UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


AMENDMENT NO. 1
  TO


ANNUAL REPORT


ON FORM 10-K





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the Fiscal Year Ended March 31, 2010





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

(I.R.S. Employerincorporation or organization)

Identification No.)





Jingyi Road, Changxing Economic Development Zone, Changxing, Zhejiang Province,


The People’s Republic of China





(Address, including zip code, of principal executive offices)





(86) 572-6267666


(Registrants’ telephone number, including area code)





Securities Registered Under Section 12(b) of the Exchange Act:  None.


Securities Registered Under Section 12(g) of the Exchange Act:  Common Stock, par value $0.001 per share





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No o




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes o    No o




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes o     No o




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 o     No o




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o




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




Large accelerated filer o    Accelerated filer o         Non-accelerated filer oSmaller Reporting Company o




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




Aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price as of September 30, 2009 was approximately $70,110,000.




The number of outstanding shares of the registrant’s common stock on June 28, 2010 was 50,000,000.





EXPLANATORY NOTE
 
 We are filing this Amendment No. 1 to our Annual Report on Form 10-K to restate our Cost of Sales, Gross Income, Operating Expenses and Earning Per Share figures in our Consolidated Statements of Operations and Other Comprehensive Income section of our financial statements and corresponding sections in the notes to our financial statements and in our MD&A, as well as to revise certain disclosures in Item 1 in order to conform to our disclosures made in our Registration Statement on Form S-1 (File No. 333-169850), including the Sections entitled “Competitive Business Conditions and Market Trends”,
“Cooperative Partnership”, “Development Strategy of the Company” and “Research and Development (R&D)”.  All other Items in this Amendment No. 1 remain materially unchanged.









CHISEN ELECTRIC CORPORATION


ANNUAL REPORT ON FORM 10-K


FOR THE YEAR ENDED MARCH 31, 2010





Index





TABLE OF CONTENTS





PART I


3ITEM 1.
Business

3ITEM 1A
Risk Factors

17ITEM 1B.
Unresolved Staff Comments

17ITEM 2.
Properties

17ITEM 3.
Legal Proceedings

19ITEM 4.
Submission of Matters to a Vote of Security Holders

19PART II


19ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19ITEM 6.
Selected Financial Data

21ITEM 7.
Management‘s Discussion and Analysis of Financial Condition and Results of Operations

21ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk.

29ITEM 8.
Financial Statements and Supplementary Data

29ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

29ITEM 9A(T).
Controls and Procedures

29ITEM 9B.
Other Information

30PART III


30ITEM 10.
Directors, Executive Officers, and Corporate Governance

30ITEM 11.
Executive Compensation

36ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

38ITEM 13.
Certain Relationships and Related Transactions, and Director Independence

39ITEM 14.
Principal Accountant Fees and Services

40PART IV


41ITEM 15.
Exhibits and Financial Statement Schedules

41SIGNATURES


45


- 2 -





PART I




ITEM 1.               Business




Forward Looking Statements




The following discussion of our financial condition and results of operations of Chisen Electric Corporation (formerly known as World Trophy Outfitters, Inc., and the term “World Trophy” is used when discussing the operations of the Company prior to November 12, 2008 and the “Registrant” when discussing its operations after November 12, 2008) 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.





Exchange Agreement





On November 12, 2008 (the “Closing Date”), World Trophy entered into a Share Exchange Agreement (the “Exchange Agreement”) with Fast More Limited, a Hong Kong investment holding company (“Fast More”), Cheer Gold Development Limited, a company organized under the laws of Samoa (“Cheer Gold”) and Floster Investment Limited, a company organized under the laws of Samoa (“Floster” and together with Cheer Gold, the “Stockholders”).
As a result of the share exchange, the World Trophy acquired all of the issued and outstanding securities of Fast More from the Stockholders in exchange for Thirty-Five Million (35,000,000) newly-issued shares of the World Trophy’s common stock, par value $0.001 per share (“Common Stock”), of which Thirty-Two Million Nine Hundred Thousand (32,900,000) shares were issued to Cheer Gold and Two Million One Hundred Thousand (2,100,000) shares were issued to Floster. As of the Closing Date, the Stockholders collectively beneficially own seventy percent (70%) of the voting capital stock of the Company, 65.8% of which is owned by Cheer Gold and 4.2% of which is owned by Floster. As a result of the Exchange, Fast More became a wholly-owned subsidiary of World Trophy.





Effective February 2, 2009, the Registrant amended its Articles of Incorporation to change its name from “World Trophy Outfitters, Inc.” to “Chisen Electric Corporation”. The following is disclosure regarding the Registrant, Fast More and Fast More’s wholly-owned and chief operating subsidiary, Changxing Chisen Electric Co., Ltd. (hereinafter referred to as “CCEC”, and together with Fast More and the Registrant, the “Company”), the principal business activities of which consist of the manufacture and sale of sealed lead-acid battery products primarily in the electric bicycle
market.


- 3 -





Prior Operations of World Trophy





World Trophy was formed as a Nevada corporation on January 13, 2005, and had been in the business of selling big game hunting packages to high end clients who sought to hunt with the top tier big game outfitters.  Its main product sold was hunting trips, which included the hunting license and guide fees.  World Trophy purchased and resold several hunting trips, selling them at a profit or for a mark-up. World Trophy also provided incidental advisory services to purchasers of hunting trips by helping these clients select an appropriate hunt, with no additional fees charged for these services.





During the year ended March 31, 2008, World Trophy sold its entire inventory of big game hunts, but was unsuccessful in developing a profitable business.  World Trophy ceased its operations and became a development stage company effective April 1, 2008. Prior to the Exchange, World Trophy focused its efforts on seeking a business opportunity and had been in the process of locating and negotiating with business entities for the merger of a target company into World Trophy.




The Registrant’s Common Stock is currently traded on the Over-The-Counter Bulletin Board under the symbol “CIEC”. Immediately prior to the Exchange, World Trophy was considered a “blank check” development stage company with US$51,039 in assets and a net loss of US$(27,977) for the three (3) months ended September 30, 2008.  On the Closing Date, the Registrant did not have any liabilities.





Current Operations of the Company




Fast More is an investment holding company incorporated in Hong Kong on December 17, 2007 with limited liability. CCEC was founded in Huzhou, Zhejiang Province in China in 2002. On February 16, 2008, Fast More acquired the 51%, 9% and 40% equity interests in CCEC from Mr. Xu Kecheng, Mr. Xu Keyong and BEME International Co., Ltd., respectively, for RMB6,502,500 (approximately US$926,000), RMB1,147,500 (approximately US$164,000) and RMB 5,100,000 (approximately US$726,000), respectively. Upon the completion of these acquisition transactions, CCEC became the wholly-owned and chief operating subsidiary of Fast More.  Since the ultimate beneficial owner of Fast More was, at all times, the
substantial stockholder of CCEC (Mr. Xu Kecheng), the ownership transfer transaction was accounted for as a transfer of entities under common control in accordance with the FASB Accounting Standards Codification (“ASC”) Topic 805.




On May 18, 2009, the Registrant incorporated Chisen Technology Holdings Corporation in Nevada as its wholly-owned subsidiary.  Chisen Technology Holdings Corporation is authorized to do business in the State of Washington and up to the date of filing, this entity has no operations.





Summary of the Company’s Current Business




The Company is a leading lead-acid motive battery producer in China's personal transportation device market. Our motive battery products are sold under our own brand name and are predominantly used in electric bicycles and distributed and sold in China. Electric bicycles become increasingly popular. Among all types of batteries for electric bicycles, the lead-acid motive battery is the preferred choice for electric bicycle manufacturers in China because of its cost efficiency.


- 4 -





Today, the Company manufactures over 14,480,000 batteries each year, has more than 2,500 employees and is one of China's largest manufacturers of lead-acid batteries for electric-powered bicycles (LABEBs). For each of the Company’s fiscal years ended March 31, 2010 and 2009, sales revenues were US$177,192,000 and US$109,020,000, respectively, and our net income during the same periods amounted to US$9,500,000 and US$8,880,000, respectively.





The Company is located at Changxing Economic Development Zone at the bank of the Taihu Lake 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. The Company’s corporate offices are located at Jingyi Road, Changxing Economic Development Zone, Changxing, Zhejiang Province, The People’s Republic of China.




The Company’s Products




Description of our Lead-Acid Motive Batteries




The key components of a lead-acid motive battery include electrode plates and fiberglass dividing plates. The electrode plates are coated with oxidized lead and alloy lead. Pairs of positively charged electrode plates and negatively charged electrode plates each separated by a fiberglass dividing plate are bound together by metal strip and installed into the plastic casing of a lead-acid motive battery. The battery is then filled with sulfuric acid and charged with electricity. The number and the size of electrode plates required to be installed in a lead-acid motive battery will depend on the required level of its storage capacity and the power output.




We produce and offer ten (10) models of lead-acid motive battery products for sale and are mainly engaged in the production of the following models of lead-acid motive battery products for electric bicycles:





Product

Dimensions (LxWxH)

Weight

(kg)


Power

Output

(w)


Estimated

Hours

Required

Per

Charging

(1)


Estimated

Minutes

of Use

Per

Charging

(min)(2)


Estimated

Travel

Distance Per

Charging (km)6-DZM-10Ah

151×99×98


4.2



60



10
h


135-145



45-506-DZM-12Ah

151×99×102


4.3



72



10
h


120-130



45-506-DZM-16Ah

151×99×118


5.6



96



10
h


120-130



50-606-DZM-17Ah

181×76×166


6.3



102



10
h


120-130



50-606-DZM-20Ah

181×76×170


7.0



120



10
h


120-130



60-708-DZM-16Ah

200×100×118


7.4



128



10
h


120-130



60-708-DZM-18Ah

250×100×128


9.0



144



10
h


120-130



60-708-DZM-20Ah

250×100×128


9.05



160



10
h


120-130



60-706-DZM-24Ah

175×165×125


9.5



144



10
h


120-130



70-806-DZM-25Ah

250×78×118


8.85



150



10
h


120-130



70-80




- 5 -




(1) Estimated hours required per charging refers to the estimated number of hours required for charging the battery from nil to full storage capacity.




(2) Estimated hours of use per charging refer to the estimated maximum number of hours for which the battery is able to be used on each occasion when it is charged to its full storage capacity.





All the lead-acid motive battery products produced by us are re-chargeable and can be recharged approximately 500 times. They are standardized and can be used in electric bicycles, electric motorcycles and electric cars produced by different manufacturers.





Pictures of Our Products




6-DZM-10AH

6-DZM-12AH





6-DZM-16AH

6-DZM-17AH




6-DZM-20AH

8-DZM-18AH/8-DZM-20AH


- 6 -





6-DZM-24AH

6-DZM-25AH8-DZM-16AH




Distribution Methods




We sell our lead-acid motive battery products principally to manufacturers of electric bicycles. However, with the growing retail market for replacement of battery products, i.e. our secondary market, we have also strengthened our efforts in the sales of battery products to sales representatives and exclusive distributors which are strategically located in 27 provinces, autonomous regions and directly-administered municipalities in China.  The Company currently has exclusive sales agreements with distributors at the provincial and county level, and employs sales representatives in each province across China to help distributors to further distribute products from counties to
towns.  We have established and maintained long-term relationships with distributors who we believe have local business experience and established regional sales networks.




Our largest distributors are located in the cities of Yancheng and Haimen in Jiangsu Province and in the city of Tangshan in Hebei Province.





Market Share




Zhejiang is the main province of producing LABEBs, the output of which accounted for approximately half of the total domestic output of LABEBs in China. According to the China Battery Industry Association, in 2009, total output of the top five (5) enterprises operating in Zhejiang accounted for approximately 35 million LABEBs of the approximate 100 million sold across China in the personal transportation market.





According to market research results of China Battery Industry Association, for the year ended March 31, 2010, our sales of lead-acid battery products in China represented approximately 11.84% of the total market size (in terms of sales revenue) of the lead-acid motive battery products for electric bicycles in China.


- 7 -





The table below shows the three top manufacturers of LABEBs in China, and their revenues during fiscal year ended March 31, 2010:




Battery Manufacturer

Production Location

Revenues in 2010

(approximate)

US$(Million)


Market ShareZhejiang Chaowei Power Co., Ltd.

Changxing, Zhejiang


338.31



22.6
%Tianneng Power International

Changxing, Zhejiang


330.83



22.1
%Changxing Chisen Electric Co., Ltd.

Changxing, Zhejiang


177.19



11.84
%





Revenues generated by the Company in China accounted for 100% of the Company’s revenues in the fiscal years ended March 31, 2010 and 2009.





The Company’s battery production reached 14.48 million units and 7.8 million units, respectively for the fiscal years ended March 31, 2010 and 2009.





Competitive Business Conditions and Market Trends




At the United Nations Climate Change Conference 2009, the Chinese Government announced that in 2020 greenhouse gas emissions will be reduced approximately 40% to 45% from 2005’s basis. We believe that in the next several years, due to intensifying global environmental concerns, there will be increased development of the electric bicycle. At present, due to the fact that the use of electric bicycles is very much in line with the energy-saving and environmental protection policy initiated by the Chinese government, the development of electric vehicles won its support. The electric bicycle, as an environment-friendly and convenient
personal transportation vehicle, bears the advantages of convenience, non-pollution, safety and less energy consumption. In accordance with the measured data of the electric bicycle market demand in China as reported in a recent article at www.chinanews.com.cn/cj/cj-cyzh/news/2010/03-31/2201616.shtml, it was estimated that 25,000,000 electric bicycles will have been sold in China by the end of 2010.
 
 With respect to new product trends in the market, Europe, the United States and Japan now use primarily a lithium-ion battery.  This reflects a trend not only in the electric bicycle industry, but also in the electric automobile and telecommunications industries.  In contrast, 95% of all electric bicycles produced in 2009 in China were powered by lead-acid motive batteries, and less than 5% of electric bicycles produced in 2009 were powered by lithium-ion batteries.  Governments in the United States, Japan, Europe and China are encouraging the development of motive battery products that are more environmentally
friendly with increased power output and less weight.  Although we expect the development of lithium-ion batteries to accelerate over the next few years, we do not believe that the lithium-ion battery will replace the usage of the lead-acid motive battery in the electric bicycle industry in the next 3 to 5 years unless there is significant improvement with the safety and cost of production of lithium-ion batteries.


- 8 -


In 2009, the top electric bicycle brand in terms of production was Taimei, followed by Xinri and Yadea. Each of these companies is a relatively small enterprise. We believe that continued industrial integration and brand concentration will continue to increase and that these famous brands will rapidly increase their market share.  We also believe that brands will become more diversified by an increasing influence of well-known brands on the market. Xinri’s electric bicycle was utilized at the Beijing 2008 Olympic Games and at the Paralympic Games, which is a great honor in China, and the Company was chosen as the only
manufacturer to supply environmentally friendly batteries to Xinri for its electric bicycle. The Company is also an alternative power source sponsor at the 2010 Shanghai World Expo, providing an eco-friendly solution to power the road signage at select Expo Park locations. Based on this, in the next several years, we will strive to create an international first-class brand and become the leader in providing “green” energy in the electric bicycle marketplace. Simultaneously, through constant research and development of new chemical energy technologies, we believe the Company will provide energy-savings and highly-effective energy solutions to our customers for the purpose of improving the quality of human life and a sustainable ecological environment.




Competition




Our chief competitors are Tianneng Power International Ltd. (“Tianneng”) and Zhejiang Chaowei Power Co., Ltd. (“Chaowei”). These companies were the first companies to enter the battery industry in China. For example, Chaowei and Tianneng are the leading companies in terms of production and sales volume.  Chaowei has a lot of after-sales service stores and takes an advantage in the secondary market by its continued business expansion. Tiannneng’s capital stock is listed on The Hong Kong Stock Exchange.





However, Chaowei and Tianneng do not have close cooperation with any of the top electric bicycle manufacturers in China. Although the Company entered into its battery industry later than some of its competitors, the Company has achieved success in establishing long-term strategic cooperation with many famous electric bicycle manufacturers in China, such as Xinri, Yadea, Taimei, Xinkelin and Lvyuan.




Cooperative Partnership




In April 2008, CCEC set up the Zhejiang Changxing Chisen Physical-Chemical Power Supply Research and Development Center at the College of Chemistry and Chemical Engineering at Xiamen University in order to research and develop new products. Xiamen University is a first class comprehensive University in China with 9 graduate schools, 120 research institutions and cooperative inter-university ties to over 100 institutions worldwide. A copy of the Company’s Agreement with Xiamen University is attached hereto as Exhibit 10.11.




Development Strategy of the Company




With a leading position in the LABEB battery product market in China, our product research and development capability and our cooperative partnership, we believe we are well positioned to capture additional business opportunities in China's personal transportation device market. In light of those prevailing economic trends of developing alternative transportation devices, aiming to reduce the reliance on oil and gas and producing lesser emissions, we intend 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
lead-acid back-up batteries, lithium iron motive batteries, lithium iron back-up battery products and complementary electrical equipment, such as chargers, controllers and motors, for different types of personal transportation devices. It is our goal to become the largest battery developer and producer with a first-class sales and service network in China.


- 9 -





The top five lead-acid motive battery manufacturers in 2009 accounted for over 50% of the total market share with the Company, representing approximately 11.84% of the total market share, ranking third in the industry.  The Company has taken the following measures to set up its position as one of the leaders in the industry: (1) the Company invested in an automatic production line with the maximum daily production capacity increasing by 120% compared with that in 2008; (2) the Company is actively seeking an acquisition target to expand its market share and develop its production capacity.





Research and Development (R&D)




R&D Summary




During the fiscal year ended March 31, 2010, the Company doubled its Company-sponsored research and development activities expenses to US$244,000 from US$117,000 for the fiscal year ended March 31, 2009 in order to further enhance the competitiveness of the Company’s products by the improvement of production technique and the release of new lead-acid battery products.





The Company plans to spend US$320,000 during fiscal year ending March 31, 2011, US$410,000 during fiscal year ending March 31, 2012 and US$538,000 during fiscal year ending March 31, 2013 on Company-sponsored research and development activities.





In order to further enhance the competitiveness of our products, the Company has expended vast resources on R&D and technology innovation. The Company desires to increase its competitiveness through the improvement of lead-acid battery production techniques and the launch of new-model power battery.





On the development of new products lines, the Company has conducted research on ultra lead –acid motive batteries, wind and solar energy storage batteries, VRLA batteries applied for telecommunication and uninterruptible power supply (UPS), lithium-ion (Li-ion) power batteries, anode material for Li-ion batteries and Li-ion ultra capacitors.  The ultra lead-acid motive battery, which was released in March 2009, is over 8% greater than other products of same type on performance indicators.    In February 2009, the Company developed lead-acid batteries for electric road vehicles, which have occupied some market share in the domestic market.





The Company has finished small lot production on VRLA batteries applied for telecommunication and UPS, which have generated positive customer feedback in the testing market in Southeast Asia and Europe.  With the release of the plan for the revitalization of China’s new energy and the vigorous promotion of the Chinese government to new energy motors, we believe such products will occupy a significant market share. Li-ion ultra capacitors and anode material for Li-ion batteries have passed the trial production phase and both are deemed to be state-of– the art techniques. The products have entered into the alpha test phase.


- 10 -





Sources and Availability of Raw Materials from Suppliers




The Company purchases the raw materials used in the manufacturing of its products from numerous sources. The Company believes that all necessary raw materials for its products are readily available and will continue to be so in the foreseeable future. The Company has never had, nor does it anticipate experiencing, any shortages of such materials.




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 each of the two fiscal years ended March 31, 2010 and March 31, 2009, the average selling price of electrolytic lead by our suppliers was approximately RMB15,000 (approximately US$2,200) and RMB15,000 (approximately US$2,200) per ton, respectively. There were slight fluctuations on the average selling price of electrolytic lead for the fiscal year ended March 31, 2010 and the
average selling price of electrolytic lead decreased by 1.57% as compared to the fiscal year ended March 31, 2009. For each of the two financial years ended March 31, 2010 and March 31, 2009, 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 believe the Company generally maintains sufficient quantities of inventories of its products to meet customer demand.




The Company has entered into written contracts with several suppliers and vendors. The Company has major suppliers who accounted for the following percentage of total purchases and total trade payables in the fiscal years ended March 31, 2010 and 2009:





Purchases


Trade PayablesMajor Suppliers

Fiscal year ended

March 31, 2010


Fiscal year ended

March 31, 2009


Fiscal year ended

March 31, 2010


Fiscal year ended

March 31, 2009Company A


23.96
%


17.46
%

US$
0


US$
0Company B


15.71
%


6.12
%

US$
1,061,000


US$
394,000Company C


12.69
%


19.44
%

US$
1,971,000


US$
1,539,000Company D


8.78
%


5.47
%

US$
0


US$
415,000Company E


6.92
%


0
%

US$
0


US$
0




- 11 -





Key Customers





Trade receivables related to the Company’s major customers for the years ended March 31, 2010 and 2009 comprised 80% and 85% of all trade receivables as of March 31, 2010 and 2009, respectively.  Trade payables related to the Company’s major suppliers for the years ended March 31, 2010 and 2009 comprised 20% and 24% of all trade payables as of March 31, 2010 and 2009, respectively. The Company’s major customers for the fiscal years ended March 31, 2010 and 2009 accounted for the following percentages of total revenue and trade receivables:




Sales


Trade ReceivablesMajor Customers

Fiscal year ended

March 31, 2010


Fiscal year ended

March 31, 2009


Fiscal year ended

March 31, 2010


Fiscal year ended

March 31, 2009Company X


21.08
%


47.40
%

US$
26,283,000


US$
29,598,000Company Y


19.08
%


6.34
%

US$
14,005,000


US$
1,609,000Company Z


6.77
%


0.47
%

US$
2,747,000


US$
109,000




Employees





As of the date of this Annual Report, the Company had 2,566 full-time employees.





Intellectual Property




The Company submitted the trademark “” to be registered in Class 20 in China in July, 1999.


On November 21, 2000, the protection of which was granted by State Trademark Bureau from November 21, 2000 to November 20, 2010. On March 21, 2009, the trademark was transferred from Changxing Chisen Co., Ltd. to Changxing Chisen Electric Co., Ltd., which was verified by State Trademark Bureau.





The Company submitted the trademark “” to be registered in Class 12 in China in July, 1999.


On December 28, 2000, the protection of which was granted by State Trademark Bureau from December 28, 2000, to December 27, 2010. On March 21, 2009, the trademark was transferred from Changxing Chisen Co., Ltd. to Changxing Chisen Electric Co., Ltd., which was verified by State Trademark Bureau.





The Company submitted the trademark “” to be registered in China in Class 9, December 2002. The valid period of which lasts from April 21, 2004 to April 20, 2014 after the Company received approval from State Trademark Bureau on April 21, 2004. On December 28, 2006, the trademark was transferred from Changxing Chisen Co., Ltd. to Changxing Chisen Electric Co., Ltd., which was verified by State Trademark Bureau.


- 12 -





The Company submitted the trademark “” to be registered in Class 9 in China in March, 2004.


On March 28, 2006, the protection of which was granted by State Trademark Bureau from March 28, 2006 to March 27, 2016. On December 28, 2006, the trademark was transferred from Changxing Chisen Co., Ltd. to Changxing Chisen Electric Co., Ltd., which was verified by State Trademark Bureau.





The Company submitted the trademark “” to be registered in China in Class 9, November 2005. On November 21, 2008, State Trademark Bureau granted the protection of which from November 21, 2008 to November 20, 2018.





The Company submitted the trademark “” to be registered in China in Class 9, in April 2006. On April 28, 2009, the protection of which is granted by State Trademark Bureau from April 28, 2009 to April 27, 2019.




The Company submitted the trademark“” to be registered in China in Class 9, April 2006. On April 28, 2009, the protection of which is granted by State Trademark Bureau from April 28, 2009 to April 27, 2019.




The Company submitted the trademark “” to be registered in Benelux, Egypt, Germany, France, Hungary, Italy, Russian Federation, Vietnam, United Kingdom, Greek, Australia, America in Class 9, August 2007. Protection was granted in Benelux from August 8, 2008 to January 21, 2018, in Australia from September 11, 2008 to January 21, 2018, in United Kingdom from January 21, 2008 to January 21, 2018 and in the United States from January 21, 2008 to January 21, 2018 .




The Company submitted the trademark “” to be registered in Class 6 in China in September 2007.




The Company submitted the trademark “” to be registered in Class 12 in China in September 2007.





The Company submitted the trademark “” to be registered in China in Class 9, January 2008.




The Company submitted the trademark “” to be registered in Class 9 in China, in April 2008.





The Company submitted the trademark “” to be registered in Class9 in China on May 4, 2008.


- 13 -





The Company submitted the trademark “” to be registered in Class9 in China, in May 2008.




The Company submitted the trademark “” to be registered in China from Class 1 to Class 45 in May 2008.





The Company submitted the trademark “” to be registered in other 36 classes in China, in June 2008





The Company submitted the trademark “” to be registered in Class 9 in Cambodia, Thailand, Malaysia, Indonesia and India, in August 2008, of which, the registration application in Cambodia was rejected and a second application has been submitted by the Company.




The Company submitted the trademark “” to be registered in Class 9 in China in August 2008.




The Company submitted the trademark “”to be registered in Class9 in China, in December 2009.





The Company currently holds 25 patents in total. Others are still pending.





The Company currently has one domain name, http://www.chisenpower.com. This domain name is in good standing.




Honors and Certificates Company’s Qualification and Honors





·
China Foundation of Consumer Protection High Quality Product Certification





·
China Famous Trademark





·
Huzhou Municipal Government High Quality Enterprise Certificate





·
Zhejiang Famous Product Certification (December 2007)





·
Zhejiang Clean Production Enterprise Certificate





·
Zhejiang Patent Demonstration Enterprise





·
Zhejiang Advanced Information Management Enterprise





·
Zhejiang Top 100 Most Innovative Enterprise





·
Zhejiang Famous Trademark Enterprise Certificate (February 2009)





·
“AAA” Credit Enterprise


- 14 -





·
Customer Satisfaction “AAA” Enterprise of National Electric Industry





·
The “AAA” Trust-worthy Enterprise of Zhejiang Province





·
Best New Product of  Northern China International Bicycle Fair in 2010





·
Best New Technology of  Northern China International Bicycle Fair in 2009





Compliance with Environmental Regulations and Other Laws




We are subject to the national and local environmental laws and regulations in China on environmental matters, such as the discharge of waste water, exhaust fumes and solid waste. The main pollutants generated by us are lead dust or particles and waste water which contain lead and sulfuric acid. During the operation of our production, we did not release any toxic element other than those that are permitted under the relevant laws and regulations.




Lead is the key raw material used in our production of lead-acid motive battery products. An excessive intake of lead dust or particles, whether through inhaling or skin contact, could have harmful effect on health. Lead poisoning may also result from occupations that involve close and frequent contact with or exposure to lead dust or particles.




Lead dust and particles are generated during our production process. Our workers are exposed to electrode plates during different stages of our production process.




Pursuant to the applicable environmental laws and regulations in China, we are obliged to install environmental protection equipment to ensure effective removal of lead dust and particles generated during our production process. We have installed such equipment at each of our production plants.





Our production process generates waste water containing lead and sulfuric acid. Such waste water will be neutralized and treated to remove lead contents in accordance with the applicable environmental standards in China. We have installed such waste water treatment facilities at all our production plants. Waste water generated at our production process, after the required treatment, will either be collected and reused for our production requirements or discharged to the municipal waste water collection systems for further treatment and discharge to the environment.




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 once a year. The medical checks include measurement of blood lead level.


- 15 -





Business Qualification and Licenses




General Business License




According to certain corporate laws of the PRC, in order to be a lawfully established company in China, the relevant corporate registration authority shall issue a business license, the date of which shall be the date of the establishment of the company. The company business license shall state the name, domicile, registered capital, actually paid capital, business scope and the name of the legal representative of such company. If any of the items as stated in the business license is changed, the company shall modify the company’s registration, and the company registration authority shall issue a new business license.




CCEC obtained its business license on February 25, 2002, which such license was issued by the Huzhou Administration for Industry and Commerce. According to the Industrial Product Production License Control Regulation of the PRC, enterprises which manufacture lead-acid batteries are permitted to engage in said production if the company obtains a production license.





On January 13, 2005 the Administration of Quality Supervision, Inspection and Quarantine of the PRC issued a Production License to CCEC (the license number XK06-044-00223).  On August 17, 2007, due to the fact that the Company added new product lines, an updated Production License with the same license number was reissued to CCEC.





Environmental Reports, Certifications and Licenses





According to certain environmental laws and regulations in China, the Department of Environmental Protection Administration under the State Council shall, in accordance with the national standards for environment quality and China’s economic and technological conditions, establish the national standards for the discharge of pollutants. The People's Governments of Provinces, Autonomous Regions and Municipalities directly under the Central Government may establish their local standards for the discharge of pollutants for items not specified in the national standards. With regard to items already specified in the national standards, they may set local standards, which are more stringent than the national
standards, and report the local ones to the Department of Environmental Protection Administration under the State Council for the record. Units that discharge pollutants in areas where the local standards for the discharge of pollutants have been established shall observe such local standards.





On September 5, 2008, the Changxing Environmental Protection Bureau issued the Notice of Examination Opinion approving the Company’s Environment Effect Report on its Relocation and Extension of the Company’s 1500 unit-per-year Lead-acid Battery Production Project.





On October 11, 2007, the Beijing TIRT Quality Certification Center for the Environment issued the ISO14001 Certificate (number 04807E20059R0M) to the Company and signed-off on the environmental management system applied in the Company’s production and management activities.




On July 31, 2007, the Beijing TIRT Quality Certification Center for the Environment issued the ISO9001 Certificate to the Company (number 04807Q10708R0M) agreeing that the quality management system applied in the Company’s production and management activities.


- 16 -





On September 20, 2008, the Changxing Environmental Protection Bureau issued the Pollutant Discharge License to the Company (license number HuChang080042).





On June 22, 2010, the China Quality Mark Certification Group issued OHSAS18001 Certificate (number CQM-33-2004-0036-0001) to the Company after the Company passed its evaluation on Occupational Health and Safety Assessment Series.





ITEM 1A             Risk Factors




Not required for a "smaller reporting company".




ITEM 1B.            Unresolved Staff Comments




None.





ITEM 2.               Properties




All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of fifty (50) years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.





The Company maintains leases with Changxing Xiangyi Industrial Park Investment Co. for the purpose of the production of its battery products at Xiangyi Industrial Park, Jing’er Road, Changxing Economic Development Zone, Zhejiang, The People’s Republic of China. Those leases are described in the table below:




Address

Lessor

Area

(Square

meters)

Rental

Amount

Per year

(US$)

Commencement

Date

Termination

Date

NoteNo.8 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

6,200

68,867

August 1, 2008

July 31, 2013

The annual rent will increase by 5% yearly from August 1, 2009.No.4 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

6,200

68,867

August 1, 2008

July 31, 2013

The annual rent will increase by 5% yearly from August 1, 2009.The North Part of the No. 6 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

34,434

August 1, 2008

July 31, 2013

The annual rent will increase by 5% yearly from August 1, 2009.


- 17 -





No.1 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

6,200

70,386

January 1, 2009

December 31, 2013

The annual rent will increase by 5% yearly from January 1, 2010.The North Part of the No. 2 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

35,193

February 8, 2009

February 7, 2014

The annual rent will increase by 5% yearly from February 8, 2010.The South Part of the No. 2 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

35,193

February 1, 2009

January 31, 2014

The annual rent will increase by 5% yearly from February 1, 2010.The South Part of the No. 5 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

35,193

February 16, 2009

February 15, 2014

The annual rent will increase by 5% yearly from February 16, 2010.No.7 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

6,200

70,386

February 16, 2009

February 15, 2014

The annual rent will increase by 5% yearly from February 16, 2010.The South Part of the No. 6 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

35,475

October 16, 2009

October 15, 2014

The annual rent will increase by 5% yearly from October 16, 2010.The  North Part of the No. 5 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

3,100

35,475

October 16, 2009

October 15, 2014

The annual rent will increase by 5% yearly from October 16, 2010.No.3 Factory Building, Xiangyi Industrial Park, Economic Development Zone, Changxing, Zhejiang, China

Changxing Xiangyi Industrial Park Investment Co.

6,200

70,950

January 18, 2010

January 17, 2015

The annual rent will increase by 5% yearly from January 18, 2011.


- 18 -





In addition to the leases set forth above, the Company’s office space at Jingyi Road is a fixed asset of the Company. In 2004, CCEC purchased from the Chinese government land use rights to use such land for 50 years for RMB4,470,000 (approximately US$650,598) and the building and other facilities thereon were contributed by the Company.  The land area and the covered area are 53,974.42 square meters and 33,145.79 square meters, respectively.





ITEM 3.
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 March 31, 2010 and as of the date of this Annual Report, there was no pending or outstanding material litigation with the Company.





ITEM 4.
Submission of Matters to a Vote of Security Holders




On November 13, 2009, the Company held its annual meeting of the stockholders for the fiscal year ended March 31, 2009.  At the annual meeting the stockholders of the Company of record as of the close of business on October 7, 2009 voted in favor of re-electing Xu Kecheng, Liu Chuanjie, Gong Xiaoyan, He Zhiwei, Dong Quanfeng, Yun Hon Man and Jiang Yanfu to serve as the Company’s directors and ratified the appointment of Mazars CPA Limited to serve as the Company’s independent registered public accounting firm for the fiscal year ended March 31, 2010.





PART II




ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities




Market for Common Equity




Our Common Stock formerly traded on the OTCBB under the symbol “WTRY” from October 15, 2007 to February 2, 2009 and has traded (and continues to trade) under the symbol “CIEC” since February 2, 2009. There has been an extremely limited public market for our Common Stock.  As of the date hereof, 50,000,000 shares of Common Stock were issued and outstanding.





When the trading price of our Common Stock is below US$5.00 per share, the Common Stock is considered to be a “penny stock” that is subject to rules promulgated by the SEC (Rule 15-1 through 15g-9) under the Exchange Act. These rules impose significant requirements on brokers under these circumstances, including: (a) delivering to customers the SEC’s standardized risk disclosure document; (b) providing customers with current bid and ask prices; (c) disclosing to customers the brokers-dealer’s and sales representatives compensation; and (d) providing to customers monthly account statements.


- 19 -




The following table sets forth on a per share basis for the periods shown, the high and low closing bid prices of our Common Stock. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.




Closing Bid Prices

High (US$)


Low (US$)Calendar Year Ended December 31, 20094th Quarter


7.51



4.103rd Quarter


4.15



1.502nd Quarter


4.00



1.501st Quarter


1.70



0.93Calendar Year Ended December 31, 20084th Quarter


3.30



1.054th Quarter (prior to 3 for 1 split)


0.10



0.103rd Quarter:


0.10



0.102nd Quarter:


0.10



0.101st Quarter:


0.10



0.10





The high and low bid quotations for the Common Stock as of March 31, 2010 were $7.75 and $6.24, respectively.  The market quotations represent prices between dealers, do not include retail markup, markdown, or commissions and may not represent actual transactions.





Dividends




Dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of the Board. We presently intend to retain all earnings, if any, for use in our business operations and accordingly, the Board does not anticipate declaring any cash dividends for the foreseeable future. We have not paid any cash dividends on our Common Stock.




Holders of Common Equity




As of June 22, 2010, we have issued Fifty Million (50,000,000) shares of our Common Stock to 87 holders of record.


- 20 -





The Company believes that it has more stockholders since many of its shares are held in "street" name. See also the “Security Ownership of Certain Beneficial Owners and Management” above for a table setting forth (a) each person known by us to be the beneficial owner of five percent (5%) or more of our Common Stock and (b) all directors and officers individually and all directors and officers as a group as of the date of this Annual Report, after giving effect to the Exchange. The Exchange occurred simultaneously with the cancellation of 18,658,200 shares of Common Stock held by Mr. Mathew Evans, World Trophy’s sole officer and director and World Trophy’s majority stockholder immediately
prior to the Exchange.





Securities Authorized for Issuance under Equity Compensation Plans




As of the date of this Annual Report, we have no compensation plans (including individual compensation arrangements) under which the Registrant’s equity securities are authorized for issuance.





Performance Graph




Not required for a “smaller reporting company”.




Options and Warrants





As of March 31, 2010 and as of the date of this Annual Report, the Registrant had no outstanding options or warrants.





Transfer Agent and Registrar




Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100, P.O. Box 17136, Salt Lake City, Utah 84117, telephone (801) 272-9294, facsimile (801) 277-3147, currently acts as the Registrant’s transfer agent and registrar.





ITEM 6.               Selected Financial Data




Not required for a “smaller reporting company”.





ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations





Forward Looking Statements





The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This Annual Report includes 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 Annual 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 place on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.





The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Annual Report.


- 21 -





Summary of Significant Accounting Policies





Accounting Principles





The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).





Basis of Consolidation





The consolidated financial statements include the financial information of the Registrant and its subsidiaries. All significant inter-company accounts and transactions have been eliminated upon consolidation.





Revenue Recognition





Operating revenue represents sale of goods at invoiced value to customers, net of returns, discounts and value-added tax (“VAT”), and is recognized when goods are delivered to customers, the significant risks and rewards of ownership of goods have been transferred to customers, the sales price to the customers is fixed or determinable and the collectability of consideration is reasonably assured.





Costs related to shipping and handling are included in selling, marketing and distribution expenses.





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$502,000 and US$130,000 for the years ended March 31, 2010 and 2009, respectively.





Income Taxes





The Company provides for income taxes using the liability method. Under the liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current period.





A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.





Tax rate changes are reflected in the computation of the income tax provision during the period such changes are enacted.





Under the provision of ASC 740 Income Taxes, tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% of being realized on examination by the tax authority. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.




Property, Plant and Equipment (“PPE”) and Long-Term Land Lease Prepayments





PPE are stated at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets.





The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, overhaul and minor renewals and betterments, are normally charged to operating expenses in the period in which they are incurred.  In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the assets, the expenditure is capitalized.


- 22 -





Depreciation is provided, on a straight-line basis, to write off the cost less accumulated depreciation of each PPE item at rates based on their estimated useful lives from the date on which they become fully operational and after taking into account their estimated residual values as follows:





Buildings
20 yearsLeasehold improvements
Over the unexpired term of leaseFurniture, fixtures and office equipment
10 yearsMotor vehicles
5 yearsPlant and machinery
10 years





When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income.





Construction-in-progress consists of factories and office buildings under construction and machinery pending installation and includes the costs of construction, machinery and equipment, and any interest charges arising from borrowings used to finance these assets during the period of construction or installation. No provision for depreciation is made on construction-in-progress until such time the relevant assets are completed and ready for their intended use.





Long-term land lease prepayments are amortized on a straight-line basis over the term of lease.





Inventories





Inventories are stated at the lower of cost and net realizable value. Cost, which comprises all costs of purchase and, where applicable, costs of conversion and other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average costing method. The Company estimates the market price of its inventories with reference to the net realizable value based upon current market conditions and historical experience. Estimated losses on inventories represent reserves for obsolescence, excess quantities, irregulars and slow moving inventory, and which are charged to cost of sales.





Trade Receivables and Allowance for Doubtful Accounts





The allowance for the risk of non-collection of trade receivables takes into account credit-risk concentration. Collective debt risk is assessed based on average historical losses and specific circumstances such as serious adverse economic conditions. The Company’s estimate is based on a variety of factors, including historical collection experience, existing economic conditions and a review of the current status of the receivables. Trade receivables are presented net of an allowance for doubtful accounts of US$6,000 and US$6,000 as of March 31, 2010 and 2009, respectively.





Cash and Cash Equivalents





Cash represents cash on hand and deposits with financial institutions which are repayable on demand. Cash equivalents represent short-term, highly liquid investments purchased with an original maturity of three months or less, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.





Foreign Currency Translation





Items included in the financial statements of the Company’s subsidiary are measured using Renminbi (“RMB”), the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented in United States Dollars (“US$”), which is the Company’s presentation currency.





Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.





On consolidation, the results and financial position of all the group entities that have a functional currency different from the presentation currency are translated as follows:





(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;


(b) income and expenses for each statement of operations are translated at average exchange rates;


- 23 -





(c) all resulting exchange differences are recognized as a separate component of equity.





Fair Value of Financial Instruments





The ASC Topic 825, “Disclosures about Fair Value of Financial Instruments”, requires that the Company discloses estimated fair value of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.





The Company adopted ASC Topic 820 – Fair Value Measurements and Disclosures (“ASC 820”).  The adoption of ASC 820 did not have a material impact on our consolidated financial statements. ASC 820 establishes a three-tier fair value hierarchy to prioritize the inputs used in measuring fair value.  The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3).  The three levels are defined as follows:





Level 1: Observable inputs, such as unadjusted quoted market prices in active markets for the identical asset or liabilities.





Level 2: Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.





Level 3: Unobservable inputs reflecting the entity’s own assumptions in measuring the asset or liability at fair value.





The Company’s financial instruments consist principally of cash and cash equivalents, restricted bank balances, other financial assets, accounts receivable and payable, deposits, prepayment and other receivables, notes payable, accrued expenses and other liabilities, amount due from/to related parties and short-term borrowings which are carried at amounts that generally approximate their fair values because of  the short-term maturity of these instruments.





Warranty





Estimated warranty costs are recognized 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, which are reviewed periodically in light of actual experience. The reconciliation of the changes in the warranty obligation is as follows:





YearsendedMarch31,2010


2009US$’000


US$’000Balance as of April 1,


121



413Exchange realignment


1



9Accrual for warranties issued during the year


188



91Settlement made during the year


(84
)


(392
)Balance as of March 31,


226



121





Government Subsidies





Government subsidies are recognized as income over the periods necessary to match them with the related costs. Subsidies related to expense items are recognized in the same period as those expenses are charged in the consolidated statements of operations and other comprehensive income and are reported separately as other income.





Use of Estimates





The preparation of the consolidated financial statements in conformity with US GAAP requires the management to make 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 reported periods. The management evaluates these estimates and judgments on an ongoing basis and bases their estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that they believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying
values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies.


- 24 -





Actual amounts could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, inventory allowance, taxes and contingencies.





Related Parties





Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.


- 25 -


Results of Operations
 
 Results of Operations for the Fiscal Year Ended March 31, 2010 Compared To the Fiscal Year Ended March 31, 2009
 
 The following table sets forth a summary of certain key components of our results of operations for years indicated, in dollars and as a percentage of revenues.
 
 For The Years Ended March 31,2010


2009


2010


2009$ ’000


$’000Revenues


177,192



109,020



100.00
%


100.00
%Cost of sales


153,708



88,945



86.75
%


81.59
%Gross profit


23,484



20,075



13.25
%


18.41
%Sales, marketing and distribution


8,696



5,459



4.91
%


5.01
%General and administrative expenses


3,647



3,763



2.06
%


3.45
%Operating income


11,141



10,853



6.29
%


9.96
%Other income, net


1,671



758



0.94
%


0.70
%Interest Income


343



362



0.19
%


0.33
%Incomes before interest and income tax expenses


13,155



11,973



7.42
%


10.98
%Interest expenses


2,068



1,232



1.17
%


1.13
%Income before income tax expenses


11,087



10,741



6.26
%


9.85
%Income tax expenses


1,587



1,861



0.90
%


1.71
%Net income


9,500



8,880



5.36
%


8.15
%Other comprehensive income


106



278



0.06
%


0.25
%Comprehensive income


9,606



9,158



5.42
%


8.40
%
 
 Revenues and Cost of Sales
 
 Revenues increased by 62.53% to US$177,192,000 for the year ended March 31, 2010 compared with US$109,020,000 for the year ended March 31, 2009. This increase was driven primarily by the combined effect of increase in sales volume by 85.64% to 14,480,000 units for the year ended March 31, 2010 compared with 7,800,000 units for the year ended March 31, 2009, and the decrease in the average net selling price. The increase in sales volume was mainly attributable to the increase in the Company’s sales to existing and new electric bicycle manufacturers following the continued rapid growth in the electric bicycle market in the PRC. During the year ended March 31, 2010, there was increase in sales of approximately
434% to a major electric bicycle manufacturer, Taimei. The Company also expanded its production facilities during the year ended March 31, 2010 in response to the significant increase in demand of the Company’s battery products. However, the Company reduced the average selling price by approximately 11% in order to maintain the market competitiveness against other competitors in China.
 
 Cost of sales for the year ended March 31, 2010 and 2009 were US$153,708,000 and US$88,945,000, respectively. The increase in cost of sales of 72.81% was mainly due to increase in sales volume by 85.64%. The impact of increase in sales volume to cost of sales was partially offset by the decrease in unit of major material cost. Electric plates are the major raw material for our batteries, which are substantially made up of lead and which accounted for approximately 80% of our total production cost. The average cost of electric plates decreased by 10% as a result of decrease in average market lead price for the year.
 
 The cost rate for the year ended March 31, 2010 increased by approximately 5.16% from 81.59% for the year ended March 31, 2009 to 86.75% for the year ended March 31, 2010. The increase in cost rate was mainly due to the impact on decrease in average selling price outweighed the effect of decrease in average major material cost. In addition, the Company adopted several promotion activities during the year under which it offered sales discounts and rebates to the certain customers. This resulted in the reduction of total turnover and gross margin by approximately US$2,917,000 and 1.41%, respectively.
 
 Depreciation and Amortization
 
 Depreciation and amortization expenses were US$646,000 and US$451,000 for the fiscal years ended March 31, 2010 and 2009, respectively. This increase of US$195,000, or 43.24%, was mainly attributable to the Company’s acquisition of new equipment and machinery during the year ended March 31, 2010 as a result of the Company’s business expansion.
 
 General and Administrative Expenses
 
 General and administrative expense was US$3,647,000 and US$3,763,000 for the years ended March 31, 2010 and 2009, respectively, and mainly consisted of staff salaries and benefits, depreciation expenses, travel expenses, legal and professional fees, other taxes, entertainment expenses and vehicle expenses. This decrease of US$116,000, or 3.08%, was mainly caused  by the increase of social insurance and research and development expenses of approximately US$304,000, offset by the decrease of travel, rental, entertainment and other expenses of approximately US$392,000.


- 26 -




Sales, Marketing and Distribution
 
 Sales, marketing and distribution expenses were US$8,696,000 and US$5,459,000 for the years ended March 31, 2010 and 2009, respectively. This increase of US$3,237,000, or 59.30% was mainly due to the increase in transportation expenses and sales commissions related to the Company’s increased sales activities.
 
 Other Income, Net
 
 Net other income was US$1,671,000 and US$758,000 for the years ended March 31, 2010 and 2009, respectively. Due to economies of scale, we can purchase raw lead at a reasonable price. As a result, we purchase and then sell lead to our suppliers. Since this is not our core business, we consider this to be other income. This increase of US$913,000, or 120.45%, was mainly attributable to the net sales of lead to suppliers, which generated net other income of approximately US$1,204,000.
 
 Incomes before Interest and Income Tax Expenses
 
 Incomes before interest and income tax expenses increased from US$11,973,000 for the year ended March 31, 2009 to US$13,155,000 for the year ended March 31, 2010. This increase of US$1,182,000, or approximately 9.87%, was mainly driven by the Company’s increased selling activities and the Company’s sales of raw materials during the year ended March 31, 2010.
 
 Interest Expense
 
 Interest expense was US$2,068,000 and US$1,232,000 for the years ended March 31, 2010 and 2009, respectively. Interest expense increased by US$836,000, or 67.86%, due to the increase in average short-term bank borrowing balances for the year ended March 31, 2010 compared to the year ended March 31, 2009.
 
 Net Income
 
 Net Income was US$9,500,000 and US$8,880,000 for the years ended March 31, 2010 and 2009, respectively. The increase of net income was mainly driven by the continued increase in the sales of the Company’s battery products and the Company’s sales of its raw materials during the year ended March 31, 2010.
 
 Liquidity and Capital Resources
 
 The Company generally finances its operations through profits generated from its operations and through 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 Annual 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:




- 27 -





Fiscal Years Ended March 312010


2009US$’000


US$’000Net cash (used in) provided by operating activities


(9,163
)


12,089Net cash used in investing activities


(13,050
)


(8,933
)Net cash provided by (used in) financing activities


25,601



(1,461
)Net increase in cash and cash equivalents


3,388



1,695Effect of exchange rate changes on cash


11



139Cash and cash equivalents at beginning of year


2,620



786Cash and cash equivalents at end of year


6,019



2,620




Operating Activities





Net cash used in operating activities was approximately US$9,163,000 for the year ended March 31, 2010, as compared to net cash provided by operating activities of US$12,089,000 for the year ended March 31, 2009. This decrease of cash flow was mainly attributable to an increase in inventories as a result of the expansion of the Company’s production capacity and the increase of trade receivables related to the Company’s increase in selling activities, offset by an increase in notes payable.





Investing Activities





Net cash used in investing activities was approximately US$13,050,000 for the year ended March 31, 2010, as compared to approximately US$8,933,000 for the year ended March 31, 2009. This increase of net cash outflow was mainly due to the acquisition by the Company of new plants and machinery and investments in restricted bank balances.




Financing Activities





Net cash provided by financing activities was approximately US$25,601,000 for the year ended March 31, 2010, as compared to net cash used in financing activities of approximately US$1,461,000 for the year ended March 31, 2009. The increase of cash flow was mainly due to the Company’s new short-term bank borrowings and bills financing and the decrease in repayment of short-term bank loans.




Working Capital





Our working capital increased by approximately US$4,255,000 to approximately US$16,761,000 as compared to working capital of approximately US$12,506,000 as of March 31, 2009.  This increase is primarily due to the increase in our cash and cash equivalents, restricted bank balances, other financial assets, trade receivables, prepayment and inventories of approximately US$49,456,000 in the aggregate, offset by the increase in our trade and notes payables, accrued expenses and other accrued liabilities, amounts due to related parties, and short-term bank borrowings of approximately US$44,809,000 in the aggregate. The increase in trade receivables was the result of the increase of sales volume. Inventory carrying levels have been increased for raw materials, semi-finishedgoods and replacement batteries. This has been done to meet the projected demand in the first quarter of 2010/11. The increase in short-term bank loans and notes payables was the result of our financing arrangement.





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.


- 28 -





ITEM 7A.            Quantitative and Qualitative Disclosures about Market Risk.




Not required for a “smaller reporting company”.





ITEM 8.                  Financial Statements and Supplementary Data




Reference is made to the “F” pages herein comprising a portion of this Annual Report on Form 10-K.




ITEM 9.               Changes in and Disagreements with Accountants on Accounting and Financial Disclosures




On November 13, 2009, the Company held its annual meeting of the stockholders for the fiscal year ended March 31, 2009.  At the annual meeting the stockholders of the Company of record as of the close of business on October 7, 2009 ratified the appointment of Mazars CPA Limited to serve as the Company’s independent registered public accounting firm for the fiscal year ended March 31, 2010.




There were no changes in and disagreements with accounts on accounting and financial disclosure for the fiscal year ended March 31, 2010.





ITEM 9A(T).       Controlsand Procedures




Evaluation of 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 Annual 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.




Management’s Annual Report on Internal Control over Financial Reporting




Management is responsible for establishing and maintaining adequate internal control structure and procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2010 based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.




Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.




Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting as of March 31, 2010 was effective.





This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report.


- 29 -





Changes in Internal Control over Financial Reporting




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




ITEM 9B.            Other Information




Effective April 30, 2009, the Registrant’s common stock began trading under a new ticker symbol, “CIEC” on the Over-The-Counter Bulletin Board. The Registrant changed its ticker symbol from “WTRY” to “CIEC” as a result of the Registrant’s name change from “World Trophy Outfitters, Inc.” to “Chisen Electric Corporation”, which such name change became effective as of February 2, 2009.




On June 3, 2009, the Board of Directors of the Registrant appointed Mr. Zhu Zhongli as the Registrant’s Vice President of Sales.  Mr. Zhu is assuming one of the roles previously occupied by Mr. Xu Kecheng, the Registrant’s current Chief Executive Officer, the Chairman of the Board and Acting Vice President of Sales, effective immediately.  As Vice President of Sales for the Registrant, Mr. Zhu is in charge of overall sales and marketing management. Mr. Zhu previously served as the Assistant General Manager of the Company since August 2006.  Prior to joining the Company, Mr. Zhu served as the General Manager of Changxing Lida Wear-Resisting Material Co., Ltd., a
manufacturing company in China, since March 1999.  Mr. Zhu has extensive experience in the local Chinese market and has achieved outstanding success in sales of storage batteries in China.





On June 15, 2010, the board of directors of the Registrant approved the removal of Mr. He Zhiwei from the position of Chief Financial Officer of the Registrant, effective as of June 15, 2010.  On the same day, the Board approved the appointment of Mr. Liu Chuanjie as CFO. Mr. Liu is 33 years old. Mr. Liu is currently a director of the Registrant, a one-year appointment until the next annual general meeting of the Registrant’s stockholders. He has served in such capacity since November 24, 2008. Mr. Liu is also the Registrant’s treasurer, serving in such capacity since November 12, 2008, and he will continue to serve as treasurer until removed from the position by the Board.
There were no pre-existing arrangements pursuant to which Mr. Liu was appointed CFO. Mr. Liu does not have a family relationship with any other director or executive officer of the Company.





Since May 2004, Mr. Liu has served as Controller, Director of Finance, and as a director of Changxing Chisen Electric Co., Ltd., the chief operating subsidiary of the Company. Mr. Liu has expertise in accounting systems and national accounting policies, fund raising and investing.





Mr. Liu has not had a direct or indirect material interest in any transaction (occurring since the beginning of the Company’s last fiscal year, or currently proposed) in which the Company was a participant and the amount involved exceeded US$120,000.





In connection with Mr. Liu’s appointment as CFO, material terms of such appointment are undetermined as of the date of this Annual Report.




PART III




ITEM 10.             Directors, Executive Officers, and Corporate Governance




Set forth below are the names of the Registrant’s current directors, officers and significant employees, their business experience during the last five (5) years, their ages and all positions and offices that they currently hold with the Registrant.




Name

Age

Position(s)Xu Kecheng

48

Chairman of the Board, Chief Executive Officer & PresidentLiu Chuanjie

33

Chief Financial Officer, Treasurer and DirectorFei Wenmei

48

Corporate SecretaryZhu Zhongli

47

Vice-President of SalesLou Shourong

46

Vice-PresidentDong Quanfeng

46

Independent DirectorJiang Yanfu

67

Independent DirectorGong Xiaoyan

64

Independent DirectorYun Hon Man

42

Independent DirectorHe Zhiwei

44

DirectorGui Changqing

72

Significant EmployeeWang Huanxiang

34

Significant EmployeeLin Zugeng

76

Significant Employee


- 30 -





Family Relationships




There are no family relationships by and between or among the members of the Board or other executives. None of our directors and officers are directors or executive officers of any company that files reports with the SEC except as set forth in the Biographies section below.





Term of Office




Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our Bylaws. Our officers are appointed by the Board and hold office until removed by the Board.




Biographies of Officers and Directors




Xu Kecheng.Mr. Xu has served as President, Chief Executive Officer and a Director of the Registrant since the closing date of the Exchange. Mr. Xu founded Chisen in 2003 and has served as CCEC’s President and Chairman of the Board since its inception. Besides successfully establishing and running CCEC, Mr. Xu also acquired Ai Ge Organism Products Co., Ltd., a biological & pharmaceutical company in China in November 2006 where he serves as Chairman of the Board and Executive Director. In 2002, he was involved in the formulation of coated tempered glass panel standards used
for home gas kitchen ranges, which was put on the list of the National Building Materials Industry Standard. Mr. Xu graduated from Hangzhou University in 1997 with the major in economic management. In addition to serving as senior economist to the Company, Mr. Xu is a member of China Battery Industry Association, a member of Huzhou CPPCC, a member of the Standing Committee of Changxing People’s Congress and he has been honored with the title of “Integrity Entrepreneur” by the Changxing Government. Mr. Xu also finished a course of study at the class of advanced training at the Party School of the CPC Central Committee.





Liu Chuanjie.Mr. Liu has served as Chief Financial Officer of the Registrant since June 15, 2010, as Treasurer of the Registrant since the closing date of the Exchange and has served as a Director of the Registrant since November 24, 2008. Mr. Liu also serves as Controller, Director of Finance and as a Director of Chisen since May 2004. Mr. Liu has expertise in accounting systems and national accounting policies, fund raising and investing. Prior to joining Chisen, Mr. Liu served as the head of the financial department of Changxing Chisen Xinguangyuan Co., Ltd., a manufacturing
company in China, from October 2000 to April 2004. Mr. Liu is a graduate of the Institute of Jiaxing.




Fei Wenmei.Ms. Fei has served as Corporate Secretary of the Registrant since the closing date of the Exchange. In March 2005, Ms. Fei joined CCEC as Chief Administrative Manager in charge of corporate brand building, intellectual property and project application. Ms. Fei currently serves CCEC as an assistant economist and clean production management controller. From March 1991 to February 2005, Ms. Fei served as Chief Administrative Manager of the Huaneng Changxing Power Plant Industry & Trading Company and prior to that she served as Chief of Staff at the Changxing Land
Administration Bureau from March 1987 to February 1991. Ms. Fei has been engaged in administrative management for many years and has vast experience in corporate administrative management. Ms. Fei graduated from Zhejiang Radio and Television University with a degree in Chinese Language.





Zhu Zhongli.  Mr. Zhu has served as Vice-President of Sales of the Registrant since June 3, 2009.   Mr. Zhu replaces Xu Kecheng, who had temporarily replaced Wang Yajun effective March 3, 2009.   Mr. Zhu is in charge of overall sales and marketing management. Mr. Zhu previously served as the Assistant General Manager of the Company since August 2006.  Prior to joining the Company, Mr. Zhu served as the General Manager of Changxing Lida Wear-Resisting Material Co., Ltd., a manufacturing company in China, since March 1999.  Mr. Zhu has extensive experience in the local Chinese market and has
achieved outstanding success in sales of storage batteries in China.


- 31 -





Lou Sourong. Mr. Lou has served as a Vice President of the Registrant since the closing date of the Exchange. From October 2007 to present, Mr. Lou has served as a Deputy General Manager of CCEC, a manufacturing company in China. From April 2006 to September 2007, Mr. Lou served as Executive Deputy General Manager for Changxing Nuo Wan Te Ke Co., Ltd., a manufacturing company in China. Prior to that, Mr. Lou served as the factory director and marketing manager in Changxing Chisen Glass Co., Ltd., a manufacturing company in China from June 1996 to March 2006. Mr. Lou has extensive
experience in materials supply, procurement and production plan management.




Dong Quanfeng.Professor Dong has served as a Director of the Registrant since November 24, 2008. Professor Dong has served as a Chemistry professor and doctorial tutor at the Department of Chemistry of Xiamen University since March 2006. Professor Dong concurrently acts as a visiting research fellow at the National Hi-Tech Green Material Development Center, is a Member of the Editorial Board of the industry magazine “Battery”, is a Member of the Chinese Institute of Electrics Chemical and Physical Power Committee, a Member of ISE, a Member of the American ECS and is the
Vice Director of the Changxing Chisen Physical Chemistry Battery Research Center. Professor Dong is engaged in the research of new chemical electric power sources and related energy storage material and has finished several national and provincial-municipal scientific research projects. In 1997, Professor Dong won the provincial second prize of the Development of Science and Technology. In 1999, Professor Dong won the technology innovation prize of Hubei province. In 2004, Professor Dong won third prize of the Development of Science and Technology of Xiamen. In 2006, he won the title of “Technology Innovation Advanced Individual” by the National Information Industry. Professor Dong has issued over 80 papers on internationally significant academic journals and has applied for several patents. Prior to his employment as a full time professor at Xiamen University, Professor
Dong served as an associate professor at Xiamen University since January 2001. Mr. Dong graduated from Wuhan University with a Ph D degree in Chemistry and performed postdoctoral research at Israel Technical Institute.




Jiang Yanfu. Professor Jiang has served as a Director of the Registrant since November 24, 2008. Professor Jiang has served as a professor and doctorial tutor of business administration at Tsinghua University since December 1993. Professor Jiang has served as Dean of the Entrepreneurial Research Center since April 2000 and has served as academic director-general and co-founded of Trinity Innovation since December 2003, a consulting company in China.  Professor Jiang has expertise in entrepreneurial management, corporate governance and institutional economics. He has undertaken many important research programs such as the
“Theoretical Study on Chinese Technology Innovation”. He served as a director of and as an advisor to many companies. Professor Jiang’s main research fields include risk investment and entrepreneurial management, corporate governance and cyber economy. The major courses he has instructed includeEntrepreneurial Management, Technology and Institution Innovation, and Analysis ofInstitutional Economics.




Gong Xiaoyan.Ms. Gong has served as a Director of the Registrant since November 24, 2008. Ms. Gong currently serves as Chairman of Tianjin Bicycle Industrial Association, a non-governmental organization in China since June 2006. Prior to that, Ms. Gong served as Secretary-general of Tianjin Bicycle Industrial Association, a non-govermental organization in China since September 1998. She has been honored with the titles “China Top-Hundred Female Entrepreneurs”, “Most Influential Enterprises Leader of China” and “Tianjin Female Entrepreneur” issued by Tianjin Municipal Government.





Yun Hon Man. Mr. Yun has served as a director of the Registrant since November 24, 2008. Mr. Yun has served and continues to serve as a Corporate Consultant with Smart Pine Investment Limited since September 2007, a consulting firm organized under the laws of Hong Kong. Mr. Yun also serves as a Director of CH Lighting International Corporation (OTCBB: CHHN) since July 28, 2008 and as a Director of Xinde Technology Company (OTCBB: WTFS) since January 2010.   Mr. Yun also served as Chief Operating Officer of China INSOnline Corp. (NASDAQ: CHIO) from January 2008 through April 2010. Prior to that, Mr. Yun served as Corporate
Controller of Hi-Tech Wealth Inc. (n/k/a China Mobile Media Technology, Inc.)(OTCBB: CHMO) from January 2007 through August 2007. From January 2003 through December 2006, Mr Yun served as Corporate Controller of General Components, Inc. (n/k/a China Mobile Media Technology, Inc.)(OTCBB: CHMO). Mr. Yun is a Chartered Accountant having memberships with the Institute of Chartered Accountants in England and Wales. He is also a Fellow Member of the Chartered Association of Certified Accountants. He is a member of the Hong Kong Institute of Certified Public Accountants, the Association of International Accountants, the Society of Registered Financial Planners, the Institute of Financial Accountants and the Institute of Crisis
and Risk Management. Mr. Yun received his MBA at the University of Western Sydney in 2007.


- 32 -





He Zhiwei.Mr. He has served as the Director of the Registrant since the closing date of the Exchange. From 2006 to 2008, Mr. He built, organized and led the private-label consumer electronics global sourcing group of Amazon.com, Inc. (NasdaqGS: AMZN) and Circuit City Stores, Inc. (NYSE: CC).  Mr. He previously served as Chief Financial Officer of the Company from the closing date of the Exchange to June 15, 2010.  Prior to that, Mr. He held the FP&A leadership role at the Capital One Financial Corporation (NYSE: COF), where he was responsible for the financial
analysis and planning of technology operations group.  From 1999 to 2004, Mr. He held various management positions in worldwide operations, global supply chain, IT development and operations at Dell Inc. (NasdaqGS: DELL) and Capital One Financial Corporation (NYSE: COF).  Mr. He is a graduate of Shanghai Jiao Tong University (1988) in China with a BS Degree in Electrical Engineering, and an MBA from the McCombs School of Business at the University of Texas at Austin (1999).





Significant Employees




Gui Changqing.Mr. Gui has served and continues to serve as Chief Scientist at the Zhejiang Changxing Chisen Physical-Chemical Power Supply Research and Development Center since June 2007 and as counselor of the 712 Institute since January 2005. Prior to that, Mr. Gui served as expert team member of the 712 Institute from January 2001 to December 2004. Early in his career Mr. Gui was engaged in the R&D of the powered lead-acid battery for the national military in China serving as General Engineer and Researcher. The product won a scientific and technical award from the State
Commission of Science and Technology. Mr. Gui has published more than 100 papers of international significance and has trained 24 postgraduates. Mr. Gui is extremely well respected by his peers in the storage battery industry. In 1992, he won the special government allowance from the State Council, has served as Director of the Association of Chinese Chemical Physics Power Industry and as a Director of the Wuhan Power Supply Society. Mr. Gui earned his doctorate degree in electrochemistry from Shanghai Fudan University.




Wang Huanxiang.Mr. Wang has served as Technical Controller of CCEC since May 2008. Prior to that, Mr. Wang was a career researcher of the storage battery and served as Deputy General Manager of Zhejiang Chaowei Power Co., Ltd. from May 2004 to March 2008. Prior to that, Mr. Wang served as Chief of Technical Department of Zhejiang Wolong Technology Corp. from March 2001 to May 2004. He has several patents and has issued several papers, including “Research of S n SO 4 Applied to Electric Bicycles” and “Drying and Changing Technical Research for Long Cycle Life Lead Acid Electrical Bicycle Battery” in various academic journals, including the International Battery. Mr. Wang is a graduate of Zhengzhou University with a degree in electrochemistry.




Lin Zugeng.Professor Lin currently works as a scientist at the Zhejiang Changxing Chisen Physical-Chemical Power Supply Research and Development Center. Professor Lin has been working with the Department of Chemistry at Xiamen University since 1956. Professor Lin is an expert in physical chemistry and electrochemistry and is one of the founders of the electrochemical curricula at Xiamen University. From July 1982 to September 1984, Professor Lin worked as a visiting scholar at the Chemical Energy Center of London’s Metropolitan University. From July 1990 to April 1999,
Professor Lin served as the President of Xiamen University. Concurrently, he served as a member of an evaluation group of the Academic Degrees Committee of the State Council for the subject of chemistry, a director of the Chinese Chemical Society, Chief Commissary of the Electrochemistry Committee of Chinese Chemical Society, Deputy Chief Commissary of the Professional Committee of Chemical and Physical Power at the Chinese Institute of Electronics and Deputy Editor-in-Chief of the Chemical Journal of Chinese Universities. Professor Lin has many significant achievements in electrochemical experimental technology, electrode material of chemical power, electrode processes of chemical power and spectral electrochemistry, and has undertaken many national key projects, including the 863 Plan and the National Natural Science Foundation. Professor Lin has published more than 100 papers in
domestic and foreign academic journals, has been awarded 3 times the national scientific prize and 3 times the provincial scientific prize. In 1988, Professor Lin was acknowledged as an expert with outstanding achievement. Now Prof. Lin works as scientist of Chisen Technical Development Center.


- 33 -





Legal Proceedings Involving Officers and Directors





Unless otherwise indicated, to the knowledge of the Company after reasonable inquiry, no current director or executive officer of the Company during the past ten years, has (i) been convicted in a criminal proceeding (excluding traffic violations or other minor offenses), (ii) been a party to any judicial or administrative proceeding (except for any matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws, (iii) filed a petition under federal bankruptcy
laws or any state insolvency laws or has had a receiver appointed for the person’s property or (iv) been subject to any judgment, decree or final order enjoining, suspending or otherwise limiting for more than 60 days, the person from engaging in any type of business practice , acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity or engaging in any activity in
connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws, (v) been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated, (vi) been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated, (vii) been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation of: (a) any Federal or State securities or commodities law or regulation, (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity, or (viii) been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act
(7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.





There are no material pending legal proceedings to which any of the individuals listed above is party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. There are no family relationships between directors and executive officers of the Company.




Compliance with Section 16(A) of the Exchange Act




Section 16(a) of the Exchange Act requires a company's officers and directors, and persons who own more than ten percent (10%) of a registered class of the Registrant’s equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater than ten percent (10%) stockholders are required by SEC regulation to furnish the Registrant with copies of all Section 16(a) forms they file.




To the Registrant’s knowledge, based solely on a review of the copies of such reports furnished to the Registrant, all reports under Section 16(a) required to be filed by its officers and directors and greater than ten percent (10%) beneficial owners were timely filed as of the date of this filing with the exception of the followings;  (a) He Zhiwei failed to file a Form 4 in connection with his dismissal as the Company’s Chief Financial Officer and Director on June 15, 2010 and (b) Liu Chuanjie failed to file a Form 4 in connection with his appointment as the Company’s new Chief Financial Officer on June 15, 2010.





Committees of our Board of Directors




As of January 15, 2009, our Board of Directors has an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee established in accordance with the Exchange Act and NASDAQ rules.  Prior to January 15, 2009, we did not have an Audit Committee, a Compensation Committee or a Corporate Governance and Nominating Committee.  Since January 15, 2009, the Audit Committee met six (6) times, the Compensation Committee met two (2) times and the Corporate Governance and Nominating Committee met two (2) times.  A brief description of each committee is set forth below.


- 34 -




·
Audit Committee– The purpose of the Audit Committee is to provide assistance to our Board of Directors in fulfilling their oversight responsibilities relating to our consolidated financial statements and financial reporting process and internal controls in consultation with our independent registered public accountants and internal auditors. The Audit Committee is also responsible for ensuring that the independent registered public accountants submit a formal written statement to us regarding relationships and services which may affect the auditor’s objectivity and
independence.  The Board appointed Yun Hon Man, Gong Xiaoyan, Dong Quanfeng and Jiang Yanfu to serve as members of the Audit Committee, with Yun Hon Man serving as Chairman, commencing on January 15, 2009.  Our Audit Committee financial expert is Yun Hon Man, an independent director.





·
Compensation Committee– The purpose of the Compensation Committee is to review and make recommendations to our Board of Directors regarding all forms of compensation to be provided to our executive officers and directors, including stock compensation and loans, and all bonus and stock compensation to all employees.  The Board appointed Jiang Yanfu, Dong Quanfeng, Yun Hon Man and Gong Xiaoyan to serve as members of the Compensation Committee, with Jiang Yanfu serving as Chairman, commencing on January 15, 2009.





·
Corporate Governance and Nominating Committee– The purpose of the Nominating Committee is to review the composition and evaluate the performance of the Board, recommend persons for election to the Board and evaluate director compensation.  The Nominating Committee is also responsible for reviewing the composition of committees of the Board and recommending persons to be members of such committees, and maintaining compliance of committee membership with applicable regulatory requirements.The Company
does not have a formal diversity policy. Although the Board does not currently have formal specific minimum criteria for nominees, substantial relevant and diverse business and industry experience would generally be considered important qualifying criteria,as would the ability to attend and prepare for Board and shareholder meetings.We have not adopted procedures by which security holders may recommend nominees to our Board of Directors.  The Board appointed Gong Xiaoyan, Dong Quanfeng, Yun Hon Man and Jiang Yanfu to serve as members of the Corporate Governance and Nominating Committee, with Gong Xiaoyan serving as Chairman, commencing on January
15, 2009.





·
Strategy and Steering Committee– Xu Kecheng and Wang Chunyan served as members of the Strategy and Steering Committee, with Xu Kecheng serving as Chairman, during the fiscal year ended March 31, 2010.




Committee Charters





On January 15, 2009, the Board approved Charters for each of the Audit Committee, Compensation Committee and the Corporate Governance and Nominating Committee. Copies of the Audit Committee Charter, the Compensation Committee Charter and the Corporate Governance and Nominating Committee Charter are referenced hereto as Exhibits 99.1, 99.2 and 99.3, respectively.





Director Qualifications and Experience





The following table identifies some of the experience, qualifications, attributes and skills that the Board considered in making its decision to appoint and nominate directors to the Board. This information supplements the biographical information provided above. The vertical axis displays the primary factors reviewed by the Board in evaluating a board candidate.





Experience, Qualification,

Skill or Attribute

Xu

Kecheng

Liu

Chuanjie

Dong

Quanfeng

Jiang

Yanfu

Gong

Xiaoyan

Yun Hon

Man

He

ZhiweiProfessional standing in chosen field

x

x

x

x

x

x

xExpertise in energy or related industry:

x



x



xAudit Committee Financial Expert (actual or potential)











xCivic and community involvement:









xOther public company experience:











x

xDiversity by race, gender or culture:

x

x

x

x

x

x

xSpecific skills/knowledge:Corporate governance

x





x



x


- 35 -




Board Leadership Structure




The Board believes that the Company’s Chief Executive Officer is best situated to serve as Chairman of the Board because he is ultimately responsible for the day-to-day operation of the Company and is the director most familiar with the Company’s business and industry and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent directors and management have different perspectives and roles in strategy development. Our independent directors bring experience, oversight and expertise from outside the Company and industry, while the Chief Executive Officer brings company-specific experience and expertise. The Board believes
that the combined role of Chairman and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management and the Board, which are essential to effective governance.





One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for the execution of strategy once it is developed. The Board believes the combined role of Chairman and Chief Executive Officer, together with the presence of four independent directors on the Board, is in the best interest of shareholders because it provides the appropriate balance between strategy development and independent oversight of management. The Board retains the authority to modify this structure to best address the Company’s unique circumstances, and so advance the best interests of all shareholders, as and when appropriate.





The Board’s Role in Risk Oversight




The Board oversees our shareholders’ interest in the long-term health and the overall success of the Company and its financial strengths. The full Board is actively involved in overseeing risk management for the Company. It does so in part through discussion and review of our business, financial and corporate governance practices and procedures. The Board, as a whole, reviews the risks confronted by the Company with respect to its operations and financial condition, establishes limits of risk tolerance with respect to the Company’s activities and ensures adequate property and liability insurance coverage.




Because of the role of the Board in the risk oversight of the Company, the Board believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to the Company’s operations. The Board recognizes that there are different leadership structures that could allow it to effectively oversee the management of the risks relating to the Company’s operations, and while the Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason the Board selected its current leadership structure over other potential alternatives. See the
discussion under the heading “— Board Leadership Structure” above for a discussion of why the Board has determined that its current leadership structure is appropriate.





ITEM 11.             Executive Compensation





Compensation Discussion and Analysis




Not required for a “smaller reporting company”.


- 36 -





Summary Compensation Table





The following table sets forth compensation information for services rendered by our named executive officers in all capacities during the last 2 completed fiscal years (ended March 31, 2010 and March 31, 2009). The compensation listed below was paid to our current officers by SkyAce. The following information includes the U.S. dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.





Summary Compensation Table





Name And Principal Function

(a)

Year

(b)

Salary

(US$)

(c)

Bonus

(US$)

(d)

Stock

Awards

(US$)

(e)

Option

Awards

(US$)

(f)

Non-

Equity

Incentive

Plan

Compen-

sation

(US$)

(g)

Non-

qualified

Deferred

Compen-

sation

Earnings

(US$)

(h)

All Other

Compensation

(US$)

(i)

Total

(US$)

(j)Xu Kecheng, President &

2010


11,728

-0-


-0-

-0-


-0-

-0-


-0-

11,728CEO (1)

2009


9,356

-0-


-0-

-0-


-0-

-0-


-0-

9,356He Zhiwei, Former

2010


117,369

-0-


-0-

-0-


-0-

-0-


-0-

117,369Chief Financial Officer (2)

2009


80,051

-0-


-0-

-0-


-0-

-0-


-0-

80,051Lou Shourong, Vice-

2010


10,958

-0-


-0-

-0-


-0-

-0-


-0-

10,958President (3)

2009


8,257

-0-


-0-

-0-


-0-

-0-


-0-

8,257Liu Chuanjie, Chief Financial

2010


10,861

-0-


-0-

-0-


-0-

-0-


-0-

10,861Officer and Treasurer (4)

2009


7,900

-0-


-0-

-0-


-0-

-0-


-0-

7,900




(1)
Xu Kecheng has served as the Registrant’s Chief Executive Officer and President effective as of the closing date of the Exchange.  Mr. Xu also served (and continues to serve) as President of CCEC during the fiscal years ended March 31, 2010 and 2009.  Mr. Xu’s compensation for the years ended March 31, 2010 and 2009 reflects his services as CEO and President of the Registrant and President of CCEC, combined.





(2)
He Zhiwei served as the Registrant’s Chief Financial Officer effective as of the closing date of the Exchange until June 15, 2010.  Mr. He’s compensation for the years ended March 31, 2010 and 2009 reflects his services as CFO of the Registrant during such time periods.




(3)
Lou Shourong has served as the Registrant’s Vice-President effective as of the closing date of the Exchange.  Mr. Lou also served (and continues to serve) as a Deputy General Manager of CCEC during the fiscal years ended March 31, 2010 and 2009.  Mr. Lou’s compensation for the years ended March 31, 2010 and 2009 reflects his services as Vice-President of the Registrant and Deputy General Manager of CCEC, combined.





(4)
Liu Chuanjie has served as the Registrant’s Treasurer effective as of the closing date of the Exchange.  Mr. Liu also served (and continues to serve) as Controller and Director of Finance of CCEC during the fiscal years ended March 31, 2010 and 2009.  Mr. Liu’s compensation for the years ended March 31, 2010 and 2009 reflects his services as Treasurer of the Registrant and Controller and Director of CCEC, combined. Mr. Liu has served as Chief Financial Officer of the Registrant since June 15, 2010.





As of March 31, 2010, the Registrant did not have any “Grants of Plan-Based Awards”, “Outstanding Equity Awards”, “Option Exercises and Stock Vested”, “Pension Benefits”, “Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans” or “Potential Payments Upon Termination or Change in Control” to report.





Furthermore, the Company does not have any bonuses, stock awards, option awards, non-executive incentive plan compensation or non-qualified deferred compensation earnings to report.


- 37 -





Narrative Disclosure to Summary Compensation Table





The Company has no other compensation plans other than basic salary and benefits.





Director Compensation





We did not provide any compensation to our Directors during the fiscal year ended March 31, 2010. We may establish certain compensation plans (e.g. options, cash for attending meetings, etc.) with respect to Directors in the future.





Additional Narrative Disclosure





Employment Agreements




There are currently no employment agreements by and between the Registrant and its employees. CCEC has a labor contract with each employee as required by law in the PRC. The labor contract mainly includes working content, contract period, working time, payment and other terms. A form of such labor contract is referenced hereto as Exhibit 10.2.





Benefit Plans




The Registrant has no stock option, retirement, pension or profit-sharing programs for the benefit of its directors, officers or other employees; however our Board may recommend the adoption of one or more such programs in the future.





In accordance with Chinese law, CCEC offers a welfare program pursuant to which it pays pension, accident, medical, birth, job and house allowance payments for all contract employees of CCEC.





ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters




The following table sets forth each person known by us to be the beneficial owner of five (5%) percent or more of our Common Stock, all directors individually and all directors and officers as a group as of June 28, 2010. Each person named below has sole voting and investment power with respect to the shares shown unless otherwise indicated.




Name and Address of Beneficial Owner(1)

Amount of

Direct

Ownership

After

Exchange

Amount of

Indirect

Ownership

After Exchange

Total Beneficial

Ownership

After Exchange

Percentage

of Class(2)Xu Kecheng, Chairman of the Board, Chief ExecutiveOfficer & President


0

32,900,000
(3)
32,900,000
(3)
65.8
%Liu Chuanjie, Chief Financial Officer , Treasurer and Director


0

0

0

0
%Fei Wenmei, Corporate Secretary


0

0

0

0
%Zhu Zhongli, Vice-President of Sales


0

0

0

0
%Lou Shourong, Vice President


0

0

0

0
%Dong Quanfeng, Director


0

0

0

0
%Jiang Yanfu, Director


0

0

0

0
%Gong Xiaoyan, Director


0

0

0

0
%Yun Hon Man, Director


0

0

0

0
%He Zhiwei, Director


0

0

0

0
%ALL DIRECTORS AND OFFICERS AS A GROUP (10 PERSONS):


0

32,900,000

32,900,000

65.8
%Cheer Gold Development Limited

Level 5 Development Bank of Samoa Building

Beach Road, Apia, Samoa


32,900,000

0

32,900,000

65.8
%


- 38 -





(1)
Unless otherwise noted, each beneficial owner has the same address as the Registrant.


(2)
Applicable percentage of ownership is based on 50,000,000 shares of our Common Stock outstanding as of June 28, 2010, together with securities exercisable or convertible into shares of Common Stock within sixty (60) days of June 28, 2010 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of
any other person. Note that affiliates are subject to Rule 144 and Insider trading regulations - percentage computation is for form purposes only.


(3)
Xu Kecheng may be considered to beneficially own 32,900,000 shares by virtue of his 100% ownership in Wisejoin Group Limited, which owns and controls 100% of Cheer Gold, which directly beneficially owns 32,900,000 shares of Common Stock.




ITEM 13.             Certain Relationships and Related Transactions, and Director Independence




Related Party Transactions





During the fiscal year ended March 31, 2010, the Company owed US$2,852,000 and US$3,799,000 to Zhejiang Changxing Ruilang Electronic Company Limited, a company which is controlled by a close family member of Mr. Xu Kecheng (“RuilangElectronic”) for the acquisition of land and buildings and the purchase of certain raw materials, respectively.  As of March 31, 2010, the balance oustanding was US$2,102,000 for the purpose of purchasing certain raw materials.





On April 20, 2007, the Company borrowed US$292,000 from Zhejiang Ai Ge Organism Products Company Limited, a company controlled by Mr.Xu Kecheng, to help the Company settle liquidity shortages.  As of March 31, 2010, the amount outstanding was US$292,000.  It is an unsecured advance which is interest-free and repayable on demand.





As of March 31, 2010, Zhejing Chisen Glass Company Limited (“Chisen Glass”) provided guarantees, in aggregate, of US$5,868,000, US$440,000 and US$440,000 to secure the short-term bank loans, notes payable and bill financing of the Company, respectively.





As of March 31, 2010, US$5,868,000 of the Company’s short-term bank loans was collateralized by land use rights owned by Ruilang Electronic and guaranteed by Mr.Xu Kecheng and Ms.Zhou Fang Qin, the spouse of Xu Kecheng.





As of March 31, 2010, Changxing Chisen Xinguangyuan Company Limited (“Xinguangyuan”), Mr.Xu Kecheng and a third party provided guarantees, in aggregate, amounting to US$8,802,000 to secure the short-term bank loans of the Company.





As of March 31, 2010, Xinguangyuan and Mr.Xu Kecheng provided guarantees, in aggregate, of US$11,737,000 and US$5,868,000 to secure the short-term bank loans and notes payable of the Company, respectively.


- 39 -





As of March 31, 2010, Chisen Glass, Mr.Xu Kecheng and Ms.Zhou Fang Qin, the spouse of Mr. Xu Kecheng, provided guarantees, in the aggregate, amounting to US$2,714,000, US$4,401,000 and US$1,467,000 to secure the short-term bank loans, notes payable and bills financing of the Company, respectively.





As of March 31, 2010, Xinguangyuan provided guarantees, in aggregate, amounting to US$3,667,000 to secure the notes payable of the Company.





As of March 31, 2010, US$4,402,000 of the Company’s short-term bank loans was collateralized by a guarantee provided by Mr.Xu Kecheng.





Policies and Procedures for Related-Party Transactions




The Company did not have any policies or procedures for related party transactions for the fiscal year ended March 31, 2010.




Promoters and Certain Control Persons




None.




Director Independence





The following directors are independent: Dong Quanfeng, Jiang Yanfu, Gong Xiaoyan and Yun Hon Man. The following directors are not independent: Xu Kecheng, Liu Chuanjie and He Zhiwei.




ITEM 14.             Principal Accountant Fees and Services




Effective as of January 14, 2009, the Board of Directors of the Registrant dismissed Pritchett, Siler & Hardy, P.C. (“PS&H”) as the independent registered public accounting firm of the Registrant.  The firm of Mazars CPA Limited (“Mazars”) acts as our independent registered public accounting firm effective as of January 14, 2009.  The following is a summary of fees incurred for services rendered.




Audit Fees




During the year ended March 31, 2010, the fees for our current principal accountant, Mazars, were US$165,000 for the audit of our consolidated financial statements included in this Annual Report and reviews of Form 10-Q.




Audit-Related Fees





During the year ended March 31, 2010, our current principal accountant, Mazars, did not render assurance and related services reasonably related to the performance of the audit or review of financial statements.




Tax Fees





During the year ended March 31, 2010, our current principal accountant, Mazars, did not render assurance and related services reasonably related to the performance of the audit or review of financial statements.




All Other Fees





During the year ended March 31, 2010, there were no fees billed for products and services provided by the current principal accountant, Mazars, other than those set forth above.




Audit Committee Pre-Approval




The policy of the Audit Committee is to pre-approve all audit and non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax fees, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services. The Audit Committee has delegated pre-approval authority to certain committee members when expedition of services is necessary. The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation,
and the fees for the services performed to date. All of the services described above in this Item 14 were approved in advance by the Board of Directors during the fiscal year ended March 31, 2010, which, at the time of such approval, performed all of the functions of an Audit Committee in light of the subsequent formal creation of the Company’s existing Audit Committee and adoption of the Audit Committee’s Charter in January 2009.


- 40 -





PART IV




ITEM 15.             Exhibits and Financial Statement Schedules




(a)           Financial Statements and Schedules




The financial statements are set forth under Item 8 of this Annual Report. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.




(b)           Exhibits




EXHIBIT NO.

DESCRIPTION

LOCATION2.1

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, 20083.1

Articles of Incorporation of World Trophy Outfitters, Inc.

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, 20053.2

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, 20093.3

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, 20093.4

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, 20083.5

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, 20083.6

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


- 41 -





3.7

Articles of Associations 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, 200810.1

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, 200810.2

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, 200810.3

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, 200810.4

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, 200810.5

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, 200810.6

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, 200810.7

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, 200810.8

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, 200810.9

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, 200810.10

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


- 42 -





10.11

Cooperation Agreement, dated April 20, 2008, by and between Changxing Chisen Electric Co., Ltd. and Xiamen University

Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010 as filed with the SEC on June 28, 201010.11

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, 200810.12

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, 200810.13

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, 200810.14

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, 200810.15

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, 200810.16

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, 200814.1

Code of 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, 200917

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, 200821

List of Subsidiaries

Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010 as filed with the SEC on June 28, 201031.1

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

Provided herewith31.2

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

Provided herewith32.1

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

Provided herewith


- 43 -





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 herewith99.1

Audited Consolidated Financial Statements of Fast More Limited and its Subsidiary for the Fiscal Years Ended March 31, 2008 and 2007

Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 200899.2

Unaudited Condensed and Consolidated Financial Statements of Fast More Limited and its Subsidiary for the Three (3) Months Ended June 30, 2008 and 2007

Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 200899.3

Unaudited Pro Forma Financial Statements of Fast More Limited for the three (3) month period ended June 30, 2008 and the two years ended March 31, 2008.

Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 200899.4

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, 200999.5

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, 200999.6

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


- 44 -


SIGNATURES




In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to the Annual Report to be signed on our behalf by the undersigned, thereunto duly authorized.




CHISEN ELECTRIC CORPORATIONDate: February 28, 2011By:
/s/ Xu KechengName:
Xu KechengTitles:
Chairman of the Board, Chief Executive Officer, President, Principal

Executive Officer/s/ Liu ChuanjieName:
Liu ChuanjieTitles:
Chief Financial Officer and Principal Financial and Accounting

Officer




In accordance with the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.




Signatures

Title

Date/s/ Xu Kecheng

Chairman of the Board, Chief Executive Officer,Name: Xu Kecheng

President, Principal Executive Officer

February 28, 2011/s/ Liu Chuanjie

Chief Financial Officer, Principal Accounting andName: Liu Chuanjie

Chief Financial Officer, Treasurer and Director

February 28, 2011/s/ Dong QuanfengName: Dong Quanfeng

Director

February 28, 2011/s/ Yun Hon ManName: Yun Hon Man

Director

February 28, 2011






- 45 -


Audited Consolidated Financial Statements of


Chisen Electric Corporation
  For the years ended March 31, 2010 and 2009


Index to Consolidated Financial Statements
 For the years ended March 31, 2010 and 2009





PageReport of Independent Registered Public Accounting Firm

F-1Consolidated Statements of Operations and Other Comprehensive Income

F-2Consolidated Balance Sheets

F-3 - F-4Consolidated Statements of Changes in Shareholders’ Equity

F-5Consolidated Statements of Cash Flows

F-6 - F-7Notes to and Forming Part of Consolidated Financial Statements

F-8 - F-31





Report of Independent Registered Public Accounting Firm





To the Board of Directors and stockholders of:


Chisen Electric Corporation


We have audited the accompanying consolidated balance sheets of Chisen Electric Corporation ( “Chisen Electric”) and its subsidiaries (collectively referred to as the “Company”) as of March 31, 2010 and 2009, and the related consolidated statements of operations and other comprehensive income, changes in stockholders' equity and cash flows for each of the years then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting.  Accordingly, we express no such opinion.  Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.





/s/ Mazars CPA Limited


Certified Public Accountants


Hong Kong


Date: June 28, 2010


F-1


Chisen Electric Corporation





Consolidated Statements of Operations and Other Comprehensive Income
 For the years ended March 31, 2010 and 2009







Years ended March 31,2010


2009Note

US$’000


US$’000(As restated)Operating revenues:Net sales to third parties



177,192



109,020Cost of sales



(153,708
)


(88,945
)Gross income



23,484



20,075Operating expenses:Sales, marketing and distribution



(8,696
)


(5,459
)General and administrative



(3,647
)


(3,763
)Operating income



11,141



10,853Other income, net



1,671



758Interest income



343



362Interest expense



(2,068
)


(1,232
)Income before income taxes



11,087



10,741Income taxes expenses
4


(1,587
)


(1,861
)Net income



9,500



8,880Other comprehensive incomeForeign currency translation adjustment



106



278Comprehensive income



9,606



9,158Shares


Shares(As restated)Earnings per share
2Weight average number of common stock outstanding- basic and diluted



50,000,000



40,753,425US$


US$(As restated)Net income per share of common stock- basic and diluted



0.19



0.22





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


F-2


Chisen Electric Corporation





Consolidated Balance Sheets
 As of March 31, 2010 and 2009







As of March 31,2010


2009Note

US$’000


US$’000ASSETSCurrent assets:Cash and cash equivalents



6,019



2,620Restricted bank balances
5


21,420



13,878Other financial assets
6


7,438



1,314Trade receivables, net



50,440



35,023Other receivables



800



842Prepayments



4,933



862Due from related parties
14(b)


8



474Inventories
7


30,038



17,135Total current assets



121,096



72,148Available-for-sale financial assets
8


882



878Long-term land lease prepayments, net



749



608Property, plant and equipment, net
9


10,474



5,315Total assets



133,201



78,949





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


F-3





Chisen Electric Corporation





Consolidated Balance Sheets
 As of March 31, 2010 and 2009


As of March 31,2010


2009Note

US$’000


US$’000LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Trade payables



14,923



11,176Notes payable
10


35,504



23,343Accrued expenses and other accrued liabilities



5,087



3,769Due to related parties
14(b)


2,532



639Income taxes payable



148



264Short-term bank borrowings
11


46,141



20,451Total current liabilities



104,335



59,642Government subsidies
12


139



186Deferred tax liabilities
4(c)


460



460Total non-current liabilities



599



646Total liabilities



104,934



60,288Commitments and contingencies
15


-



-Shareholders’ 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 authorized50,000,000 shares issued and outstanding



50



50Capital reserves



144



144Statutory reserves
13


2,239



1,103Accumulated other comprehensive income



1,054



948Retained earnings



24,780



16,416Total shareholders’ equity



28,267



18,661Total liabilities and shareholders’ equity



133,201



78,949





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


F-4


Chisen Electric Corporation





Consolidated Statements of Changes in Shareholders' Equity
 For the years ended March 31, 2010 and 2009







AccumulatedCommon stock issued











otherNumber


Amount


Capital


Statutory


Retained


comprehensiveof shares





reserves


reserves


earnings


income


TotalUS$’000


US$’000


US$’000


US$’000


US$’000


US$’000Balance as of April 1, 2008 (As restated) (Note 17)


35,000,000



35



159



71



8,568



670



9,503Recapitalization upon reverse acquisition


15,000,000



15



(15
)


-



-



-



-Net income


-



-



-



-



8,880



-



8,880Transfer to statutory reserves


-



-



-



1,032



(1,032
)


-



-Foreign currency translation adjustment


-



-



-



-



-



278



278Balance as of March 31, 2009


50,000,000



50



144



1,103



16,416



948



18,661Balance as of April 1, 2009


50,000,000



50



144



1,103



16,416



948



18,661Net income


-



-



-



-



9,500



-



9,500Transfer to statutory reserves


-



-



-



1,136



(1,136
)


-



-Foreign currency translation adjustment


-



-



-



-



-



106



106Balance as of March 31, 2010


50,000,000



50



144



2,239



24,780



1,054



28,267




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


F-5


Chisen Electric Corporation





Consolidated Statements of Cash Flows
 For the years ended March 31, 2010 and 2009







Years ended March 31,2010


2009US$’000


US$’000Cash flows from operating activitiesNet income


9,500



8,880Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation of property, plant and equipment


646



451Written-off of property, plant and equipment


6



44Amortization of long-term land lease prepayments


13



13Exchange differences


22



(84
)Provision for warranty costs


197



(302
)Government grant recognized


(47
)


(47
)Investment income from available-for-sale financial assets


-



(131
)Deferred taxation


-



460Changes in assets and liabilities:Other financial assets


(6,118
)


3,851Trade receivables, net


(15,265
)


(19,148
)Other receivables


46



(377
)Prepayment


(4,067
)


(520
)Due from related parties


468



800Inventories


(12,830
)


(4,524
)Trade payables


3,699



4,949Notes payable


12,060



23,343Accrued expenses and other accrued liabilities


732



637Due to related parties


1,891



(6,348
)Income taxes payable


(116
)


142Net cash (used in) provided by operating activities


(9,163
)


12,089Cash flows from investing activitiesPurchase of property, plant and equipment


(5,417
)


(1,647
)Additions of long-term land lease prepayments


(151
)


(113
)Investment in restricted bank balances, net


(7,482
)


(7,304
)Dividend received from available-for-sale financial assets


-



131Net cash used in investing activities


(13,050
)


(8,933
)




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


F-6




Chisen Electric Corporation





Consolidated Statements of Cash Flows
 For the years ended March 31, 2010 and 2009


Years ended March 31,2010


2009US$’000


US$’000Cash flows from financing activitiesProceeds from bills financing


3,668



-Proceeds from short-term bank loans


41,666



20,451Repayment of short-term bank loans


(19,733
)


(21,912
)Net cash provided by (used in) financing activities


25,601



(1,461
)Net increase in cash and cash equivalents


3,388



1,695Cash and cash equivalents, beginning of year


2,620



786Effect on exchange rate changes


11



139Cash and cash equivalents, end of year


6,019



2,620Supplemental disclosure of cash flow informationInterest received


343



261Interest paid


1,981



1,160Tax paid


1,635



1,264





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


F-7


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009





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 Bulletin Board under the symbol “CIEC.OB”.





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.





Details of Chisen Electric’s subsidiaries as of March 31, 2010 are as follows:





Name

Place and

date of

establishment /

incorporation

Percentage of

effective equity

interest / voting

right attributable

to the Company

Principal activitiesFast More Limited (“Fast More”)

Hong Kong

December 17, 2007

100
%
Investment holdingChangxing Chisen Battery Co., Limited (“Changxing Chisen”) *

Zhejiang,

the People’s

Republic of China

(“PRC”)

February 25, 2002

100
%
Manufacture and sales of sealed lead-acid battery productsChisen Technology Holdings Corporation (“Chisen Technology”)

Nevada,

United States

May 18, 2009

100
%
Inactive





*
This is a direct translation of the name in Chinese for identification purpose only and is not the official name in English.





On November 12, 2008, Chisen Electric entered into a Share Exchange Agreement (“Exchange”) with Fast More, Cheer Gold Development Limited (“Cheer Gold”) and Floster Investment Limited (Floster Investment Limited and together with Cheer Gold, the “Stockholders”) whereby Chisen Electric acquired all of the issued and outstanding common stock of Fast More from the Stockholders in exchange for the issuance by Chisen Electric to the Stockholders of an aggregate 35,000,000 newly-issued shares of Chisen Electric’s common stock, par value of US$0.001 each, representing 70% of Chisen Electric’s common stock issued and outstanding upon completion of the share exchange (the
“Share Exchange Transaction”).





Prior to the closing of the Share Exchange Transaction, Chisen Electric implemented a 3 for 1 forward stock split, resulting to the increase of Chisen Electric’s common stock issued and outstanding from 11,219,400 shares to 33,658,200 shares, immediately before the completion of the Share Exchange Transaction.


F-8


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009




1.
ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)





Upon the completion of the Share Exchange Transaction (including, but not limited to, the cancellation of the 18,658,200 shares of Chisen Electric’s common stock concurrent and simultaneous with the consummation of the Share Exchange Transaction) on November 12, 2008, there were 50,000,000 shares of Chisen Electric’s common stock issued and outstanding.





The acquisition by Chisen Electric of Fast More is deemed to be a reverse acquisition in accordance with generally accepted accounting principles. In accordance with the Accounting and Financial Reporting Interpretations and Guidance prepared by the staff of the U.S. Securities and Exchange Commission, Chisen Electric (the legal acquirer) is considered the accounting acquiree and Fast More (the legal acquiree) is considered the accounting acquirer. The consolidated financial statements of the consolidated entity will in substance be those of Fast More, with the assets and liabilities, and revenues and expenses, of Chisen Electric being included effective from the date of completion of Share Exchange Transaction.
Chisen Electric is deemed to be a continuation of the business of Fast More. The outstanding common stock of Chisen Electric prior to the Share Exchange Transaction will be accounted for at their net book value and no goodwill will be recognized.





In order to rationalize the corporate structure and prepare for the Share Exchange Transaction, Fast More and Changxing Chisen (collectively referred to as “the Fast More Group”) underwent a reorganization (“Reorganization”) prior to the consummation of the Share Exchange Transaction. On February 16, 2008, Fast More acquired the 51%, 9% and 40% equity interest in Changxing Chisen from Mr. Xu Ke Cheng, Mr. Xu Ke Yong and BEME International Co., Limited at a consideration of RMB6,502,500 (equivalent to USD926,000), RMB1,147,500 (equivalent to USD164,000) and RMB5,100,000 (equivalent to USD726,000) respectively. Upon completion of the transactions, Changxing Chisen has become a wholly-owned
subsidiary of Fast More.





Since the ultimate beneficial owner of the companies now comprising the Fast More Group was, all the time prior to the completion of the Reorganization, Mr. Xu Ke Cheng, the ownership transfer transaction was accounted for as a transfer of entities under common control in accordance with the FASB Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations”. Hence, the consolidation has been accounted for at historical cost and prepared on the basis as if the Reorganization had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Accounting principles


The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States of America (“USGAAP”).





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.


F-9


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Revenue recognition


Operating revenue represents sale of goods at invoiced value to customers, net of returns, discounts and value-added tax (“VAT”), and is recognized when goods are delivered to customers, the significant risks and rewards of ownership of goods have been transferred to customers, the sales price to the customers is fixed or determinable and the collectability of consideration is reasonably assured.





Costs related to shipping and handling are included in selling, marketing and distribution expenses.





Segmental information


During the years ended March 31, 2010 and 2009, all revenue of the Company represented income from sales of sealed lead-acid batteries and therefore no financial information by business segment is presented. Furthermore, as all income is derived from the PRC, no geographical segment information is presented.





Research and development costs


All costs of research and development activities are generally expensed as incurred. Research and development costs were US$244,000 and US$117,000 for the years ended March 31, 2010 and 2009, respectively.





Advertising and promotion costs


Advertising and promotion costs are expensed as sales, marketing and distribution costs as incurred. Advertising costs were US$681,000 and US$389,000 for the years ended March 31, 2010 and 2009, respectively.





Shipping and handling costs


Shipping and handling costs are expensed as sales, marketing and distribution costs as incurred. Shipping costs were US$3,597,000 and US$2,776,000 for the years ended March 31, 2010 and 2009, respectively.





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$502,000 and US$130,000 for the years ended March 31, 2010 and 2009, respectively.





Income taxes


The Company provides for income taxes using the liability method. Under the liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current period.


F-10


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Income taxes (Continued)


A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.





Tax rate changes are reflected in the computation of the income tax provision during the period such changes are enacted.





Under the provision of ASC 740 Income Taxes, tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% of being realized on examination by the tax authority. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.





Comprehensive income


ASC Topic 220, "Reporting Comprehensive Income", requires the presentation of comprehensive income, in addition to the existing statements of operations. Comprehensive income is defined as the change in equity during the year from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners, and is not included in the computation of income tax expense or benefit. Accumulated comprehensive income consists of changes in unrealized gains and losses on foreign currency translation.





Available-for-sale financial assets


The Company’s available-for-sale financial assets consist of investment in unlisted equity securities and are recorded at cost.





The Company periodically assesses whether its investment in non-marketable equity securities are impaired and if any impairment is other than temporary. Factors considered in assessing whether an impairment is other than temporary include the credit quality of the investment, the duration of the impairment, the Company’s ability and intent to hold the investment until recovery and overall economic conditions. A decline in value of these securities below cost that is deemed to be other than temporary results in an impairment charge to earnings that reduces the carrying amount of the securities to fair value establishing a new cost basis.





Property, plant and equipment (“PPE”) and long-term land lease prepayments


PPE are stated at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets.





The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, overhaul and minor renewals and betterments, are normally charged to operating expenses in the period in which they are incurred.  In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the assets, the expenditure is capitalized.


F-11


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Property, plant and equipment (“PPE”) and long-term land lease prepayments (Continued)


Depreciation is provided, on a straight-line basis, to write off the cost less accumulated depreciation of each PPE item at rates based on their estimated useful lives from the date on which they become fully operational and after taking into account their estimated residual values as follows:





Buildings

20 yearsLeasehold improvements

Over the unexpired term of leaseFurniture, fixtures and office equipment

10 yearsMotor vehicles

5 yearsPlant and machinery

10 years





When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income.





Construction-in-progress consists of factories and office buildings under construction and machinery pending installation and includes the costs of construction, machinery and equipment, and any interest charges arising from borrowings used to finance these assets during the period of construction or installation. No provision for depreciation is made on construction-in-progress until such time the relevant assets are completed and ready for their intended use.





Long-term land lease prepayments are amortized on a straight-line basis over the term of lease.





Impairment of long-lived assets


Long-lived assets are reviewed at least annually for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, impairment is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and recorded as a reduction of original costs. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell.





Inventories


Inventories are stated at the lower of cost and net realizable value. Cost, which comprises all costs of purchase and, where applicable, costs of conversion and other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average costing method. The Company estimates the market price of its inventories with reference to the net realizable value based upon current market conditions and historical experience. Estimated losses on inventories represent reserves for obsolescence, excess quantities, irregulars and slow moving inventory, and which are charged to cost of sales.


F-12


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Trade receivables and allowance for doubtful accounts


The allowance for the risk of non-collection of trade receivables takes into account credit-risk concentration. Collective debt risk is assessed based on average historical losses and specific circumstances such as serious adverse economic conditions. The Company’s estimate is based on a variety of factors, including historical collection experience, existing economic conditions and a review of the current status of the receivables. Trade receivables are presented net of an allowance for doubtful accounts of US$6,000 and US$6,000 as of March 31, 2010 and 2009, respectively.





Cash and cash equivalents


Cash represents cash on hand and deposits with financial institutions which are repayable on demand. Cash equivalents represent short-term, highly liquid investments purchased with an original maturity of three months or less, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.





Foreign currency translation


Items included in the financial statements of the Company’s subsidiary are measured using Renminbi (“RMB”), the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented in United States Dollars (“US$”), which is the Company’s presentation currency.





Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.





On consolidation, the results and financial position of all the group entities that have a functional currency different from the presentation currency are translated as follows:





(a)
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;


(b)
income and expenses for each statement of operations are translated at average exchange rates;


(c)
all resulting exchange differences are recognized as a separate component of equity.





Fair value of financial instruments


The ASC Topic 825, “Disclosures about Fair Value of Financial Instruments”, requires that the Company discloses estimated fair value of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.


F-13


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Fair value measurements


The Company adopted ASC Topic 820 – Fair Value Measurements and Disclosures (“ASC 820”). The adoption of ASC 820 did not have a material impact on our consolidated financial statements. ASC 820 establishes a three-tier fair value hierarchy to prioritize the inputs used in measuring fair value.  The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3).  The three levels are defined as follows:





Level 1:
Observable inputs, such as unadjusted quoted market prices in active markets for the identical asset or liabilities.





Level 2:
Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.





Level 3:
Unobservable inputs reflecting the entity’s own assumptions in measuring the asset or liability at fair value.





The Company’s financial instruments consist principally of cash and cash equivalents, restricted bank balances, other financial assets, trade receivables and payables, deposits, prepayment and other receivables, notes payable, accrued expenses and other liabilities, amount due from/to related parties and short-term borrowings which are carried at amounts that generally approximate their fair values because of the short-term maturity of these instruments.




Warranty


Estimated warranty costs are recognized 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, which are reviewed periodically in light of actual experience. The reconciliation of the changes in the warranty obligation is as follows:





Years ended March 31,2010


2009US$’000


US$’000Balance as of April 1,


121



413Exchange realignment


1



9Accrual for warranties issued during the year


188



91Settlement made during the year


(84
)


(392
)Balance as of March 31,


226



121


F-14


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Government subsidies


Government subsidies are recognized as income over the periods necessary to match them with the related costs. Subsidies related to expense items are recognized in the same period as those expenses are charged in the consolidated statements of operations and other comprehensive income and are reported separately as other income.




Operating leases


Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Rental payables under operating leases are recognized as expenses on the straight-line basis over the lease term.




Use of estimates


The preparation of the consolidated financial statements in conformity with US GAAP requires the management to make 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 reported periods. The management evaluates these estimates and judgments on an ongoing basis and bases their estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that they believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the
carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies.




Actual amounts could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, inventory allowance, taxes and contingencies.





Related parties


Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.





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. Since there were no potentially dilutive securities for the years ended March 31, 2010 and 2009, basic and diluted earnings per share are the same for both years.





Upon the completion of the Share Exchange Transaction, the number of Chisen Electric’s common stock issued and outstanding, taken into account of the 3 for 1 forward split as detailed in Note 1 was increased to 50,000,000 shares and was applied retrospectively for the calculation of earnings per share.


F-15


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent accounting pronouncements


In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material effect on the Company’s consolidated financial statements.





In June 2009, the FASB issued ASC Topic 860, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No.140.  ASC Topic 860 requires entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets.  The statement eliminates the concept of a qualifying special-purpose entity, changes the requirements for the de-recognition of financial assets, and calls upon sellers of the assets to make additional disclosures about them.  ASC Topic 860 is effective as for an entity’s first annual reporting period that begins after November 15, 2009.  The
Company does not expect the adoption of ASC Topic 860 will have a material impact on the Company’s consolidated financial statements.





In June 2009, the FASB issued ASC Topic 810, Amendments to FASB Interpretation No. 46(R).  ASC Topic 810 amends Interpretation No.46(R) to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity.  ASC Topic 810 is effective for an entity’s first fiscal period that begins after November 15, 2009.  The Company does not expect the adoption of ASC Topic 810 will have a material impact on the Company’s consolidated financial statements.





In June 2009, the FASB issued ASC Topic 105, “the FASB Accounting Standards Codification” (“ASC”). ASC would become the source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities. Once the ASC is in effect, all of its content would carry the same level of authority. The ASC becomes effective for interim and annual periods ending on or after September 15, 2009. The Company adopted the ASC in the second quarter of fiscal 2010. The adoption of the ASC did not have an effect on the Company’s financial position and results of operations. However, because the ASC completely replaces existing standards, it affects the way US GAAP is referenced within
the consolidated financial statements.





In August 2009, the FASB issued Accounting Standards Updates (“ASU”) 2009-05, Fair Value Measurements and Disclosures (ASC Topic 820): Measuring Liabilities at Fair Value, effective for the first reporting period after issuance. This Update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using the quoted price of the identical liability or similar liabilities when traded as an asset or another valuation technique that is consistent with the principles of ASC Topic 820. The adoption of Update 2009-05 did not have any affect on the Company’s consolidated
financial statements.


F-16


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent accounting pronouncements (Continued)


In January 2010, FASB issued ASU No. 2010-02 regarding accounting and reporting for decreases in ownership of a subsidiary. Under this guidance, an entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary.  Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value.  In contrast, an entity is required to account for a decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction.  This ASU
clarifies the scope of the decrease in ownership provisions, and expands the disclosures about the deconsolidation of a subsidiary or de-recognition of a group of assets.  This ASU is effective for the first interim or annual reporting period ending on or after December 31, 2009. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.





In January 2010, FASB issued ASU No. 2010-02 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification. The amendments in this Update affect accounting and reporting by an entity that experiences a decrease in ownership in a subsidiary that is a business or nonprofit activity. The amendments also affect accounting and reporting by an entity that exchanges a group of assets that constitutes a business or nonprofit activity for an equity interest in another entity.  The amendments in this update are effective beginning in the period that an entity adopts SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – An Amendment of
ARB No. 51.” If an entity has previously adopted SFAS No. 160 as of the date the amendments in this update are included in the Accounting Standards Codification, the amendments in this update are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. The amendments in this update should be applied retrospectively to the first period that an entity adopted SFAS No. 160. The Company does not expect the adoption of Update 2010-02 to have a material impact on its consolidated financial statements.


F-17


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent accounting pronouncements (Continued)


In January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers.  2)  Activity in Level 3 fair value measurements.  In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number).  This update provides amendments to Subtopic 820-10 that clarify existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities. 2) Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or
Level 3.  The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company is currently evaluating the impact of Update 2010-06 will have on its consolidated financial statements.





ASC Topic 855, “Subsequent Events,” was amended in February 2010. Under the amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and the Company adopted these new requirements for the year ended March 31, 2010.


F-18


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


3.
OPERATING RISKS





(a)
Concentration of major customers and suppliers


Years ended March 31,2010


2009Major customers with revenues of more than 10% of the Company’s salesSales to major customers

US$
71,161,000


US$
51,676,000Percentage of sales


40
%


47
%Number


2



1Major suppliers with purchases of more than 10% of the Company’s purchasesPurchases from major suppliers

US$
100,982,000


US$
47,415,000Percentage of purchases


64
%


60
%Number


4



4





Trade receivables related to the Company’s major customers comprised 80% and 85% of all account receivables as of March 31, 2010 and 2009, respectively.





Trade payables related to the Company’s major suppliers comprised 20% and 24% of all account payables as of March 31, 2010 and 2009, respectively.





Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arisen from financial economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The major concentrations of credit risk arise from the Company’s accounts receivable. Even though the Company has major concentrations, it does not consider itself exposed to significant risk with regards to the related receivables.





(b)
Country risks




The Company’s major subsidiary has operation conducted in the PRC. Accordingly, its business, financial condition and result of operation maybe influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC economy.




The operation in the PRC is subject to special considerations and significant risks not typically associated with companies in the United States. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange and remittance restrictions. The Company’s results maybe adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, inter alia. The management does not believe these risks to be significant. There can be no assurance, however, those
changes in political and other conditions will not result in any adverse impact.


F-19


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


3.
OPERATING RISKS (CONTINUED)





(c)
Cash and time deposits





The Company mainly maintains its cash balances with various banks located in the PRC. In common with local practice, such amounts are not insured or otherwise protected should the financial institutions be unable to meet their liabilities. There has been no history of credit losses. There are neither material commitment fees nor compensating balance requirements for any outstanding loans of the Company.





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. These net operating loss carry-forwards are severely limited when Chisen Electric experiences a change in control.  Therefore, following the Exchange as mentioned in Note 1 in November 2008, the amount available to offset future taxable income is limited. 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 year.





Changxing Chisen is subject to state and local enterprise income taxes in the PRC at a standard rate of 25%. Changxing Chisen received official designation by the local tax authority as a foreign invested enterprise engaged in manufacturing activities and is confirmed by the local tax authority that it is exempted from enterprise income tax for two years commencing from the first profitable year in 2006, followed by a 50% reduction for the next three years.





Dividends payable by a foreign invested enterprise in the PRC to its foreign investors in Hong Kong are subject to a 5% withholding tax and deferred tax expenses of US$Nil and US$460,000 were charged to the statement of operations for the years ended March 31, 2010 and 2009, respectively.


F-20


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


4.
INCOME TAXES (CONTINUED)





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





Years ended March 31,2010


2009US$’000


US$’000Current taxes arising in the PRC:For the year


1,587



1,401Deferred taxes arising in the PRC:For the year


-



4601,587



1,861




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 domestic and foreign jurisdictions where it is required to file income tax returns. As of March 31, 2010 and 2009, the Company has identified the following jurisdictions as “major” tax jurisdictions, as defined, in which it is required to file income tax returns in 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 March 31, 2010 and 2009, 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 years ended March 31, 2010 and 2009, no interest or penalties were recorded.


F-21


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


4.
INCOME TAXES (CONTINUED)





(b)
Reconciliation from the expected income tax expenses calculated with reference to the statutory tax rate in the PRC of 25% (2009: 25%) is as follows:





Years ended March 31,2010


2009US$’000


US$’000Expected income tax expenses


2,772



2,693Effect on tax incentives / holiday


(1,389
)


(1,319
)Non-deductible items


6



217Withholding tax


-



481Others


198



(211
)Income tax expenses


1,587



1,861





(c)
Components of net deferred tax liabilities were as follows:


As of March 31,2010


2009US$’000


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


460



460





5.
RESTRICTED BANK BALANCES





Restricted bank balances represented time deposits with original maturity between three and twelve months to secure banking facilities granted by various financial instruments as follows:





As of March 31,2010


2009Note

US$’000


US$’000Notes payable
10


19,659



13,878Bills financing
11


1,761



-21,420



13,878





6.
OTHER FINANCIAL ASSETS





Other financial assets represented notes receivable from customers for the settlement of accounts receivable balances. As of March 31, 2010 and 2009, 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.


F-22


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


7.
INVENTORIES




Inventories consisted of the following:


As of March 31,2010


2009US$’000


US$’000Raw materials


7,186



4,269Work-in-progress and semi-finished goods


13,482



9,370Finished goods


9,370



3,49630,038



17,135





8.
AVAILABLE-FOR-SALE FINANCIAL ASSETS





Available-for-sale financial assets as of March 31, 2010 and March 31, 2009 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.





9.
PROPERTY, PLANT AND EQUIPMENT, NET





Property, plant and equipment is summarized as follows:





As of March 31,2010


2009US$’000


US$’000Buildings


5,468



2,632Leasehold improvements


495



-Plant and machinery


4,071



2,386Motor vehicles


974



807Furniture, fixtures and office equipment


1,419



427Construction-in-progress


-



36512,427



6,617Accumulated depreciation


(1,953
)


(1,302
)10,474



5,315





Depreciation expenses were approximately US$646,000 and US$451,000 for the years ended March 31, 2010 and 2009, respectively.





The Company has pledged certain buildings as collaterals against general banking facilities granted to Changxing Chisen. Details of which are disclosed in Note 11.


F-23


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


10.
NOTES PAYABLE




Notes payable were issued by the Company to creditors with the banker’s acceptance payable at the maturity date for the purpose of raw materials for production exclusively. The Company has to repay the notes within six months from date of issuance and service fees would be charged by banks for the issuance for the notes. The notes payable were collateralized by restricted bank balances as set out in Note 5 and certain land lease prepayments and buildings as set out in Note 11(i) below.


As of March 31,2010


2009US$’000


US$’000Corporate and personal guarantees issued by related parties (Note 14(d))


14,377



8,034Corporate guarantees issued by third parties


1,467



2,922




11.
SHORT-TERM BANK BORROWINGS




Short-term bank borrowings comprise of the followings:





As of March 31,Note

2010


2009US$’000


US$’000Short-term bank loans
(i)


42,473



20,451Bills financing
(ii)


3,668



-46,141



20,451




(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 and the notes payables as set out in Note 10 are collateralized by land lease prepayments and buildings of the Company with carrying values as follows:





As of March 31,2010


2009US$’000


US$’000Land lease prepayments


598



608Buildings


2,018



2,0692,616



2,677


F-24


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


11.
SHORT-TERM BANK BORROWINGS (CONTINUED)




(i)
Short-term bank loans (continued)




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





As of March 31,2010


2009US$’000


US$’000Corporate and personal guarantees issued by related parties (Note 14(d))


30,589



16,069Corporate guarantees issued by third parties


1,467



4,381Corporate and personal guarantees issued by related parties and a third party jointly (Note 14(d))


8,802



-




The weighted average annual interest rates of the short-term bank loans were 5.40% and 6.55% as of March 31, 2010 and 2009 respectively.




(ii)
Bills financing





Bill financing represents amounts due to various banks which are repayable within six months from the date of issue. At March 31, 2010, the bills are secured by certain restricted bank balances of the Company with carrying value of US$1,761,000 and guaranteed by certain related parties to the extent of US$1,907,000.





The weighted average annual interest rates of the bills financing were 3.96% as of March 31, 2010.





12.
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$47,000 was credited to the statement of operations for the year ended March 31, 2010.


F-25


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


13.
DISTRIBUTION OF INCOME




Upon completion of the Reorganization as detailed in Note 1, Changxing Chisen became wholly foreign owned enterprises when all of their equity interest have been acquired by the Company and are required by relevant laws and regulation to transfer at least 10% of their after-tax profit determined in accordance with the PRC accounting rules and regulations to a statutory surplus reserve until such reserve balance reaches 50% of Changxing Chisen’s registered capital.




The Company transferred US$1,136,000 and US$1,032,000 out of the after-tax income to the statutory reserve for the years ended March 31, 2010 and 2009, respectively.




The statutory surplus reserve can only be utilized to offset prior years' losses or for capitalization as paid-in capital. No distribution of the remaining reserves shall be made other than upon liquidation of Changxing Chisen.





14.
RELATED PARTY TRANSACTIONS




(a)
Names and relationship of related parties:


Name of related party

Existing relationships with the CompanyMr. Xu Kecheng

Director and controlling stockholder of Chisen ElectricZhejiang Chisen Glass Company Limited (“Chisen Glass”)*

A company controlled by a close family member of Mr. Xu KechengMr. Xu Keyong

A close family member of Mr. Xu KechengMs. Zhou Fang Qin

Spouse of Mr. Xu KechengChangxing Chisen Xinguangyuan Company Limited (“Xinguangyuan”)*

A company controlled by a close family member of Mr. Xu KechengZhejiang Ai Ge Organism Products Company Limited (“Ai Ge Organism”)*

A company controlled by Mr. Xu KechengZhejiang Changxing Nuo Wan Te Ke Glass Company Limited (“Nuo Wan Te Ke”)*

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

A company controlled by a close family member of Mr. Xu Kecheng




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


F-26


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


14.
RELATED PARTY TRANSACTIONS (CONTINUED)




(b)
Summary of balances with related parties:




As of March 31,2010


2009US$’000


US$’000Due from related parties:Ms. Zhou Fang Qin


8



195Chisen Glass


-



278Xinguangyuan


-



18



474Due to related parties:Mr. Xu Keyong


25



24Chisen Glass


110



-Ruilang Electronic


2,102



-Ai Ge Organism


292



602Nuo Wan Te Ke


3



132,532



639




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





(c)
Summary of related party transactions:





Name of related

party

Nature of transactions

Years ended March 31,2010


2009US$’000


US$’000Chisen Glass

Purchase of raw materials


106



-Acquisition of motor vehicle


-



160Ruilang Electronic

Purchase of raw materials


3,799



-Acquisition of land use right and buildings


2,859



-


F-27


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


14.
RELATED PARTY TRANSACTIONS (CONTINUED)




(d)
Other arrangements:





●
As of March 31, 2010, Chisen Glass provided guarantees, in aggregate, amounting to US$5,868,000, US$440,000 and US$440,000 to secure the short-term bank loans, notes payable and bill financing of the Company, respectively.





●
As of March 31, 2010, US$5,868,000 of the Company’s short-term bank loans was collateralized by land use rights owned by Ruilang Electronic and guaranteed by Mr. Xu Kecheng and Ms. Zhou Fang Qin.





●
As of March 31, 2010,  Xinguangyuan, Mr. Xu Kecheng and a third party provided guarantees, in aggregate, amounting to US$8,802,000 to secure the short-term bank loans of the Company.





●
As of March 31, 2010, Xinguangyuan and Mr. Xu Kecheng provided guarantees, in aggregate, amounting to US$11,737,000 and US$5,868,000 to secure the short-term bank loans and notes payable of the Company, respectively.





●
As of March 31, 2010, Chisen Glass, Mr. Xu Kecheng and Ms. Zhou Fang Qin provided guarantees, in the aggregate, amounting to US$2,714,000, US$4,401,000 and US$1,467,000 to secure the short-term bank loans, notes payable and bills financing of the Company, respectively.





●
As of March 31, 2010, Xinguangyuan provided guarantees, in aggregate, amounting to US$3,667,000 to secure the notes payable of the Company.





●
As of March 31, 2010, US$4,402,000 of the Company’s short-term bank loans was collateralized by a guarantee provided by Mr. Xu Kecheng.


F-28


Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009


15.
COMMITMENTS AND CONTINGENCIES





(a)
Operating lease commitments





The Company leases certain office premises under non-cancelable operating leases.  Rental expenses under operating leases for the years ended March 31, 2010 and 2009 were US$474,000 and US$206,000, respectively.





The following table summarizes the approximate future minimum rental payments under non-cancelable operating leases in effect as of March 31, 2010 and 2009:





As of March 31,2010


2009US$’000


US$’000Within one year


599



185One to two years


630



205Two to three years


661



202Three to four years


489



212Four to five years


115



54Total


2,494



858





(b)
Capital commitments





As of March 31, 2010 and 2009, the Company had capital expenditure commitments for construction projects and purchase of machineries for an aggregate amount of approximately US$84,000 and US$423,000, respectively.





16.
SUBSEQUENT EVENTS





In preparing the consolidated financial statements, the Company has evaluated all subsequent events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued, and determined there were no subsequent events to report as of that date.




F-29




Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009




17.
RESTATEMENT OF FINANCIAL STATEMENTS
  (a)
The Company’s previously issued consolidated financial statements for the year ended March 31, 2009 have been restated to correct an accounting error in relation to the Share Exchange Transaction as detailed in Note 1 above. The table below shows the effect of restatements:
 
 As previously reportedConsolidated statement of changes in

Number of


Amount


Capitalshareholders’ equity

Shares





reservesUS$’000


US$’000Balance as of April 1, 2008 and March 31, 2009


50,000,000



50



144
 
 As restatedConsolidated statement of changes in

Number of


Amount


Capitalshareholders’ equity

Shares





reservesUS$’000


US$’000Balance as of April 1, 2008


35,000,000



35



159Recapitalization upon reverse acquisition


15,000,000



15



(15
)Balance as of March 31, 2009


50,000,000



50



144
 
 The effect of restatements on 2009 was to increase the basic and diluted earnings per share as follows:
 
 Year ended March 31, 2009As previously


AsEarnings per share

reported


restatedWeighted average number of common stock outstanding - basic and diluted


50,000,000



40,753,425US$



US$Net income per share of common stock - basic and diluted


0.18



0.22
 
 There was no impact on the 2009 consolidated statement of operations and other comprehensive income, consolidated balance sheet and consolidated statement of cash flows.
 
 F-30
 Chisen Electric CorporationNotes to and Forming Part of Consolidated Financial StatementsFor the years ended March 31, 2010 and 2009
 
 17.
RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)
  (b)
Certain comparative figures in the 2009 consolidated statement of operations and other comprehensive income have been restated by the Company to conform to the current year’s presentation of financial statements. The table below shows the effect of restatements:
 
 Years ended March 31,2009As


Aspreviously


RestatedreportedUS$’000


US$’000Cost of sales


88,823



88,945Gross income


20,197



20,075Sales, marketing and distribution


5,337



5,459General and administrative


4,007



3,763


F-31