer

Date: August 9, 2011	By:	/s/ Liu Chuanjie
		Name: Liu Chuanjie
		Its: Chief Financial Officer, Principal Financial and Accounting Officer

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