XOTC:CIEC Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2012

 

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   (IRS Employer
incorporation or organization)   Identification No.)

 

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

The People’s Republic of China

 (Address of principal executive offices)

 

(86) 572-6267666

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

 

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

 

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

 

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 August 10, 2012, the registrant had 500,000,000 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 
 

 

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION   3
     
ITEM 1. FINANCIAL STATEMENTS   3
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION    27
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    33
     
ITEM 4. CONTROLS AND PROCEDURES    34
     
PART II OTHER INFORMATION    34
     
ITEM 1. LEGAL PROCEEDINGS    34
     
ITEM 1A. RISK FACTORS    34
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    34
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES    34
     
ITEM 4.  MINE SAFETY DISCLOSURES    34
     
ITEM 5. OTHER INFORMATION    34
     
ITEM 6. EXHIBITS    35
     
SIGNATURES    43
     
EXHIBIT 31.1    
     
EXHIBIT 31.2    
     
EXHIBIT 32.1    
     
EXHIBIT 32.2    

 

-2-
 

 

PART I

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

Unaudited Condensed Consolidated Financial Statements of

Chisen Electric Corporation

For the three months ended June 30, 2012

 

-3-
 

 

Chisen Electric Corporation
 
Index to Consolidated Financial Statements
For the three months ended June 30, 2012

 

  Page
   
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income 5 – 6
   
Unaudited Condensed Consolidated Balance Sheets 7 – 8
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity 9
   
Unaudited Condensed Consolidated Statements of Cash Flows 10 – 11
   
Notes to Unaudited Condensed Consolidated Financial Statements 12 – 26

 

-4-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Statements of Operations and
Other Comprehensive Income
For the three months ended June 30, 2012 and 2011

 

       Three months ended
June 30,
 
       2012   2011 
   Note   US$’000   US$’000 
             
Operating revenues:               
Net sales to third parties        20,421    35,399 
                
Cost of sales        (18,846)   (33,464)
                
Gross profit        1,575    1,935 
                
Operating expenses:               
Sales, marketing and distribution        (5,767)   (2,520)
General and administrative        (2,429)   (1,705)
                
Operating loss        (6,621)   (2,290)
                
Other expense, net        (975)   (12)
Interest income        567    303 
Interest expense        (3,458)   (1,282)
                
Loss before income taxes        (10,487)   (3,281)
                
Income taxes benefit   4    -    449 
                
Loss before extraordinary items        (10,487)   (2,832)
                
Extraordinary gain (less applicable income taxes of US$0)        -    12,963 
Extraordinary loss (less applicable income taxes of US$0)        -    (1,827)
                
Net (loss) income including non-controlling interests        (10,487)   8,304 
                
Less: Net loss attributable to non-controlling interests        79    - 
                
Net (loss) income attributable to CIEC common stockholders        (10,408)   8,304 
                
Amounts attributable to CIEC common stockholders               
                
Loss before extraordinary items        (10,408)   (2,832)
                
Extraordinary gain (less applicable income taxes of US$0)        -    12,963 
Extraordinary loss (less applicable income taxes of US$0)        -    (1,827)
                
Net (loss) income attributable to CIEC common stockholders        (10,408)   8,304 
                
Other comprehensive income               
Foreign currency translation adjustment        9    493 
                
Comprehensive (loss) income        (10,399)   8,797 

 

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

 

-5-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Statements of Operations and
Other Comprehensive Income
For the three months ended June 30, 2012 and 2011

  

     Three months ended
June 30,
 
     2012   2011 
  Note   US$’000   US$’000 
     Shares   Shares 
(Losses) Earnings per share   3           
Weight average number of common stock outstanding                 
- basic and diluted       500,000,000    500,000,000 

 

       US$    US$  
                
 Net loss per share of common stock outstanding before extraordinary items               
- basic and diluted       (0.02)   (0.01)
 Net (loss) income per share of common stock outstanding after extraordinary items               
- basic and diluted       (0.02)   0.02 

 

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

  

-6-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Balance Sheets
As of June 30, 2012 and March 31, 2012

 

       As of
June 30,
   As of
March 31,
 
       2012   2012 
   Note   US$’000   US$’000 
ASSETS               
                
Current assets:               
Cash and cash equivalents        13,777    13,804 
Restricted bank balances   5    77,321    90,628 
Other financial assets   6    6,872    662 
Trading securities        79    79 
Trade receivables, net        15,561    12,705 
Deposit paid for land auctions   7    12,413    31,262 
Other receivables        14,094    15,804 
Prepayments        1,466    3,150 
Due from a related party   16(b)   1,378    5 
Inventories   9    20,969    22,414 
Income taxes receivable        17    17 
Assets classified as held for sale   8    32,206    - 
                
Total current assets        196,153    190,530 
                
Available-for-sale financial assets   10    2,980    2,980 
Long-term land lease prepayments, net   12    5,037    5,061 
Property, plant and equipment, net   11    50,203    46,121 
Deposit for acquisition of land and property, plant and equipment        9,554    12,144 
                
Total assets        263,927    256,836 

 

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

  

-7-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Balance Sheets
As of June 30, 2012 and March 31, 2012

 

       As of
June 30,
   As of
March 31
 
       2012   2012 
   Note   US$’000   US$’000 
LIABILITIES AND STOCKHOLDERS’ EQUITY               
                
Current liabilities:               
Trade payables        18,087    18,792 
Notes payable   13    7,924    17,918 
Accrued expenses and other accrued liabilities        27,490    20,124 
Due to related parties   16(b)   4,722    3,749 
Short-term bank borrowings   14    188,779    168,837 
Government subsidies   15    34    47 
                
Total current liabilities        247,036    229,467 
                
Deferred tax liabilities   4(c)   460    460 
                
Total non-current liabilities        460    460 
                
Total liabilities        247,496    229,927 
                
Commitments and contingencies   17    -    - 
                
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:               
1,000,000,000 shares authorized        -    - 
500,000,000 shares issued and outstanding        500    500 
Capital reserves        144    144 
Statutory reserves        4,003    4,003 
Accumulated other comprehensive income        3,965    3,956 
Retained earnings        7,482    17,890 
                
Total CIEC stockholders’ equity        16,094    26,493 
                
Non-controlling interests        337    416 
                
Total stockholders’ equity        16,431    26,909 
                
Total liabilities and stockholders’ equity        263,927    256,836 

 

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

 

-8-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity
For the three months ended June 30, 2012

 

   Common stock issued           Accumulated                  
   Number
of shares
   Amount   Capital
reserves
   Statutory
reserves
   other
comprehensive
 income
   Retained
earnings
   Total CIEC
stockholders’
equity
   Non-
controlling
interests
   Total
stockholders’
equity
 
       US$’000   US$’000   US$’000   US$’000   US$’000   US$’000   US$’000   US$’000 
                                     
Balance as of April 1, 2012   500,000,000    500    144    4,003    3,956    17,890    26,493    416    26,909 
                                              
Net loss   -    -    -    -    -    (10,408)   (10,408)   (79)   (10,487)
                                              
Foreign currency translation adjustment   -    -    -    -    9    -    9    -    9 
                                              
Balance as of June 30, 2012   500,000,000    500    144    4,003    3,965    7,482    16,094    337    16,431 

 

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

 

-9-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended June 30, 2012 and 2011

 

   Three months ended
June 30,
 
   2012   2011 
   US$’000   US$’000 
Cash flows from operating activities          
Net (loss) income including non-controlling interests   (10,487)   8,304 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:          
Depreciation of property, plant and equipment   838    304 
Impairment loss on plant and machinery and leasehold improvement   -    1,827 
Net compensation gain on disposal of land use rights and buildings   -    (12,963)
Amortization of long-term land lease prepayments   26    22 
Reversal of provision for inventories   -    (188)
Exchange differences   -    (60)
Provision for warranty costs   3,524    139 
Government grant recognized   (13)   (12)
Deferred taxes   -    (484)
Changes in assets and liabilities:          
Other financial assets   (6,210)   (1,349)
Trade receivables, net   (2,850)   4,910 
Other receivables   1,189    868 
Prepayment   1,749    (587)
Due from a related party   (1,372)   3 
Inventories   1,453    3,541 
Trade payables   (711)   2,108 
Notes payable   (10,000)   (5,846)
Accrued expenses and other accrued liabilities   3,833    1,167 
Due to related parties   1,125    (1,233)
Income taxes payable   -    26 
           
Net cash (used in) provided by operating activities   (17,906)   497 
           
Cash flows from investing activities          
Purchase of property, plant and equipment and construction in progress   (4,905)   (4,973)
Addition of long-term land lease prepayments   -    (733)
Compensation received for loss on disposal of plant and machinery and leasehold improvement   476    2,747 
Investment in restricted bank balances, net   13,339    (5,972)
Deposit paid for acquisition of land and property, plant and equipment   2,593    - 
Refund of deposit paid for land auctions   18,849    - 
Acquisition of assets classified as held for sale   (32,206)   - 
           
Net cash used in investing activities   (1,854)   (8,931)

 

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

 

-10-
 

 

Chisen Electric Corporation
 
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended June 30, 2012 and 2011

 

   Three months ended
June 30,
 
   2012   2011 
   US$’000   US$’000 
Cash flows from financing activities          
Proceeds from short-term bank loans   31,933    12,378 
Repayment of short-term bank loans   (12,203)   (8,201)
Proceeds from bills financing   55,472    31,549 
Repayment of bills financing   (55,315)   (29,785)
Due to a related party   (154)   - 
Capital contributed by non-controlling interests   -    216 
           
Net cash provided by financing activities   19,733    6,157 
           
Net decrease in cash and cash equivalents   (27)   (2,277)
           
Cash and cash equivalents, beginning of period   13,804    7,630 
           
Effect on exchange rate changes   -    101 
           
Cash and cash equivalents, end of period   13,777    5,454 
           
Supplemental disclosure of cash flow information          
Interest received   585    303 
Interest paid   4,031    1,282 

 

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

 

-11-
 

 

Chisen Electric Corporation
 
Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

1.ORGANIZATION AND PRINCIPAL ACTIVITIES

 

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

 

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

 

Details of Chisen Electric’s subsidiaries as of June 30, 2012 are as follows:

 

Name   Place and date of
establishment /
incorporation
  Percentage of
effective equity
interest / voting
right attributable
to the Company
  Principal activities
             
Fast More Limited (“Fast More”)  

Hong Kong

December 17, 2007

  100

Investment holding

 

             
Zhejiang Chisen Electric Co., Limited * (“Zhejiang Chisen”)  

Zhejiang,
the People’s Republic of China (“PRC”)

February 25, 2002

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

  

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

 

-12-
 

 

Chisen Electric Corporation
 
Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentations

The accompanying unaudited condensed consolidated financial statements as of June 30, 2012 have been prepared based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the financial position, results of operations and cash flows as of June 30, 2012 and for all periods presented. Information as of March 31, 2012 was derived from the audited consolidated financial statements of the Company for the year ended March 31, 2012.

 

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 July 2, 2012 for the year ended March 31, 2012. The results of operations for the three months ended June 30, 2012 are not necessarily indicative of the operating results to be expected for the full year ending March 31, 2013.

 

The Company had negative working capital of US$50,883,000 as of June 30, 2012 and incurred loss of US$10,408,000 for the three months ended June 30, 2012. These conditions raised substantial doubt about the Company’s ability to continue as going concern.

 

Continuation of the Company as a going concern is dependent upon attaining profitable operations in the future, exercising tight cost and cash flow controls measures, and the financial support from a controlling stockholder of Chisen Electric. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The controlling stockholder had undertaken to make available adequate funds to the Company as and when required to maintain the Company as a going concern. Having taken into consideration the undertaking provided by the controlling stockholder, management believes that the Company will be able to settle its liabilities when they become due. However, there can be no assurance that the financing from the controlling stockholder will be continued.

 

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.

 

-13-
 

 

Chisen Electric Corporation
 
Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

Fair value measurements

ASC 820 establishes a three-tier fair value hierarchy to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

 

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

 

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

 

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

 

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

 

The Company’s trading securities are measured at fair value on recurring basis. The trading securities are listed on a stock exchange in the PRC with quoted price in active market (Level 1 inputs).

 

Recent accounting pronouncement

As of the date this quarterly report is filed, there are no recently issued accounting pronouncements which adoption would have a material impact on the Company’s financial statements.

 

3.(LOSSES) EARNINGS PER SHARE

 

Basic (losses) earnings per share is computed by dividing (loss) income available to common stockholders by the weighted-average number of common stocks outstanding during the period. Diluted (losses) earnings per share is computed similar to basic (losses) earnings per share except that the denominator is increased to include the number of additional common stocks that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive securities for the three months ended June 30, 2012 and 2011. As a result of a forward stock split in November 2011, the calculation of basic and diluted (losses) earnings per common stock for all periods presented are adjusted retrospectively.

 

-14-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

4.INCOME TAXES

 

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

 

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

 

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

 

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

 

Dividends payable by a foreign invested enterprise in the PRC to its foreign investors in Hong Kong are subject to a 10% withholding tax. No deferred tax expenses on undistributed profits were charged to the statement of operations for the three months ended June 30, 2012 and 2011 as the management considered that there is no change in the expected amount of profits to be distributed in the foreseeable future.

 

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

 

   Three months ended
June 30,
 
   2012   2011 
   US$’000   US$’000 
         
Current taxes arising in the PRC:          
Corporate income tax   -    (35)
           
Deferred taxes arising in the PRC:          
Benefit of tax loss recognized   -    484 
           
    -    449 

 

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.

 

-15-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

  

4.INCOME TAXES (CONTINUED)

 

(a)Income tax benefits (expenses) are comprised of the following (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 June 30, 2012 and March 31, 2012, the Company has identified the following jurisdictions as “major” tax jurisdictions, as defined, in which it is required to file income tax returns namely the United States, Hong Kong and the PRC. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements.

 

As of June 30, 2012 and March 31, 2012, the Company had no unrecognized tax benefits or accruals for the potential payment of interest and penalties. The Company’s policy is to record interest and penalties in this connection as a component of the provision for income tax expense. For the three months ended June 30, 2012 and 2011, no interest or penalties were recorded.

 

(b)Reconciliation from the expected income tax (benefit) expenses calculated with reference to the statutory tax rate in the PRC of 25% (2011: 25%) is as follows:

 

   Three months ended
 June 30,
 
   2012   2011 
   US$’000   US$’000 
         
Expected income tax expenses   (2,621)   (736)
Effect on tax incentives / holiday   486    322 
Unrecognized tax losses and temporary difference   1,865    - 
Non-taxable income   -    (70)
Others   270    35 
           
Income tax (benefit) expenses   -    (449)

 

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

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
           
Withholding tax on undistributed earnings of a PRC subsidiary   460    460 

 

-16-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

4.INCOME TAXES (CONTINUED)

 

(d)Components of deferred tax assets were as follows:

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Depreciation and impairment   18    1,036 
Provisions and accruals   143    623 
Tax losses carried forward   6,643    3,280 
           
    6,804    4,939 
Valuation allowance   (6,804)   (4,939)
           
Net deferred tax assets   -    - 

 

As it is not probable that taxable profits will be available against which the deductible temporary differences and the used tax losses of Zhejiang Chisen and Chisen Jiangsu can be utilized, deferred tax assets have not been recognized.

 

5.RESTRICTED BANK BALANCES

 

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

 

       As of
 June 30,
   As of
 March 31,
 
   Note   2012   2012 
       US$’000   US$’000 
             
Notes payable  13    20,206    21,562 
Short-term bank loans  14    6,340    - 
Bills financing  14    50,775    69,066 
                
         77,321    90,628 

 

6.OTHER FINANCIAL ASSETS

 

Other financial assets represented notes receivable from customers for the settlement of trade receivable balances and trade deposits. As of June 30, 2012 and March 31, 2012, all notes receivable were guaranteed by established banks in the PRC and had maturities of 6 months or less from the date of issue. The fair value of the notes receivable approximated their carrying value.

 

-17-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

7.DEPOSITS PAID FOR LAND AUCTIONS

 

As of March 31, 2012, the Company paid US$31,262,000 deposits to the government of Jiangsu Province, the PRC to tender for the auctions of two pieces of land. During the three months ended June 30, 2012, the Company had successfully acquired the lands. As of June 30, 2012, the outstanding balance of deposits was US$12,413,000, which will be refunded by the government in near future.

 

8.ASSETS CLASSIFIED AS HELD FOR SALE

 

During the three months ended June 30, 2012, the Company acquired two pieces of land located at Xuyi County, Jiangsu Province, PRC with an aggregate consideration of US$32,206,000. Total size of the lands is approximately 83,658 m². The Company intends to sell these lands in the foreseeable future and seek to make short-term gain from the disposal of assets. The lands are carried at the lower of its carrying amount and fair value less costs to sell.

 

The management, based on the professional valuation conducted by Greater China Appraisal Limited, estimated that the fair value of the lands is higher than its carrying amount.

 

9.INVENTORIES

 

Inventories consisted of the following:

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Raw materials   3,231    4,132 
Work-in-progress and semi-finished goods   15,778    14,371 
Finished goods   1,960    3,911 
           
    20,969    22,414 

 

10.AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

Available-for-sale financial assets as of June 30, 2012 and March 31, 2012 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.

 

-18-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

11.PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plant and equipment is summarized as follows:

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Buildings   18,864    13,714 
Leasehold improvements   1,567    1,532 
Plant and machinery   22,221    24,807 
Motor vehicles   1,547    1,547 
Furniture, fixtures and office equipment   4,427    4,281 
Construction in progress   8,482    9,196 
           
    57,108    55,077 
           
Accumulated depreciation and impairment loss   (6,905)   (8,956)
           
    50,203    46,121 

 

Depreciation expenses were approximately US$838,000 and US$304,000 for the three months ended June 30, 2012 and 2011, respectively.

 

12.LONG-TERM LAND LEASE PREPAYMENTS, NET

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Prepaid land use rights   5,164    5,163 
Accumulated amortization   (127)   (102)
           
    5,037    5,061 

 

Lease prepayment as of June 30, 2012 and March 31, 2012 represented the land use rights located in the PRC, which are amortized over the leasehold periods.

 

Amortization expense for the three months period ended June 30, 2012 and 2011 were US$25,000 and US$22,000 respectively.

 

-19-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

13.NOTES PAYABLE

 

Notes payable were issued by the Company to creditors with the banker’s acceptance payable at the maturity date for the purchase of raw materials for production exclusively. The Company has to repay the notes within nine months from date of issuance and service fees would be charged by banks for the issuance of the notes. The notes payable were collateralized by restricted bank balances as set out in Note 5 and long-term land lease prepayments with carrying amount of US$4,766,000 (as of March, 31, 2012: US$760,000) as of June 30, 2012.

 

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

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Corporate and personal guarantees issued by related parties (Note 16(d))   3,566    4,277 
Corporate guarantees issued by third parties   1,584    1,584 
Corporate guarantees jointly issued by related parties and third parties (Note 16(d))   6,339    3,960 

 

As of June 30, 2012 and March 31, 2012, the Group had unutilized banking facilities of approximately US$11,073,000 and US$17,991,000 to meet the liquidity needs.

  

14.SHORT-TERM BANK BORROWINGS

 

Short-term bank borrowings comprise of the followings:

 

       As of
 June 30,
   As of
 March 31,
 
   Note   2012   2012 
       US$’000   US$’000 
             
Short-term bank loans  (i)    71,839    52,090 
Bills financing  (ii)    116,940    116,747 
                
         188,779    168,837 

 

(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.

   

-20-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

14.SHORT-TERM BANK BORROWINGS (CONTINUED)

 

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

 

       As of
 June 30,
   As of
 March 31,
 
   Note   2012   2012 
       US$’000   US$’000 
             
Restricted bank balances  5    6,340    - 
Long-term land lease prepayments and buildings        4,766    4,142 
Trade receivables        11,093    11,090 
                
         22,199    15,232 

 

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

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Corporate and personal guarantees issued by related parties (Note 16(d))   28,842    24,524 
Corporate guarantees issued by third parties   4,596    1,426 
Corporate and personal guarantees issued jointly by realized parties and a third party (Note 16((d))   20,253    11,881 

 

The weighted average annual interest rates of the short-term bank loans were 6.63% and 6.01% as of June 30, 2012 and March 31, 2012 respectively.

 

-21-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

14.SHORT-TERM BANK BORROWINGS (CONTINUED)

 

(ii)Bills financing

 

Bill financing represents amounts due to various banks which are repayable within nine months from the date of issue.

 

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

 

       As of
 June 30,
   As of
 March 31,
 
   Note   2012   2012 
       US$’000   US$’000 
             
Restricted bank balances  5    50,775    69,066 
Long-term land lease prepayments        4,766    - 
Available-for-sale financial assets        2,980    - 
                
         58,521    69,066 

 

Also, certain related parties and third parties have issued guarantee against these bills financing to the extent of US$55,625,000 and US$59,414,000 as of June 30, 2012 and March 31, 2012.

 

The weighted average annual interest rates of the bills financing were 4.29% and 4.29% as of June 30, 2012 and March 31, 2012, respectively.

 

 

15.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$13,000 and US$12,000 were credited to the statement of operations for the three months ended June 30, 2012 and 2011 respectively.

 

-22-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

16.RELATED PARTY TRANSACTIONS

 

(a)Names and relationship of related parties:

 

Name of related party   Existing relationships with the Company
     
Mr. Xu Kecheng   Director and controlling stockholder of Chisen Electric
Zhejiang Chisen Glass Company Limited (“Chisen Glass”)*   A company controlled by a close family member of Mr. Xu Kecheng
Mr. Xu Keyong   A close family member of Mr. Xu Kecheng
Mr. Xu Zhaoyu   A close family member of Mr. Xu Kecheng
Ms. Zhou Fang Qin   Spouse of Mr. Xu Kecheng
Changxing Chisen Xinguangyuan Company Limited (“Xinguangyuan”)*   A company controlled by a close family member of Mr. Xu Kecheng
Zhejiang Ai Ge Organism Products Company Limited (“Ai Ge Organism”)*   A company controlled by Mr. Xu Kecheng
Zhejiang Changxing Nuo Wan Te Ke Glass Company Limited (“Nuo Wan Te Ke”)*   A company controlled by a close family member of Mr. Xu Kecheng
Zhejiang Changxing Ruilang Electronic Company Limited (“Ruilang Electronic”) *   A company controlled by a close family member of Mr. Xu Kecheng
     
*These are direct translation of the name in Chinese for identification purpose only and are not the official names in English.

 

(b)Summary of balances with related parties:

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Due from a related party:        
Ms. Zhou Fang Qin   1,378    5 
           
Due to related parties:          
Ms. Zhou Fang Qin   349    824 
Mr. Xu Keyong   2    2 
Mr. Xu Zhaoyu   317    - 
Chisen Glass   1,660    1,219 
Ruilang Electronic   2,078    1,387 
Ai Ge Organism   316    316 
Xinguangyuan   -    1 
           
    4,722    3,749 

 

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

 

-23-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

16.RELATED PARTY TRANSACTIONS (CONTINUED)

 

(c)Summary of related party transactions:

 

      Three months ended June 30,
Name of related party  Nature of transactions  2012   2011 
      US$’000   US$’000 
            
Ruilang Electronic  Purchase of raw materials   1,323    869 
              
Chisen Glass  Purchase of raw materials   853    378 

  

(d)Other arrangements:

 

˙As of June 30, 2012, Chisen Glass provided guarantees, in aggregate, amounting to US$6,339,000, US$3,169,000 and US$1,585,000 to secure the short-term bank loans, bills financing and notes payable of the Company, respectively.

 

˙As of June 30, 2012, Ruiling Electronic, Chisen Glass, Mr. Xu Kecheng and Ms. Zhou Fang Qin provided guarantees, in aggregate, amounting to US$10,697,000 and US$396,000 to secure the bills financing and notes payable of the Company, respectively.

 

˙As of June 30, 2012, Mr. Xu Kecheng, Ms. Zhou Fang Qin and a third party provided guarantees, in aggregate, amounting to US$7,924,000, US$9,509,000 and US$6,339,000 to secure the short-term bank loans, bills financing and notes payable of the Company, respectively.

 

˙As of June 30, 2012, Xinguangyuan, Mr. Xu Kecheng and Ms. Zhou Fang Qin, provided guarantees, in aggregate, amounting to US$16,608,000, US$7,924,000 and US$1,585,000 to secure the short-term bank loans, bills financing and notes payable of the Company, respectively.

 

˙As of June 30, 2012, Chisen Glass and a third party provided guarantees, in aggregate, amounting to US$3,962,000 and US$1,981,000 to secure the short-term bank loans and bills financing of the Company, respectively.

 

˙As of June 30, 2012, Xinguangyuan provided guarantees, in aggregate, amounting to US$16,322,000 to secure the bills financing of the Company.

 

˙As of June 30, 2012, Xinguangyuan, Chisen Glass and a third party provided guarantees, in aggregate, amounting to US$3,613,000 to secure the short-term bank loans of the Company.

 

˙As of June 30, 2012, Mr. Xu Kecheng, Ms. Zhou Fang Qin, Xinguangyuan and a third party provided guarantees, in aggregate, amounting to US$4,754,000 to secure the short-term bank loans of the Company.

 

-24-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

16.RELATED PARTY TRANSACTIONS (CONTINUED)

 

(d)Other arrangements (Continued)

 

˙As of June 30, 2012, Chisen Glass and Xinguangyuan provided guarantees, in aggregate, amounting to US$4,438,000 to secure the bills financing of the Company.

 

˙As of June 30, 2012, Ruiling Electronic, Mr. Xu Kecheng and Ms. Zhou Fang Qin provided guarantees, in aggregate, amounting to US$1,585,000 to secure the bills financing of the Company.

 

˙As of June 30, 2012, Xinguangyuan, Chisen Glass, Mr. Xu Kecheng and Ms. Zhou Fang Qin provided guarantees, in aggregate, amounting to US$5,895,000 to secure the short-term bank loans of the Company.

  

17.COMMITMENTS AND CONTINGENCIES

 

(a)Operating lease commitments

 

The following table summarizes the approximate future minimum rental payments under non-cancelable operating leases in effect as of June 30, 2012 and March 31, 2012:

 

   As of
 June 30,
   As of
 March 31,
 
   2012   2012 
   US$’000   US$’000 
         
Within one year   361    451 
One to two years   199    329 
Two to three years   50    99 
           
Total   610    879 

  

(b)Capital commitments

 

As of June 30, 2012 and March 31, 2012, 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$119,342,000 and US$122,845,000 respectively.

 

-25-
 

 

Chisen Electric Corporation

 

Notes to Unaudited Condensed Consolidated Financial Statements
For the three months ended June 30, 2012 and 2011

 

18.PROVISION FOR WARRANTY

 

Provision for warranty is included in accrued expenses and other accrued liabilities as of June 30, 2012 and March 31, 2012. 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 June 30, 
   2012   2011 
   US$’000   US$’000 
         
Balance as of April 1,   1,218    301 
Exchange realignment   -    4 
Accrual for warranties issued during the period   3,524    139 
Settlement made during the period   (2,367)   (77)
           
Balance as of June 30,   2,375    367 

  

19.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$645,000 and US$113,000 for the three months ended June 30, 2012 and 2011 respectively.

 

20.SEGMENTAL INFORMATION

 

During the three months ended June 30, 2012 and 2011 all revenue of the Company represented income from sales of sealed lead-acid battery products and relevant components and therefore no financial information by business segment is presented. Furthermore, as all revenue is derived from the PRC, no geographical segment is presented.

 

-26-
 

 

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

 

Forward Looking Statements

 

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

 

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

 

Company Overview

 

We produce and sell sealed lead-acid motive batteries, also known as valve regulated lead-acid motive batteries (VRLA batteries) in China's personal transportation device market. Our motive battery products, sold under our own brand name “Chisen”, are predominantly used in electric bicycles and are distributed and sold in China.  Among all types of batteries for electric bicycles, the lead-acid motive battery is the preferred choice of electric bicycle manufacturers in China, accounting for 95% of the market share because of its cost efficiency.

 

For the three months ended June 30, 2012 and 2011, sales revenues were US$20,421,000 and US$35,399,000, respectively, and our net (loss) income attributable to CIEC common stockholders during the same periods amounted to US$(10,408,000) and US$8,304,000, respectively.  The Company also had negative working capital of US$38,937,000 and US$50,833,000 as of March 31, 2012 and June 30, 2012, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

Development Strategy of the Company

 

We strive to create an international first-class brand and become the one of the leaders in providing “green” energy in the global electric bicycle market.  Through our continuous researching and developing of new chemical energy technologies, we intend to provide energy-saving and highly-effective energy solutions to our customers for improving 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, we plan to expand our product mix to include valve regulated lead-acid back-up batteries, the lithium-ion battery, lead-acid power storage batteries dedicated for solar and wind power and lead-acid motive batteries for electric cars.

 

-27-
 

 

Production Capacity

 

On September 6, 2010, CEJC entered into a Project Investment Contract and a Supplemental Agreement to the Project Investment Contract with the Jiangsu Xuyi Economic Development Zone Administrative Committee, pursuant to which CEJC shall invest, in the aggregate, approximately RMB1,200,000,000 (approximately US$177,000,000) to manufacture VRLA batteries, as well as our newest product, lithium-ion batteries, and other related products in the Jiangsu Xuyi Economic Development Zone (“Plant A”). At the date of this report, CEJC has completed all construction related to the first stage and has invested over RMB422,000,000 (approximately US$62,000,000) in assets for the production of VRLA batteries only. Currently, the Company does not plan to construct lithium-ion battery production facilities in Plant A.

 

Augment Marketing and Promotion Efforts to Increase Brand Awareness

 

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

 

Expand Sales Network and Distribution Channels

 

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

 

Build Partnerships with New and Existing Clients

 

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

 

Vertical Integration Strategy

 

During the period ended June 30, 2012, we have implemented a vertical integration strategy of producing lead plates at Plant A which has enabled us to reduce processing costs as compared to the same period in last year.  

 

Recent Accounting Pronouncements

 

As of the date of this report, there are no recently issued accounting pronouncements the adoption of which would have a material impact on the Company’s financial statements.

 

Corporate Information

 

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

 

-28-
 

 

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

 

Critical Accounting Policies, Estimates and Assumptions

 

For the three months ended June 30, 2012 as compared to the fiscal year ended March 31, 2012, 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.

 

Results of Operations for the Three Months Ended June 30, 2012 Compared With the Three Months Ended June 30, 2011

 

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

 

   For The Three Months ended June 30 (Unaudited) 
   (in thousands) 
   2012 (US$)   2011 (US$)   2012   2011 
Revenues   20,421    35,399    100.00%   100.00%
Cost of sales   (18,846)   (33,464)   92.29%   94.53%
Gross profit   1,575    1,935    7.71%   5.47%
Sales, marketing and distribution   (5,767)   (2,520)   28.24%   7.12%
General and administrative expenses   (2,429)   (1,705)   11.89%   4.82%
Operating loss   (6,621)   (2,290)   32.42%   6.47%
Other expenses, net   (975)   (12)   4.77%   0.03%
Interest income   567    303    2.78%   0.86%
Net loss from operations before interest and tax expenses   (7,029)   (1,999)   34.42%   5.65%
Interest expenses   (3,458)   (1,282)   16.93%   3.62%
Loss before income taxes   (10,487)   (3,281)   51.35%   9.27%
Income taxes benefits   -    449    -%   1.27%
Loss before extraordinary items   (10,487)   (2,832)   51.35%   8.00%
Extraordinary gain (less applicable taxes of US$0)   -    12,963    -%   36.62%
Extraordinary loss (less applicable taxes of US$0)   -    (1,827)   -%   5.16%
Net (loss) income including non-controlling interest   (10,487)   8,304    51.35%   23.46%
Net loss attributable to non-controlling interest   79    -    0.39%   -%
Net (loss) income attributable to CIEC common shareholders   (10,408)   8,304    50.97%   23.46%
Other comprehensive income   9    493    0.04%   1.39%
Comprehensive (loss) income   (10,399)   8,797    50.92%   24.85%

 

Revenues and Cost of Sales

 

Our revenue decreased significantly by US$14,978,000 or 42.31%, to US$20,421,000 for the three months ended June 30, 2012 compared with US$35,399,000 for the three months ended June 30, 2011. The decrease was mainly attributable to the decrease in the average selling price per unit following the price cutting strategy adopted by other major competitors and loss of market share as a result of scale down our production capacity in order to comply with the unexpected tightening of an environmental protection policy implemented by the PRC Central Government enforced on all lead-acid battery manufacturers during the year ended March 31, 2012. At the date of this report, our production capacity has recovered. However, it has taken time for us to regain market share.

 

-29-
 

 

Cost of sales for the three months ended June 30, 2012 and 2011 were US$18,846,000 and US$33,464,000, respectively. The decrease in cost of sales of US$14,618,000 or 43.68% was mainly attributable to the decrease in sales volume resulting from the loss of market share as stated above.

 

The decrease in cost of sales was also attributable to a significant decrease in processing charges on lead plates, one of the major components of our battery products, resulting from our vertical integration of producing lead plates at Plant A which commenced in August 2011.

 

Our gross profit ratio increased by 2.24% to 7.71% for the three months ended June 30, 2012 as compared with the corresponding period in 2011. The increase was mainly attributable to the decrease in the cost of production as a result of the implementation of the vertical integration strategy as stated above.

 

Depreciation and Amortization

 

Depreciation and amortization expense for the three months ended June 30, 2012 and 2011 was US$838,000 and US$304,000, respectively. The increase of US$534,000 or 175.66% was mainly attributable to the additional depreciation charges of US$242,000 incurred as a result of the change of estimated useful life on certain machinery at our Jing’er Road Plant (“Plant B”). Last year, we were advised by the local governmental authority that the external battery formation technique, which was used in Plant B to produce battery products, will be prohibited after October 31, 2012. Our management reviewed the machinery in Plant B and identified that certain machinery cannot be used after that date and therefore, their estimated useful life was adjusted accordingly.

 

In addition, in order to expand our production capacity, we have invested significantly in plant and machinery at Plant A and the increase in depreciation expense was in line with the increase in the property, plant and equipment.

 

General and Administrative Expenses

 

General and administrative expenses were US$2,429,000 and US$1,705,000 for the three months ended June 30, 2012 and 2011, respectively, and mainly consisted of staff salaries and benefits, research and development, depreciation expenses, material consumption, legal and professional fees, social insurance, repair and maintenance expenses and utility expenses.

 

The increase in general and administrative expenses of US$724,000 or 42.46% for the period ended June 30, 2012 as compared to the corresponding period in 2011 was mainly attributable to: (a) an increase of US$250,000 for staff salaries and relevant benefits, such as social insurance and staff cafeteria expenses, due to the operation of a new plant in Xuyi County of Jiangsu Province where we now employ more administrative staff; (b) an increase in research and development expenses of US$428,000, which are mainly attributable to the resources invested in improving the quality of existing products as well as the development of new products and the increase in staff in our R&D department.

 

Sales, Marketing and Distribution

 

Sales, marketing and distribution expense increased by US$3,247,000 or 128.85% to US$5,767,000 for the three months ended June 30, 2012 as compared to US$2,520,000 for the three months ended June 30, 2011.

 

For purposes of complying with the tightened environmental protection policy discussed above, during the year ended March 31, 2012, we introduced the internal battery formation technique into our production. However, this technique is relatively new to the Company and we are unable to handle it as well as the external battery formation technique which we used before. Under the internal formation technique we are unable to repair all returned defected batteries. The Company temporarily used more new batteries for providing warranty services. As the cost of new batteries is higher than the cost of repaired batteries, the cost of warranty for the three months ended June 30, 2012 increased significantly by US$3,385,000 to US$3,524,000 as compared with the corresponding period in 2011.

 

-30-
 

 

Interest Income

 

Interest income was US$567,000 and US$303,000 for the three months ended June 30, 2012 and 2011, respectively. The increase of US$264,000 or 87.13% was mainly attributable to an increase in restricted cash pledged for banking facilities granted by banks.

 

Other Expense, net

 

Other expenses, net were US$975,000 and US$12,000 for the three months ended June 30, 2012 and 2011, respectively. The increase of US$963,000 or 8,025.00% was mainly attributable to the increase in loss on disposal of scrap materials of US$721,000 from the production process as a result of immature production technique used in internal formation batteries.

 

Loss before Interest and Income Tax Expenses

 

Loss before interest and income tax expenses was US$7,029,000 and US$1,999,000 for the three months ended June 30, 2012 and 2011, respectively. The increase of US$5,030,000 or 251.63% was mainly attributable to the increase in sales, marketing and distribution expenses of US$3,247,000, general and administrative expenses of US$724,000 and other expenses, net of US$963,000.

 

Interest Expense

 

Interest expense for the three months ended June 30, 2012 and 2011 was US$3,458,000 and US$1,282,000, respectively. The increase in interest expense of US$2,176,000 or 169.73% was mainly attributable to the increase in banking facilities utilized by the Company as well as an increase in average interest rate.

 

Loss before income taxes

 

Loss before income tax expenses was US$10,487,000 and US$3,281,000, respectively. The increase of US$7,206,000 or 219.63% was mainly attributable to the increase in sales, marketing and distribution, interest expenses and general and administrative expenses of US$3,247,000, US$2,176,000 and US$724,000, respectively.

 

Net (Loss) Income Including Non-Controlling Interest

 

Net loss including non-controlling interest was US$10,487,000 for three months ended June 30, 2012 as compared with a net income of US$8,304,000 for the corresponding period in 2011. The decrease of US$18,791,000 was mainly attributable to an increase in sales, marketing and distribution expenses, general and administrative expenses, other expenses, net, and interest expenses of US$ 3,247,000, US$724,000, US$963,000, and US$2,176,000, respectively as well as decrease in net gain on extraordinary items of US$11,136,000.

 

Liquidity and Capital Resources

 

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

 

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

 

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

 

   Three Months Ended
June 30,
 
   (in thousands) 
   2012(US$)   2011(US$) 
Net cash (used in) provided by operating activities   (17,906)   497 
Net cash used in investing activities   (1,854)   (8,931)
Net cash provided by financing activities   19,733    6,157 
Net decrease in cash and cash equivalents   (27)   (2,277)
Cash and cash equivalents, beginning of period   13,804    7,630 
Effect on exchange rate changes   -    101 
Cash and cash equivalents at end of period   13,777    5,454 

 

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Operating Activities

 

The increase in net cash used in operating activities was mainly attributable to an increase in cash outflow from the other financial assets, trade receivable, net, and notes payable of US$4,861,000, US$7,760,000 and US$4,154,000, respectively for the three months ended June 30, 2012 as compared with the corresponding period in 2011.

 

Investing Activities

 

The decrease in net cash used in investing activities was mainly attributable to the release of restricted bank balances of US$19,331,000 and a refund of a deposit paid for a land auction of US$18,849,000 offset by cash used in the acquisition of lands held for sale of US$32,206,000.

 

 Financing Activities

 

Net cash provided by financing activities was US$19,733,000 and US$6,157,000 for the three months ended June 30, 2012 and 2011 respectively. The increase in cash provided by financing activities was mainly attributable to an increase in net proceeds received from short-term bank loans of US$15,553,000 offset by a decrease in net proceeds received from bills financing of US$1,607,000. The increase in short-term bank borrowings was used for operating and acquisition of lands held for sale during the period.

 

Working Capital

 

During the period ended June 30, 2012 we had negative working capital of US$50,883,000 which, together with our decrease in sales revenues of US$14,978,000 and our net loss attributable to CIEC common stockholders of US$10,408,000, raises substantial doubt about our ability to continue as a going concern. 

 

The negative working capital was mainly attributable to the significant increase in loss from operations and the increase in long term capital investment.

 

During the three months ended June 30, 2012, the Company suffered a significant loss as the result of loss of market share as discussed above. In order to comply with the tightened environmental policy and to rebuild our production capacity, we invested significantly in land lease prepayment and property, plant and equipment in Plant A. Although our production capacity has recovered at the date of this report, it has taken time for us to regain market share. Together with the decrease of cash generated from operations, it was necessary for us to increase bank borrowings to fund this project.

 

In order to improve working capital, management decided to defer and/or decrease long term investment so as to maintain sufficient short term funds. Also, the Company’s principal stockholder had undertaken to make available funds to the Company as and when required to maintain the Company as a going concern. Notwithstanding the above, the Company has regular cash flow control measures over the liquidity of its working capital as stated in the financial statements to strictly monitor the condition of the working capital. Apart from the above, management believes that business is recovering and will continue to do so, which may also help improve working capital flow.

 

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Capital Commitment

 

As of June 30, 2012 and March 31, 2012, the Company had outstanding capital expenditure commitments relating to various construction projects and purchase of machineries for an aggregate amount of approximately US$119,342,000 and US$122,845,000, respectively.

 

Off-Balance Sheet Arrangements

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Interest Rates Risk

 

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

 

Foreign Exchange Rates Risk

 

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

 

Contractual Obligations

 

    Payments Due By Period  
Contractual Obligations (US$)   Total    

Less than

1 year

   

1-3

years

   

3-5

years

   

More than

5 years

 
Bank Indebtedness   (SEE TABLE BELOW)  
Other Indebtedness     0       0       0       0       0  
Capital Lease Obligations     0       0       0       0       0  
Operating Lease Obligations   (SEE TABLE BELOW)  
Purchase Obligations   (SEE TABLE BELOW)  
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under US GAAP     0       0       0       0       0  
Total:     0       0       0       0       0  

 

Bank indebtedness (US$)   June 30, 2012     March 31, 2012  
Short-term bank borrowings   US$ 188,779,000     US$ 168,837,000  
Notes payable (within (1) year)   US$ 7,924,000     US$ 17,918,000  
Total   US$ 196,703,000     US$ 186,755,000  

 

Purchase Obligations (US$)   June 30, 2012     March 31, 2012  
Construction projects and purchase of machinery   US$ 119,342,000     US$ 122,845,000  
Total   US$ 119,342,000     US$ 122,845,000  

 

Operating Lease Obligations (US$)   June 30, 2012     March 31, 2012  
Within one (1) year   US$ 361,000     US$ 451,000  
1-3 years   US$ 249,000     US$ 428,000  
Total   US$ 610,000     US$ 879,000  

 

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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 and accounting 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 and accounting officer, concluded that our disclosure controls and procedures were effective as of the fiscal quarter covered by this report, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time period specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, as appropriate to allow appropriate decisions on a timely basis regarding required disclosure.

  

Changes in Internal Control over Financial Reporting

 

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

       

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

In the normal course of business, we are named as defendant in lawsuits in which claims are asserted against us. In our opinion, the liabilities, if any, which may ultimately result from such lawsuits, are not expected to have a material adverse effect on our financial position, results of operations or cash flows. As of June 30, 2012, there was no pending or outstanding material litigation with the Company.

 

ITEM 1A. RISK FACTORS

 

Not required for a “smaller reporting company”.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

(a) Exhibits

 

EXHIBIT NO.   DESCRIPTION   LOCATION
         

 

2.1   Share Exchange Agreement, dated November 12, 2008, by and among World Trophy Outfitters, Inc., Fast More Limited, Cheer Gold Development Ltd. and Floster Investment Limited   Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
3.1   Articles of Incorporation of World Trophy Outfitters, Inc. (n/k/a Chisen Electric Corporation)   Incorporated by reference to Exhibit 3(i).1 to the Registrant’s Registration Statement on Form SB-2 as filed with the SEC on September 23, 2005
         
3.2   Certificate of Amendment to Articles of Incorporation of Chisen Electric Corporation (name change)   Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009
         
3.3   Amended and Restated Bylaws of Chisen Electric Corporation   Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

  

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

 

3.6   Certificate of Incorporation of Changxing Chisen Electric Co., Ltd.   Incorporated by reference to Exhibit 3.5 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
3.7   Articles of Association of Changxing Chisen Electric Co., Ltd.   Incorporated by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
3.8   Business Registration Certificate of Changxing Chisen Electric Co., Ltd. (English Translated Version and Mandarin Version)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
3.9   Certificate of Change to Articles of Incorporation of Chisen Electric Corporation (Forward Split)   Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on November 28, 2011
         
10.1   Agreement on Establishment of Changxing Chisen Physical Chemistry Power Research and Development Center, dated April 30, 2008   Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

 

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10.2   Form of Labor Contract   Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.3   Lease Agreement, dated March 30, 2008, by and between Changxing Chisen Electric Co., Ltd. and Changxing Xiangyi Industrial Park Investment Co., Ltd.   Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

 

10.4   Contract For Loan on Guarantee, by and among Zhejiang Changxing Agricultural Cooperative Bank, Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd.   Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.5   Renminbi Loan Contract, dated January 11, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Corporation (Changxing Branch)   Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.6   Renminbi Loan Contract, dated April 11, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Corporation (Changxing Branch)   Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.7   Renminbi Loan Contract, dated March 31, 2008, by and between Changxing Chisen Electric Co., Ltd. and Bank of China (Hong Kong) Limited Shanghan Branch   Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

 

10.8   Loan Contract (Short Term), dated August 15, 2008, by and between Changxing Chisen Electric Co., Ltd. and Bank of China Changxing Branch   Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.9   Acceptance Agreement, dated August 25, 2008, by and between Changxing Chisen Electric Co., Ltd. and Industrial Bank Co., Ltd. Hangzhou Branch   Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.10   Acceptance Agreement of Commercial Bill, dated September 18, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Bank Co., Ltd. Changxing Branch   Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

 

10.11   Cooperation Agreement, dated April 20, 2008, by and between Changxing Chisen Electric Co., Ltd. and Xiamen University   Included by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K as filed with the SEC on June 28, 2010
         
10.11   Acceptance Agreement of Commercial Bill, dated July 29, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Changxing Branch Co., Ltd.   Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.12   Acceptance Agreement of Commercial Bill, dated September 9, 2008, by and between Changxing Chisen Electric Co., Ltd. and China Construction Bank Changxing Branch Co., Ltd.   Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008

 

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

 

10.14   Supply Contract, dated April 22, 2008, by and between Changxing Chisen Electric Co., Ltd. And Jiangsu Yadea Science & Technology Development Co., Ltd.   Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.15   Sales Contract of Battery, dated November 10, 2007, by and between Changxing Chisen Electric Co., Ltd. and Hu Qinzhong, Yancheng Office   Incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.16   Sales Contract of Battery, dated February 17, 2008, by and between Changxing Chisen Electric Co., Ltd. and Song Chunwei   Incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
10.17   Compensation Agreement of Corporate Relocation Acquisition, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang    Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.

  

10.18   Investment Agreement, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang   Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.
         
10.19   Supplemental Agreement, dated August 20, 2010, by and between the Company’s chief operating subsidiary, Changxing Chisen Electric Co., Ltd., and the Administrative Committee of Changxing Economic Development Zone, Zhejiang    Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on August 24, 2010.
         
10.20   Xuyi Economic Development Zone Project Investment Contract, dated September 6, 2010, by and between Chisen Electric Jiangsu Co., Ltd. and Jiangsu Xuyi Economic Development Zone Administrative Committee   Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on September 13, 2010.
         
10.21   Xuyi Economic Development Zone Project Investment Contract Supplemental Agreement, dated September 6 2010, by and between Chisen Electric Jiangsu Co., Ltd. and Jiangsu Xuyi Economic Development Zone Administrative Committee   Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on September 13, 2010.

 

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10.22    Electrode Purchase Contract, dated August 2, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu XiangFa Electric Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.25    Sales Contract, dated August 31, 2009, by and between Changxing Chisen Electric Co., Ltd. and Anqing Burui Power Supply Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

10.26    Contract, dated November 24, 2009, by and between Changxing Chisen Electric Co., Ltd. and Anyang City Yubei Gold and Lead Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.27    Parts Acquisition Contract, dated January 1, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu Xinri E-Vehicle Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

10.29    Contract, dated August 1, 2010, by and between Changxing Chisen Electric Co., Ltd. and Tianjin Aima Technology Company Limited (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.30   Supplementary Agreement of Changxing Chisen Electric Co., Ltd. Relocation Project (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.31   Contract of Guaranty of Maximum Amount, dated on our about February 10, 2010, by and between Agricultural Bank of China (Changxing County Branch) and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.32   Guarantee Contact, dated on or about April 2, 2010, by and between China Construction Bank Corporation (Changxing Branch) and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.33   Contract Guarantee of Maximum Amount, dated on or about April 14, 2009, by and between Shanghai Pudong Development Bank (Huzhou Branch) and Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

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 10.34   Guarantee Contract, dated on or about January 12, 2010, by and between Changxing Economic Development Zone and Zhejiang Changxing Ruilang Electric Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.35   Contract of Guarantee with a Maximum Amount, dated on or about July 1, 2008, by and between Bank of China (Changxing Branch) and Mr. Xu Kecheng (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

10.36   Contract of Guarantee, undated, by and between CITIC Trust Co., Ltd. and Zhejiang Changxing Xinguangyuan Co., Ltd. (RMB40,000,000) (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.37   Contact of Guarantee, undated, by and between CITIC Trust Co., Ltd. and Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. (RMB60,000,000) (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

10.38   Guarantee Contract (64720012302010005), dated January 13, 2010, by and among China Construction Bank Corporation, on the one hand, and Mr. Xu Kecheng and Ms. Zho Fangqin, on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.39   Guarantee Contract (64720012302010004), dated January 13, 2010, by and among China Construction Bank Corporation, on the one hand, and Mr. Xu Kecheng and Ms. Zho Fangqin, on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.40    Contract of Guarantee of Maximum Amount (33905201000030826), undated, by and between Agricultural Bank of China Changxing County Sub-branch, on the one hand, and Zhejiang Chisen Glass Co., Ltd., on the other hand  (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.41   Contract of Guarantee with a Maximum Amount (BOC 130), dated October 25, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and Bank of China Ltd., on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.42   Contract of Guarantee (3350012010AM00077300), dated November 16, 2010, by and between Zhejiang Changxing Chisen Xinguangyuan Co., Ltd. and Bank of Communication (Huzhou Branch) (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

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

 

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

 

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

 

10.46   Guarantee Contract (647200123020100201), dated October 9, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.47   Guarantee Contract (64720092302010036), dated October 18, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.48   Guarantee Contract (647200923020100381), dated November 10, 2010, by and between Xu Kecheng and Zho Fangqin, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.49   Contract of Guarantee (P2009M17SZJZH0001JF14-0081-1) under Trust Loan Contract No. P2009M17SZJZH0001JF14-0081-1 , undated, by and between Xu Kecheng and CITIC Trust Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

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

 

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

 

10.52   Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd. dated March 8, 2010 (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.53   Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Chisen Glass Co., Ltd., dated December 20, 2010 (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.54   Contract by and between Changxing Chisen Electric Co., Ltd. and Zhejiang Changxing Ruilang Electronic Company Limited dated October 18, 2010 (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.55   Summary of Oral Loan Agreement with Ai Ge Organism Products Company Limited   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

10.56   Electrode Purchase Contract, dated August 2, 2010, by and between Changxing Chisen Electric Co., Ltd. and Jiangsu XiangFa Electric Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.57   Electrode Plate Supply Contract, by and between Changxing Chisen Electric Co., Ltd. and Anqing Borui Power Supply Co., Ltd., dated August 2, 2010 (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.58   Guarantee Contract (6472009992011036), dated March 31, 2011, by and between Xu Kecheng, on the one hand, and China Construction Bank Corporation (Changxing Sub-Branch) on the other hand (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
10.59   Shanghai Pudong Development Bank Contract of Guarantee of Maximum Amount,  dated March 31, 2011, by and between Shanghai Pudong Development Bank Huzhou Sub-branch and Zhejiang Chisen Glass Co., Ltd. (English Translated and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

 

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

 

14.1   Code of Business Conduct and Ethics   Incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009
         
16.1   Letter to SEC from Pritchett, Siler & Hardy, P.C.   Incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2009
         
17   Resignation of Mathew Evans, dated November 12, 2008   Incorporated by reference to Exhibit 17 to the Company’s Current Report on Form 8-K as filed with the SEC on November 12, 2008
         
21   List of Subsidiaries   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
31.1   Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   Provided herewith
         
31.2   Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   Provided herewith
         
32.1   Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002   Provided herewith
         
32.2   Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002   Provided herewith
         
99.1   Audit Committee Charter, dated January 15, 2009   Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009
         
99.2   Compensation Committee Charter, dated January 15, 2009   Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 4, 2009

 

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

 

99.4   China Battery Industry Association Certificate of Ranking (English Translated Version)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
99.5   China News Article entitled “Electric Bicycles are Involved in Government’s Subsidy Program” (English and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011
         
99.6   Subsidize Policy on New Energy Vehicle (English and Mandarin Versions)   Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2011

  

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SIGNATURES

 

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

 

Date: August 14, 2012 By: /s/ Xu Kecheng  
    Name: Xu Kecheng  
    Its: President, Chief Executive   
    Officer and Principal Executive  
    Officer  

 

Date: August 14, 2012 By: /s/ Liu Chuanjie  
    Name: Liu Chuanjie  
    Its: Chief Financial Officer,  
    Principal Financial and  
    Accounting Officer  

 

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XOTC:CIEC Quarterly Report 10-Q Filling

XOTC:CIEC Stock - Get Quarterly Report SEC Filing of XOTC:CIEC stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XOTC:CIEC Quarterly Report 10-Q Filing - 6/30/2012
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