SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For
the quarterly period ended September 30, 2010





OR





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





For
the transition period from ______ to __________





COMMISSION
FILE NUMBER: 333-128532





CHISEN ELECTRIC
CORPORATION


(Exact
name of registrant as specified in its charter)





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





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


The
People’s Republic of China


(Address
of principal executive offices)





(011)
0572-6267666


(Registrant’s
Telephone Number, Including Area Code)





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





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





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





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




Large
      Accelerated Filer  ̈
            Accelerated
      Filer  ̈
            Non-Accelerated
      Filer  ̈
            Smaller
      Reporting Company x





Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act.


Yes   ̈      No x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  As of November 12, 2010, the registrant
had 50,000,000 shares of common stock, par value $0.001 per share, issued and
outstanding.





TABLE
OF CONTENTS





PART
      I FINANCIAL INFORMATION
                
                3ITEM
      1. FINANCIAL STATEMENTS
                
                3ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                
                4ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                
                11ITEM
      4. CONTROLS AND PROCEDURES
                
                12PART
      II OTHER INFORMATION
                
                13ITEM
      1. LEGAL PROCEEDINGS
                
                13ITEM
      1A. RISK FACTORS
                
                13ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                
                13ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                
                13ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
                
                13ITEM
      5. OTHER INFORMATION
                
                13ITEM
      6. EXHIBITS
                
                13SIGNATURES
                
                17EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32.2


2


PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS





PageUnaudited
      Condensed Consolidated Statements of Operations and Other
      Comprehensive Income
                
                F-2Unaudited
      Condensed Consolidated Balance Sheets
                
                F3-4Unaudited
      Condensed Consolidated Statements of Changes in Stockholders’
      Equity
                
                F-5Unaudited
      Condensed Consolidated Statements of Cash Flows
                
                F6-7Notes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      Statements
                
                F8-20




3


Unaudited
Condensed Consolidated Financial Statements of
  Chisen
Electric
Corporation
  For
the six months ended September 30,
2010
  
 
 Chisen
      Electric CorporationIndex
      to Unaudited Condensed Consolidated Financial
StatementsFor the six months ended September 30,
      2010
 
 PageUnaudited
      Condensed Consolidated Statements of Operations and Other Comprehensive
      Income
                                  
                                  F-2Unaudited
      Condensed Consolidated Balance Sheets
                                  
                                  F-3
      – F-4Unaudited
      Condensed Consolidated Statements of Changes in Stockholders’
      Equity
                                  
                                  F-5Unaudited
      Condensed Consolidated Statements of Cash Flows
                                  
                                  F-6
      - F-7Notes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      Statements
                                  
                                  F-8
      –
F-20
  F-1
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Statements of Operations andOther
      Comprehensive IncomeFor the six months ended September 30, 2010 and
      2009
 
 Three months ended
                                        September 30
                                      
                                      
                                      Six months ended
                                        September 302010
                                      
                                      
                                      2009
                                      
                                      
                                      2010
                                      
                                      
                                      2009Note
                                      
                                      US$’000
                                      
                                      
                                      US$’000
                                      
                                      
                                      US$’000
                                      
                                      
                                      US$’000Operating
      revenues:Net
      sales to third parties
                                      
                                      
                                      
                                      76,613
                                      
                                      
                                      
                                      50,392
                                      
                                      
                                      
                                      127,042
                                      
                                      
                                      
                                      79,867Cost
      of sales
                                      
                                      
                                      
                                      (65,869
                                      )
                                      
                                      
                                      (41,708
                                      )
                                      
                                      
                                      (111,260
                                      )
                                      
                                      
                                      (65,813
                                      )Gross
      income
                                      
                                      
                                      
                                      10,744
                                      
                                      
                                      
                                      8,684
                                      
                                      
                                      
                                      15,782
                                      
                                      
                                      
                                      14,054Operating
      expenses:Sales,
      marketing and distribution
                                      
                                      
                                      
                                      (3,040
                                      )
                                      
                                      
                                      (2,167
                                      )
                                      
                                      
                                      (5,551
                                      )
                                      
                                      
                                      (3,953
                                      )General
      and administrative
                                      
                                      
                                      
                                      (956
                                      )
                                      
                                      
                                      (1,030
                                      )
                                      
                                      
                                      (1,641
                                      )
                                      
                                      
                                      (2,086
                                      )Operating
      income
                                      
                                      
                                      
                                      6,748
                                      
                                      
                                      
                                      5,487
                                      
                                      
                                      
                                      8,590
                                      
                                      
                                      
                                      8,015Other
      income, net
                                      
                                      
                                      
                                      110
                                      
                                      
                                      
                                      578
                                      
                                      
                                      
                                      613
                                      
                                      
                                      
                                      725Interest
      income
                                      
                                      
                                      
                                      102
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      198
                                      
                                      
                                      
                                      55Interest
      expense
                                      
                                      
                                      
                                      (606
                                      )
                                      
                                      
                                      (378
                                      )
                                      
                                      
                                      (1,291
                                      )
                                      
                                      
                                      (747
                                      )Income
      before income taxes
                                      
                                      
                                      
                                      6,354
                                      
                                      
                                      
                                      5,687
                                      
                                      
                                      
                                      8,110
                                      
                                      
                                      
                                      8,048Income
      taxes expense
                                      4
                                      
                                      
                                      (912
                                      )
                                      
                                      
                                      (770
                                      )
                                      
                                      
                                      (1,161
                                      )
                                      
                                      
                                      (1,125
                                      )Net
      income attributable to CIEC common stockholders
                                      
                                      
                                      
                                      5,442
                                      
                                      
                                      
                                      4,917
                                      
                                      
                                      
                                      6,949
                                      
                                      
                                      
                                      6,923Other
      comprehensive incomeForeign
      currency translation adjustment
                                      
                                      
                                      
                                      433
                                      
                                      
                                      
                                      24
                                      
                                      
                                      
                                      554
                                      
                                      
                                      
                                      24Comprehensive
      income
                                      
                                      
                                      
                                      5,875
                                      
                                      
                                      
                                      4,941
                                      
                                      
                                      
                                      7,503
                                      
                                      
                                      
                                      6,947Shares
                                      
                                      
                                      Shares
                                      
                                      
                                      Shares
                                      
                                      
                                      SharesEarnings
      per share
                                      3Weight
      average number of common stock outstanding-
      basic and diluted
                                      
                                      
                                      
                                      50,000,000
                                      
                                      
                                      
                                      50,000,000
                                      
                                      
                                      
                                      50,000,000
                                      
                                      
                                      
                                      50,000,000US$
                                      
                                      
                                      US$
                                      
                                      
                                      US$
                                      
                                      
                                      US$Net
      income per share of common stock outstanding-
      basic and diluted
                                      
                                      
                                      
                                      0.11
                                      
                                      
                                      
                                      0.10
                                      
                                      
                                      
                                      0.14
                                      
                                      
                                      
                                      0.14
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-2
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Balance SheetsAs of September 30, 2010 and March 31,
      2010
 
 As
      of
                                  September
      30,
                                
                                
                                As
      of
                                  March
      31,2010
                                
                                
                                2010Note
                                
                                US$’000
                                
                                
                                US$’000ASSETSCurrent
      assets:Cash and cash
      equivalents
                                
                                
                                
                                8,612
                                
                                
                                
                                6,019Restricted bank
      balances
                                5
                                
                                
                                21,638
                                
                                
                                
                                21,420Other financial
      assets
                                6
                                
                                
                                3,122
                                
                                
                                
                                7,438Trade receivables, net
                                
                                
                                
                                68,875
                                
                                
                                
                                50,440Other
      receivables
                                
                                
                                
                                1,858
                                
                                
                                
                                800Prepayments
                                
                                
                                
                                2,192
                                
                                
                                
                                4,933Due from related
      parties
                                14(b)
                                
                                
                                5
                                
                                
                                
                                8Inventories
                                7
                                
                                
                                24,575
                                
                                
                                
                                30,038Assets classified as held for
      sale
                                19(a)
                                
                                
                                2,524
                                
                                
                                
                                -Total
      current assets
                                
                                
                                
                                133,401
                                
                                
                                
                                121,096Available-for-sale
      financial assets
                                8
                                
                                
                                2,699
                                
                                
                                
                                882Long-term
      land lease prepayments, net
                                
                                
                                
                                152
                                
                                
                                
                                749Property,
      plant and equipment, net
                                9
                                
                                
                                9,402
                                
                                
                                
                                10,474Deposit
      for acquisition of land and buildings
                                
                                
                                
                                788
                                
                                
                                
                                -Total
      assets
                                
                                
                                
                                146,442
                                
                                
                                
                                133,201
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-3
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Balance SheetsAs of September 30, 2010 and March 31,
      2010
 
 As of
                            September
                          
                          
                          As of March30, 2010
                          
                          
                          
                          31, 2010Note
                          
                          US$’000
                          
                          
                          US$’000LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Trade
    payables
                          
                          
                          
                          14,971
                          
                          
                          
                          14,923Notespayable
                          10
                          
                          
                          41,038
                          
                          
                          
                          35,504Accrued expenses and other accrued
      liabilities
                          
                          
                          
                          6,742
                          
                          
                          
                          5,087Due to related parties
                          14(b)
                          
                          
                          4,127
                          
                          
                          
                          2,532Income taxes
      payable
                          
                          
                          
                          919
                          
                          
                          
                          148Short-term bankborrowings
                          11
                          
                          
                          41,336
                          
                          
                          
                          46,141Liabilities
      directly associated with assets classified as held for
sale
                          19(b)
                          
                          
                          874
                          
                          
                          
                          -Total
      current liabilities
                          
                          
                          
                          110,007
                          
                          
                          
                          104,335Government
      subsidies
                          12
                          
                          
                          117
                          
                          
                          
                          139Deferred
      tax liabilities
                          4(c)
                          
                          
                          460
                          
                          
                          
                          460Total
      non-current liabilities
                          
                          
                          
                          577
                          
                          
                          
                          599Total
      liabilities
                          
                          
                          
                          110,584
                          
                          
                          
                          104,934Commitments
      and contingencies
                          15
                          
                          
                          -
                          
                          
                          
                          -Stockholders’
      equity:Preferred
      stock, US$0.001 par value each:10,000,000
      shares authorized and no shares issued and outstanding
                          
                          
                          
                          -
                          
                          
                          
                          -Common
      stock, US$0.001 par value each:100,000,000
      shares authorized50,000,000
      shares issued and outstanding
                          
                          
                          
                          50
                          
                          
                          
                          50Capitalreserves
                          
                          
                          
                          144
                          
                          
                          
                          144Statutory
      reserves
                          
                          
                          
                          3,184
                          
                          
                          
                          2,239Accumulated other comprehensive
      income
                          
                          
                          
                          1,608
                          
                          
                          
                          1,054Retained
      earnings
                          
                          
                          
                          30,784
                          
                          
                          
                          24,780Total CIEC
      stockholders’equity
                          
                          
                          
                          35,770
                          
                          
                          
                          28,267Non-controlling
      interests
                          
                          
                          
                          88
                          
                          
                          
                          -Total
      stockholders’ equity
                          
                          
                          
                          35,858
                          
                          
                          
                          28,267Total
      liabilities and stockholders’ equity
                          
                          
                          
                          146,442
                          
                          
                          
                          133,201
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-4
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Statements of Changes in Stockholders'
      EquityFor the six months ended September 30,
      2010
 
 Common stock issued
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  AccumulatedNumber
                    of shares
                  
                  
                  Amount
                  
                  
                  Capital
                    reserves
                  
                  
                  Statutory
                    reserves
                  
                  
                  Retained
                    earnings
                  
                  
                  other
                    comprehensive
                    income
                  
                  
                  Total CIEC
                    stockholders’
                    equity
                  
                  
                  Non-
                    controlling
                    interest
                  
                  
                  Total
                    stockholders’
                    equityUS$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000Balance as of
      April 1, 2010
                  
                  
                  50,000,000
                  
                  
                  
                  50
                  
                  
                  
                  144
                  
                  
                  
                  2,239
                  
                  
                  
                  24,780
                  
                  
                  
                  1,054
                  
                  
                  
                  28,267
                  
                  
                  
                  -
                  
                  
                  
                  28,267Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,949
                  
                  
                  
                  -
                  
                  
                  
                  6,949
                  
                  
                  
                  -
                  
                  
                  
                  6,949Transfer
      to statutory reserves
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  945
                  
                  
                  
                  (945
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  554
                  
                  
                  
                  554
                  
                  
                  
                  -
                  
                  
                  
                  554Capital
      contributed by non-controlling interests
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  88
                  
                  
                  
                  88Balance
      as of September 30, 2010
                  
                  
                  50,000,000
                  
                  
                  
                  50
                  
                  
                  
                  144
                  
                  
                  
                  3,184
                  
                  
                  
                  30,784
                  
                  
                  
                  1,608
                  
                  
                  
                  35,770
                  
                  
                  
                  88
                  
                  
                  
                  35,858
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-5
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Statements of Cash FlowsFor the six months ended September 30, 2010 and
      2009
 
 Six months ended
                      September 30,2010
                    
                    
                    2009US$’000
                    
                    
                    US$’000Cash flows from operating
      activitiesNet income
                    
                    
                    6,949
                    
                    
                    
                    6,923Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation of property, plant
      and equipment
                    
                    
                    540
                    
                    
                    
                    270Written-off
      of property, plant and equipment
                    
                    
                    -
                    
                    
                    
                    6Loss
      on disposal of property, plant and equipment
                    
                    
                    18
                    
                    
                    
                    -Amortization
      of long-term land lease prepayments
                    
                    
                    8
                    
                    
                    
                    6Exchange
      differences
                    
                    
                    68
                    
                    
                    
                    147Provision
      for warranty costs
                    
                    
                    549
                    
                    
                    
                    44Government
      grant recognized
                    
                    
                    (24
                    )
                    
                    
                    (24
                    )Changes
      in assets and liabilities:Other financial
      assets
                    
                    
                    4,443
                    
                    
                    
                    (3,761
                    )Trade receivables,
      net
                    
                    
                    (17,570
                    )
                    
                    
                    (13,386
                    )Other
      receivables
                    
                    
                    (171
                    )
                    
                    
                    (281
                    )Prepayment
                    
                    
                    2,826
                    
                    
                    
                    (1,281
                    )Due from related
      parties
                    
                    
                    3
                    
                    
                    
                    299Inventories
                    
                    
                    5,979
                    
                    
                    
                    (4,518
                    )Trade
    payables
                    
                    
                    (208
                    )
                    
                    
                    5,020Notes
    payable
                    
                    
                    4,925
                    
                    
                    
                    12,314Accrued expenses and other accrued
      liabilities
                    
                    
                    1,467
                    
                    
                    
                    1,732Due to related
      parties
                    
                    
                    1,551
                    
                    
                    
                    (321
                    )Income taxes payable
                    
                    
                    771
                    
                    
                    
                    507Net
      cash provided by operating activities
                    
                    
                    12,124
                    
                    
                    
                    3,696Cash
      flows from investing activitiesPurchase of property, plant and
      equipment
                    
                    
                    (1,685
                    )
                    
                    
                    (657
                    )Proceeds on disposal of property,
      plant and equipment
                    
                    
                    1
                    
                    
                    
                    -Investment in restricted bank balances,
      net
                    
                    
                    149
                    
                    
                    
                    (9,798
                    )Deposit paid for acquisition of
      land and buildings
                    
                    
                    (788
                    )
                    
                    
                    (1,463
                    )Acquisition ofavailable-for-sale financial
      assets
                    
                    
                    (1,802
                    )
                    
                    
                    -Net cash used in investing
      activities
                    
                    
                    (4,125
                    )
                    
                    
                    (11,918
                    )
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-6
 
 Chisen
      Electric CorporationUnaudited
      Condensed Consolidated Statements of Cash FlowsFor the six months ended September 30, 2010 and
      2009
 
 Six months ended
                          September 30,2010
                        
                        
                        2009US$’000
                        
                        
                        US$’000Cash
      flows from financing activitiesProceeds from short-term bank
      loans
                        
                        
                        6,417
                        
                        
                        
                        23,839Repayment of short-termbank
      loans
                        
                        
                        (8,282
                        )
                        
                        
                        (10,676
                        )Repayment of bills
      financing
                        
                        
                        (3,731
                        )
                        
                        
                        -Capital contributed by
      non-controlling
      interest
                        
                        
                        88
                        
                        
                        
                        -Net cash(used in)provided by financing
      activities
                        
                        
                        (5,508
                        )
                        
                        
                        13,163Netincrease in cash and cash
      equivalents
                        
                        
                        2,491
                        
                        
                        
                        4,941Cash and cash equivalents,
      beginning of period
                        
                        
                        6,019
                        
                        
                        
                        2,620Effect on exchange rate
      changes
                        
                        
                        102
                        
                        
                        
                        (143
                        )Cash and cash equivalents, end of
      period
                        
                        
                        8,612
                        
                        
                        
                        7,418Supplemental disclosure of cash
      flow informationInterest
      received
                        
                        
                        198
                        
                        
                        
                        -Interest
    paid
                        
                        
                        1,268
                        
                        
                        
                        704Tax paid
                        
                        
                        400
                        
                        
                        
                        550
 
 The financial statements should be read in
      conjunction with the accompanying
notes.
  F-7
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial StatementsFor the six months ended September 30, 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 September 30, 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%
                      
                      InactiveChisen
      Electric Jiangsu Co., Limited (“Chisen Jiangsu”)*
                      
                      Jiangsu,
                        PRC
                        August
      23, 2010
                      
                      98%
                      
                      Inactive
 
 *
                These are direct translation
      of the name in Chinese for identification purpose only and are not the
      official name in
English.
  F-8
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated
      FinancialStatementsFor the six months ended September 30, 2010 and
      2009
 
 2.
                PREPRATION
      OF INTERIM FINANCIAL STATEMENTS
  Basis
of presentations
  The
accompanying unaudited condensed consolidated financial statements as of
September 30, 2010 have been prepared based upon Securities and Exchange
Commission rules that permit reduced disclosure for interim periods and include,
in the opinion of management, all adjustments (consisting of normal recurring
adjustments and reclassifications) necessary to present fairly the financial
position, results of operations and cash flows as of September 30, 2010 and for
all periods presented. Information as of March 31, 2010 was derived from the
audited consolidated financial statements of the Company for the year ended
March 31, 2010.
  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the
United States of America (“USGAAP”) have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Chisen
Electric's Form 10-K filed on June 28, 2010 for the year ended March 31, 2010.
The results of operations for both the three months and six months ended
September 30, 2010 and 2009 are not necessarily indicative of the operating
results to be expected for the full year.
  The
condensed consolidated financial statements and accompanying notes are presented
in United States dollars and prepared in conformity with USGAAP which requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
 Basis
of consolidation
 The
consolidated financial statements include the financial information of Chisen
Electric and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated upon consolidation.
 
 Recent
accounting pronouncements
 In July
2010, FASB issued ASU No. 2010-20 “Disclosures about the credit quality of
financing receivables and the allowance for credit losses”, which requires
expanded disclosures about the credit quality of an entity’s financing
receivables and its allowance for credit loss on a disaggregated basis. This ASU
is effective for annual reporting periods ending on or after December 15, 2011.
The Company does not expect the adoption of this ASU will have a material impact
on the Company’s consolidated financial statements.
 
 3.
                EARNINGS
      PER SHARE
 
 Basic earnings per share is
computed by dividing income
available to common stockholders by the weighted-average number of common stocks
outstanding during the period. Diluted earnings per share is computed similar to
basic earnings per share except that the denominator is increased to
include the number of additional common
stocks that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. There were no
potentially dilutive securities for both thethree months andsix months ended September 30, 2010 and
2009.
  F-9
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 4.
                INCOME
      TAXES
 
 Chisen
Electric had a net operating loss carry-forward for income tax reporting
purposes that might be offset against future taxable income. No tax benefit has
been reported in the financial statements, because Chisen Electric believes that
it is more likely than not that the carry-forwards will finally expire and
therefore cannot be used.  Accordingly, the potential tax benefits of
the loss carry-forwards are offset by a valuation allowance of the same
amount.
 
 Chisen
Electric’s subsidiaries are subject to income taxes on an entity basis on income
arising in or derived from the tax jurisdictions in which each entity domiciles
and operates.
 
 Hong Kong
Profits Tax has not been provided as Fast More had no assessable profit for the
period.
 
 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. No deferred tax expenses were
charged to the statement of operations for both thethree months andsix months ended September
30, 2010 and 2009.
 
 (a)
                Income
      tax expenses are comprised of the
following:
 
 Three months ended
                                                  September 30
                                                
                                                Six months ended
                                                  September 302010
                                                
                                                2009
                                                
                                                2010
                                                
                                                2009US$’000
                                                
                                                US$’000
                                                
                                                US$’000
                                                
                                                US$’000Current
      taxes arising inthe
      PRC:For
      the period
                                                912
                                                
                                                770
                                                
                                                1,161
                                                
                                                1,125
  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.
  F-10
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
   4.
                INCOME
      TAXES (CONTINUED)
   (a)
                (Continued)
  Subject
to the provision of ASC 740, the Company has analyzed its filing positions in
all of the jurisdictions where it is required to file income tax returns. As of
September 30, 2010 and March 31, 2010, the Company has identified the following
jurisdictions as “major” tax jurisdictions, as defined, in which it is required
to file income tax returns namely the United States, Hong Kong and the PRC.
Based on the evaluations noted above, the Company has concluded that there are
no significant uncertain tax positions requiring recognition in its unaudited
condensed consolidated financial statements.
  As of
September 30, 2010 and March 31, 2010, 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 six months ended
September 30, 2010 and 2009, no interest or penalties were
recorded.
 
 (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:
 
 Three months ended
                            September 30
                          
                          
                          Six months ended
                            September 302010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009US$’000
                          
                          
                          US$’000
                          
                          
                          US$’000
                          
                          
                          US$’000Expected
      income tax expenses
                          
                          
                          1,588
                          
                          
                          
                          1,422
                          
                          
                          
                          2,027
                          
                          
                          
                          2,012Effect
      on tax incentives / holiday
                          
                          
                          (794
                          )
                          
                          
                          (761
                          )
                          
                          
                          (996
                          )
                          
                          
                          (1,092
                          )Non-deductible
      items
                          
                          
                          -
                          
                          
                          
                          99
                          
                          
                          
                          -
                          
                          
                          
                          172Non-taxable
      income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (34
                          )
                          
                          
                          -Others
                          
                          
                          118
                          
                          
                          
                          10
                          
                          
                          
                          164
                          
                          
                          
                          33Income
      tax expenses
                          
                          
                          912
                          
                          
                          
                          770
                          
                          
                          
                          1,161
                          
                          
                          
                          1,125
 
 (c)
                Components
      of net deferred tax liabilities were as
follows:
 
 As
      of
                            September 30,
                          
                          
                          As
      of
                            March 31,2010
                          
                          
                          2010US$’000
                          
                          
                          US$’000Withholding
      tax on undistributed earnings of a PRC subsidiary
                          
                          
                          460
                          
                          
                          
                          460
  F-11
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 5.
                RESTRICTED BANK
      BALANCES
 
 Restricted bank balances as of September
30, 2010 and March 31, 2010 represented time depositswith original maturity for six months.
As of September 30, 2010 and March 31, 2010, all restricted bank balances were
pledged for the issue of notes payable as disclosed in Note 10
below.
 
 6.
                OTHER FINANCIAL
      ASSETS
 
 Other financial assetsrepresentednotes receivablefromcustomersfor the settlement ofaccounts receivable
balances. As ofSeptember 30, 2010 and
March 31, 2010, all notes
receivable were guaranteed by established banks in the PRC and had maturities ofsixmonths or lessfrom the date of issue.The fair value of the notes receivable
approximated their carrying value.
 
 7.
                INVENTORIES
  Inventories consisted of the
following:
 
 As of
                          September 30,
                        
                        
                        As of
                          March 31,2010
                        
                        
                        2010US$’000
                        
                        
                        US$’000Raw
      materials
                        
                        
                        1,742
                        
                        
                        
                        7,186Work-in-progress
      and semi-finished goods
                        
                        
                        6,442
                        
                        
                        
                        13,482Finished
      goods
                        
                        
                        16,391
                        
                        
                        
                        9,37024,575
                        
                        
                        
                        30,038
 
 8.
                AVAILABLE-FOR-SALE FINANCIAL
      ASSETS
 
 Available-for-sale
      financial assets as of September 30, 2010 and March 31, 2010 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.
  F-12
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 9.
                PROPERTY, PLANT AND EQUIPMENT,
      NET
 
 Property, plant and equipment is
summarized as follows:
 
 As of
                          September 30,
                        
                        
                        As of
                          March 31,2010
                        
                        
                        2010US$’000
                        
                        
                        US$’000Buildings
                        
                        
                        2,933
                        
                        
                        
                        5,468Leasehold
      improvements
                        
                        
                        787
                        
                        
                        
                        495Plant
      and machinery
                        
                        
                        4,849
                        
                        
                        
                        4,071Motor
      vehicles
                        
                        
                        991
                        
                        
                        
                        974Furniture,
      fixtures and office equipment
                        
                        
                        1,619
                        
                        
                        
                        1,41911,179
                        
                        
                        
                        12,427Accumulated
      depreciation
                        
                        
                        (1,777
                        )
                        
                        
                        (1,953
                        )9,402
                        
                        
                        
                        10,474
 
 Depreciation expenseswereapproximatelyUS$288,000 and US$138,000 for the three months ended
September 30, 2010 and 2009, respectively, and US$540,000 and
US$270,000 for the six months ended September 30, 2010 and 2009,
respectively.
 
 The Company has pledged certain
buildingsas collaterals
against general banking facilities granted to the Company. Details of which are
disclosed in Note 11.
 
 10.
                NOTES
    PAYABLE
  All notes
payable issued by the Company were interest-free, guaranteed by banks, repayable
within six months from date of issue and 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.
  In
addition, various parties have issued guarantee against these notes payable as
follows:
 
 As
      of
                          September
      30,
                        
                        
                        As
      of
                          March
      31,2010
                        
                        
                        2010US$’000
                        
                        
                        US$’000Corporate
      and personal guarantees issued by related parties (Note
    14(d))
                        
                        
                        17,908
                        
                        
                        
                        14,377Corporate
      guarantees issued by third parties
                        
                        
                        1,492
                        
                        
                        
                        1,467
  F-13
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 11.
                SHORT-TERMBANKBORROWINGS
  Short-term
bank borrowings comprise of the followings:
 
 As
      of
                          September
      30,
                        
                        
                        As
      of
                          March
      31,Note
                        
                        2010
                        
                        
                        2010US$’000
                        
                        
                        US$’000Short-term
      bank loans
                        (i)
                        
                        
                        41,336
                        
                        
                        
                        42,473Bills
      financing
                        (ii)
                        
                        
                        -
                        
                        
                        
                        3,66841,336
                        
                        
                        
                        46,141
  (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 assets of the
Company with carrying values as follows:
 
 As
      of
                          September
      30,
                        
                        
                        As
      of
                          March
      31,2010
                        
                        
                        2010US$’000
                        
                        
                        US$’000Land
      lease prepayments
                        
                        
                        -
                        
                        
                        
                        598Buildings
                        
                        
                        -
                        
                        
                        
                        2,018Land
      lease prepayments classified as held for sale
                        
                        
                        601
                        
                        
                        
                        -Buildings
      classified as held for sale
                        
                        
                        1,923
                        
                        
                        
                        -2,524
                        
                        
                        
                        2,616
  Various
parties have also issued guarantee against these short-term bank loans as
follows:
 
 As
      of
                          September
      30,
                        
                        
                        As
      of
                          March
      31,2010
                        
                        
                        2009US$’000
                        
                        
                        US$’000Corporate
      and personal guarantees issued by related parties (Note
    14(d))
                        
                        
                        24,771
                        
                        
                        
                        30,589Corporate
      guarantees issued by third parties
                        
                        
                        1,492
                        
                        
                        
                        1,467Corporate
      and personal guarantees issued by related parties and a third party
      jointly (Note 14(d))
                        
                        
                        8,954
                        
                        
                        
                        8,802
  The
weighted average annual interest rates of the short-term bank loans were 5.41%
and 5.40% as of September 30, 2010 and March 31, 2010
respectively.
  F-14
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
  11.
                SHORT-TERMBANKBORROWINGS(CONTINUED)
  (ii)
                Bills
      financing
  Billsfinancing represents amounts due to
various banks which are repayable within six months from the date of
issue.
 
 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$12,000 and US$12,000
was credited to the statement of operations for the three months ended September
30, 2010 and 2009, respectively, and US$24,000 and US$24,000 were credited to
the statement of operations for the six months ended September 30, 2010 and 2009
respectively.
 
 13.
                FAIR VALUE
      MEASUREMENT
 
 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, 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.
  F-15
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 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 translation of the name in Chinese for identification purpose
      only and are not the official names in
English.
  (b)
                Summary
      of balances with related parties:
 
 As
      of
                      September
      30,
                    
                    
                    As
      of
                      March
      31,2010
                    
                    
                    2010US$’000
                    
                    
                    US$’000Due
      from related parties:Ms.
      Zhou Fang Qin
                    
                    
                    5
                    
                    
                    
                    8Due
      to related parties:Mr.
      Xu Keyong
                    
                    
                    25
                    
                    
                    
                    25Chisen
      Glass
                    
                    
                    1,105
                    
                    
                    
                    110Ruilang
      Electronic
                    
                    
                    2,670
                    
                    
                    
                    2,102Ai
      Ge Organism
                    
                    
                    297
                    
                    
                    
                    292Nuo
      Wan Te Ke
                    
                    
                    3
                    
                    
                    
                    3Xinguangyuan
                    
                    
                    27
                    
                    
                    
                    -4,127
                    
                    
                    
                    2,532
  All
amounts due from / to related parties represent unsecured advances which are
interest-free and repayable on demand.
  F-16
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 14.
                RELATED PARTY TRANSACTIONS(CONTINUED)
  (c)
                Summary
      of related party transactions:
  Name
      of
                                    Nature
      of
                                    
                                    Three
      months ended
                                      September
      30
                                    
                                    
                                    Six
      months ended
                                      September
      30related
      party
                                    transactions
                                    
                                    2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009US$’000
                                    
                                    
                                    US$’000
                                    
                                    
                                    US$’000
                                    
                                    
                                    US$’000Ruilang
      Electronic
                                    Purchase
      of raw materials
                                    
                                    
                                    2,201
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4,134
                                    
                                    
                                    
                                    -Deposit
      paid for acquisition of land and building
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,462
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,462Chisen
      Glass
                                    Purchase of raw materials
                                    
                                    
                                    760
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,420
                                    
                                    
                                    
                                    -
  (d)
                Other
      arrangements:
   ̇
                As of September 30, 2010, Chisen Glass provided
      guarantees, in aggregate, amounting to US$5,969,000 and US$3,731,000 to
      secure the short-term bank loans and notes payable of the Company,
      respectively.
 
  ̇
                As ofSeptember 30,
      2010,
      US$3,432,000 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 September 30, 2010,  Xinguangyuan, Mr. Xu
      Kecheng and a third party provided guarantees, in aggregate, amounting to US$8,954,000 to
      secure the short-term bank loans of the
  Company.
 
  ̇
                As of September 30, 2010, Xinguangyuan and Mr. Xu
      Kechengprovided guarantees, in aggregate,
      amounting to US$11,938,000and US$5,969,000to secure the short-term bank
      loans and notes
      payable of the Company,
respectively.
 
  ̇
                As of September 30, 2010, Chisen Glass, Mr. Xu Kecheng
      and Ms. Zhou Fang Qin provided guarantees, in the aggregate, amounting to
      US$3,432,000 and US$4,477,000 to secure the short-term bank loans and
      notes payable of the
      Company, respectively.
 
  ̇
                As of September 30, 2010, Xinguangyuanprovided guarantees, in aggregate,
      amounting to US$3,731,000 to secure the notes payable of the
      Company.
  F-17
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 15.
                COMMITMENTS AND
      CONTINGENCIES
 
 (a)
                Operating lease
      commitments
 
 The following table summarizes the
approximate future minimum rental payments undernon-cancelable operating leases in
effect as of September 30, 2010 and March 31, 2010:
 
 As
      of
                      September
      30,
                    
                    
                    As
      of
                      March
      31,2010
                    
                    
                    2010US$’000
                    
                    
                    US$’000Within
      one year
                    
                    
                    625
                    
                    
                    
                    599One
      to two years
                    
                    
                    656
                    
                    
                    
                    630Two
      to three years
                    
                    
                    651
                    
                    
                    
                    661Three
      to four years
                    
                    
                    275
                    
                    
                    
                    489Four
      to five years
                    
                    
                    29
                    
                    
                    
                    115Total
                    
                    
                    2,236
                    
                    
                    
                    2,494
 
 (b)
                Capital
      commitments
 
 As of
September 30, 2010 and March 31, 2010, the Company had outstanding capital
expenditure commitments relating to various construction projects and purchase
of land and machineries for an aggregate amount of approximately US$160,187,000
and US$84,000 respectively.
 
 16.
                PROVISION FOR
      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 while are reviewed periodically in light of
actual experience. The reconciliation of the changes in the warranty obligation
is as follows:
 
 Three months ended
                          September 30
                        
                        
                        Six months ended
                          September 302010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009US$’000
                        
                        
                        US$’000
                        
                        
                        US$’000
                        
                        
                        US$’000Beginning
      balance
                        
                        
                        283
                        
                        
                        
                        147
                        
                        
                        
                        226
                        
                        
                        
                        121Exchange
      realignment
                        
                        
                        4
                        
                        
                        
                        -
                        
                        
                        
                        5
                        
                        
                        
                        1Accrual
      for warranties issued during the period
                        
                        
                        230
                        
                        
                        
                        65
                        
                        
                        
                        554
                        
                        
                        
                        105Settlement
      made during the period
                        
                        
                        (48
                        )
                        
                        
                        (20
                        )
                        
                        
                        (316
                        )
                        
                        
                        (35
                        )Closing
      balance
                        
                        
                        469
                        
                        
                        
                        192
                        
                        
                        
                        469
                        
                        
                        
                        192
  F-18
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 17.
                RETIREMENT PLAN
      COSTS
 
 Contributions
to defined contribution retirement schemes are charged to cost of sales, sales,
marketing and distribution costs and general and administrative expenses in the
consolidated statements of operations and other comprehensive income as and when
the related employee services are provided. Retirement plan costs were
US$286,000 and US$66,000 for the three months ended September 30, 2010 and 2009
respectively, and US$415,000 and US$238,000 for the six months ended September
30, 2010 and 2009 respectively.
 
 18.
                SEGMENTAL
      INFORMATION
 
 During
the six months ended September 30, 2010 and year ended March 31, 2010, all
revenue of the Company represented income from sales of sealed lead-acid battery
and therefore no financial information by business segment is presented.
Furthermore, as all income is derived from the PRC, no geographical segment is
presented.
 
 19.
                ASSETS CLASSIFIED AS HELD FORSALE
 
 As of
                      September 30,
                    
                    
                    As of
                      March 31,2010
                    
                    
                    2010Note
                    
                    US$’000
                    
                    
                    US$’000Long-term
      land lease prepayments
                    
                    
                    
                    601
                    
                    
                    
                    -Buildings
                    
                    
                    
                    1,923
                    
                    
                    
                    -(a)
                    
                    
                    2,524
                    
                    
                    
                    -Liabilities
      directly associated with assets classified as held for
sale
                    (b)
                    
                    
                    874
                    
                    
                    
                    -
 
 (a)
                On
      August 20, 2010, the Company’s wholly owned subsidiary, Changxing Chisen,
      entered into an investment agreement with the Administrative Committee of
      Changxing Economic Development Zone (“ACC”). Changxing Chisen agreed to
      relocate its business and production plant to a new location within one
      year from the date of the investment agreement. As a result, ACC will buy
      back the long-term land lease prepayments and buildings located in the
      existing plant of Jingyi Road, Changxing Economic Development Zone. All
      the related assets were reclassified at their carrying amounts from
      property, plant and equipment and long-term land lease prepayments to
      assets held for sale on the date of the investment
    agreement.
 
 (b)
                As
      of September 30, 2010 and March 31, 2010, the Company had deferred
      compensation income from ACC of approximately US$874,000 (equivalent to 5%
      of total compensation) and US$Nil
respectively.
  F-19
 
 Chisen
      Electric CorporationNotes
      to and Forming Part of Unaudited Condensed Consolidated Financial
      StatementsFor the six months ended September 30, 2010 and
      2009
 
 20.
                SUBSEQUENT
      EVENTS
 
 On
October 8, 2010, the Company filed with the SEC a registration statement on Form
S-1 relating to the proposed public offering of its common stock. The Company
intends to use the net proceeds from the offering to construct new production
facilities in Changxing County (Zhejiang Province) and Jiangsu Province for the
development and production of a new product, lithium-ion batteries. The
registration statement is reviewing by SEC and has not yet effective as of the
filing date of these financial statements.
  F-20


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




Forward-Looking
Statements





The
following discussion of our financial condition and results of operations of
Chisen Electric Corporation and its subsidiaries should be read in conjunction
with our financial statements and the related notes, and the other financial
information included in this report.





As used in this report, unless otherwise
indicated, the terms “we,”“our,”“us,”the “Registrant”and “Chisen”refer to Chisen Electric Corporation, a
Nevada corporation. We conduct our business through our subsidiaries,which include our
wholly-owned subsidiary, Fast More Limited, a Hong Kong investment
holding company, its 100% owned
and chief operating subsidiary,Changxing Chisen Electric Co., Ltd., a wholly foreign owned entity
("WFOE") organized under the laws of
thePRC (“CCEC”) and CCEC’s subsidiary, ChisenElectric Jiangsu Co., Ltd.
(collectively, the “Company”).





This
report contains forward-looking statements.  The words “anticipated,”
“believe,” “expect, “plan,” “intend,” “seek,” “estimate,” “project,” “could,”
“may,” and similar expressions are intended to identify forward-looking
statements.  These statements include, among others, information
regarding future operations, future capital expenditures, and future net cash
flow.  Such statements reflect our management’s current views with
respect to future events and financial performance and involve risks and
uncertainties, including, without limitation, the current economic downturn adversely
affecting demand for the our products; our reliance on our major
customers for a large
portion of our net sales; our ability to develop and market new products; our
ability to raise additional capital to fund our operations; our ability to
accurately forecast amounts of supplies needed to meet customer demand; market
acceptance of our products; exposure to product
liability and defect claims; fluctuations in the availability of raw materials
and components needed for our products; protection of our intellectual property
rights; changes in the laws of the PRC that affect our operations; inflation and fluctuations in
foreign currency rates and various other matters, many of which are beyond our
control.  Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove to be incorrect, actual results
may vary materially and adversely from those anticipated, believed, estimated or
otherwise indicated.  Consequently, all of the forward-looking
statements made in this report are qualified by these cautionary statements and
there can be no assurance of the actual results or developments.





Company Overview





We are one of the leading producers of
sealed lead-acid motive batteries in China's personal transportation device
market by ranking as one of the top three manufacturers in China in terms of
production. Our motive battery products, sold under our own brand name “Chisen”,
are predominantly used in electric bicycles and are distributed and sold in
China.  Electric bicycles have become increasingly popular in China.
According to market research results of Shenzhen Forward Business Information
Company (“Forward Business”), during the five years from 2004 to 2009, the
market sales of electric bicycles in China quadrupled, and the number of
electric bicycles in China increased to approximately 120,000,000. Among all
types of batteries for electric bicycles, the lead-acid motive battery is the
preferred choice of electric bicycle manufacturers in China, accounting for 95%
of the market share because of its cost efficiency. According
to the market research result from Forward Business, the cost of using lead-acid
motive batteries is RMB4/kWh, which is significantly lower than its alternative
and competing product, lithium-ion batteries, by 50%.  Currently, we
manufacture over 14,480,000 sealed lead-acid motive batteries each year, have
more than 2,500 employees and are one of China's largest manufacturers of sealed
lead-acid motive batteries for electric-powered bicycles
(LABEBs).  For each of our fiscal years ended March 31, 2010 and 2009,
sales revenues were $177,192,000 and $109,020,000, respectively, and our net
income during the same periods amounted to $9,500,000 and $8,880,000,
respectively.  For the three months ended September 30, 2010, our
sales revenue and net income were $76,613,000 and $5,442,000,
respectively.





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


4


Results
of Operations for the Six(6) Months Ended September 30, 2010 as Compared with
the Six(6) Months Ended September 30, 2009





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




For The Six (6) Months Ended September 30 (Unaudited)2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Revenues
                                    
                                    $
                                    127,042,000
                                    
                                    
                                    $
                                    79,867,000
                                    
                                    
                                    
                                    100.00
                                    %
                                    
                                    
                                    100.00
                                    %Cost
      of sales
                                    
                                    $
                                    111,260,000
                                    
                                    
                                    $
                                    65,813,000
                                    
                                    
                                    
                                    87.58
                                    %
                                    
                                    
                                    82.40
                                    %Gross
      income
                                    
                                    $
                                    15,782,000
                                    
                                    
                                    $
                                    14,054,000
                                    
                                    
                                    
                                    12.42
                                    %
                                    
                                    
                                    17.60
                                    %Sales,
      marketing and distribution expenses
                                    
                                    $
                                    5,551,000
                                    
                                    
                                    $
                                    3,953,000
                                    
                                    
                                    
                                    4.37
                                    %
                                    
                                    
                                    4.95
                                    %General
      and administrative expenses
                                    
                                    $
                                    1,641,000
                                    
                                    
                                    $
                                    2,086,000
                                    
                                    
                                    
                                    1.29
                                    %
                                    
                                    
                                    2.61
                                    %Operating
      income
                                    
                                    $
                                    8,590,000
                                    
                                    
                                    $
                                    8,015,000
                                    
                                    
                                    
                                    6.76
                                    %
                                    
                                    
                                    10.04
                                    %Other
      income, net
                                    
                                    $
                                    613,000
                                    
                                    
                                    $
                                    725,000
                                    
                                    
                                    
                                    0.48
                                    %
                                    
                                    
                                    0.91
                                    %Interest
      income
                                    
                                    $
                                    198,000
                                    
                                    
                                    $
                                    55,000
                                    
                                    
                                    
                                    0.16
                                    %
                                    
                                    
                                    0.07
                                    %Net
      income from operations before interest and tax expenses
                                    
                                    $
                                    9,401,000
                                    
                                    
                                    $
                                    8,795,000
                                    
                                    
                                    
                                    7.40
                                    %
                                    
                                    
                                    11.01
                                    %Interest
      expense
                                    
                                    $
                                    1,291,000
                                    
                                    
                                    $
                                    747,000
                                    
                                    
                                    
                                    1.02
                                    %
                                    
                                    
                                    0.94
                                    %Income
      before income taxes
                                    
                                    $
                                    8,110,000
                                    
                                    
                                    $
                                    8,048,000
                                    
                                    
                                    
                                    6.38
                                    %
                                    
                                    
                                    10.08
                                    %Income
      taxes expense
                                    
                                    $
                                    1,161,000
                                    
                                    
                                    $
                                    1,125,000
                                    
                                    
                                    
                                    0.91
                                    %
                                    
                                    
                                    1.41
                                    %Net
      income
                                    
                                    $
                                    6,949,000
                                    
                                    
                                    $
                                    6,923,000
                                    
                                    
                                    
                                    5.47
                                    %
                                    
                                    
                                    8.67
                                    %Other
      comprehensive income
                                    
                                    $
                                    554,000
                                    
                                    
                                    $
                                    24,000
                                    
                                    
                                    
                                    0.44
                                    %
                                    
                                    
                                    0.03
                                    %Comprehensive
      income
                                    
                                    $
                                    7,503,000
                                    
                                    
                                    $
                                    6,947,000
                                    
                                    
                                    
                                    5.91
                                    %
                                    
                                    
                                    8.70
                                    %




Revenues





During
the six (6) months ended September 30, 2010, we kept strong growth in our sales.
The Company successfully expanded the customer base and also enhanced our
existing customers’ relationship. Revenues for the six (6) months ended
September 30, 2010 and 2009 were approximately US$127,042,000 and US$79,867,000,
respectively. The increase in revenues of 59% was mainly attributable to the
continuing strong sales of our battery products in existing and new customers,
which resulted in an increase in sales volume of 42% to 9,537,000 units for the
six (6) months ended September 30, 2010 compared with 6,702,000 units for the
six (6) months ended September 30, 2009.


5


The
strong sales was mainly attributable to the continued growth in the electric
bicycle market in the PRC together with the launch of promotion activities from
January 2010 to September 2010 which bring positive effect on sales. Our sales
to one of the existing major electric bicycle manufacturing customer were
increased by 94% for the period when compared to the same period in last
year.  Meanwhile, Company developed 97 new distributors for the six
(6) months ended September 30, 2010, which increased the total sales to the
distributors by 29 %.





The
increase of revenues was also caused by an average increase of 11% in the
battery unit selling price in response to the increase in the average costs of
our major raw materials.





Cost
of Sales





Cost of
sales for the six (6) months ended September 30, 2010 and 2009 was approximately
US$111,260,000 and US$65,813,000, respectively, and cost rates were 88% and 82%,
respectively. The increase of cost rate was mainly due to the average purchase
price of major raw material for the six (6) months ended September 30, 2010
increased by 16% as compared to the corresponding period of last year,but the battery average selling
pricewas only increased by11% in order tomaintain our competitiveness in the
market.





Depreciation
and Amortization





Depreciation
expense was approximately US$540,000 and US$270,000 for the six (6) months ended
September 30, 2010 and 2009, respectively. The increase in depreciation expense
was mainly attributable to the new machines, equipments and dormitories acquired
during the twelve (12) months period from October 1, 2009 to September 30,
2010made in
connection with the Company’s business expansion efforts.





Sales,
Marketing and Distribution Expenses





Sales,
marketing and distribution expenses were approximately US$5,551,000 and
US$3,953,000for
the six (6) months ended September 30, 2010 and 2009,
respectively.  The increase of US$1,598,000 or 40% was mainly driven
by the increases in transportation expense, after-sale related expenses and
warranty costs provision by US$909,000, US$223,000 and US$443,000
respectively.





General
and Administrative Expenses





General
and administrative expenseswere approximately
US$1,641,000 and US$2,086,000for the six (6) months
ended September 30, 2010 and 2009, respectively, and mainly consisted of staff
salaries, staff welfare, social security contributions, depreciation expenses,
research and development expenses, legal and professional fees, other taxes and
promotion and advertising expenses. The decrease of US$445,000 or 21% in general
and administrative expenses was mainly due to the decrease of legal advisory fee
as well as reclassification of certain expenses to cost of sales, and sales,
marketing and distribution expenses in order to more accurately reflect its true
nature.





Other
Income, Net





Net other
income was approximately US$613,000 and US$725,000 for the six (6) months ended
September 30, 2010 and 2009, respectively. The decrease of US$112,000 or 15% was
mainly attributable to thedecreasein net sales of lead to electric plate
suppliers byUS$228,000, offset by the addition of
dividend income fromavailable-for-salefinancial assets ofUS$135,000.





Net
Income from Operations before Interest and Tax Expenses




Net
income from operations before interest and tax expense was approximately
US$9,401,000 and US$8,795,000, for the six (6) months ended September 30, 2010
and 2009, respectively. The increase of US$606,000 or 7% was mainly attributable
to the increase in sales volume, thus resulting in an increase in the gross
income for the six (6) months ended September 30, 2010.


6


Interest
Expense, Net





Net
interest expensewas approximately
US$1,093,000 and US$692,000for the six (6) months
ended September 30, 2010 and 2009, respectively. Net interest expense increased
by US$401,000 or 58%, comparing with six (6) months  ended September
30, 2009 was mainly due to the increase in average short-term bank loans for the
six (6) months ended September 30, 2010, compared to the six (6) months ended
September 30, 2009. The increase in average short-term bank loans was mainly due
to the increasing demand of fund in response to the business
expansion.


7


Net
Income





Net income was US$6,949,000 and
US$6,923,000for
the six (6) months ended September 30, 2010 and 2009, respectively. Our net
income was increased only for 0.4% comparing with the six months ended September
30, 2010. It  mainly due to the positive effect of increase in sales
volume for the period was substantially offset by the increase of cost rate per
unit of sales, and the increase in sales, marketing and distribution
expenses.





Results
of Operations for the Three(3) Months Ended September 30, 2010 as Compared with
the Three(3) Months Ended September 30, 2009





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





For The Three (3) Months Ended September 30 (Unaudited)2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenues
                        
                        $
                        76,613,000
                        
                        
                        $
                        50,392,000
                        
                        
                        
                        100.00
                        %
                        
                        
                        100.00
                        %Cost
      of sales
                        
                        $
                        65,869,000
                        
                        
                        $
                        41,708,000
                        
                        
                        
                        85.98
                        %
                        
                        
                        82.77
                        %Gross
      income
                        
                        $
                        10,744,000
                        
                        
                        $
                        8,684,000
                        
                        
                        
                        14.02
                        %
                        
                        
                        17.23
                        %Sales,
      marketing and distribution expenses
                        
                        $
                        3,040,000
                        
                        
                        $
                        2,167,000
                        
                        
                        
                        3.97
                        %
                        
                        
                        4.30
                        %General
      and administrative expenses
                        
                        $
                        956,000
                        
                        
                        $
                        1,030,000
                        
                        
                        
                        1.25
                        %
                        
                        
                        2.04
                        %Operating
      income
                        
                        $
                        6,748,000
                        
                        
                        $
                        5,487,000
                        
                        
                        
                        8.81
                        %
                        
                        
                        10.89
                        %Other
      income, net
                        
                        $
                        110,000
                        
                        
                        $
                        578,000
                        
                        
                        
                        0.14
                        %
                        
                        
                        1.15
                        %Interest
      income
                        
                        $
                        102,000
                        
                        
                        $
                        -
                        
                        
                        
                        0.13
                        %
                        
                        
                        -Net
      income from operations before interest and tax expenses
                        
                        $
                        6,960,000
                        
                        
                        $
                        6,065,000
                        
                        
                        
                        9.08
                        %
                        
                        
                        12.04
                        %Interest
      expense
                        
                        $
                        606,000
                        
                        
                        $
                        378,000
                        
                        
                        
                        0.79
                        %
                        
                        
                        0.75
                        %Income
      before income taxes
                        
                        $
                        6,354,000
                        
                        
                        $
                        5,687,000
                        
                        
                        
                        8.29
                        %
                        
                        
                        11.29
                        %Income
      taxes expenses
                        
                        $
                        912,000
                        
                        
                        $
                        770,000
                        
                        
                        
                        1.19
                        %
                        
                        
                        1.53
                        %Net
      income
                        
                        $
                        5,442,000
                        
                        
                        $
                        4,917,000
                        
                        
                        
                        7.10
                        %
                        
                        
                        9.76
                        %Other
      comprehensive income
                        
                        $
                        433,000
                        
                        
                        $
                        24,000
                        
                        
                        
                        0.57
                        %
                        
                        
                        0.05
                        %Comprehensive
      income
                        
                        $
                        5,875,000
                        
                        
                        $
                        4,941,000
                        
                        
                        
                        7.67
                        %
                        
                        
                        9.81
                        %


8


Revenues





During
the three (3) months ended September 30, 2010, we had a strong growth in our
sales. We successfully expanded our customer base and also enhanced the existing
customers’ relationship. Revenues for the three (3) months ended September 30,
2010 and 2009 were approximately US$76,613,000 and US$50,392,000, respectively.
The increase in revenues of 52% was mainly attributable to the continuing strong
sales of our battery products in existing and new customers, which resulted in
an increase of 31% to 5,520,000 units for the three (3) months ended September
30, 2010 compared with 4,200,000 units for the three (3) months ended September
30, 2009.





The
strong sales was mainly attributable to the continued growth in the electric
bicycle market in the PRC together with the launch of promotion activities from
January 2010 to September  2010 which bring positive effect on sales.
Our sales to one of the existing major electric bicycle manufacturing customer
were increased 93% for the period when compared to the same period in last
year.  Meanwhile, Company developed 44 new distributors for the three
(3) months ended 2010, which increased the total sales to the distributors by
23%.





The
increase of revenues was also caused by an average increase of 13% in the
battery unit selling price in response to the increase in the average costs of
our major raw materials.





Cost
of Sales





Cost of
sales for the three (3) months ended September 30, 2010 and 2009 was
approximately US$65,869,000 and US$41,708,000, respectively, and cost rates were
86% and 83%, respectively. The increase of cost rate was mainly due to the fact
that the average purchase price of major raw material for the three (3) months
ended September 30, 2010 increased 13% as compared to the same period in last
year.




Depreciation
and Amortization





Depreciation
expense was approximately US$288,000 and US$138,000 for the three (3) months
ended September 30, 2010 and 2009, respectively. The increase in depreciation
expense was mainly attributable to the new machines, equipments and dormitories
acquired during the twelve (12) months from October 1, 2009 to September 30,
2010 made in connection with the Company’s business expansion
efforts.





Sales,
Marketing and Distribution Expenses





Sales, marketing and distribution
expenses were approximately US$3,040,000 and US$2,167,000 for the three (3)
months ended September 30, 2010 and 2009, respectively. The increase of
US$873,000 or 40% was mainly driven by the increases in transportation expense,
after-sale related expenses and warranty costs provision by US$446,000,
US$172,000 and US$63,000 respectively. The increase was mainly attributable to
the continuing strong sales of our battery products.





General
and Administrative Expenses





General
and administrative expenseswere approximately
US$956,000 and US$1,030,000for the three (3) months
ended September 30, 2010 and 2009, respectively, and mainly consisted of staff
salaries, depreciation expenses, research and development expenses, legal and
professional fees, other taxes and promotion and advertising expenses. The
decrease of US$74,000 or 7% in general and administrative expenses was mainly
due to the reclassification of certain expenses to cost of sales, and sales,
marketing and distribution expenses in order to more accurately reflect its true
nature.





Other
Income, Net





Net other
income was approximately US$110,000 and US$578,000 for the three (3) months
ended September 30, 2010 and 2009, respectively. The decrease of US$468,000 or
81% was mainly due to the decrease in net sales of lead to electric plate
suppliers.





Net
Income from Operations before Interest and Tax Expenses





Net
income from operations before interest and tax expense was approximately
US$6,960,000 and US$6,065,000, for the three (3) months ended September 30, 2010
and 2009, respectively. The increase of US$895,000 or 15% was mainly
attributable to the increase in sales volume and average selling price, thus
resulting in an increase in the gross income for the three (3) months ended
September 30, 2010.


9


Interest
Expense, Net





Net
interest expensewas approximately
US$504,000 and US$378,000for the three (3) months
ended September 30, 2010 and 2009, respectively. Net interest expense increased
by US$126,000 or 33% comparing with three (3) months ended September 30, 2009
due to the increase in average short-term bank loans for the three (3) months
ended September 30, 2010, compared to the three (3) months ended September 30,
2009. The increase in average short-term bank loans was mainly due to the
increasing demand of fund in response to the business expansion.





Net
Income





Net income was US$5,442,000 and
US$4,917,000for
the three (3) months ended September 30, 2010 and 2009, respectively. The
increase in net incomeof US$525,000 or 11% was
mainly caused by the continuing strong sales of our battery
products.





Liquidity
and Capital Resources





We generally finance our operations
through operating profit and borrowings from banks.  During the
reporting period, we arranged a number of bank loans to satisfy our financing
needs. As of the date of this report, we have not experienced any difficulty in
raising funds by bank loans, and we have not experienced any liquidity problems
in settling our payables in the normal course of business and repaying our bank
loans when they fall due.





The
following table sets forth the summary of our cash flows, in dollar, for the
periods indicated:




Six (6) Months Ended
                      September 30
                      (Unaudited)2010
                    
                    
                    2009Net
      cash provided by operating activities
                    
                    $
                    12,124,000
                    
                    
                    $
                    3,696,000Net
      cash used in investing activities
                    
                    $
                    (4,125,000
                    )
                    
                    $
                    (11,918,000
                    )Net
      cash (used in) provided by financing activities
                    
                    $
                    (5,508,000
                    )
                    
                    $
                    13,163,000Net
      increase  in cash and cash equivalents
                    
                    $
                    2,491,000
                    
                    
                    $
                    4,941,000Effect
      of exchange rate changes on cash
                    
                    $
                    102,000
                    
                    
                    $
                    (143,000
                    )Cash
      and cash equivalents at beginning of period
                    
                    $
                    6,019,000
                    
                    
                    $
                    2,620,000Cash
      and cash equivalents at end of period
                    
                    $
                    8,612,000
                    
                    
                    $
                    7,418,000





Operating
Activities





Net cash
provided by operating activities was approximately US$12,124,000 for the six (6)
months ended September 30, 2010, as compared to net cash provided by operating
activities of approximately US$3,696,000 for the six (6) month ended September
30, 2009. This increase of US$8,428,000 was mainly due to the combined result of
decrease in inventories, prepayments and other financial assets offset by the
increase in trade receivables as well as lowering the magnitude of increase in
notes payable.


10


Investing
Activities





Net cash
used in investing activities were approximately US$4,125,000 for the six (6)
months ended September 30, 2010, as compared to approximately US$11,918,000 for
the six (6) months ended September 30, 2009. The decrease of US$7,793,000 was
mainly due to the decrease in restricted bank balance following the new issuance
of notes payable was mainly secured by corporate and personal guarantee provided
by related parties during the period.





Financing
Activities





Net cash
used in financing activities was approximately US$5,508,000 for the six (6)
month ended September 30, 2010, as compared to net cash provided by financing
activities of approximately US$13,163,000 for the six (6) month ended September
30, 2009. The decrease was mainly due to the fact that the bank borrowings and
loans at the beginning of the year 2010 could meet the Company’s operation
demands, which resulted in the decrease in the net cash provided by financing
activities for the six (6) months ended September 30, 2010.





Working
Capital





Our
working capital increased by approximately US$6,633,000 to approximately
US$23,394,000 as of September 30, 2010, as compared to the working capital of
approximately US$16,761,000 as of March 31,2010.  This increase is
mainly attributed by our strong sales during the period.





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.





Critical
Accounting Policies, Estimates and Assumptions





For the three (3) and six (6) month
periods ended September 30, 2010, there were no changes in the methodology for
computing critical accounting estimates, no additional accounting estimates met
the standards for critical accounting policies, and there were no material
changes to the important assumptions underlying the critical accounting
estimates.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Interest Rates Risk




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





Foreign Exchange Rates
Risk




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





Country
Risk





Substantially
all of our assets and operations are located and conducted in China. While the
PRC economy has experienced significant growth in the past twenty years, growth
has been uneven, both geographically and among various sectors of the economy.
The Chinese government has implemented various measures to encourage economic
growth and guide the allocation of resources. Some of these measures benefit the
overall economy of China, but may also have a negative effect on us. For
example, our operating results and financial condition may be adversely affected
by government control over capital investments or changes in tax regulations
applicable to us. If there are any changes in any policies by the Chinese
government and our business is negatively affected as a result, then our
financial results, including our ability to generate revenues and profits, will
also be negatively affected.


11


Contractual
Obligations




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





Bank indebtedness (US$)
                
                September 30, 2010
                
                
                March 31, 2010Short-term
      bank borrowings
                
                US$
                41,336,000
                
                
                US$
                46,141,000Notes
      payable (within (1) year)
                
                US$
                41,038,000
                
                
                US$
                35,504,000Total
                
                US$
                82,374,000
                
                
                US$
                81,645,000





Purchase Obligations (US$)
                    
                    September 30, 2010
                    
                    
                    March 31, 2010Construction
      Projects and Purchase of Land and Machineries
                    
                    US$
                    160,187,000
                    
                    
                    US$
                    84,000Total
                    
                    US$
                    160,187,000
                    
                    
                    US$
                    84,000





Operating Lease Obligations
      (US$)
                    
                    September 30, 2010
                    
                    
                    March 31, 2010Within
      one (1) year
                    
                    US$
                    625,000
                    
                    
                    US$
                    599,0001-3
      years
                    
                    US$
                    1,307,000
                    
                    
                    US$
                    1,291,0003-5
      years
                    
                    US$
                    304,000
                    
                    
                    US$
                    604,000Over
      five (5) years
                    
                    US$
                    0
                    
                    
                    US$
                    0Total
                    
                    US$
                    2,236,000
                    
                    
                    US$
                    2,494,000





ITEM
4. CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures




Under the supervision and with the
participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures, as defined
in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our
management, including our principal executive officer and our principal
financial officer, concluded that our disclosure controls and procedures were
effective as of September 30, 2010, to ensure that information required to be
disclosed by us in the reports filed or submitted by us under the Exchange Act
(i) is recorded, processed, summarized and reported within the time period
specified in SEC rules and forms, and (ii) is accumulated and communicated
to our management, including our principal executive officer and our principal
financial officer, as appropriate to allow appropriate decisions on a timely
basis regarding required disclosure.





Changes in Internal Control over
Financial Reporting




There was no change in the Company’s
internal control over financial reporting that was identified in connection with
such evaluation that occurred during the period ended September 30, 2010 that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.


12


PART
II


OTHER
INFORMATION




ITEM
1. LEGAL PROCEEDINGS




In the normal course of business, we
are named as defendant in lawsuits in which claims are asserted against us. In
our opinion, the liabilities, if any, which may ultimately result from such
lawsuits, are not expected to have a material adverse effect on our financial
position, results of operations or cash flows. As of September 30, 2010, there
was no pending or outstanding material litigation with the Company.





ITEM
1A. RISK FACTORS




Not required for a "smaller reporting
company".




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




During the period ended September 30,
2010, the Company had no unregistered sales of equity securities.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS




None.




ITEM
5. OTHER INFORMATION




None.





ITEM
6. EXHIBITS




(a) 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. (n/k/a Chisen Electric
      Corporation)
                                    
                                    Incorporated
      by reference to Exhibit 3(i).1 to the Registrant’s Registration Statement
      on Form SB-2 as filed with the SEC on September 23,
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,
2008


13





3.5
              
              Memorandum
      and Articles of Association of Fast More Limited, dated as of December 17,
      2007
              
              Incorporated
      by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K as
      filed with the SEC on November 12, 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, 20083.7
              
              Articles
      of Association of Changxing Chisen Electric Co., Ltd.
              
              Incorporated
      by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K as
      filed with the SEC on November 12, 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


14





10.11
              
              Cooperation
      Agreement, dated April 20, 2008, by and between Changxing Chisen Electric
      Co., Ltd. and Xiamen University
              
              Included
      by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K
      as filed with the SEC on June 28, 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 Jiangsu 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, 200810.17
              
              Compensation
      Agreement of Corporate Relocation Acquisition, dated August 20, 2010, by
      and between the Company’s chief operating subsidiary, Changxing Chisen
      Electric Co., Ltd., and the Administrative Committee of Changxing Economic
      Development Zone, Zhejiang
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 24, 2010.10.18
              
              Investment
      Agreement, dated August 20, 2010, by and between the Company’s chief
      operating subsidiary, Changxing Chisen Electric Co., Ltd., and the
      Administrative Committee of Changxing Economic Development Zone,
      Zhejiang
              
              Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 24, 2010.10.19
              
              Supplemental
      Agreement, dated August 20, 2010, by and between the Company’s chief
      operating subsidiary, Changxing Chisen Electric Co., Ltd., and the
      Administrative Committee of Changxing Economic Development Zone,
      Zhejiang
              
              Incorporated
      by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 24, 2010.10.20
              
              Xuyi
      Economic Development Zone Project Investment Contract, dated September 6,
      2010, by and between Chisen Electric Jiangsu Co., Ltd. and Jiangsu Xuyi
      Economic Development Zone Administrative Committee
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on September 13, 2010.10.21
              
              Xuyi
      Economic Development Zone Project Investment Contract Supplemental
      Agreement, dated September 6 2010, by and between Chisen Electric Jiangsu
      Co., Ltd. and Jiangsu Xuyi Economic Development Zone Administrative
      Committee
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on September 13,
2010.


15





14.1
                
                Code
      of Business Conduct and Ethics
                
                Incorporated
      by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 4, 200916.1
                
                Letter
      to SEC from Pritchett, Siler & Hardy, P.C.
                
                Incorporated
      by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on January 21, 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
                
                Included
      by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K 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
      herewith32.2
                
                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
                
                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, 200999.2
                
                Compensation
      Committee Charter, dated January 15, 2009
                
                Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 4, 200999.3
                
                Corporate
      Governance and Nominating Committee Charter, dated January 15,
      2009
                
                Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 4,
2009


16


SIGNATURES




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





Date: November
      12, 2010
                By:
                /s/ Xu
      KechengName:
      Xu KechengIts:
      President, Chief Executive Officer and
                  Principal
      Executive OfficerDate: November
      12, 2010
                By:
                /s/ Liu
      ChuanjieName:
      Liu ChuanjieIts:
      Chief Financial Officer, Principal
                  Financial
      and Accounting Officer


17