UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-K





x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934




For the
fiscal year ended June 30, 2010




or





 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
the transition period from _________ to _____________





Commission
file number: 000-51336








BEFUT
International Co., Ltd.


(Exact
name of registrant as specified in its charter)





Nevada
            20-2777600(State
      or other jurisdiction of
              incorporation
      or organization)
            (IRS
      Employer Identification No.)





27th
Floor, Liangjiu International Tower


5
Heyi Street


Dalian
City, 116011


P.
R. China


(Address
of Principal Executive Offices) (Zip Code)





Registrant’s
telephone number:  (011)-86-411-83678755





Securities
registered pursuant to Section 12(b) of the Act: None.





Securities
registered pursuant to Section 12(g) of the Act: Common Stock, Par Value
$0.001 Per Share





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





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





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










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





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





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





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
              Do
      not check if a smaller reporting company
            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





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: $585,556.04  as of December 31, 2009, based on the average
bid and asked price $0.5075 of the Company’s common stock on such date as
reported by the Over-the-Counter Bulletin Board. Shares of voting stock held by
each executive officer and director of the registrant and each person who
beneficially owns 10% or more of the registrant’s outstanding voting stock has
been excluded from the calculation. This determination of affiliated status may
not be conclusive for other purposes.





The
number of outstanding shares of the registrant’s common stock on September 24,
2010 was 29,715,640.





Documents
Incorporated by Reference: None.











FORM 10-K
ANNUAL REPORT


FISCAL
YEAR ENDED JUNE 30, 2010





TABLE
OF CONTENTS




PAGEPART I
              
              
              
              2Item 1.
              
              Business.
              
              2Item 1A.
              
              Risk
      Factors.
              
              15Item 2.
              
              Properties.
              
              28Item 3.
              
              Legal
      Proceedings.
              
              30PART II
              
              
              
              31Item 5.
              
              Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
              
              31Item 7.
              
              Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations.
              
              33Item 8.
              
              Financial
      Statements and Supplementary Data.
              
              40Item 9.
              
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
              
              40Item 9A.
              
              Controls
      and Procedures.
              
              40Item 9B.
              
              Other
      Information.
              
              41PART III
              
              
              
              42Item 10.
              
              Directors,
      Executive Officers and Corporate Governance.
              
              42Item 11.
              
              Executive
      Compensation.
              
              43Item 12.
              
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholders Matters.
              
              44Item 13.
              
              Certain
      Relationships and Related Transactions, and Director
      Independence.
              
              45Item 14.
              
              Principal
      Accountant Fees and Services.
              
              46PART IVItem 15.
              
              Exhibits,
      Financial Statement Schedules.
              
              4747SIGNATURES
              
              48EXHIBIT
      INDEX
              
              49FINANCIAL
      STATEMENTS
              
              F-1














FORWARD-LOOKING
STATEMENTS





Certain
statements in this Report, and the documents incorporated by reference herein,
constitute "forward-looking statements". Such forward-looking statements include
statements, which involve risks and uncertainties, regarding, among other
things, (a) our projected sales, profitability, and cash flows, (b) our growth
strategies, (c) anticipated trends in our industries, (d) our future financing
plans, and (e) our anticipated needs for, and use of, working capital. They are
generally identifiable by use of the words “may,” “will,” “should,”
“anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,”
“ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or
the negative of these words or other variations on these words or comparable
terminology. These statements may be found under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
“Business,” as well as in this Report generally. Actual events or results
may differ materially from those discussed in forward-looking statements as a
result of various factors and matters described in this report generally. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact occur. You
should not place undue reliance on these forward-looking
statements.





The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events except to the extent as required by
applicable law.




Unless
otherwise noted, all currency figures in this filing are in U.S. dollars.
References to "yuan" or "RMB" are to the Chinese yuan (also known as the
renminbi). According to www.safe.gov.cn, the
official website of the PRC State Administration of Foreign Exchange, as of June
30, 2010, US $1.00 = RMB 6.7909  yuan.




The
"Company", "we," "us," "our," and the "Registrant" refer to (i) BEFUT
International Co., Ltd., the public company incorporated in the state of Nevada
(“BEFUT”), (ii) BEFUT Corporation, the direct subsidiary of BEFUT,  a
corporation incorporated in the State of Nevada (“Befut Nevada”); (ii) Hongkong
BEFUT Co., Ltd. (“Befut Hongkong”), a wholly-owned subsidiary of Befut Nevada
incorporated under the laws of Hong Kong; (iii)Befut Electric (Dalian), Co.,
Ltd. (“WFOE”), a corporation organized under the laws of the People’s Republic
of China (the “PRC”) that is wholly owned by Befut Hongkong; (vi) Dalian Befut
Wire & Cable Manufacturing Co., Ltd. (“Dalian Befut”), a corporation
organized under the laws of the PRC which is the captive manufacturing company
to WFOE; (vii) Dalian Marine Cable Co., Ltd., a corporation organized under the
laws of the PRC which is 86.6% owned by Dalian Befut (“Befut Marine”); (viii)
Dalian Befut Zhong Xing Switch Co., Ltd (“Befut Zhong Xing”), a corporation
organized under the laws of the PRC which is 73.5% owned by Dalian Befut, and
(ix) Dalian Yuansheng Technology Co., Ltd. (“Dalian Yuansheng”), a corporation
organized under the laws of the PRC which is 93.3% owned by Dalian
Befut.





1





PART
I





ITEM
1. BUSINESS





Overview





We believe that we are one of the most
competitive manufacturers of specialty cable products in northeastern China. Our
cable products consist of (i) traditional electric power system cable and (ii)
an assortment of specialty cable, including marine cable, mining specialty cable
and, petrochemical cable.  We also have developed the capability to
produce other types of specialty cable such as carbon fiber composite cable,
submarine cable and certain “new energy” cable, including cable for wind and
solar energy. Our traditional cable products are primarily focused on serving
end-user applications in the construction, electrical utility, and
transportation (including automotive) markets. Our specialty cable products are
used primarily in ship building, nuclear power plants, mining and petrochemical
operations. We also have the technical capability for large-scale production of
marine cable for use in electronic conveyance, controls and lighting on a
variety of ships, a segment of the market with significantly higher profit
margin potential that we intend to further
pursue.  Additionally, we recently began  developing
and producing switch appliances, including high and low voltage distribution
cabinet  switches and crane electronic control switches, which
products compliment our cable product offerings.





We are headquartered in the city of
Dalian,a large
trading and financial center in northeastern China located at the tip of China’s
Liaodong Peninsula.  Our sales and marketing activities are conducted
through our 14 branch offices located throughout China. Currently, our products
are sold through our sales force to over 500 Chinese customers.





We are in the process of constructing a
new manufacturing facility located in Dalian’s Changxing Island Harbor
Industrial Zone.  We recently completed Phase I of this project (the
“Phase I Changxing Facility”) which consists of 45,477 square meters of floor
space with a maximum production capacity of approximately 4,000 km of cable per
year.  This facility commenced production in April 2010 and currently
has a production capacity of 2,400 km of cable per year.   We
estimate that Phase II of this project (the “Phase II Changxing Facility”) will
add approximately 45,000 square meters of additional floor space.





We also have a high-quality customer
base, including Shougang Group, China Huaneng Group, China National Petroleum
Corporation, China Shipbuilding Industry Corporation, China Ocean Shipping
(Group) Company, which enables us to maintain and strengthen our competitive
position in the wire and cable industry.





Recent
Developments





In July 2010 , Dalian Befut increased
its equity interests in Befut Zhong Xing from 70% to 73.5% by contributing RMB
14 million ($2.06 million) to the registered capital of Befut Zhong Xing. Befut
Zhong Xing develops and manufactures switch appliances, including
high-low-voltage distribution cabinet  switches and crane electronic
control switches.





On July 23, 2010, Dalian Befut acquired
60% of equity interests of Dalian Yuansheng for $88,235 (the registered capital
value of such equity interests) from Mr. Chengnian Yan. Dalian Befut also
increased the Dalian Yuansheng’s registered capital by RMB 5 million
($735,294), thereby increasing Dalian Befut’s total equity interest to
93.3%.  Dalian Yuansheng is engaged in the research and development of
carbon fiber composite cable and other specialty cable. One of the principal
shareholders of Dalian Yuansheng holds a patent for carbon fiber composite cable
which will be transferred to Dalian Yuansheng.





Our
Products





Our products are categorized into three
types:  traditional cable, specialty cable and switch appliances. The
following table provides information about our principal products:




2


Products
                                                                                                                                
                                                                                                                                Features
                                                                                                                                
                                                                                                                                ApplicationsTraditional CableElectric
      Cable
                                                                                                                                
                                                                                                                                Thermo-mechanical,
      electrical and anti-corrosion
                                                                                                                                
                                                                                                                                Used
      in the telecommunications industry, auto industry, metal refining
      industry, electrical and petrochemical industry, transportation industry
      (including electrified railway and urban rail transportation) and
      construction industry.Specialty CableMarine
      Cable
                                                                                                                                
                                                                                                                                Anti-erosion,
      anti-stretch and long-life
                                                                                                                                
                                                                                                                                Used
      in various capacities in the shipping industry, including the construction
      of ships, on-water oil platforms and coastal marine
      projects.  It is also capable of meeting other needs on a ship,
      including power transmission, signal transmission of lighting and
      information processing equipment, and control systems.Mine
      Specialty Cable
                                                                                                                                
                                                                                                                                Temperature
      resistant, corrosion protection, soft, low-temperature
      resistant
                                                                                                                                
                                                                                                                                Used
      by mining companies.Petrochemical
      Cable
                                                                                                                                
                                                                                                                                Corrosion
      protection, long-life, high stretch resistance feature
                                                                                                                                
                                                                                                                                Used
      in the petrochemical industry and in offshore
  construction.Other
      Specialty Cable
                                                                                                                                
                                                                                                                                High-temperature
      resistant, low-temperature resistant, hard-wear, acid-bases resistant,
      age-resistant, long-life
                                                                                                                                
                                                                                                                                Used
      in steelwork and at iron ore yards.Switch AppliancesHigh-low-voltage
      distribution cabinet  switch
                                                                                                                                
                                                                                                                                Power
      grids under 20KV
                                                                                                                                
                                                                                                                                Used
      between transformer room and production workshop.Crane
      electronic control switch
                                                                                                                                
                                                                                                                                Easy
      to  operate, convenient to  maintain, and
      reliable
                                                                                                                                
                                                                                                                                Used
      on various
cranes.


We
believe that the specialty cable sector is one of the most profitable sectors in
the wire and cable industry with significantly higher gross margins of up to
60%. Specialty cable is typically produced for specific uses in harsh conditions
that are unsuitable for other traditional cable.





With the
completion of the Phase I Changxing Facility, we plan to enhance the development
of marine cable (one of our specialty cable products), including submerged cable
used to transfer data and telecommunications and marine cable used in
shipbuilding. We are also in the process of developing carbon fiber composite
cable, which is a new type of cable composed of  carbon fiber and a
metallic conductor.  Carbon fiber is one of the most advanced cable
products in China and has the potential for higher gross margins than other
types of specialty cable. Carbon fiber composite cable is lighter than pure
metal cable and has better electrical conductivity. We believe it can be useful
in upgrading China’s power grid. We also believe the use of carbon fiber
composite cable could alleviate the  pressure on cables caused by
natural disasters, including heavy snowfall. By January 2011, we expect to be
one of the few manufacturers in China producing carbon fiber composite
cable.  With this new technology, we expect that carbon fiber
composite cable will be one of our primary areas of our focus for growth in the
next few years.  Additionally, we are developing cable for “new
energy” sources such as wind and solar energy, which we believe will also be
cable products with high-margin potential.




3





We, through
Dalian Befut, currently hold 7 patents and have 22 pending patent applications
with respect to our cable products, and we are the only company in the PRC cable
and wire industry holding a patent for watertight cable. The patent for carbon
fiber composite cable is currently owned by one of the principal shareholders of
Dalian Yuansheng, Dalian Befut’s recently acquired subsidiary, and will be
transferred to Dalian Yuansheng.




The following table shows the sales of
our products in our three main categories (traditional cable, specialty cable
and switch appliances) as a percentage of total sales for the fiscal years ended
June 30, 2010, 2009 and 2008:




Percentage
      of Total Sales for Fiscal Years Ended June 30,Products
                                              
                                              2010
                                              
                                              
                                              2009
                                              
                                              
                                              2008USD
                                              
                                              
                                              Percentage
                                              
                                              
                                              USD
                                              
                                              
                                              Percentage
                                              
                                              
                                              USD
                                              
                                              
                                              PercentageTraditional
      Cable
                                              
                                              
                                              12,938,647
                                              
                                              
                                              
                                              41.39
                                              %
                                              
                                              
                                              10,581,298.57
                                              
                                              
                                              
                                              54.8
                                              %
                                              
                                              
                                              10,006,487.50
                                              
                                              
                                              
                                              50.0
                                              %Specialty
      CableMarine
      Cable
                                              
                                              
                                              6,589,038
                                              
                                              
                                              
                                              21.08
                                              %
                                              
                                              
                                              1,274,389.97
                                              
                                              
                                              
                                              6.6
                                              %
                                              
                                              
                                              1,280,830.40
                                              
                                              
                                              
                                              6.4
                                              %Petrochemical
      Cable
                                              
                                              
                                              5,133,764
                                              
                                              
                                              
                                              16.42
                                              %
                                              
                                              
                                              1,409,552.55
                                              
                                              
                                              
                                              7.3
                                              %
                                              
                                              
                                              900,583.88
                                              
                                              
                                              
                                              4.5
                                              %Mine
      Specialty Cable
                                              
                                              
                                              5,862,434
                                              
                                              
                                              
                                              18.75
                                              %
                                              
                                              
                                              3,784,552.04
                                              
                                              
                                              
                                              19.6
                                              %
                                              
                                              
                                              6,904,476.38
                                              
                                              
                                              
                                              34.5
                                              %Total
      Specialty Cable
                                              
                                              
                                              17,585,236
                                              
                                              
                                              
                                              56.25
                                              %
                                              
                                              
                                              6,468,494.56
                                              
                                              
                                              
                                              33.50
                                              %
                                              
                                              
                                              9,085,890.66
                                              
                                              
                                              
                                              45.40
                                              %Other
      Cable
                                              
                                              
                                              N/A
                                              
                                              
                                              
                                              N/A
                                              
                                              
                                              
                                              2,259,145.87
                                              
                                              
                                              
                                              11.7
                                              %
                                              
                                              
                                              920,596.84
                                              
                                              
                                              
                                              4.6
                                              %Switch
      Appliances
                                              
                                              
                                              734,778
                                              
                                              
                                              
                                              2.35
                                              %
                                              
                                              
                                              N/A
                                              
                                              
                                              
                                              N/A
                                              
                                              
                                              
                                              N/A
                                              
                                              
                                              
                                              N/ATotal
                                              
                                              
                                              31,258,662.00
                                              
                                              
                                              
                                              100
                                              %
                                              
                                              
                                              19,308,939.00
                                              
                                              
                                              
                                              100
                                              %
                                              
                                              
                                              20,012,975.00
                                              
                                              
                                              
                                              100
                                              %





The following pictures illustrate the
physical structure of our traditional cable and marine cable:




Traditional
Cable







Marine
Cable







4




Manufacturing





OEM
Agreements





All of our products are manufactured in
the PRC by Dalian Befut, our captive manufacturer, pursuant to agreements
between WFOE, our wholly-owned subsidiary in the PRC, and Dalian Befut executed
on February 16, 2009.  These agreements include an Original Equipment
Manufacturer Agreement, an Intellectual Property License Agreement and a
Non-competition Agreement (collectively, the “OEM Agreements”).




Pursuant to
the Original Equipment Manufacturer Agreement, (i) Dalian Befut is required to
manufacture products according to WFOE’s specifications and may not manufacture
products for any person or entity other than WFOE; (ii) WFOE is responsible for
supplying all raw materials to Dalian Befut and the design specifications for
products to be manufactured; (iii) WFOE purchases the manufactured products from
Dalian Befut at a price not greater than the cost of such manufactured products;
and (iv) WFOE has an exclusive right to purchase some or all of the assets
and/or equity of Dalian Befut at a mutually agreed price to the extent permitted
by PRC law.  The Original Manufacturing Agreement has an indefinite
term and may only be terminated in the event of certain breaches of the
agreement.




Pursuant to
the Intellectual Property License Agreement, WFOE is permitted to use certain of
Dalian Befut’s intellectual property rights, including trademarks, patents and
know-how, for the marketing and sale of the products manufactured by Dalian
Befut.   Additionally, Dalian Befut agreed not to compete with
WFOE pursuant to the Non-competition Agreement.





As a result of the OEM Agreements,
Dalian Befut ceased to be an independent operating company and became
contractually bound to manufacture products solely for our benefit and sell such
products to us at cost.  Throughout the remainder of this report, we
use the term “captive manufacturer” to describe our relationship with Dalian
Befut.





Changxing
Island Manufacturing Facilities





We are in the process of constructing a
new manufacturing facility located in Dalian’s Changxing Island Harbor
Industrial Zone, which is approximately 120 kilometers from
Dalian.  Construction began in 2006 and we recently completed Phase I
of this project (the “Phase I Changxing Facility”). We relocated all of our
cable manufacturing operations to the Phase I Changxing Facility and commenced
operations and product manufacturing at this facility in April
2010.  The Phase I Changxing Facility boasts 45,477 square meters of
floor space, consisting of 24,964 square meters of production space, 5,326
square meters of warehouse space, 8,264 square meters of office space, and 6,923
square meters of supporting facilities space.  The Phase I Changxing
Facility has over 70 sets of advanced wiring equipment, 20 of which are newly
purchased sets.  The Phase I Changxing Facility currently has a
production capacity of 2,400 km of cable per year, which is three times the
amount we were able to produce at our old manufacturing facility.  The
Phase I Changxing Facility is estimated to reach its full production capacity of
approximately 4,000 km of cable per year by June 30, 2013.





We have completed the design plan for
Phase II of this construction project (the “Phase II Changxing
Facility”).  Construction of the Phase II Changxing Facility is
planned to commence after the Phase I Changxing Facility reaches its maximum
production capacity.  The Phase II Changxing Facility will be used
primarily for the development and production of specialty cable which
corresponds to our plan to focus our business on specialty cable over the next
five years.





Previously, our cable manufacturing was
conducted at a manufacturing facility located in the city of Dalian with a
production capacity of approximately 800 km of cable per year.  We now
use our old manufacturing facility located in Dalian for the production of
switch appliances.





Manufacturing
Process





We, through Dalian Befut, utilize
sophisticated manufacturing processes and know-how, which enable us to produce a
wide array of traditional and specialty cable.  Due to our research
and development efforts, we believe we are a leader in the material
configuration and manufacturing processes for specialty cable.




5





The following illustration shows the
basic steps in the manufacturing process of our cable products:










Raw
Materials and Suppliers





Our primary raw materials are copper
wire, insulation materials and protective materials. Our main suppliers for
copper wire for the fiscal year ended June 30, 2010 were Tianjin Huabei Wire
& Cable Manufacturing, Shenyang Tailida Copper Co., Ltd. and Shanyang Metal
Co., Ltd. Our main suppliers for insulation and protective materials in the
same period were Yingkou Genorio Industrial Co., Ltd., Jiangsu Right Plastic
Co., Ltd.,  Huayi Plastic Co., Ltd. and Tianjin Commercial Import
& Export Co., Ltd.





Our principal raw materials are
generally available in the market and we have not experienced any raw material
shortages in the past. Because of the general availability of these raw
materials, we do not believe that we will experience any raw material shortages
in the foreseeable future; however, changes in the price of copper, which has a
history of volatility, directly affect the prices of our products and may
influence the demand for our products. Nonetheless, because we seek to pass the
cost of our raw materials (mainly copper wire) on to our customers, we believe
our actual margin rate will not be significantly affected even if the price of
raw materials increases.





The following is a list of our top
suppliers expressed as a percentage of the U.S. dollar amount of total raw
materials purchased in the fiscal year ended June 30, 2010:




Ranking
                              Suppliers
                              Total
      Amount (USD)
                              Percentage
                                of Total
                                Purchases1
                              Tianjin
      Huabei Cable Factory
                              10,235,535.32
                              
                              43.0
                              %2
                              Yingkou
      Genorio Industrial Co., Ltd.
                              2,923,471.82
                              
                              12.29
                              %3
                              Shenyang
      Tailida Copper Co., Ltd.
                              2,799,529.91
                              
                              11.77
                              %4
                              Shanyang
      Metal Co., Ltd.
                              1,212,324.14
                              
                              5.1
                              %5
                              Dalian
      Lian Zhong Fu Hai Tong Co., Ltd.
                              1,160,963.75
                              
                              4.88
                              %


Distribution,
Sales Network and Customers





We sell our products through a team of
24 full-time sales personnel located in Dalian and another 20 full-time sales
personnel located at 14 sales branch offices in major cities throughout China,
including in Beijing, Shenyang, Tianjin, Jilin, Harbin and Benxi. In addition,
we have contracted with five distributors to sell our
products.  Normally, the contracts we have with the distributors are
for one year and are non-exclusive. In the year ended June 30, 2010, most of our
sales were generated by our full-time sales personnel, who are responsible for
maintaining business relationships with our customers.




6





As of June 30, 2010, we had a total of
approximately 500 customers located throughout China.





In the year ended June 30, 2010, our
five largest customers accounted for approximately 45.93% of our total sales,
among which Dalian Huasheng Electric Installation Corporation was the largest,
accounting for 10.03% of our total revenue. These key customers and their
respective percentages of our total sales are listed below:




Top
      5 Customers for the Fiscal Year Ended June 30, 2010Customer Name
              Product
              Sales (USD)
              %  of Total
  SalesDalian
      Huasheng Electrical Installation Co., Ltd.
              Electric
      Cable
              2,894,472
              10.03%COSCO
      Dalian Shipyard Co., Ltd.
              Marine
      Cable
              2,755,916
              9.55%Tianjin
      Xingang Shipbuilding Heavy Industry Co., Ltd.
              Marine
      Cable
              2,607,949
              9.03%Angang
      Steel Co., Ltd. Bayuquan Steel Branch
              Electric
      Cable
              2,593,340
              8.98%China
      Nuclear Power Engineering Co., Ltd. North Branch
              Mining
      Cable
              2,406,732
              8.34%Top
      5 Customers for the Fiscal Year Ended June 30, 2009Custom Name
              Product
              Sales (USD)
              %  of Total
  SalesDalian
      Huasheng Electrical Installation Co., Ltd.
              Electric
      Cable
              4,108,709
              19.49%Ningxia
      meili Paper Industry Co., Ltd.
              Electric
      Cable
              1,513,689
              7.18%Dalian
      Binshan Group Air Condition Installation Co., Ltd.
              Electric
      Cable
              1,317,818
              6.25%CCEED
      Industrial Equipment Installation Co. Ltd.
              Electric
      Cable
              1,156,218
              5.48%Dalian
      Binshan Group Co., Ltd.
              Specialty
      Cable
              752,702
              3.57%




Growth
Strategy





Our objective is to become the leading
manufacturer of specialty cable products in China.  We intend to
achieve this objective by pursuing a growth strategy that includes:




Increase focus on
high-margin specialty products.   To meet the growing
demand for specialty cable products, we plan to increase the production of
high-margin specialty cable from approximately 58% to approximately 67% of our
total production volume over the next three to five years.  In
addition, we plan to produce submarine cable, carbon fiber composite cable and
other high-end cable products with high profit margins, increasing our sales and
financial performance.




Our sales
generated from specialty cable in our fourth fiscal quarter ended June 30, 2010
accounted for 58.6% of our total sales revenue in that
quarter.  Additionally, current economic policy in China encourages
marine construction, mining, petrochemical and new energy
industries.  Based on these factors, in our fiscal year ending June
30, 2011 we plan to continue devoting more resources to developing, marketing
and selling petrochemical and marine cable and investing in our new high-margin
product, carbon fiber composite cable.




Expand production
capacity.  In order to accommodate the increasing demand for
our products, we intend to expand our current production capacity of 2,400 km of
cable per year to 4,000 km of cable per year by maximizing the production
capacity from our recently completed Phase I Changxing Facility.  The
construction of the Phase II Changxing Facility will further increase our
production capacity.  An increase in production capacity will allow us
to produce and sell a higher quantity of products while lowering our
manufacturing costs due to economies of scale.  The Phase II Changxing
Facility will expand our production capacity for specialty cable.




7




Expand into new
markets.   We plan to enter into new markets, such as the
submarine cable market and the “new energy” cable market, which includes the
production of wind and solar energy cable. We also recently entered the switch
appliance market in the fiscal year ended June 30, 2010.  Because
switch appliances are not our primary business, this product only accounts for
2%-3% of our total revenue. However, we anticipate that the sales of switch
appliances will to increase to 5% of our total revenue in the year ending June
30, 2011.




Increase sales and
broaden customer base.  We plan to continue to provide high
quality cable products to our existing customer base and use our existing
customer contacts, industry reputation and experienced sales team to increase
our sales of traditional and specialty cable products.  In the
short-term, we will continue our sales and marketing efforts to increase our
sales of our traditional cable products, while our long-term strategy is to
concentrate on developing and expanding our sales and customer base for our
specialty cable products.





Pursue strategic
acquisitions.  We will continue to actively consider possible
investments in or acquisitions of companies that complement our business
strategies and expand our product offerings. As a result of the fragmented
nature of the cable and wire industry in China, we believe attractive potential
acquisition targets may present themselves.  We plan to
consider  strategic acquisitions as a means to accelerate our growth,
increase our sales and expand our market share.





Seasonality




Demand
for our traditional cable is generally lower from December to March than from
April to November primarily due to the Chinese new year and spring festival
which occurs from January to March. Sales of our specialty cable products have
not experienced seasonal trends. We believe that  our expanding focus
on specialty cable products will significantly reduce the impact of seasonality
on our overall business.





Research
and Development




For the
fiscal years ended June 30, 2010 and 2009, we spent $880,944 and $89,179 on
research and development, respectively. We significantly increased our budget
for research and development in fiscal 2010 compared to fiscal 2009, all of
which was spent on the research and development of new technologies which are
the subject of 22 pending patent applications (including fees associated with
the application process).  We maintain an internal research and
development department staffed with 40 senior technical employees consisting of
31 full-time employees and 9  part-time employees.




Our research
and development team is led by Mr. Guoxiang Liu, who was formerly employed by
the Shenyang Electric Cable Factory, a state owned enterprise and one of Asia’s
largest cable companies, prior to its dissolution. Due to our research and
development efforts, we believe we are a leader in the material configuration
and manufacturing process of specialty cable. As an ancillary method of our
research and development, we also have a research cooperation relationship with
Dalian University of Technology to share their technology and research
achievements.





We plan to continue differentiating
ourselves from our competition by focusing our activities on developing the most
advanced products in the cable and wire industry.





Intellectual
Property





Trademarks.Dalian
Befut is the registered holder of the following trademark, which is registered
with the Trademark Office of the State Administration for Industry and Commerce
in China.




8










M∙Q∙E





The registered scope of use of this
trademark includes wire products such as wire cable, electric wire, power
materials (electric wire and wire cable), and electric resisters for copper
wire. The registered term of the trademark expires on September 6, 2011. Under
the PRC Trademark Law, registered trademarks are granted for a term of ten years
and are renewable for additional terms. Each renewal is limited to a ten-year
term and the registrant must continue to use the trademark and apply for a
renewal within six months prior to the expiration of the current
term.




In 2008, the trademark above was
recognized as a “Famous Trademark” in China through a judicial procedure
pursuant to Rules on Famous Trademark Recognition and Protection promulgated by
the PRC National Industrial and Commercial Bureau.  A Famous Trademark
in China entitles the owner of the mark to stronger protection as compared to a
general trademark. For example, a holder of a Famous Trademark may prohibit
others from using the same or similar mark not only on the same or similar
products but also on products in other industries if the use of such mark would
cause confusion or be misleading to a reasonable consumer. In addition, in a
trademark dispute adjudication, a Famous Trademark itself provides evidence of
influence on consumers. In Dalian, there are only ten Famous Trademarks, one of
which is our mark.





Patents.  Dalian Befut has
seven registered patents in China. The following table provides information
regarding each patent.





Name
      of Patent
                                            
                                            Type
                                              of
                                              Patent
                                            
                                            Patent
      No.
                                            
                                            Inventor’s
                                              Name
                                            
                                            Date
      of
                                              Application
                                            
                                            Date
      of
                                              Publication
                                              and
      TermIntelligent
      reactive power compensation for automatic screen
                                            
                                            Utility
      model
                                            
                                            ZL200720184912.4
                                            
                                            Dalian
      Befut Wire & Cable Manufacturing Co., Ltd
                                            
                                            12/14/2007
                                            
                                            10/15/2008;
      Term: 10 years from 10/15/2008 to 10/14/2018Automatic
      Protection Ni-mh Battery Screen
                                            
                                            Utility
      model
                                            
                                            ZL200720184913.9
                                            
                                            
                                            
                                            12/14/2007
                                            
                                            01/07/2009
                                              Term:
      10 years from 01/07/2009 to 01/06/2019New
      tide-proof power cable
                                            
                                            Utility
      model
                                            
                                            ZL200820015254.0
                                            
                                            Guoxiang
      Liu,
                                              Hongming
      Wu,
                                              Ying
      Zhao and Hongbo Cao
                                            
                                            08/29/2008
                                            
                                            06/10/2009
                                              Term:
      10 years from 06/10/2009 to 06/09/2019Sonar
      watertight cable
                                            
                                            Utility
      model
                                            
                                            ZL200820015255.5
                                            
                                            
                                            
                                            08/29/2008
                                            
                                            06/10/2009
                                              Term:
      10 years from 06/10/2009 to 06/09/2019
  9
  Environmentally
      friendly wire & cable of low-smoke, halogen-free, fire-retardant
      insulation
                                          
                                          Utility
      model
                                          
                                          ZL200820015256.X
                                          
                                          
                                          
                                          08/29/2008
                                          
                                          06/10/2009
                                            Term:
      10 years from 06/10/2009 to 06/09/2019Mine
      fire-retardant rubber branch of the pre-cable
                                          
                                          Utility
      model
                                          
                                          ZL200820015332.7
                                          
                                          
                                          
                                          09/01/2008
                                          
                                          06/10/2009
                                            Term:
      10 years from 06/10/2009 to 06/09/2019High-temperature
      plastic extrusion die-tool
                                          
                                          Utility
      model
                                          
                                          ZL200820015331.2
                                          
                                          Guoxiang
      Liu,
                                            Hongming
      Wu,
                                            Ying
      Zhao and Hongbo Cao
                                          
                                          08/29/2008
                                          
                                          08/12/2009
                                            Term:
      10 years from 08/12/2009 to 08/12/2019





In addition to the registered patents,
Dalian Befut has pending applications for 22 additional patents as set forth in
the table below.





Name
      of Patent
                                                                                        
                                                                                        Type
      of
                                                                                          Patent
                                                                                        
                                                                                        Patent
      No.
                                                                                        
                                                                                        Inventor’s
                                                                                          Name
                                                                                        
                                                                                        Date
      of
                                                                                          Application
                                                                                        
                                                                                        Date
      of
                                                                                          Acceptance
                                                                                          of
      the
                                                                                          Application
                                                                                          by
      the PRC
                                                                                          IP
      Office
                                                                                        
                                                                                        Status
      of
                                                                                          ApplicationNew
      tide-proof power cable
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200820015254.0
                                                                                        
                                                                                        Guoxiang
      Liu,
                                                                                          Hongming
      Wu and
                                                                                          Ying
      Zhao
                                                                                        
                                                                                        08/27/2008
                                                                                        
                                                                                        08/29/2008
                                                                                        
                                                                                        Patent
      PendingSonar
      watertight cable
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200820015255.5
                                                                                        
                                                                                        
                                                                                        
                                                                                        08/27/2008
                                                                                        
                                                                                        08/29/2008
                                                                                        
                                                                                        Patent
      PendingEnvironmentally
      friendly wire & cable of low-smoke, halogen-free, fire-retardant
      insulation
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200820015256.X
                                                                                        
                                                                                        
                                                                                        
                                                                                        08/27/2008
                                                                                        
                                                                                        08/29/2008
                                                                                        
                                                                                        Patent
      PendingHigh-temperature
      plastic extrusion die-tool
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200820015331.2
                                                                                        
                                                                                        
                                                                                        
                                                                                        08/29/2008
                                                                                        
                                                                                        09/01/2008
                                                                                        
                                                                                        Patent
      PendingMine
      fire-retardant rubber branch of the pre-cable
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200820015332.7
                                                                                        
                                                                                        
                                                                                        
                                                                                        08/29/2008
                                                                                        
                                                                                        09/01/2008
                                                                                        
                                                                                        Patent
      PendingPre-fabricated
      branched cable
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200920247890.0
                                                                                        
                                                                                        Hongbo
      Cao
                                                                                        
                                                                                        11/06/2009
                                                                                        
                                                                                        11/06/2009
                                                                                        
                                                                                        Patent
      PendingThermocouple
      compensation cable with flame retardant
                                                                                        
                                                                                        Utility
      model
                                                                                        
                                                                                        200920247891.5
                                                                                        
                                                                                        
                                                                                        
                                                                                        11/06/2009
                                                                                        
                                                                                        11/06/2009
                                                                                        
                                                                                        Patent
      Pending
  10
  BXVW
      outdoor weather-proof sheathed cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200920247892.X
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            Patent
      PendingMeasurement
      and computer input cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200920247894.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            Patent
      PendingFluoroplastic
      -46 insulated shielded wire
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200920247889.8
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            11/06/2009
                                                                                            
                                                                                            Patent
      PendingHalogen-free
      flame-retardant thermocouple compensation cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219723.X
                                                                                            
                                                                                            Hongbo
      Cao
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingFlame-retardant
      BXVW outdoor weather-proof sheathed cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219732.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingFlame-retardant
      silicon rubber insulated and sheathed measurement and computer input
      cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219731.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingHigh-strength
      silicone rubber motor lead wire
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219726.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingAviation
      fluoroplastic -46 insulated, shielded wire
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219727.8
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingFlame-retardant,
      fire-resistant, halogen-free pre-fabricated branched cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219719.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            11/10/2009
                                                                                            
                                                                                            Patent
      PendingShielded
      instrumentation cable for communication equipment
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219842.5
                                                                                            
                                                                                            Hongbo
      Cao
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            Patent
      PendingShielded
      signal cable for metro communication
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219843.X
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            Patent
      PendingA
      new type of wind cable
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219840.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            Patent
      PendingSafety
      explosion-proof type computer input cables
                                                                                            
                                                                                            Utility
      model
                                                                                            
                                                                                            200910219841.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            11/13/2009
                                                                                            
                                                                                            Patent
      Pending
  11
  A
      new type of control cable for nuclear power station
                                                                                          
                                                                                          Utility
      model
                                                                                          
                                                                                          200910219914.6
                                                                                          
                                                                                          Hongbo
      Cao
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          Patent
      PendingNew
      type wind cable
                                                                                          
                                                                                          Utility
      model
                                                                                          
                                                                                          200920248142.4
                                                                                          
                                                                                          
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          Patent
      PendingComputer
      input cables
                                                                                          
                                                                                          Utility
      model
                                                                                          
                                                                                          200920248147.7
                                                                                          
                                                                                          
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          Patent
      PendingFlexible
      shielded control cable for marine engine
                                                                                          
                                                                                          Utility
      model
                                                                                          
                                                                                          200910219917.X
                                                                                          
                                                                                          
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          Patent
      PendingShielded
      signal cable for metro communication
                                                                                          
                                                                                          Utility
      model
                                                                                          
                                                                                          200920248141.X
                                                                                          
                                                                                          
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          11/17/2009
                                                                                          
                                                                                          Patent
      Pending





Under the PRC Patent Law, a patent is
valid for a term of twenty years in the case of an invention and a term of ten
years in the case of utility models and designs. Our pending patents are all
utility models and will be entitled to ten years of protection. Any use of a
patent without consent or a proper license from the patent owner constitutes an
infringement of patent rights. We cannot assure you that any patent applications
filed by us will be approved in the future.





With respect to intellectual property
rights such as trademarks and patents as described above and know-how for the
marketing and sale of the products manufactured by Dalian Befut, WFOE and Dalian
Befut have entered into an Intellectual Property License Agreement, pursuant to
which, WFOE is permitted to use Dalian Befut’s trademarks, patents (except newly
issued patents not existing as of the date of the agreement) and know-how for
nominal consideration.  If and when any of the above patent
applications are granted, we intend to either enter into a similar Intellectual
Property License Agreement between WFOE and Dalian Befut or arrange for the
transfer such patents from Dalian Befut to WFOE.





Competition





Currently, there are approximately
7,000 manufacturers in China producing a variety of types of cable and wire.
Among  these manufacturers, we estimate that approximately 2,000
manufacturers have the capability to produce specialty cable, approximately 40
of such manufacturers have the capability to produce nuclear cable and
approximately 20 have the capability to produce marine cable. Unlike most other
competitors, we are capable of producing both nuclear cable and marine cable. In
addition, by January 2011, we expect to become one of the few manufacturers in
China producing carbon fiber composite cable.





Our competitors include manufacturers
that have the ability to conduct comprehensive cable and wire production, such
as Far East Cable Co., Limited (“Far East”), Shangshang Cable Co., Ltd., as well
as manufacturers that can produce specialty cable, such as Yangzhou Marine Cable
Manufacturing Factory (“Yangzhou Marine”).  Far East is our largest
competitor in the sector of traditional electrical cable and wire and is a
leader in terms of market share. We believe our competitive advantage over Far
East is in specialty cable production, a segment in which we have more
qualification certificates and market share.  In terms of specialty
cable, Yangzhou Marine is our major competitor. It entered into this market
earlier than we did and currently has a strong competitive advantage on
qualification certificates and market share.  However, Yangzhou
Marine's primary market is mostly in the adjacent provinces, such as Jiangsu and
Zhejiang, areas in which we have not focused our sales and marketing
efforts.





Competitive
Advantages





We believe we have the following
competitive advantages:





·
            We have a strong research and
      development team.We believe we have an
      exceptional  research and development team with highly skilled
      personnel, many of whom are former employees of the Shenyang Electric
      Cable Factory. Our team also includes experts from Dalian Science and
      Technology University.




12





·
            We have the unique ability to
      produce certain types of specialty cable.  By January
      2011, we expect to be one of a few manufacturers in China producing carbon
      fiber composite cable.  The patent for carbon fiber composite
      cable is currently owned by one of the principal shareholders of Dalian
      Yuansheng, Dalian Befut’s recently acquired subsidiary, and will be
      transferred to Dalian Yuansheng.  Additionally, we are the only
      company in the PRC cable and wire industry holding a patent for watertight
      cable.  These specialty cable products are both high-margin
      products with great market potential in the cable and wire
      industry.





·
            We have modern production
      facilities.As of the date of this report, our Phase I
      Changxing Facility is now in operation has greatly increased our
      production capacity. We believe that such expansion may provide a
      significant advantage in terms of production scale and capacity in
      northeastern China.  The addition of the Phase II Changxing
      Facility will make our production capabilities even more
      competitive.





·
            We have a strong internal
      sales force.We primarily sell our products to our
      customers through our internal sales force of 44 people with minimal
      reliance on distributors or outside sales personnel.  We believe
      this approach enables us to enjoy lower sales costs and higher profit
      margins than many of our
competitors.





·
            Our geographic location allows
      us to better serve our regional customer base.There are
      currently more than 100 companies located in northern China that, on
      average, purchase at least $7 million worth of specialty cable per year.
      As most of our competitors are located in southern China, our geographic
      location provides us with a significant advantage over them with respect
      to attracting large customers in northern China due to lower
      transportation costs, regional relationships and similar cultural
      backgrounds.





Certifications





We have obtained qualifications in
specialty cable production and we are a nationally-designated enterprise for
coal mining and mechanical products.  Additionally, we have obtained
classification society certifications from the China Classification Society,
American Bureau of Shipping, Germanischer Lloyd, Nippon Kaiji Kyokai and Korean
Register of Shipping for our marine cable.  We have also received a
MIL-Spec Quality Management System certification.  In the year ended
June 30, 2010, we became one of 29 designated suppliers of  China
National Petroleum Corporation, one of the  largest companies in the
world with very strict standards of selecting cable and wire suppliers, further
evidencing the quality of our cable products.





Environmental
Compliance





We are subject to environmental
regulations that are generally applicable to manufacturing companies in the PRC.
For example, we obtained necessary approvals for our new manufacturing
facilities. We are also subject to periodic inspection by environmental
regulators and must follow specific procedures in some of our processes. We have
not violated environmental regulations or approved practices.





Employees





We currently have 208 employees in
total, of whom 162 are full-time and 46 are part-time.





Government
Regulation





We are subject to the recent PRC State
Administration of Foreign Exchange (“SAFE”) regulations regarding offshore
financing activities by PRC residents. SAFE issued a public notice in October
2005 requiring PRC domestic residents to register with the local SAFE branch
before establishing or controlling any company outside of China for the purpose
of capital financing with assets or equities of PRC companies, referred to in
the notice as an “offshore special purpose company.”




13




Dalian Befut’s production facilities
maintain an ISO 9001 Quality Management System.





According to The Rule Regarding the
Administration on Compulsory Products Certification promulgated by the General
Administration of Quality Supervision, Inspection and Quarantine of the PRC on
December 3, 2001 and effective May 1, 2002, products that impact health and
safety of human beings, life and health of animals and plants and environmental
protection and public safety that are listed in the Index of the PRC Compulsory
Production Certification (the “Index”) are subject to the universally applicable
national standards, technical rules and implementation procedures. China
Compulsory Certification (“CCC”) is a mandatory requirement for the production,
distribution and exportation of any of the products that are listed in the
Index. Certain of our cable and wire products are subject to such certification
and we have maintained effective CCC status on those products
accordingly.





In 2006, we obtained a license from the
Dalian customs bureau for importing and exporting cable, wire and power
equipment. We renewed this license in July 2009 and the extended expiration date
is July 20, 2012.





Corporate
History and Structure





We are a holding company and conduct
substantially all of our production, marketing, finance, research and
development, and administrative activities through our indirect subsidiaries and
captive manufacturing entity located in the PRC. We were incorporated in the
State of Nevada under the name “Frezer, Inc.” on May 2, 2005. On June 18, 2009,
we changed our name to “BEFUT International Co., Ltd.” and effectuated a
1-for-4.07 reverse stock split of our outstanding shares of common stock. As a
result, our ticker symbol was changed to BFTI.OB.





On March 13, 2009, we entered into a
Share Exchange Agreement with Befut Nevada and Befut BVI  pursuant to
which Befut BVI transferred to us all of the outstanding shares of common stock
of Befut Nevada in exchange for (i) the issuance to Befut BVI of an aggregate of
117,768,300 or 98.3% of our then outstanding shares of common stock, and (ii)
the cancellation of an aggregate of 2,176,170 shares of our common stock then
owned by Befut Nevada (the “Share Exchange”). Befut Nevada had acquired such
shares from three individuals for an aggregate purchase price of $370,000
pursuant to the terms of a Stock Purchase Agreement dated as of March 2,
2009.





Simultaneously with the Share Exchange,
the Company consummated a private placement of 15% convertible promissory notes
and warrants to purchase common stock for gross proceeds of $500,000. As of the
date of this report, such convertible notes are no longer
outstanding.





As a result of the Share Exchange,
Befut Nevada became our wholly-owned subsidiary.  Befut Hongkong is a
wholly-owned subsidiary of Befut Nevada, and WFOE is a wholly owned subsidiary
of Befut Hongkong.  Befut BVI remains our largest shareholder, owning
94.0% of our outstanding shares.





We conduct our operations through WFOE
and Dalian Befut, a captive manufacturing entity of WFOE.  Dalian
Befut was incorporated on June 13, 2002 under the laws of the PRC, and is
currently owned by eight individuals residents of  the
PRC.  Mr. Hongbo Cao, our chairman, president and chief executive
officer, and Mr. Tingmin Li are the largest shareholders of Dalian Befut, owning
an aggregate of 94.6% of its equity interests. For a discussion of our
contractual manufacturing relationship with Dalian Befut, see the section
entitled “Business – Manufacturing Process – OEM Agreements.”





Befut Marine is a subsidiary of Dalian
Befut incorporated on April 14, 2006.  Befut Marine’s current
shareholders are Dalian Befut, Ms. Lin Li , Mr. Hongtao Cao and Mr. Fansheng Li,
each of whom own 86.6%, 5.0%, 5.0% and 3.4% of its equity interests,
respectively. Befut Marine conducts all of our  production and sales
of marine cable.





Befut Zhong Xing is a subsidiary of
Dalian Befut incorporated on July 1, 2009.   Befut Zhong Xing’s
current shareholders are Dalian Befut and Mr. Chengnian Yan, each of whom own
73.5% and 26.5% of its equity interests, respectively.  Befut Zhong
Xing manufactures switch appliances, including high-low-voltage distribution
cabinet  switches and crane electronic control switches.




14





Dalian Yuansheng is a recently acquired
subsidiary of Dalian Befut incorporated on June 3, 2009. Dalian
Yuansheng’s  current shareholders are Dalian Befut and Mr. Xianjun
Cheng, each of whom own 93.3% and 6.7% of its equity interests, respectively.
Dalian Yuansheng is engaged in the research and development of carbon fiber
composite and other specialty cable.





Our corporate organizational chart is
set forth below.











ITEM
1A. RISK FACTORS





An
investment in our common stock involves a high degree of risk. You should
carefully consider the following information about these risks, together with
the other information contained in this Report before investing in our common
stock. If any of the events anticipated by the risks described below occur, our
results of operations and financial condition could be adversely affected which
could result in a decline in the market price of our common stock, causing you
to lose all or part of your investment.





Risks
Related to our Business





Adverse
capital and credit market conditions may significantly affect our ability to
meet liquidity needs, access to capital and cost of capital.





The capital and credit markets may
experience extreme volatility and disruption from time to
time,  including, among other things, extreme volatility in securities
prices, severely diminished liquidity and credit availability, ratings
downgrades of certain investments and declining valuations of others. Adverse
market conditions may limit our ability to replace, in a timely manner, maturing
liabilities and access the capital necessary to operate and grow our business.
As such, we may be forced to delay raising capital or bear an unattractive cost
of capital which could decrease our profitability and significantly reduce our
financial flexibility. Demand for our products is vulnerable to economic
downturns. The worsening of economic conditions could result in a decrease in or
cancellation of orders for our products. We are unable to predict the duration
and severity of any disruption in financial markets and global adverse economic
conditions and the effect such events might have on our business. Our results of
operations, financial condition, cash flows and capital position could be
materially adversely affected by disruptions in the financial markets. Further,
any decreased collectability of accounts receivable or early termination of
sales contracts due to the current deterioration in economic conditions could
negatively impact our results of operations.




15




Quarterly
operating results may fluctuate due to factors beyond our control, including
customer demand and raw materials pricing.





Our quarterly results of operations may
fluctuate as a result of a number of factors, including fluctuation in the
demand for our products and changes in the price of copper, which directly
affect the prices of our products and may influence demand. Quarter-to-quarter
comparisons of results of operations have been and will be impacted by the
volume of such orders and shipments. In addition, our operating results each
quarter could be adversely affected by the following factors, among others, such
as variations in the mix of product sales, price changes in response to
competitive factors, increases in raw material costs and increases in utility
costs (particularly electricity).  Demand for our traditional cable
products are subject to seasonality factors which can affect our quarter to
quarter results as well.





Fluctuating
copper prices impact our business and operating results.





Copper is the principal raw material
used in the manufacture of our products.  The copper industry is
highly volatile and cyclical in nature. Copper prices, which have increased over
the past several years followed by more recent sharp declines, have varied
significantly and may vary significantly in the future. This affects our
business both positively and negatively, as higher copper prices increase demand
for our products, while lower copper prices can decrease demand.  The
price of copper is influenced by factors including general economic conditions,
industry capacity utilization, import duties and other trade restrictions. We
cannot predict copper prices in the future or the effect of fluctuations in the
costs of copper on our future operating results.  In accordance with
customary practice in our industry, we seek to mitigate the impact of changing
raw material prices by passing price increases and decreases onto our customers
by adjusting our prices to reflect changes in raw material prices. We may not be
able to adjust our product prices rapidly enough in the short-term to recover
the costs of increases in raw materials. Our future profitability may be
adversely affected to the extent we are unable to pass on higher raw material
costs to our customers.





We
face substantial competition in our business and our failure to compete
effectively may adversely affect our ability to generate revenue.





The wire and cable industry in China is
competitive and highly fragmented with more than 7,000 companies. The principal
elements of competition in the market are, in our opinion, pricing, payment
terms, product availability and quality. While we believe that we have attained
a competitive position with respect to all of these factors, our major
competitors such as Far East Cable Co., Limited and Yangzhou Marine Cable
Factory may have substantially greater resources than us and may be better able
to successfully endure downturns in our industry or primary market segments. In
periods of reduced demand for our products, we reduce our selling prices to
maintain or increase market share or maintain selling prices, which may result
in loss of market share.  Under either situation, we would experience
a reduction in our sales and overall profitability.  In addition, we
cannot assure you that additional competitors will not enter our markets, or
that we will be able to compete successfully against existing or new
competition.





We
may not be able to effectively control and manage our growth.




16




If our business and primary markets,
including shipbuilding, nuclear power and mining, continue to grow and develop
as we expect, it will be necessary for us to finance and manage expansion in an
orderly fashion. We may face challenges in managing the production and sale of
expanding product offerings and in integrating acquired businesses with our own.
Such events will increase demands on our existing management and facilities.
Failure to manage this growth and expansion could interrupt or adversely affect
our operations, cause production backlogs, longer product development time
frames and administrative inefficiencies.





In
the past several years we have derived a significant portion of our revenues
from a small group of customers. If we were to become dependent again upon a few
customers, such dependency could negatively impact our business, operating
results and financial condition.





Previously, our customer base has been
highly concentrated. For the year ended June 30, 2010 and 2009, our five largest
customers accounted for 46% and 45% of our total sales, respectively, and
the  largest customer accounted for approximately 10.0% and 19.5% of
our total sales in such periods, respectively.  As our customer base
may change from year-to-year, during such years that the customer base is highly
concentrated, the loss of, or reduction of our sales to, any of such major
customers could have a material adverse effect on our business, operating
results and financial condition. Moreover, our success will depend in part upon
our ability to obtain orders from new customers, as well as the financial
condition and success of our customers and general economic
conditions.





Shortages
or disruptions in the availability of raw materials, especially copper, could
have a material adverse effect on our business.





Copper, protective materials and
insulation materials are our principal raw materials used in the manufacture of
our cable products.  Copper, our principal raw material, accounted for
approximately 76.2% of our raw material purchases during the fiscal year ended
June 30, 2010.  We expect that copper will continue to account for a
significant portion of our raw material purchases in the future. The price of
raw materials fluctuate because of general economic conditions, global supply
and demand and other factors causing monthly variations in the costs of our raw
materials purchases. The macro-economic factors, together with labor and other
business interruptions experienced by certain suppliers, have contributed to
periodic shortages in the supply of raw materials, and such shortages may
increase in the future. If we are unable to procure adequate supplies of raw
material to meet our future production needs and customer demand, shortages
could result in a material loss of customers and revenues and adversely impact
our results of operations. In addition, supply shortages or disruptions or the
loss of key suppliers may cause us to procure our raw materials from less cost
effective sources and may have a material adverse affect on our business,
revenues and results of operations.




We
depend on a few suppliers for a significant portion of our principal raw
materials and we do not have any long-term supply contracts with our raw
materials suppliers. Interruptions of production at our key suppliers may affect
our results of operations and financial performance.





We rely on a limited number of
suppliers for most of the raw materials we use.  During the fiscal
year ended June 30, 2010, our purchases from our five largest suppliers of raw
materials represented approximately 77% of our total raw material purchases.
Purchases from our five largest suppliers of raw materials were approximately
62% and 69% in 2009 and 2008, respectively. Interruptions or shortages of
supplies from our key suppliers of raw materials could disrupt production or
impact our ability to increase production and sales. We do not have long-term or
volume purchase agreements with our suppliers.  Although there is a
large pool of suppliers available to provide our raw materials, including
copper, our principal raw material, we may have limited options in the
short-term for alternative supply if our existing suppliers fail for any reason,
including their business failure or financial difficulties, to continue the
supply of materials or components. Moreover, identifying and accessing
alternative sources may increase our costs. Interruptions at our key suppliers
could negatively impact our results of operations, financial performance and the
price of our common stock.




17




Due
to increased volatility of raw material prices, the timing lag between the raw
material purchase and product pricing can negatively impact our
profitability.





Volatility in the prices of raw
materials, among other factors, may adversely impact our ability to accurately
forecast demand and may have a material adverse impact on our results of
operations. For example, our manufacturing activities are determined, and raw
materials purchases are scheduled, upon forecasted demand while sales prices are
determined at the time of order placement, subject to adjustment at fulfillment.
The lag between the point when raw materials are acquired in advance and the
point when products are actually priced may impact us both positively and
negatively, resulting in increased or decreased profitability. In addition, we
routinely maintain a certain level of finished goods inventories to meet near
term expected demand. Pricing for the sale of these inventories is generally
based on current raw material prices. Rapid declines in the price of raw
materials may result in our inventories being carried at costs in excess of net
realizable value and may have an adverse effect on our results of operations and
the price of our common stock.





If we fail to accurately project
market demand for our products, our business expansion plans could be
jeopardized and our business, financial condition and results of operations will
be adversely affected.





To increase our production capacity,
especially for specialty cable products, we are constructing a new manufacturing
facility in the industrial zone of Changxing Island (the “Project”), located
approximately 120 kilometers from Dalian.  We recently completed Phase
I of the Project comprising approximately 25,000 square meters of production
facilities, which increased our annual production capacity from 800 km to 2,400
km.  We plan to increase our production capacity of specialty cable
products in Phase II of the Project, the construction of which will commence
upon the full capacity utilization of Phase I expected by 2013.  Our
decision to increase our manufacturing capacity was based primarily on our goal
to focus on specialty cables as our main business in the next five years. If
actual customer orders are less than our projected market demand of specialty
cables, we may suffer overcapacity problems and may have to leave capacity idle,
which can reduce our overall profitability and hurt our financial condition and
results of operations.





The
cost of complying with new environmental laws in China may have a material
adverse effect on our operations and financial condition.





As a manufacturer, we are subject to
various Chinese environmental laws and regulations on air emission, waste water
discharge, solid wastes and noise. Although we believe that our operations are
in substantial compliance with current environmental laws and regulations, we
may not be able to comply with these regulations at all times as the Chinese
environmental legal regime is evolving and becoming more
stringent.  If the Chinese government imposes more stringent
regulations in the future, we will have to incur additional and potentially
substantial costs and expenses in order to comply with new regulations, which
may negatively affect our results of operations. If we fail to comply with any
of the present or future environmental regulations in any material aspects, we
may suffer from negative publicity and may be required to pay substantial fines
or suspend or even cease operations until compliance is achieved.





We
do not maintain a reserve fund for warranty or defective products claims. Our
costs could substantially increase if we experience a significant number of
warranty claims.





We provide customers with warranties
against technical defects in our products.  The warranties require us
to replace or repair defective components or refund the purchase price to the
customer.  We have not established any reserve funds for potential
warranty claims since we have strict quality control procedures and,
historically, have experienced few warranty claims for our
products.  If we experience an increase in warranty claims or if our
repair and replacement costs associated with warranty claims increase
significantly, it would have a material adverse effect on our financial
condition and results of operations.





If
we fail to adequately protect or enforce our intellectual property rights, we
may be exposed to intellectual property infringement and the value of our
intellectual property rights could diminish.




18




Our success, competitive position and
future revenues will depend in part on our ability to obtain and maintain patent
protection for our products, methods, processes and other technologies, to
preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights of
third parties.  Dalian Befut, our captive manufacturer, holds seven
registered patents in the PRC and has 22 patents applications that are pending
approval, which may take up to two years.  However, we cannot assure
you such patents will be issued, or that existing or future issued patents will
be sufficient to provide us with meaningful protection or commercial
advantage.





If we need to initiate litigation or
administrative proceedings, such actions may be costly and may divert management
attention as well as expend other resources which could otherwise have been
devoted to our business. An adverse determination in any such litigation will
impair our intellectual property rights and may harm our business, prospects and
reputation. In addition, historically, implementation of PRC intellectual
property-related laws has been lacking, primarily because of ambiguities in the
PRC laws and difficulties in enforcement. Accordingly, intellectual property
rights and confidentiality protections in China may not be as effective as in
the United States or other countries, which increases the risk that we may not
be able to adequately protect our intellectual property. Moreover, litigation
may be necessary in the future to enforce our intellectual property rights.
Future litigation could result in substantial costs and diversion of our
management’s attention and resources, and could disrupt our business, as well as
have a material adverse effect on our financial condition and results of
operations. Given the relative unpredictability of China’s legal system and
potential difficulties enforcing a court judgment in China, there is no
guarantee that we would be able to halt any unauthorized use of our intellectual
property through litigation.





The occurrence of any acts of God,
war, terrorist attacks and other emergencies which are beyond our control may
have a material adverse effect on our business operations and financial
condition.





Acts of God, war, terrorist attacks and
other emergencies which are beyond our control may have a material adverse
effect on the economy and infrastructure in the PRC and on the livelihood of the
Chinese population.  While we have property damage insurance, we do
not carry business disruption insurance, which is not readily available in
China. Any disruption of the operations in our factories would have a
significant negative impact on our ability to manufacture and deliver products,
which would cause a potential diminution in sales, the cancellation of orders,
damage to our reputation and potential lawsuits.





We cannot give assurance that any acts
of God such as floods, earthquakes, drought or any war, terrorist attack or
other hostilities in any part of the PRC or even the world, potential or
threatened, will not, directly or indirectly, have a material adverse effect on
our business, financial condition and operating results.





If we are unable to design,
manufacture, and market our products in a timely and efficient manner, we may
not remain as competitive.





Most of
our products are characterized by short product development cycles and target
the unique requirements of our customers.  Accordingly, we devote a
substantial amount of resources to product development. To compete successfully,
we must develop and offer new and/or improved products that are suitable to
evolving customer needs.  We may experience performance difficulties,
which may result in delays, setbacks and cost overruns.  Our inability
to develop and offer new and/or improved products or to achieve customer
acceptance of these products could limit our ability to compete in the market or
to grow revenues at desired rates of growth.





If
we cannot renew or extend our mandatory certifications, we will be unable to
manufacture or sell some or all of our products, which would adversely affect
our business, financial condition and results of operations.





According
to The Rule Regarding the Administration on Compulsory Products Certification
promulgated by the General Administration of Quality Supervision, Inspection and
Quarantine of the PRC on December 3, 2001 and effective from May 1, 2002,
products that impact health and safety of human beings, life and health of
animals and plants and environmental protection and public safety that are
listed in the Index of the PRC Compulsory Production Certification (the “Index”)
are subject to applicable national standards, technical rules and implementation
procedures. China Compulsory Certification (“CCC”) is a mandatory requirement
for the production, distribution and exportation of any of the products that are
listed in the Index.  Certain of our cable and wire products are
subject to such certification and we have maintained effective CCC status on
those products accordingly.




19




We cannot assure you that such
certificates can be obtained without delay, or can be obtained at all. If we
cannot obtain the necessary renewal of our CCC status or new certificates for
any of our new products that may be listed on the Index, we may be required to
suspend or even cease operations, which would have a material adverse effect on
our business and financial condition.





Our
success depends on our management team and other key personnel, the loss of any
of whom could disrupt our business operations.





We
depend, to a large extent, on the abilities and participation of our current
management team, but have a particular reliance upon Mr. Hongbo Cao, our CEO,
President and Chairman of the Board of Directors, and Mr. Haiyang Lu, Secretary
of the Company. The loss of the services of Mr. Cao or Mr. Lu, for any reason,
may have a material adverse effect on our business and prospects. We cannot
assure you that the services of Messrs. Cao and Lu will continue to be available
to us, or that we will be able to find a suitable replacement for him. We do not
carry key man life insurance for our key personnel.





The wire
and cable industry is specialized and requires the employment of personnel with
significant technical and operational experience in the
industry.  Accordingly, we must attract and retain qualified personnel
in order to remain competitive. Our ability to effectively implement our
business strategy will depend upon, among other factors, the successful
recruitment and retention of additional management and other key personnel that
have the necessary scientific, technical and operational skills and experience
in the cable and wire industry. These individuals are difficult to find in the
PRC and we may not be able to retain such skilled employees. If we are unable to
hire individuals with the requisite experience we may not be able to produce
enough products to optimize profits, research and development initiatives may be
delayed and we may encounter disruptions in production and research which will
negatively impact our financial condition, results of operations and share
price.





If
we fail to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results. As a
result, current and potential investors could lose confidence in our financial
reporting, which could harm our business and have an adverse effect on our stock
price.





Pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, we are required to annually furnish a report by our
management on our internal control over financial reporting. Such report must
contain, among other matters, an assessment by our principal executive officer
and our principal financial officer on the effectiveness of our internal control
over financial reporting, including a statement as to whether or not our
internal control over financial reporting is effective as of the end of our
fiscal year. This assessment must include disclosure of any material weakness in
our internal control over financial reporting identified by management.
Performing the system and process documentation and evaluation needed to comply
with Section 404 is both costly and challenging. During the course of our
testing we may identify deficiencies which we may not be able to remediate in
time to meet the deadline imposed by the Sarbanes-Oxley Act of 2002 for
compliance with the requirements of Section 404.  In addition, if we
fail to maintain the adequacy of our internal controls, as such standards are
modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002.





Our
inability to successfully integrate other businesses we acquire could have
adverse consequences on our business.





An important element of our growth strategy is to invest in or acquire
businesses that will expand our product offerings, customer and geographic
markets.  However, we may be unable to identify suitable investment or
acquisition candidates or may be unable to make these investments or
acquisitions on commercially reasonable terms, if at all.  Future
acquisitions may result in greater administrative burdens and operating
costs.  We cannot assure you that we will be able to manage or integrate
acquired companies or businesses successfully. The process of integrating
acquired businesses may be disruptive to our business and may cause an
interruption of or a loss of momentum in our business as a result of the
following factors, among others:




20




·
            loss
      of key employees or customers;





·
            possible
      inconsistencies in standards, controls, procedures and policies among the
      combined companies and the need to implement company-wide financial,
      accounting, information, production and other
  systems;





·
            failure
      to maintain the quality of products that the companies have historically
      provided;





·
            failure
      to effectively coordinate research and development
  efforts;





·
            effectively
      coordinating sales, marketing and distribution functions, including the
      cross-selling of products;





·
            the
      need to coordinate geographically diverse organizations,
    and





·
            the
      diversion of management's attention from our day-to-day business as a
      result of the need to deal with any disruptions and difficulties and the
      need to add management resources to do
so.





These disruptions and difficulties, if they occur, may cause us to fail to
realize the cost savings, revenue enhancements and other benefits that we may
expect from such acquisitions and may cause material adverse short- and
long-term effects on our operating results and financial condition.





Risks
Related to Doing Business in the PRC





Substantially all of our assets and
operations are located in the PRC, and substantially all of our revenue is
derived from sales of products in the PRC.  Accordingly, our results
of operations and financial position are subject to a significant degree to
economic, political and legal risks in the PRC, including the following
risks:





Changes
in the policies of the PRC government could have a significant impact upon the
business we may be able to conduct in the PRC and the profitability of such
business.





The PRC’s economy is in a transition
from a planned economy to a market-oriented economy subject to five-year and
annual plans adopted by the government that set national economic development
goals. Policies of the PRC government can have significant effects on economic
conditions in China. The PRC government has confirmed that economic development
will follow the model of a market economy, such as the United States. Under this
direction, we believe that the PRC will continue to strengthen its economic and
trading relationships with foreign countries and business development in the PRC
will follow market forces. While we believe that this trend will continue, we
cannot assure you that this will be the case. Our interests may be adversely
affected by changes in policies by the PRC government, including:





·
            changes
      in laws, regulations or their
interpretation;


·
            confiscatory
      taxation;


·
            restrictions
      on currency conversion, imports or sources of supplies;
  and


·
            expropriation
      or nationalization of private
enterprises.





Although
the PRC government has been pursuing economic reform policies for more than two
decades, we cannot assure you that the government will continue to pursue such
policies or that such policies may not be significantly altered, especially in
the event of a change in leadership, social or political disruption, or other
circumstances affecting the PRC's political, economic and social
life.





The
PRC laws and regulations governing our current business operations are sometimes
vague and uncertain. Any changes in such PRC laws and regulations may have a
material and adverse effect on our business.




21




There are substantial uncertainties
regarding the interpretation and application of PRC laws and regulations,
including, but not limited to, the laws and regulations governing our business,
and the enforcement and performance of our arrangements with customers in the
event of the imposition of statutory liens, death, bankruptcy and criminal
proceedings. We and any future subsidiaries are considered foreign persons or
foreign funded enterprises under PRC laws, and as a result, we are required to
comply with PRC laws and regulations. These laws and regulations are sometimes
vague and may be subject to future changes, and their official interpretation
and enforcement may involve substantial uncertainty. The effectiveness of newly
enacted laws, regulations or amendments may be delayed, resulting in detrimental
reliance by foreign investors. New laws and regulations that affect existing and
proposed future businesses may also be applied retroactively. We cannot predict
what effect the interpretation of existing or new PRC laws or regulations may
have on our businesses.





We
derive substantially all of our revenues from sales of our products in the
PRC  and any downturn in the Chinese economy could have a material
adverse effect on our business and financial condition.





All of
our business operations are conducted in the PRC and substantially all of our
revenues are generated from sales in the PRC.  We anticipate that
revenues from sales of our products in the PRC will continue to represent a
substantial proportion of our total revenues in the near future.  Any
significant decline in the condition of the PRC economy could, among other
things, adversely affect consumer buying power and discourage consumption of our
products, which in turn would have a material adverse effect on our revenues and
profitability.





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





While the PRC economy has experienced
rapid growth, it has been uneven among various sectors of the economy and in
different geographical areas of the country. Rapid economic growth can lead to
growth in the money supply and rising inflation. If prices for our products do
not rise at a rate that is sufficient to fully absorb inflation-driven increases
in our costs of supplies, our profitability can be adversely
affected.





According to the International Monetary
Fund, or IMF, the annual inflation rate in China in the last ten years ranged
from a low of  -1.4% in 1999 to a high of 5.9% in 2008.  The
IMF reported that the inflation rate in 2009 was -0.7%.   These
fluctuations and economic factors have led to the adoption by the Chinese
government, from time to time, of various corrective measures designed to
restrict the availability of credit or regulate growth and contain inflation. In
order to control inflation in the past, the PRC government has imposed controls
on bank credits, limits on loans for fixed assets and restrictions on state bank
lending.  The implementation of these and other similar policies can
impede economic growth and thereby harm the market for our
products.





Our
subsidiaries are subject to restrictions on paying dividends and making other
payments to our subsidiary, Befut Nevada; as a result, we might therefore, be
unable to pay dividends to you.





We are a
holding company incorporated in the State of Nevada and do not have any assets
or conduct any business operations other than our investments in our
subsidiaries, Befut Nevada, Befut Hongkong and Befut Electric (Dalian) Co., Ltd.
(“WFOE”).  As a result of our holding company structure, we rely
entirely on dividends payments from WFOE, our subsidiary in the
PRC.  PRC regulations currently permit payment of dividends only out
of accumulated profits, as determined in accordance with PRC accounting
standards and regulations. Our subsidiaries are also required to set aside a
portion of its after-tax profits according to PRC accounting standards and
regulations to fund certain reserve funds. We may experience difficulties such
as lengthy processing time from the foreign exchange administrative bureau’s
side and formality requirement on paperwork in completing the administrative
procedures necessary to obtain and remit foreign currency. Furthermore, if any
of our subsidiaries incurs debt on its own in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other
payments. If we or Befut Nevada are unable to receive any profits from the
operations of our subsidiaries in the PRC, we may be unable to pay dividends on
our common stock.





Governmental
control of currency conversion may affect the value of your
investment.





The PRC
government imposes controls on the convertibility of Renminbi, or RMB, into
foreign currencies and, in certain cases, the remittance of currency out of the
PRC. We receive substantially all of our revenues in RMB, which is currently not
a freely convertible currency. Shortages in the availability of foreign currency
may restrict our ability to remit sufficient foreign currency to pay dividends,
or otherwise satisfy foreign currency dominated obligations. Under existing PRC
foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from the transaction,
can be made in foreign currencies without prior approval from the PRC State
Administration of Foreign Exchange, or SAFE, by complying with certain
procedural requirements. However, approval from appropriate governmental
authorities is required where RMB is to be converted into foreign currency and
remitted out of PRC to pay capital expenses such as the repayment of bank loans
denominated in foreign currencies.




22




The PRC
government also may at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control
system prevents us from obtaining sufficient foreign currency to satisfy our
currency demands, we may not be able to pay certain of our expenses as they come
due.





The
fluctuation of RMB may materially and adversely affect your
investment.





The value
of the RMB against the U.S. dollar and other currencies may fluctuate and is
affected by, among other things, changes in the PRC's political and economic
conditions. As we rely entirely on revenues earned in the PRC, any significant
revaluation of RMB may materially and adversely affect our cash flows, revenues
and financial condition. For example, to the extent that we need to convert U.S.
dollars we receive from an offering of our securities into RMB for our
operations, appreciation of the RMB against the U.S. dollar could lead the RMB
equivalent of the U.S. dollars be reduced and therefore could have a material
adverse effect on our business, financial condition and results of operations.
Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of
making dividend payments on our common stock or for other business purposes and
the U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of the
RMB we convert would be reduced. In addition, the depreciation of significant
U.S. dollar denominated assets could result in a charge to our income statement
and a reduction in the value of these assets.





Recent
PRC regulations relating to the establishment of offshore special purpose
companies by PRC domestic residents may subject our PRC resident beneficial
owners  to personal liability, limit our ability to inject capital
into our PRC subsidiaries, limit our subsidiaries’ ability to increase their
registered capital or distribute profits to us, or may otherwise adversely
affect us.





SAFE
issued a public notice in October 2005 requiring PRC domestic residents to
register with the local SAFE branch before establishing or controlling any
company outside of China for the purpose of capital financing with assets or
equities of PRC companies, referred to in the notice as an “offshore special
purpose company.” PRC domestic residents who are stockholders of offshore
special purpose companies and have completed round trip investments but did not
make foreign exchange registrations for overseas investments before November 1,
2005 were retroactively required to register with the local SAFE branch before
March 31, 2006. PRC resident stockholders are also required to amend their
registrations with the local SAFE in certain circumstances. Internal
implementing guidelines issued by SAFE, which became public in June 2007 (known
as Notice 106), expanded the reach of Circular 75. After consultation with China
counsel, we do not believe that any of our PRC domestic resident stockholders
are subject to the SAFE registration requirement, however, we cannot provide any
assurances that all of our stockholders who are PRC residents will not be
required to make or obtain any applicable registrations or approvals required by
these SAFE regulations in the future. The failure or inability of our PRC
resident stockholders to comply with the registration procedures set forth
therein may subject us to fines and legal sanctions, restrict our cross-border
investment activities, or limit our PRC subsidiaries’ ability to distribute
dividends or obtain foreign-exchange-dominated loans to our
company.





As it is
uncertain how the SAFE regulations will be interpreted or implemented, we cannot
predict how these regulations will affect our business operations or future
strategy.  For example, we may be subject to more stringent review and
approval process with respect to our foreign exchange activities, such as
remittance of dividends and foreign-currency-denominated borrowings, which may
adversely affect our results of operations and financial
condition.  In addition, if we decide to acquire a PRC domestic
company, we cannot assure you that we or the owners of such company, as the case
may be, will be able to obtain the necessary approvals or complete the necessary
filings and registrations required by the SAFE regulations.  This may
restrict our ability to implement our acquisition strategy and could
adversely affect our business and prospects.




23




The
PRC’s labor law restricts our ability to reduce our workforce in the PRC in the
event of an economic downturn and may increase our production
costs.





In
June 2007, the National People’s Congress of the PRC enacted new labor law
legislation called the Labor Contract Law, which became effective on
January 1, 2008. The legislation formalized workers’ rights concerning
overtime hours, pensions, layoffs, employment contracts and the role of trade
unions. Considered one of the strictest labor laws in the world, among other
things, this new law provides for specific standards and procedures for the
termination of an employment contract and places the burden of proof on the
employer. In addition, the law requires the payment of a statutory severance pay
upon the termination of an employment contract in most cases, including the case
of the expiration of a fixed-term employment contract. Further, the law requires
an employer to conclude an “employment contract without a fixed-term” with any
employee who either has worked for the same employer for 10 consecutive years or
more or has had two consecutive fixed-term contracts with the same employer. An
“employment contract without a fixed term” can no longer be terminated on the
ground of the expiration of the contract, although it can still be terminated
pursuant to the standards and procedures set forth under the new law. Because of
the lack of implementing rules for the new law and the precedents for the
enforcement of such a law, the standards and procedures set forth under the law
in relation to the termination of an employment contract have raised concerns
among foreign investment enterprises in the PRC that such “employment contract
without a fixed term” might in fact become a “lifetime, permanent employment
contract.” Finally, under this law, downsizing of either more than 20 people or
more than 10% of the workforce may occur only under specified circumstances,
such as a restructuring undertaken pursuant to the PRC’s Enterprise Bankruptcy
Law, or where a company suffers serious difficulties in production and/or
business operations, or where there has been a material change in the objective
economic circumstances relied upon by the parties at the time of the
conclusion of the employment contract, thereby making the performance of such
employment contract not possible.  To date, there has been very little
guidance and precedents as to how such specified circumstances for downsizing
will be interpreted and enforced by the relevant PRC authorities. All of our
employees working for us exclusively within the PRC are covered by the new law
and thus, our ability to adjust the size of our operations when necessary in
periods of recession or less severe economic downturns may be curtailed.
Accordingly, if we face future periods of decline in business activity generally
or adverse economic periods specific to our business, this new law can be
expected to exacerbate the adverse effect of the economic environment on our
results of operations and financial condition.





Recent
PRC regulations relating to acquisitions of PRC companies by foreign entities
may create regulatory uncertainties that could restrict or limit our ability to
operate. Our failure to obtain the prior approval of the China Securities
Regulatory Commission, or CSRC, may cause a material and adverse effect on our
business, results of operations and financial conditions.





On August 8, 2006, six PRC regulatory
agencies, the PRC Ministry of Commerce, or MOFCOM, the State Assets Supervision
and Administration Commission, or SASAC, the State Administration for Taxation,
the State Administration for Industry and Commerce, the China Securities
Regulatory Commission, or CSRC, and the SAFE, jointly adopted the Regulations on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or New
M&A Rule, which became effective on September 8, 2006.  The New
M&A Rule purports, among other things, to require offshore special purpose
vehicles, or SPVs, formed for overseas listing purposes through acquisitions of
PRC domestic companies and controlled by PRC companies or individuals, to obtain
the approval of the CSRC prior to publicly listing their securities on an
overseas stock exchange.





On September 21, 2006, pursuant to the
New M&A Rule and other PRC laws and regulations, the CSRC, in its official
website, promulgated relevant guidance with respect to the issues of listing and
trading of domestic enterprises’ securities on overseas stock exchanges, or the
Administrative Permits, including a list of application materials with respect
to the listing on overseas stock exchanges by SPVs.





There are substantial uncertainties
regarding the interpretation and application of current or future PRC laws and
regulations, including the New M&A Rule.  The interpretation and
application of the New M&A Rule remain unclear, and we cannot assure you
that the restructuring transactions pursuant to which Dalian Befut became the
captive manufacturer of WFOE does not
require approval from the CSRC, and if it does, what will be the penalties, if
any, imposed as a result of our failure to obtain such
approval.  These uncertainties could inhibit our new business
activities because the CSRC has declined to officially clarify the applicability
of this New M&A Rule to us and the share exchange transaction consummated on
March 13, 2009.  If CSRC approval was required for us to consummate
the share exchange, our failure to obtain or delay in obtaining the CSRC
approval would subject us to sanctions imposed by the CSRC and other PRC
regulatory agencies.  These sanctions could include fines and
penalties on our operations in China, restriction or limitation on our ability
to pay dividend outside of China, and other forms of sanctions that may cause a
material and adverse effect on our business, results of operations and financial
conditions.  However, the New M&A Rule does not stipulate the
specific penalty terms, so we are not able to predict what penalties we may
face, and how such penalties will affect our business operations or future
strategy.




24




The New M&A Rule also established
additional procedures and requirements that are expected to make merger and
acquisition activities by foreign investors more time-consuming and complex,
including requirements in some instances that the MOFCOM be notified in advance
of any change-of-control transaction in which a foreign investor takes control
of a PRC domestic enterprise that owns well-known trademarks or China’s
traditional brands.  We may grow our business in part by acquiring
other cable and wire manufacturers.  Complying with the requirements
of the New M&A Rule in completing this type of transaction could be
time-consuming, and any required approval processes, including Ministry of
Commerce approval, may delay or inhibit our ability to complete such
transactions, which could affect our ability to expand our business or maintain
our market share.





Because
our principal assets are located outside of the United States and because all of
our directors and officers reside outside of the United States, it may be
difficult for you to use the United States Federal securities laws to enforce
your rights against us and our officers and most of our directors or to enforce
judgments of United States courts against us or our officers and most of our
directors in the PRC.





All of
our present officers and directors reside outside of the United States. In
addition, our operating subsidiaries are located in the PRC and substantially
all of their assets are located outside of the United States. It may therefore
be difficult for investors in the United States to enforce their legal rights
based on the civil liability provisions of the United States Federal securities
laws against us and our officers and most of our directors in the courts of
either the United States or the PRC and, even if civil judgments are obtained in
courts of the United States, to enforce such judgments in PRC courts. Further,
it is unclear if extradition treaties now in effect between the United States
and the PRC would permit effective enforcement against us or our officers and
most of our directors of criminal penalties, under the United States Federal
securities laws or otherwise.





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





We
are required to comply with the United States Foreign Corrupt Practices Act,
which generally prohibits United States companies from engaging in bribery or
other prohibited payments to foreign officials for the purpose of obtaining or
retaining business. Foreign companies, including some that may compete with us,
are not subject to these prohibitions, and therefore may have a competitive
advantage over us. Corruption, extortion, bribery, pay-offs, theft and other
fraudulent practices may occur in the PRC. If our competitors engage in these
practices they may receive preferential treatment, giving our competitors an
advantage in securing business, which would put us at a disadvantage. We can
make no assurance that our employees or other agents will not engage in such
conduct for which we might be held responsible. If our employees or other agents
are found to have engaged in such practices, we could suffer severe penalties
and other consequences that may have a material adverse effect on our business,
financial condition and results of operations.




We
control Dalian Befut, our captive PRC manufacturer, through certain OEM
Agreements which may not be as effective in providing control over Dalian Befut
as direct ownership or VIE arrangement, and if Dalian Befut or its shareholders
breach the OEM Agreements, we would have to rely on legal remedies under PRC
law, which may not be available or effective, to enforce or protect our
rights.





We conduct substantially all of our
operations, and generate substantially all of our revenues, through an Original
Equipment Manufacturer Agreement, an Intellectual Property Rights License
Agreement and a Non-competition Agreement (collectively, the “OEM Agreements”)
with Dalian Befut that provide us, through our ownership of Befut Hongkong and
its direct ownership of WFOE, with control over Dalian Befut and its
subsidiaries, Befut Marine, Befut Zhong Xing and Dalian Yuansheng.  We
have no direct ownership interest in Dalian Befut nor do we have voting control
of shares of Dalian Befut.  As a result, Dalian Befut’s shareholders,
unlike those of a variety interest entity, or VIE, can dispose of their shares
at their sole discretion. We depend on Dalian Befut to hold and maintain
contracts with our customers.  Dalian Befut also owns or leases, as
the case may be, substantially all of the intellectual property, facilities and
other assets relating to the operation of our business, and employs the
personnel for substantially all of our business.  Although we have been
advised by Junhe Law Offices, PRC legal counsel we engaged during our corporate
restructuring in connection with going public in the United States, that the
rights, duties and obligations under each of the OEM Agreements with Dalian
Befut are valid, binding and enforceable under PRC laws and regulations in
effect, these OEM Agreements may not be as effective in providing us with
control over Dalian Befut as direct ownership of Dalian Befut would be or if
Dalian Befut was the VIE of WFOE.  In addition, Dalian Befut may
breach the OEM Agreements by, for example, deciding not to make contractual
payments to WFOE, and consequently to the Company. In the event of any such
breach, we would have to rely on legal remedies under PRC law, which may
not always be available or effective to enforce our rights, particularly in
light of uncertainties in the PRC legal system.




25




Risks
Related to an Investment in our Stock.





Shares of our common stock lack a
significant trading market.





Our
common stock is quoted on the Over The Counter Bulletin Board, or OTCBB, under
the symbol “BFTI”. This market tends to be highly illiquid.  There can
be no assurance that an active trading market in our common stock will develop,
or if such a market develops, that it will be sustained. In addition, there is a
greater chance for market volatility for securities that trade on the OTCBB as
opposed to securities that trade on a national exchange. This volatility may be
caused by a variety of factors, including the lack of readily available
quotations, the absence of consistent administrative supervision of “bid” and
“ask” quotations, and generally lower trading volume. The price at which
investors purchase shares of our common stock may not be indicative of the price
that will prevail in the trading market. Investors may be unable to sell their
shares of common stock at or above their purchase price, which may result in
substantial losses.





The
limited public trading market may cause volatility in our stock
price.





The quotation of our common stock on
the OTCBB does not assure that a meaningful, consistent and liquid trading
market currently exists, and in recent years such market has experienced extreme
price and volume fluctuations that have particularly affected the market prices
of many smaller companies like us.  As a result, our common stock is
subject to significant volatility.  Sales of substantial amounts of
our common stock, or the perception that such sales might occur, could adversely
affect prevailing market prices of our common stock.





We
have not paid any cash dividends and no cash dividends will be paid in the
foreseeable future.





We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay
dividends.  Even if the funds are legally available for distribution,
we may nevertheless decide not to pay, or may be unable to pay, any
dividends.  We intend to retain all earnings for our company’s
operations.





The
market price for our common stock may be volatile and subject to wide
fluctuations, which may adversely affect the price at which you can sell our
shares.





The
market price for our common stock may be volatile and subject to wide
fluctuations in response to factors including the following:





·
            actual
      or anticipated fluctuations in our quarterly operations
      results;





·
            changes
      in financial estimates by securities research
  analysts;





·
            conditions
      in foreign or domestic cable and wire
industry;





·
            changes
      in the economic performance or market valuations of other companies in the
      same industry;




26




·
            announcements
      by us or our competitors of new products, acquisitions, strategic
      partnerships, joint ventures or capital
  commitments;





·
            addition
      or departure of key personnel;





·
            fluctuations
      of exchange rates between the RMB and the U.S.
  dollar;





·
            intellectual
      property litigation;





·
            general
      economic or political conditions in the PRC;
and





·
            Other
      events or factors, many of which are beyond our
  control.





In addition, the securities market has
from time to time experienced significant price and volume fluctuations that are
not related to the operating performance of particular
companies.  These market fluctuations may also materially and
adversely affect the market price of our stock, regardless of our actual
operating performance.





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





Our common stock may be deemed to be
“penny stock” as that term is defined under the Securities Exchange Act of 1934,
as amended.  Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system).  Penny stock rules impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and “accredited investors.” The term
“accredited investor” refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse.





The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC, which provides information about penny stocks and the nature and
level of risks in the penny stock market.  Moreover, broker/dealers
are required to determine whether an investment in a penny stock is a suitable
investment for a prospective investor. A broker/dealer must receive a written
agreement to the transaction from the investor setting forth the identity and
quantity of the penny stock to be purchased.  These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to sell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.





Our
officers, directors and affiliates control us through their positions and stock
ownership and their interests may differ from other stockholders.





Our Chairman, President and CEO, Mr.
Hongbo Cao, has the voting rights on 27,929,242, or 94.0%, of our issued and
outstanding common stock. As a result, he is able to influence the outcome of
stockholder votes on various matters, including the election of directors and
extraordinary corporate transactions, including business combinations. The
interests of Mr. Cao may differ from other stockholders.





We
may require additional financing in the future and our operations could be
curtailed if we are unable to obtain required additional financing when
needed.





We may
need to obtain additional debt or equity financing to fund future capital
expenditures. Additional equity may result in dilution to the holders of our
outstanding shares of capital stock. Additional debt financing may include
conditions that would restrict our freedom to operate our business, such as
conditions that:




27




·
            limit
      our ability to pay dividends or require us to seek consent for the payment
      of dividends;





·
            increase
      our vulnerability to general adverse economic and industry
      conditions;





·
            require
      us to dedicate a portion of our cash flow from operations to payments on
      our debt, thereby reducing the availability of our cash flow to fund
      capital expenditures, working capital and other general corporate
      purposes; and





·
            limit
      our flexibility in planning for, or reacting to, changes in our business
      and our industry.





We cannot
guarantee that we will be able to obtain any additional financing on terms that
are acceptable to us, or at all.





ITEM
2. PROPERTIES.





Under PRC
law, all land in the PRC is owned by either the state or by rural collectives,
which grant a “land use right” to an individual or entity after a purchase price
for such land use right is paid to the government. The land use right grants the
holder the right to use the land for a specified long-term period of time and
other rights that are incidental to the ownership of the land. Land and
buildings are regarded as two separate properties in China. Land users may use
the land and own the buildings and improvements on it, but the sovereignty of
the land is retained by the State or rural collectives.





We lease
a parcel of land of approximately 14,040 square meters in Dalian from Dalian
Wanbao Industrial Co. Ltd., which is the location of our manufacturing base of
switch appliance products. The lease is for a term from October 1, 2001 through
October 1, 2051 at an aggregate rent of RMB250,000 (approximately
$367,647).  We own three factory buildings with 661.5 square meters,
1,531.05 square meters and 4,014.72 square meters of floor space, respectively,
which are built upon this leased property.





We lease an area of 685.62 square
meters of executive office space in the Xigang District in Dalian from Liaoning
Ning’an Real Estate Co., Ltd. The lease is for a three-year term beginning of
February 1, 2010 at an aggregate rent of RMB315,000 (approximately
$46,323).  Prior to such lease, we leased an area of 480 square meters
in Xigang District from an individual, Yurong Yao, at an annual rent of RMB
336,000 (approximately $49,412) from April 1, 2006 to April 1, 2009. After the
lease expired, we paid rent based on the same terms on monthly basis until our
new lease mentioned above commenced.





We have
obtained the land use right certificate and building ownership certificates for
our completed Phase I Changxing Facility, which includes factory facilities
located in Xingang County, Lingang Industrial District of Changxing Island. In
addition, we also obtained the land use right certificate for the land reserved
for our Phase II Changxing Facility.





The  land
and properties that we use are owned or leased by Dalian Befut.





Set forth
in the following table is the detailed information of the properties that we
currently use:




Nature
      of the Property
                                    
                                    Property
      Location and Production Segment
                                    
                                    Address
                                    
                                    Area
      (square meters)
                                    
                                    Ownership
      Status and TermLand
                                    
                                    Dalian
                                      
                                      Switch
      Appliance Products
                                    
                                    Qipanzi
      County, Gezhenbao Town of Ganjingzi District, Dalian
                                    
                                    14,040
                                    
                                    Leased
      from Dalian Wanbao Industrial Co. Ltd. at an aggregate rent of
      RMB2,500,000 (approximately $367,647) for 50 years from Oct. 1 2001
      through Oct. 1,
2051




28
  Building
                                    
                                    Dalian
                                      
                                      Switch
      Appliance Products (Warehouse)
                                    
                                    Qipanzi
      County, Gezhenbao Town of Ganjingzi District, Dalian
                                    
                                    661.5
                                    
                                    Building
      Ownership Certificate: Dagan Cun Fang Zi Di 205010073Building
                                    
                                    Dalian
                                      
                                      Switch
      Appliance Products (Office)
                                    
                                    Qipanzi
      County, Gezhenbao Town of Ganjingzi District, Dalian
                                    
                                    1,531.05
                                    
                                    Building
      Ownership Certificate : Dagan Cun Fang Zi Di 205010074Building
                                    
                                    Dalian
                                      
                                      Switch
      Appliance Products (Workshop)
                                    
                                    Qipanzi
      County, Gezhenbao Town of Ganjingzi District, Dalian
                                    
                                    4,014.72
                                    
                                    Building
      Ownership Certificate : Dagan Cun Fang Zi Di 205010075Building
                                    
                                    Dalian
                                      
                                      Office
                                    
                                    No.4-12,
      17-20, 27 Floor, Liang Jiu International Building,
                                      No.5
      Heyi Street, Xigang District, Dalian
                                    
                                    685.62
                                    
                                    Lease
      from Liaoning Ning’an Real Estate Co., Ltd. at an aggregate rent of
      RMB315,000 (approximately $46,323) in total for 3 years from Feb.1, 2010
      through Feb. 1, 2013Land
                                    
                                    Dalian
                                      
                                      Traditional
      and Specialty Cable
                                    
                                    Xingang
      Village, Sub-street office, Changxing Island, Dalian
                                    
                                    120,953.0
                                    
                                    Land
      use right (Certificate #:Da Guo Yong (2009) No. 06067) expires on Sep. 9,
      2056Land
                                    
                                    Dalian
                                      
                                      Traditional
      and Specialty Cable
                                    
                                    Xingang
      Village, Sub-street office, Changxing Island, Dalian
                                    
                                    30,290.0
                                    
                                    Land
      use right (Certificate #:Da Guo Yong (2009) No. 06066) expires on Sep. 9,
      2056Building
                                    
                                    Dalian
                                      
                                      Traditional
      and Specialty Cable (Doorman Room)
                                    
                                    No.20,
      Shimen Street, Lingang Industrial District, Changxing Island,
      Dalian
                                    
                                    63.96
                                    
                                    Building
      Ownership Certificate# 2009001864Building
                                    
                                    Dalian
                                      
                                      Traditional
      and Specialty Cable (Factory)
                                    
                                    No.20,
      Shimen Street, Lingang Industrial District, Changxing Island,
      Dalian
                                    
                                    2,744.56
                                    
                                    Building
      Ownership Certificate# 2009001865Building
                                    
                                    Dalian
                                      
                                      Traditional
      and Specialty Cable (Factory)
                                    
                                    No.20,
      Shimen Street, Lingang Industrial District, Changxing Island,
      Dalian
                                    
                                    3,836.56
                                    
                                    Building
      Ownership Certificate#
2009001866
  29
  Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Factory)
                                          
                                          No.20,
      Shimen Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          3,836.56
                                          
                                          Building
      Ownership Certificate# 2009001867Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Office)
                                          
                                          No.20,
      Shimen Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          2,001.63
                                          
                                          Building
      Ownership Certificate# 2009001868Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Office)
                                          
                                          No.8,
      Qifeng Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          8,508.70
                                          
                                          Building
      Ownership Certificate# 2009001869Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Warehouse)
                                          
                                          No.8,
      Qifeng Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          5,332.50
                                          
                                          Building
      Ownership Certificate# 2009001870Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Factory)
                                          
                                          No.8,
      Qifeng Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          7,293.27
                                          
                                          Building
      Ownership Certificate# 2009001871Building
                                          
                                          Dalian
                                            
                                            Traditional
      and Specialty Cable (Factory)
                                          
                                          No.8,
      Qifeng Street, Lingang Industrial District, Changxing Island,
      Dalian
                                          
                                          9,526.87
                                          
                                          Building
      Ownership Certificate#
2009001872


Mortgaged
Property





Dalian Befut entered into a long term
loan agreement with China Development Bank Corporation in November 2009. In
order to secure the loan, Dalian Befut mortgaged certain of its land use rights
and owned buildings as set forth in the table below:




Loan
      Amount
                              
                              Lending
      Institution
                              
                              Contract
      Period
                              
                              Type
      of Guarantee
                              
                              Interest  Rate
                              
                              Property
      under MortgageRMB100
      million ($14.7 million)
                              
                              China
      Development Bank Corporation
                              
                              November
      2, 2009 to November 1, 2016
                              
                              Mortgage
                              
                              The
      interest rate is a variable rate
                                equal
      to 5% per annum above the
                                floating
      base interest for loans of the
                                same
      term promulgated by the PRC’s
                                central
      bank.
                              
                              Dalian
      Befut’s land :
                                (Certificate
      #:Da Guo Yong
                                (2009)
      No. 06066 and  Da Guo Yong
                                (2009)
      No. 06067)
                                
                                Dalian
      Befut’s buildings:
                                (
      Certificate# 2009001864,
                                2009001865,
      2009001866,
                                2009001867,
      2009001868,
                                2009001869,
      2009001870,
                                2009001871,
      2009001872)






ITEM
3. LEGAL PROCEEDINGS.





From time to time, we may become
involved in various lawsuits and legal proceedings which arise in the ordinary
course of business. Litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to time that may
harm our business. However, we are currently not aware of any such legal
proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse affect on our business, financial condition or
operating results.





30





PART
II





ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.





Our common stock was approved for
quotation on the OTC Bulletin Board on September 28, 2006 and initially traded
under the symbol FRZR.OB.  In connection with a 1-for-20 reverse stock
split consummated on February 26, 2008, our symbol on the OTC Bulletin Board was
changed to FREZ.OB.





On June 18, 2009, in connection with
our name change and a 1-for-4.07 reverse stock split effective the same day, our
symbol was changed to BFTI.OB.





The table below sets forth the reported
high and low bid prices for the past two fiscal years. The bid prices shown
reflect quotations between dealers, without adjustment for markups, markdowns or
commissions, and may not represent actual transactions in our securities. 
Shares of our common stock are very thinly traded, and the price if traded may
be highly volatile and may not reflect the value of the Company.





High
      Bid
                      
                      
                      Low
      BidFiscal
      Year Ended June 30, 201006/30/2010
                      
                      $
                      -
                      
                      
                      $
                      -03/31/2010
                      
                      $
                      0.35
                      
                      
                      $
                      012/31/2009
                      
                      $
                      0.42
                      
                      
                      $
                      0.109/30/2009
                      
                      $
                      0.1
                      
                      
                      $
                      0Fiscal
      Year Ended June 30, 200906/30/2009
                      
                      $
                      0.10
                      
                      
                      $
                      0.0003/31/2009
                      
                      $
                      0.10
                      
                      
                      $
                      0.0312/31/2008
                      
                      $
                      0.13
                      
                      
                      $
                      0.02509/30/2008
                      
                      $
                      0.20
                      
                      
                      $
                      0.10


_________________


* Source:
Quarterly Trade & Quote Summary Report ordered from www.otcbb.com.





Common
and Preferred Stock





We are authorized by our Articles of
Incorporation, as amended, to issue an aggregate of 210,000,000 shares of
capital stock, of which 200,000,000 are shares of common stock, par value $0.001
per share (the "Common Stock") and 10,000,000 are shares of preferred stock, par
value $0.001 per share (the “Preferred Stock”).





Common
Stock





All outstanding shares of Common Stock
are of the same class and have equal rights and attributes. The holders of
Common Stock are entitled to one vote per share on all matters submitted to a
vote of our stockholders. All stockholders are entitled to share equally in
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available. In the event of liquidation, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of all liabilities. The stockholders do not have cumulative or
preemptive rights.





Preferred
Stock





Our Articles of Incorporation, as
amended, authorize the issuance of up to 10,000,000 shares of Preferred Stock
with designations, rights and preferences determined from time to time by its
Board of Directors. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue Preferred Stock with dividend, liquidation,
conversion, voting, or other rights which could adversely affect the voting
power or other rights of the holders of the Common Stock. In the event of
issuance, the Preferred Stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company. Although we have no present intention to issue any shares of our
authorized Preferred Stock, there can be no assurance that the Company will not
do so in the future.




31




The description of certain matters
relating to the securities of the Company is a summary and is qualified in its
entirety by the provisions of the Company's Articles of Incorporation and
By-Laws, copies of which have been filed or incorporated by reference as
exhibits to this report.





Holders





As of September 21, 2010, there were
approximately 567 shareholders of record of our common stock and an
indeterminate number of beneficial holders who held our Common Stock in street
name.





Transfer
Agent and Registrar




Our independent stock transfer agent is
Corporate Stock Transfer, Inc., located in Denver, Colorado. Their mailing
address is 3200 Cherry Creek Dr. South, Suite 430, Denver, CO 80209. Their phone
number is 303-282-4800 and fax number is 303-282-5800.




Dividends





Our board of directors has not declared
a dividend on our common stock during the last two fiscal years or the
subsequent interim period. It is the present intention of our board to utilize
all available funds for the development of the Company's business.





The payment of dividends, if any, is at
the discretion of the Board of Directors and is contingent on the Company's
revenues and earnings, capital requirements, financial conditions and the
ability of our subsidiary, WFOE, to obtain approval to send monies out of the
PRC. The PRC's national currency, the Yuan or Renminbi, is not a freely
convertible currency.





Penny
Stock Regulations





Our securities are subject to the SEC's
“penny stock” rules. The penny stock rules may affect the ability of owners of
our shares to sell them. There may be a limited market for penny stocks due to
the regulatory burdens on broker-dealers. The market among dealers may not be
active. The mark-ups or commissions charged by the broker-dealers might be
greater than any profit an investor may make. Because of large spreads market
makers quote, investors may be unable to sell the stock immediately back to the
dealer at the same price the dealer sold the stock to the investor.





Our securities are also subject to the
SEC’s rule that imposes special sales practice requirements upon broker-dealers
that sell such securities to other than established customers or accredited
investors. For purposes of the rule, the phrase “accredited investor” means, in
general terms, institutions with assets exceeding $5,000,000 or individuals
having net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, combined with a spouse’s income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser’s written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of purchasers of our securities to buy or sell in any
market.





Recent
Sales of Unregistered Securities





In connection with the 1-for-4.07
reverse stock split (the “Reverse Split”) of our common stock effective June 18,
2009,  in order to preserve our number of outstanding round-lot
shareholders our board of directors authorized the issuance of shares of common
stock (in an amount equal to the difference between the number of shares a
shareholder was to receive after the Reverse Split and 100) to each shareholder
owning at least 100 shares but less than 407 shares of our common stock on June
17, 2009.  Accordingly, we issued an aggregate of 28,893 shares of
common stock to various shareholders in the fiscal year ended June 30, 2010.
These issuances were exempt from registration pursuant to Section 4(2) of the
Securities Act.




32




On
June 7, 2010, we issued 200,007 shares of common stock upon the conversion of an
outstanding convertible promissory note.  This issuance was exempt
from registration pursuant to Section 3(9) of the Securities Act.





ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
OPERATIONS.





The
following discussion of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the notes
to those financial statements appearing elsewhere in this report.





Certain
statements in this report constitute “forward-looking statements”. Such
forward-looking statements include statements, which involve risks and
uncertainties, regarding, among other things, (a) our projected sales,
profitability, and cash flows, (b) our growth strategies, (c) anticipated trends
in our industries, (d) our future financing plans, and (e) our anticipated needs
for, and use of, working capital. They are generally identifiable by use of the
words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” or the
negative of these words or other variations on these words or comparable
terminology. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including, without
limitation, the risks and matters described in this report generally. In light
of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact occur. You
should not place undue reliance on these forward-looking
statements.





The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. Further, the information about our
intentions contained in this report is a statement of our intention as of the
date of this report and is based upon, among other things, the existing
regulatory environment, industry conditions, market conditions and prices, the
economy in general and our assumptions as of such date. We may change our
intentions, at any time and without notice, based upon any changes in such
factors, in our assumptions or otherwise.





Unless
the context indicates otherwise, as used in the following discussion, the words
“Company”, “we,” “us,” and “our,” each refer to (i) BEFUT International Co.,
Ltd. (f/k/a Frezer, Inc.), a corporation incorporated in the State of Nevada;
(ii) BEFUT Corporation, a corporation incorporated in the State of Nevada and a
wholly owned subsidiary of the Company (“Befut Nevada”); (ii) Hongkong BEFUT
Co., Ltd. (“Befut Hongkong”), a wholly-owned subsidiary of Befut Nevada,
incorporated under the laws of Hong Kong; (iii) Befut Electric (Dalian) Co.,
Ltd. (“WFOE”), a corporation incorporated under the laws of the People’s
Republic of China (the “PRC”), and a wholly-owned subsidiary of Befut Hongkong;
(vi) Dalian Befut Wire and Cable Manufacturing Co., Ltd. (“Dalian Befut”), a
corporation incorporated under the laws of the PRC, which is a captive
manufacturer of WFOE pursuant to a series of contractual agreements; (vii)
Dalian Marine Cable Co., Ltd. (“Befut Marine”), a corporation incorporated under
the laws of the PRC, and that is 86.6% owned by Dalian Befut; (viii) Dalian
Befut Zhong Xing Switch Co., Ltd. (“Befut Zhong Xing”), a corporation
incorporated under the laws of the PRC, and that is 73.5% owned by Dalian Befut;
and (ix) Dalian Yuansheng Technology Co., Ltd. (“Dalian Yuansheng”), a
corporation incorporated under the laws of the PRC, and that is 93.3% owned by
Dalian Befut.





Unless
the context otherwise requires, all references to (i) “PRC” and “China” are to
the People’s Republic of China; (ii) “U.S. dollar,” “$” and “US$” are to United
States dollars; and (iii) “RMB”, “Yuan” and Renminbi are to the currency of the
PRC or China.





Overview





We
believe that we are one of the most competitive manufacturers of specialty
cables in northeastern China.  For the fiscal year ended June 30,
2010, approximately 40% of our revenues were generated from traditional cable
and almost 60% of our revenues were generated from specialty cable. We plan
to concentrate our business on specialty cable products over the next five years
to take advantage their higher profit margins as compared to traditional cable
products. Our specialty cable products include, without limitation, marine
cable, mine cable and petro-chemical cable. We also have the technical
capability for the large-scale production of submarine cable and
high-margin new energy cable, such as wind energy cable and solar energy cable.
In addition, Dalian Yuansheng, a newly acquired subsidiary of Dalian Befut, is
engaged in researching, developing and manufacturing conductive carbon-fiber to
provide Dalian Befut with the raw materials it needs to produce carbon fiber
composite cable products. Befut Zhong Xing, a subsidiary of Dalian Befut, is
engaged in the production of electric switches and switch boxes, the supporting
equipment of cable users.




33





We
believe we are currently at the beginning of a rapid growth stage. Established
in 1996 to produce small-scale traditional cable, Dalian Befut built a factory
in Dalian in 2001 to enter the more profitable sector of specialty cables. From
2003 to 2008, our sales grew at an average rate of at least 50% per year. When
we reached our full production capacity in 2008, we achieved annual sales of
approximately $22 million. To expand our manufacturing capacity and production
of specialty cables, in 2006 we commenced construction of our new production
facility located approximately 120 km from Dalian on Changxing Island (the
“Changxing Island Project”). To maintain our competitiveness, we continue to
focus on researching and developing new products, and attracting new
large-volume customers.  At the beginning of 2010, we completed Phase
I of the Changxing Island Project (“Phase I Changxing Facility”), which
increased our total annual production capacity from 800 km of cable to 2,400 km
of cable as of June 30, 2010. We estimate that the Phase I Changxing Facility
may reach its maximum annual capacity of 4,000 km by June 30, 2013, at which
time we expect to commence construction of Phase II of the Changxing Island
Project to add 45,000 square feet of facilities to further expand our production
capacity of specialty cable (“Phase II Changxing Facility”).  At June
30, 2010, we believe we have the customer base and the technological,
manufacturing and research and development capabilities to take advantage of the
growing cable and wire market to produce high levels of sales and profits over
the next few years.





Results
of Operations





Fiscal
year ended June 30, 2010 compared to the fiscal year ended June 30,
2009




Fiscal
      year ended
                                    
                                    
                                    %
      ChangeAll
      numbers in thousands except % numbers
                                    
                                    June
      30,2010
                                    
                                    
                                    June
      30,2009Sales
                                    
                                    $
                                    31,259
                                    
                                    
                                    $
                                    19.309
                                    
                                    
                                    
                                    62
                                    %Cost
      of sales
                                    
                                    $
                                    22,957
                                    
                                    
                                    $
                                    14,102
                                    
                                    
                                    
                                    63
                                    %Gross
      profit
                                    
                                    $
                                    8,302
                                    
                                    
                                    $
                                    5,207
                                    
                                    
                                    
                                    59
                                    %Total
      operating expenses
                                    
                                    $
                                    3,962
                                    
                                    
                                    $
                                    1,379
                                    
                                    
                                    
                                    187
                                    %Total
      other income/(expenses)
                                    
                                    $
                                    964
                                    
                                    
                                    $
                                    (693
                                    )
                                    
                                    
                                    239
                                    %Net
      income
                                    
                                    $
                                    4,512
                                    
                                    
                                    $
                                    2,259
                                    
                                    
                                    
                                    98
                                    %Gross
      profit margin
                                    
                                    
                                    27
                                    %
                                    
                                    
                                    27
                                    %
                                    
                                    
                                    0
                                    %Basic
      earnings per share
                                    
                                    $
                                    0.15
                                    
                                    
                                    $
                                    0.08
                                    
                                    
                                    
                                    87.5
                                    %Diluted
      earnings per share
                                    
                                    $
                                    0.15
                                    
                                    
                                    $
                                    0.07
                                    
                                    
                                    
                                    114.3
                                    %Weighted
      average number of common shares outstanding:Basic
                                    
                                    
                                    29,545,797
                                    
                                    
                                    
                                    29,488,341
                                    
                                    
                                    
                                    0.2
                                    %Diluted
                                    
                                    
                                    30,110,241
                                    
                                    
                                    
                                    30,431,891
                                    
                                    
                                    
                                    -1.1
                                    %





Sales





Our
sales for the fiscal year ended June 30, 2010 were $31,258,662, an increase of
$11,949,723, or 61.9%, as compared to the fiscal year ended June 30, 2009. The
increase was primarily due to three factors: (i) significantly increased demand
for our traditional cables and specialty cables from new and existing customers
as compared to the demand in fiscal 2009, (ii) the increase of our annual
production capacity after we relocated our production facilities to the Phase I
Changxing Facility at the end of 2009, and (iii) increased prices of many of our
cable products due to an increase in the average price of copper, our primary
raw material, in the fiscal year ended June 30, 2010, which we passed on to our
customers.




34




Cost
of Sales





Cost
of sales is primarily comprised of the cost of raw materials used in the
production of our cable products, direct labor and manufacturing overhead
expenses. Our cost of sales for the fiscal year ended June 30, 2010 was
$22,956,708, an increase of $8,855,163, or 62.8%, as compared to the fiscal year
ended June 30, 2009. The percentage increase in our cost of sales was in line
with the percentage increase in our sales.





Copper
wire is our primary raw material. The volatility of the price of copper in the
PRC directly impacts the price of our products. However, it does not
significantly impact our profit margin because we are able to pass on the cost
of raw materials to our customers. As most of our products are high-end
specialty cable and a substantial portion of our sales are to large scale
state-owned enterprises in China, we are in a position to negotiate the price of
our products based on the prevailing market prices of raw materials. As a
result, risk of volatility in our profit margin is greatly reduced.





Gross
Profit





Gross
profit for the fiscal year ended June 30, 2010 was $8,301,954, an increase of
$3,094,560, or 59.4%, as compared to the fiscal year ended June 30, 2009. Gross
profit as a percentage of sales was 26.6% for the fiscal year ended June
30, 2010, a decrease of 0.3% as compared to the fiscal year ended June 30,
2009. Although we are able to pass certain increases in the cost of our raw
materials such as copper, onto our customers, we experienced a minor increase in
our cost of sales due to higher manufacturing costs which resulted in a slight
decrease in our gross profit margin.





Selling,
General and Administrative Expenses





Our
selling, general and administrative expenses consist primarily of salaries and
bonuses for sales personnel, advertising and promotion expenses, freight
charges, related compensation and professional fees, and amortization expenses.
Selling expenses were $80,090 in the fiscal year ended June 30, 2010, as
compared to $121,393 in the fiscal year ended June 30, 2009, a decrease of
$41,303, or 34.0%. General and administrative expenses were $3,881,655 for the
fiscal year ended June 30, 2010, an increase of $2,623,676, or 208.6%, as
compared to the fiscal year ended June 30, 2009. Such increase was primarily due
to the increase of amortization expenses of $943,463 related to intangible
assets we acquired in the third and fourth quarters of fiscal 2009 and the
increase in research and development expenses totaling $791,765, which were
primarily for technologies that are the subject of Dalian Befut’s pending
patents, and the costs associated with such patent applications.





Income
from Operations





Our
operating income was $4,340,209 for the fiscal year ended June 30, 2010, an
increase of $512,187, or 13.4%, as compared to $3,828,022 for the fiscal year
ended June 30, 2009.  This increase was a result of a significant
increase in the gross profit of our business of wire and cable
manufacturing, partially offset by an increase of general and administrative
expenses.





Government
Subsidy





In
the fiscal year ended June 30, 2010, we received subsidies from various PRC
governmental bureaus in the aggregate amount of $705,062 as compared to
subsidies of $159,979 received in the fiscal year ended June 30,
2009.





The
subsidies were comprised of a subsidy in the aggregate amount of approximately
$293,340 for the selection of our “Sanyuan” trademark as a
“Famous Trademark” of China, two subsidies in the aggregate amount of $293,340
for our engagement in marine cable business and a refund of value added taxes in
the aggregate amount of approximately $118,392 as a subsidy for employing
physically-challenged workers. The subsidies are determined on a yearly basis
and no assurances can be given that we will continue to receive such
subsidies.




35




Interest
Expenses





Interest
expense was $287,092 for the fiscal year ended June 30, 2010, a decrease of
$133,526, or 31.7%, as compared to $420,618 for the fiscal year ended June 30,
2009.  Interest expense was reduced after we obtained a long-term bank
loan with favorable terms from China Development Bank Corporation at the end of
2009.




Income
Taxes





In
fiscal 2010, our business operations were conducted solely by WFOE, Dalian Befut
and its subsidiaries, and, as such, we were governed by the PRC Enterprise
Income Tax Laws (the “EIT Law”). China enterprise income tax is calculated based
on taxable income determined under Chinese generally accepted accounting
principles. In accordance with the EIT Law, a Chinese domestic company is
subject to taxes, including but not limited to: (i) an enterprise income tax
rate of 25% and (ii) a value added tax of 17% for most of the goods
sold.





Provision
for income taxes was $907,083 for the fiscal year ended June 30, 2010, an
increase of $19,387, or 2.2%, compared to $887,696 for the fiscal year ended
June 30, 2009. The lower increase (2.2%) in our income taxes as compared to the
increase in our income from operations (13.4%) was primarily attributable to
certain deductions from the income for taxation on basis such as our products
are under “Famous Brand” in China and intangible assets allocation of our
research and development fees before tax.





Net
Income





Net
income for the fiscal year ended June 30, 2010 was $4,512,176, an increase of
$2,252,763, or 99.7%, as compared to net income of $2,259,413 for the fiscal
year ended June 30, 2009. The increase was mainly attributable to the increase
of $3,094,560 in gross profit, $545,623 in government subsidies and $977,577 in
other income, which was partially offset by an increase in general and
administrative expenses of $2,623,676.





Outlook





Our
management team believes that we will experience annual sales growth of over 70%
in our fiscal year ending June 30, 2011.  Our growth projections are
based on several factors, including the following:





·
            We
      have invested $5.5 million to purchase approximately150,000 square meters
      of land (including the land reserved for the construction of the Phase II
      Changxing Facility) and $14.5 million on the construction of the Phase I
      Changxing Facility, which has a maximum annual production capacity of
      4,000 km.





·
            We
      have invested approximately $9 million in the purchase of 20 sets of new,
      technologically advanced manufacturing equipment used in the production of
      various specialty cable. These sets of equipment, in addition to over 50
      sets of manufacturing equipment we already own, should meet most of the
      needs of our development plan to maximize the production capacity of the
      Phase I Changxing Facility and generate an annual revenue of over $150
      million in the next three years.





·
            Among
      our customer base of more than 500 customers, there are at least 30
      “large” customers with average annual specialty cable orders of over $7
      million. Prior to fiscal 2010, we had several large customers, but due to
      our production limitations, we were unable to accept large-volume orders
      from such customers. Now that the Phase I Changxing Facility is
      operational, we have a total annual production capacity of 2,400 km of
      cable and can meet large-volume orders for specialty cable. Since early
      2010, we focused our sales strategy on customers with large-volume orders.
      We estimate that in fiscal 2011, we will accept large-volume orders (more
      than $700,000 each) from 37 clients, including 11 petro-chemical
      companies, 16 mining and metallurgical companies, 5 nuclear power plants
      and 5 shipbuilding companies. These 37 clients are expected to generate
      sales of approximately $45 million in fiscal 2011, which is expected to
      represent 80% of our sales. At the same time, we plan to develop at least
      10 new “large” customers each year. There are currently more than 100
      companies located in northern China with average annual specialty cable
      requirements of over $7 million.  As most of our competitors are
      located in southern China, our geographic location provides us with a
      significant advantage over them with respect to attracting large customers
      in northern China because of lower transportation costs, regional
      relationships, and similar cultural
backgrounds.




36




·
            At
      June 30, 2010, our working capital was approximately $20 million, which we
      believe to be sufficient to meet the financing needs of our recent
      developments. In 2009, we secured a $14.6 million long-term loan from
      China Development Bank Corporation, primarily to finance the Changxing
      Island Project. To support the high level of growth we expect in fiscal
      2011, we intend to consummate a debt and/or equity financing, if we can
      obtain terms acceptable to us.





·
            We
      will continue to consider strategic acquisitions of or investments in
      companies that complement our growth strategies and expand our product
      offerings. For example, Befut Zhong Xing, acquired in July 2009,
      contributed approximately 2.7% of our revenues in the year ended June 30,
      2010. Dalian Befut’s recently acquired subsidiary, Dalian Yuansheng, is
      expected to provide Dalian Befut with the conductive carbon fiber raw
      materials for the production of carbon fiber composite
      cable products.





Liquidity
and Capital Resources





Selected
Measures of Liquidity and Capital Resources





The
following table sets forth certain relevant measures regarding our liquidity and
capital resources:





(dollars
      in thousands, except ratios)
                    
                    June
      30,
                      2010
                    
                    
                    June
      30,
                      2009Cash
      and cash equivalents and restricted cash
                    
                    $
                    2,500
                    
                    
                    $
                    796Working
      capital
                    
                    $
                    7,215
                    
                    
                    $
                    10,033Ratio
      of current assets to current liabilities
                    
                    1.5:1
                    
                    
                    1.8:1





Our
approximately $2.8 million decrease in working capital from June 30, 2009 to
June 30, 2010 was primarily due to the decrease of $2.3 million of current
assets and the increase of $0.5 million of current liabilities. The decrease of
current assets mainly includes the decrease of $5.9 million of loans we made to
unrelated parties, partially offset by the increase of $1.7 million in cash and
$1.2 million in inventory. The increase of current liabilities mainly includes
the increase of $2.5 million of accounts payable and accrued expenses, partially
offset by our repayment of $2 million in short-term loans. Approximately 85% of
our loans to unrelated parties were reduced, with the current outstanding amount
of $1,054,090 as of June 30, 2010.





Cash
Flows





We
had a net increase of $1,703,967 in cash, cash equivalents and restricted cash
from June 30, 2009 to June 30, 2010, as compared to a net increase of $443,252
from June 30, 2008 to June 30, 2009, respectively. The following table
summarizes such changes:




For
      the Fiscal Year Ended(dollars
      in thousands)
                              
                              June
      30, 2010
                              
                              
                              June
      30, 2009Net
      cash provided by (used in) operating activities
                              
                              $
                              7,283
                              
                              
                              $
                              2,545Net
      cash used in investing activities
                              
                              $
                              (12,973
                              )
                              
                              $
                              (13,669
                              )Net
      cash provided by financing activities
                              
                              $
                              7,372
                              
                              
                              $
                              11,494Net
      increase in cash and cash equivalents and restricted cash
                              
                              $
                              1,704
                              
                              
                              $
                              443


37




We
generated net cash of $7,283,445 through our operating activities in our fiscal
year ended June 30, 2010, an increase of $4,738,809, or 186.2%, as compared to
$2,544,636 in our fiscal year ended June 30, 2009.  We have
historically financed our operations and capital expenditures principally
through cash provided by operations and bank loans. The net cash obtained from
our financing activities in the fiscal year ended June 30, 2010 was
approximately $5.6 million less than the amount used in investment activities
for the same period. We invested part of the cash generated by our operating
activities to complete the Phase I Changxing Facility. Our management believes
that we have sufficient cash, along with projected cash to be generated from
operations, and access to short-term bank loans to support our current
operations for the next twelve months. We believe our cash position is strong
and sufficient to meet our anticipated working capital
needs.  However, if events or circumstances occur and we do not meet
our budgeted operating plan, we may be required to seek additional capital
and/or reduce certain discretionary spending, which could have a material
adverse effect on our ability to achieve our business
objectives.  Notwithstanding the foregoing, we may seek additional
financing, which may include debt and/or equity financing. There can be no
assurance that any additional financing will be available on acceptable terms,
if at all.  Any equity financing may result in dilution to existing
stockholders and any debt financing may include restrictive
covenants.





Operating
Activities





During
the fiscal year ended June 30, 2010, net cash derived from operating activities
was $7,283,445, an increase of $4,738,809 as compared to $2,544,636 of net cash
derived from operating activities during the fiscal year ended June 30, 2009.
The increase in net cash of approximately $4.7 million was mainly due to the
increase of net income of $2.2 million, the increase of amortization of $1.1
million and the decrease of accounts receivable of $2 million.





Investing
Activities





During
the fiscal year ended June 30, 2010, we used net cash in investing activities of
$12,973,443, a decrease of $695,284 as compared to $13,668,727 in net cash we
used in investing activities for the fiscal year ended June 30,
2009.





Financing
Activities





During
the fiscal year ended June 30, 2010, net cash provided by financing activities
was $7,372,367, a decrease of $4,121,861, as compared to net cash of $11,494,228
provided by financing activities in the fiscal year ended June 30, 2009. This
decrease was principally due to the decrease of approximately $5 million of
additional paid-in capital, as compared to the fiscal year ended June 30, 2009.
We increased our net long-term bank loans by $9 million to finance the
equipment for and construction of our Phase I Changxing Facility, and repaid
approximately $2 million of our short-term bank loans.  We also repaid
the outstanding principal amount, including all interest accrued thereon, on our
convertible notes in the aggregate principal balance of $370,000 due March 2010.
The remaining convertible notes in the aggregate principal amount of $130,000
were converted into 200,007 shares of our common stock at the conversion price
of $0.65 per share on May 6, 2010.





Financial
Obligations





As
of June 30, 2010, our outstanding loans were as follows:




Creditors
                                            
                                            Loan Amount
                                            
                                            
                                            Interest Rate
                                            
                                            Term
                                            
                                            Maturity
DateHarbin
      Bank
                                            
                                            $
                                            2,946,000
                                            
                                            
                                            
                                            6.372
                                            %
                                            1
      year
                                            
                                            09/15/10Bank
      of Dalian
                                            
                                            $
                                            2,356,800
                                            
                                            
                                            
                                            6.903
                                            %
                                            1
      year
                                            
                                            10/29/10Bank
      of East Asia
                                            
                                            $
                                            736,500
                                            
                                            
                                            
                                            6.318
                                            %
                                            6
      months
                                            
                                            12/25/10China
      Development Bank
                                            
                                            $
                                            14,730,000
                                            
                                            
                                            
                                            6.237
                                            %
                                            7
      years
                                            
                                            11/01/16





38





Accounts
Receivable





The
balance of our accounts receivable was $9,292,310, net of allowance for doubtful
accounts of $83,295, as of June 30, 2010, as compared to $8,560,592, net of
allowance for doubtful accounts of $20,222, as of June 30, 2009. The days’ sales
in receivables for the fiscal year ended June 30, 2010 were 107 days, compared
to 160 days for the fiscal year ended June 30, 2009.





Inventories





Inventories
consisted of the following as of June 30, 2010 and 2009,
respectively:





(dollars)
                  
                  June
      30,2010
                  
                  
                  June
      30,2009CategoryRaw
      materials
                  
                  $
                  1,093,193
                  
                  
                  $
                  400,343Work-in-process
                  
                  
                  323,275
                  
                  
                  
                  60,703Finished
      goods
                  
                  
                  1,127,321
                  
                  
                  
                  892,486Total
      inventories
                  
                  $
                  2,543,789
                  
                  
                  $
                  1,353,532





We
had total inventory of $2,543,789 as of June 30, 2010, an increase of
$1,190,257, or 87.9%, as compared to inventory of $1,353,532 as of June 30,
2009. Days’ sales in inventory for the fiscal year ended June 30, 2010 for the
fiscal year were 40 days, compared to 35 days for the fiscal year ended June 30,
2009. This increase was primarily due to the significant increases in our
production in fiscal 2010.





Loan
to Unrelated Parties





We
had a net decrease of $5,901,533, or 84.8%, in loans to unrelated parties as of
June 30, 2010 as compared to June 30, 2009.  As of June 30, 2010, the
aggregate outstanding balance of such loans was $1,054,090.





Off-Balance
Sheet Arrangements





At
June 30, 2010, we did not have any off-balance sheet arrangements.





Critical
Accounting Policies and Use of Estimates





Management's discussion and analysis of
its financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with
United States generally accepted accounting principles (“US GAAP”). Our
financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See Note 2 to our consolidated financial statements, “Summary of Significant
Accounting Policies.” We believe that the following paragraphs reflect the more
critical accounting policies that currently affect our financial condition and
results of operations:





Use
of Estimates and Assumption





The preparation of consolidated
financial statements in accordance with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include allowance
for doubtful accounts and income taxes. Actual results could differ from those
estimates.




39




Revenue
Recognition





The Company derives its revenues
primarily from the design, manufacture and sale of industrial wires and cables
in the PRC. In accordance with the provisions of ASC Topic 605, revenue is
recognized when products are shipped, title and risk of loss is passed to the
customers and collection is reasonably assured. Payments received before
the above criteria are satisfied are recorded as advance from
customers.





Cash
and Cash Equivalents





In accordance with FASB ASC Topic 230,
"Statement of Cash Flows", the Company considers all highly liquid instruments
with original maturities of three months or less to be cash
equivalents.





Accounts
Receivable





Accounts receivable are recorded net of
allowance for doubtful accounts. The Company provides an allowance for doubtful
accounts equal to the estimated uncollectible amounts.  Periodically,
management assesses customer credit history and relationships as well as
performs an analysis on the aging of accounts receivable.  Based on
the results of such analysis, management determines whether certain balances are
deemed uncollectible at the end of a certain fixed period.  Using its
past collection experience, the Company reserves 0.3% of accounts receivable
balances that have been outstanding for less than one year, 3% of accounts
receivable balances that have been outstanding for more than one year but less
than two years, and 10% of accounts receivable balances that have been
outstanding for more than two years. At June 30, 2010 and 2009, the Company had
accounts receivable of $9,292,310 and $8,560,592, net of allowance for doubtful
accounts of $83,295 and $20,222, respectively.





ITEM
8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA


Balance
sheets, as of June 30, 2010 and 2009, and statements of operations,
stockholders’ equity and cash flows for each of the two years in the period
ended June 30, 2010 and 2009, together with the related notes and the reports of
independent registered public accounting firms, are set forth on the “F” pages
of this report.




ITEM
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.





ITEM
9A. CONTROLS
AND PROCEDURES




Disclosure
Controls and Procedures





Our Chief Executive Officer and Chief
Financial Officer have reviewed and evaluated the effectiveness of our
disclosure controls and procedures, which included inquiries made to certain
other of our employees. Based on their evaluation, our Chief Executive Officer
and Chief Financial Officer have each concluded that, as of June 30, 2010, our
disclosure controls and procedures were effective and sufficient to ensure that
we record, process, summarize and report information required to be disclosed in
our periodic reports filed under the Securities and Exchange Commission's rules
and forms.





Management
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial
statement for external purposes in accordance with U.S. generally accepted
accounting principles. Internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on the financial
statements.




40




Any
system of internal control, no matter how well designed, has inherent
limitations, including the possibility that a control can be circumvented or
overridden and misstatements due to error or fraud may occur and not be detected
in a timely manner. Also, because of changes in conditions, internal control
effectiveness may vary over time. Accordingly, even an effective system of
internal control will provide only reasonable assurance with respect to
financial statement preparation. In addition, the design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Therefore, any current
evaluation of controls can not and should not be projected to future
periods.





Management
assessed our internal control over financial reporting as of June 30, 2010, the
end of our fiscal year of 2010. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in "Internal Control-Integrated Framework." The COSO framework
summarizes each of the components of a company’s internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and (v) monitoring.





Based on
management's assessment using the COSO criteria, management has concluded that
our internal control over financial reporting was effective as of June 30, 2010
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles.




Changes
in Internal Control





There
were no changes in our internal control over financial reporting that occurred
during our fourth fiscal quarter ending June 30, 2010 that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.





Auditor
Attestation





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to rules of the SEC that permit us to provide only
management's report in this annual report.


ITEM
9B. OTHER
INFORMATION





On September 23, 2010,  Mr.
Yining Xia resigned from his position as a director of the Company.





Mr. Xia’s resignation as a director of
the Company was not a result of any disagreement with the Company on matters
relating to its operations, policies or practices.





41





PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





General





Listed below are the names and ages of
all our directors and executive officers for the fiscal year ended June 30, 2010
along with their positions, offices and term:





Name
                        
                        Age
                        
                        Title
                        
                        Director
      or Officer SinceHongbo
      Cao
                        
                        43
                        
                        Chairman
      of the Board, Chief Executive Officer and President
                        
                        March
      13, 2009Mei
      Yu
                        
                        39
                        
                        Director,
      Chief Financial and Accounting Officer and Treasurer
                        
                        March
      13, 2009Haiyang
      Lu
                        
                        31
                        
                        Secretary
                        
                        March
      13, 2009Yining
      Xia
                        
                        48
                        
                        Former
      Director
                        
                        March
      13, 2009 – September 23,
2010





All of our directors hold offices until
our next annual meeting of the shareholders, and a successor has been duly
elected and qualified or until his or her earlier resignation, removal from
office, death or incapacity. Officers serve at the discretion of the board of
directors.





The following sets forth biographical
information regarding the above directors and executive officers.





Mr. Hongbo Cao,
Chairman of the Board, Chief Executive Officer and President.Mr. Cao has served as
Chairman of Dalian Befut, our captive manufacturer,  since December
2006. Prior to that, he also served as the CEO of Dalian Befut since June 2002,
and therefore has significant experience in the cable and wire industry in
China. He was formerly the CEO of Dalian Xincheng Power Equipment Co., Ltd. from
1985 to 2002. Mr. Cao is also a director of Befut Nevada, our direct
intermediary subsidiary.  Mr. Cao is a licensed senior economist in
China. He received a Master’s Degree in Political Economics from Liaoning Normal
University in China in 2000 and a Bachelor’s Degree in Law from Dongbei
University of Finance and Economics in China in 1998. We believe Mr.
Cao’s  industry, commercial, financial, management and legal
experience qualifies him to serve as our Chairman.





Ms. Mei Yu,
Director, Chief Financial Officer and Treasurer.Ms. Yu has served as
Director of Finance of Dalian Befut, our captive manufacturer, since
1997.  Ms.Yuisa graduate of Dongbei
University of Finance and Economics in Financial Management in 1991. She has
over 17 years of experience in accounting and finance in China and has been
familiar with Dalian Befut’s financial condition. We believe that Ms. Yu’s
knowledge of Dalian Befut’s history and her experience in accounting and finance
in China qualify her to serve a director of our company.





Mr. Haiyang Lu,
Secretary.Mr. Lu has been the head of the Strategic Development
Department of Dalian Befut and a CEO Assistant of Dalian Befut from 2006. Prior
to that, he was Manager of Planning for Dalian Yuandian Advertisement Co., Ltd.
in 2003 and Manager of Business Planning for Dalian Tianwei Medicine Co., Ltd.
from 2004 to 2006. Mr. Lu received a Bachelor’s Degree in Marketing and Sales
from Bohai University in China.




Mr. Yining Xia,
Former Director. Mr. Xia resigned
as a member of our board of directors on September 23, 2010.  Mr. Xia
previously served as Director (from 2001 to 2007) and Associate Director (from
2000 to 2001) of TIAA-CREF, one of the largest financial services companies in
the United States. Prior to that, he was served as Assistant Vice President of
Citi Group from 1999 to 2000. Mr. Xia is currently President of Allport America,
Inc., a consulting firm he founded. Mr. Xia is also a director of Befut Nevada,
the Company’s direct intermediary subsidiary.  Mr. Xia obtained a PhD in
Mathematics from the Ohio State University in 1990 and a Master’s Degree in
Mathematics from Jilin University in China in 1986. Mr. Xia’s capital market and
financial experience qualified him to serve as a director of company and to
provide us necessary guidance as a U.S. public company.





Family
Relationships




42




There are no family relationships among
our directors or executive officers.





Director
or Officer Involvement in Certain Legal Proceedings





To our knowledge, our directors and
executive officers were not involved in any legal proceedings as described in
Item 401(f) of Regulation S-K in the past ten years.





Section 16(a)
Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires the Company’s directors, executive
officers and persons who own more than 10% of the Company’s Common Stock to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
SEC.  Directors, executive officers and greater than 10% stockholders
are required by SEC rules to furnish the Company with copies of Section 16(a)
forms they file. Based upon a review of the filings made on their behalf during
the fiscal year ended June 30, 2010, as well as an examination of the SEC’s
EDGAR system Form 3, 4, and 5 filings and the Company’s records, the following
table sets forth exceptions to timely filings:




Name
                    
                    Reporting
      EventYining
      Xia, Former Director
                    
                    Form
      4 reporting the our repayment of certain convertible notes on March 12,
      2010.




Code
of Ethics





We have not yet adopted a Code of
Ethics for our executive officers. We intend to adopt a Code of Ethics applying
to such persons during the fiscal year ending June 30, 2011.





Audit
Committee





We have not yet appointed an audit
committee. Our board of directors currently acts as our audit committee. At the
present time, we believe that the members of our board of directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial
reporting.





ITEM
11. EXECUTIVE COMPENSATION





We strive to provide our named
executive officers (as defined in Item 402 of Regulation S-K) with a competitive
base salary that is in line with their roles and responsibilities when compared
to peer companies of comparable size in similar locations.





It is not uncommon for PRC private
companies in northeastern China to have base salaries as the sole form of
compensation. The base salary level is established and reviewed based on the
level of responsibilities, the experience and tenure of the individual and the
current and potential contributions of the individual. The base salary is
compared to the list of similar positions within comparable peer companies and
consideration is given to the executive’s relative experience in his or her
position.  Base salaries are reviewed periodically and at the time of
promotion or other changes in responsibilities.





We plan to implement a more
comprehensive compensation program, which takes into account other elements of
compensation, including, without limitation, short and long term compensation,
cash and non-cash, and other equity-based compensation such as stock
options.  We expect that this compensation program will be comparable
to the programs of our peer companies and aimed to retain and attract talented
individuals.




43




Summary
of Executive Compensation




The following is a summary of the
compensation paid for the fiscal years indicated to each person serving as our
named executive officers during the fiscal years ended June 30, 2010 and 2009,
respectively.





Name
      and
                                                                                                Principal
      Position
                                                                                              
                                                                                              Fiscal
                                                                                                Year
                                                                                              
                                                                                              Salary
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Bonus
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Stock
                                                                                                Awards
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Option
                                                                                                Awards
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Non-equity
                                                                                                Incentive
                                                                                                Plan
                                                                                                Compensation
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Change
      in
                                                                                                Pension
      Value
                                                                                                and
                                                                                                Nonqualified
                                                                                                Deferred
                                                                                                Compensation
                                                                                                Earnings
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              All
      Other
                                                                                                Compensation
                                                                                                ($)
                                                                                              
                                                                                              
                                                                                              Total
                                                                                                ($)Hongbo
      Cao
                                                                                              
                                                                                              2010
                                                                                              
                                                                                              $
                                                                                              35,294
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              $
                                                                                              35,294(President
      and Chief
                                                                                              
                                                                                              2009
                                                                                              
                                                                                              $
                                                                                              35,136
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              $
                                                                                              35,016.Executive
      Officer )Mei
      Yu
                                                                                              
                                                                                              2010
                                                                                              
                                                                                              $
                                                                                              14,118
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              $
                                                                                              14,118(Chief
      Financial Officer and
                                                                                              
                                                                                              2009
                                                                                              
                                                                                              $
                                                                                              11,712
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              
                                                                                              -0-
                                                                                              
                                                                                              
                                                                                              $
                                                                                              11,712Chief
      Accounting Officer )





Narrative
Disclosure to Summary Compensation Table





As of
June 30, 2010, we had not entered into any employment agreements with our named
executive officers.





Outstanding
Equity Awards At Fiscal Year-End





As of June 30, 2010, there were no
outstanding equity awards to any of our named executive officers or
directors.


Compensation
of Directors





As of the date of this report, we have
no formal or informal arrangements or agreements to compensate our directors for
services they provide as directors.








ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND
RELATED  STOCKHOLDERS MATTERS





The following table sets forth as of
September 24, 2010, the number of shares of our common stock beneficially owned
by (i) each person who is known by us to be the beneficial owner of more than
five percent of our outstanding common stock, (ii) each director, (iii) each
executive officer and (iv) all directors and executive officers as a group.
Unless otherwise indicated, the stockholders listed in the table have sole
voting and investment power with respect to the shares indicated.





Name
      and Address of Beneficial Owner (1)
                        
                        Amount
      and Nature of
                          Beneficial
      Ownership
                        
                        
                        Percentage
      of Class (2)BEFUT
      International Co. Limited (3)
                        
                        
                        27,929,242
                        
                        
                        
                        94.0
                        %Hongbo
      Cao (4)
                        
                        
                        27,929,242
                        
                        
                        
                        94.0
                        %Tingmin
      Li (5)
                        
                        
                        12,580,739
                        
                        
                        
                        42.3
                        %Mei
      Yu
                        
                        
                        0
                        
                        
                        
                        0.0
                        %Haiyang
      Lu
                        
                        
                        0
                        
                        
                        
                        0.0
                        %All
      Directors and Officers as a Group
                          (3
      individuals)
                        
                        
                        27,929,242
                        
                        
                        
                        94.0
                        %





44




(1)
            The
      address of each of the beneficial owner is c/o Dalian Befut Wire &
      Cable Manufacturing Co., Ltd., 27th Floor, Liangjiu International Tower, 5
      Heyi Street, Dalian City, 116011, P. R.
China.





(2)
            When
      calculating the percentage of shares for all the persons listed and all
      directors and officers as a group, the denominator is the number of shares
      of our common stock outstanding as of September 24, 2010, namely,
      29,715,640 shares of common stock.





(3)
            BEFUT
      International Co. Limited (“Befut BVI”) directly owns 27,929,242 shares of
      our common stock. Mr. Hongbo Cao, as the sole director of Befut BVI, has
      sole voting and investment control over the shares of common stock owned
      by Befut BVI.





(4)
            Mr.
      Hongbo Cao, as the sole director of Befut BVI, has sole voting and
      investment control over the shares of common stock owned by Befut BVI and,
      as a result, may be deemed to be the beneficial owner of the 27,929,242
      shares of our common stock owned by Befut BVI. Alternatively, Mr. Hongbo
      Cao is the beneficial owner of 12,580,739 shares of our common stock
      pursuant to a certain Stockholders Agreement of Befut BVI dated March 13,
      2009 (the “Befut BVI Stockholders Agreement”).  The Befut BVI
      Stockholders Agreement provides that, upon request by any stockholder,
      Befut BVI is required to distribute to such stockholder their pro rata
      amount of our common stock owned by Befut BVI.  Mr. Cao, as a
      45.05% equity holder of Befut BVI, has the right to receive 12,580,739
      shares of our common stock from Befut
BVI.





(5)
            Mr.
      Li, as a 45.05% equity holder of Befut BVI, has the right to receive
      12,580,739 shares of our common stock from Befut BVI upon request pursuant
      to the Befut BVI Stockholders
Agreement.





Securities
Authorized for Issuance Under Equity Compensation Plans





None.





Changes
in Control




Not Applicable.







ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTORINDEPENDENCE.





On February 16, 2009, WFOE entered into
a series of agreements with Dalian Befut, including an Original Equipment
Manufacturer Agreement, an Intellectual Property License Agreement and a
Non-competition Agreement (collectively, the “OEM Agreements”), pursuant to
which Dalian Befut became a captive manufacturer of WFOE.  For a
description of the OEM Agreements, see “Business – Manufacturing  –
OEM Agreements.”  Mr. Hongbo Cao, our current Chairman, President and
Chief Executive Officer, and Mr. Tingmin Li, one our principal stockholders, own
an aggregate of 94.6% of the equity interests of Dalian Befut.




45





In the share exchange consummated on
March 13, 2009, Befut BVI, as the sole shareholder of Befut Nevada, exchanged
all of the shares it owned in Befut BVI for the issuance of 120,899,170 shares
of the Company. Mr. Hongbo Cao, our current Chairman, President and Chief
Executive Officer, Mr. Tingmin Li, one our principal stockholders, Mr. Yining
Xia, our former director, are also shareholders of Befut BVI. Mr. Cao, the sole
director of Befut BVI, is deemed to have the sole voting and investment control
over the shares of our Common Stock owned by Befut BVI.





Mr. Yining Xia, our former director,
purchased convertible notes and warrants in the private placement for $170,000
on March 13, 2009. The terms of the purchase offered to Mr. Xia was the same as
those to the other three investors in the private placement.




Other than the above transactions or as
otherwise set forth in this report or in any reports filed by the Company with
the SEC, there have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-K. The Company is currently not a subsidiary of any
company.





Our Board conducts an appropriate
review of and oversees all related party transactions on a continuing basis and
reviews potential conflict of interest situations where appropriate. The Board
has not adopted formal standards to apply when it reviews, approves or ratifies
any related party transaction. However, the Board believes that the related
party transactions are fair and reasonable to the Company and on terms
comparable to those reasonably expected to be agreed to with independent third
parties for the same goods and/or services at the time they are authorized by
the Board.





Independence
of the Board of Directors





We have no independent directors as
that term is defined by Rule 5605(a)(2) of the NASDAQ Listing
Rules.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





We paid or accrued the following fees
in each of the prior two fiscal years to our principal
accountants:





PATRIZIO
& ZHAO, LLC




Fiscal Year
                        Ended
                      
                      
                      Fiscal Year
                        EndedJune
      30, 2010
                      
                      
                      June
      30, 2009Audit
      Fees
                      
                      $
                      110,000
                      
                      
                      $
                      80,000Audit
      Related Fees
                      
                      
                      -
                      
                      
                      
                      -Tax
      Fees
                      
                      
                      -
                      
                      
                      
                      -All
      Other Fees
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      110,000
                      
                      
                      $
                      80,000





In the event that we should require
substantial non-audit services, the Board of Directors would approve such
services and the fees therefore.





46





PART
IV


ITEM
15. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES





(a)      
The following documents are filed as part of this report:





Financial
Statements





The
following financial statements of BEFUT International Co., Ltd. and Reports of
Independent Registered Public Accounting Firms are presented in the “F” pages of
this report:







Reports
      of Independent Registered Public Accounting Firms
              
              
              F-1Consolidated
      Balance Sheets - as of June 30, 2010 and 2009
              
              
              F-2Consolidated
      Statements of Income and Other Comprehensive Income - for the
      Years ended June 30, 2010 and 2009
              
              
              F-3Consolidated
      Statements of Shareholders’ Equity - for the Years ended June 30, 2010 and
      2009
              
              
              F-4Consolidated
      Statements of Cash Flows - for the Years ended June 30, 2010 and
      2009
              
              
              F-5Notes
      to Consolidated Financial Statements
              
              
              F-6
      - F-16





(b)     
Exhibits





See the
Exhibit Index following the signature page of this report, which Index is
incorporated herein by reference.




47




SIGNATURES





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




BEFUT
      International Co., Ltd.Date: September
      28, 2010
              By:
              /s/
      Hongbo CaoHongbo
      Cao, President and CEO





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.





September
      28, 2010
                
                /s/
      Hongbo CaoHongbo
      Cao, Chairman of the Board of DirectorsPresident
      and CEO(principal
      executive officer)September
      28, 2010
                
                /s/
      Mei YuMei
      Yu, Director, Chief Financial Officer and Treasurer(principal
      financial officer and principal
                  accounting
      officer)




48





BEFUT
International Co., Ltd.


Exhibit
Index to Annual Report on Form 10-K


For
the Fiscal Year Ended June 30, 2010





3.1
            Amended
      and Restated Articles of Incorporation of the Company
  (1)3.2
            Bylaws of
      the Company. (2)4.1
            Form
      of Convertible Note issued to the investors in our private placement dated
      March 13, 2009. (3)4.2
            Form
      of Warrant issued to the investors in our private placement dated March
      13, 2009. (3)10.1
            Share
      Exchange Agreement, dated March 13, 2009 by and between the Company, Befut
      Nevada and Befut BVI. (3)10.2
            Securities
      Purchase Agreement, dated as of March 13, 2009 by and among the Company
      and the Investors. (3)10.3
            Original
      Equipment Manufacturer Agreement dated February 16, 2009 by and between
      WFOE and Dalian Befut. (3)10.4
            Intellectual
      Property License Agreement dated February 16, 2009 by and between WFOE and
      Dalian Befut. (3)10.5
            Non-competition
      Agreement dated February 16, 2009 by and between WFOE and Dalian Befut.
      (3)10.6
            Lease
      between Dalian Befut and Dalian Wanbao Industrial Co. Ltd.
    (4)10.7
            RMB
      Loan Agreement dated November 2, 2009 by and between Dalian Befut and
      China Development Bank Corporation.10.8
            Pledge
      Contract dated November 2, 2009 by and between Hongbo Cao and China
      Development Bank Corporation.10.9
            Pledge
      Contract dated November 2, 2009 by and between Tingmin Li and China
      Development Bank Corporation.10.10
            Mortgage
      Contract dated November 2, 2009 by and between Dalian Befut and China
      Development Bank Corporation regarding Land Use Right.10.11
            Mortgage
      Contract dated November 2, 2009 by and between Dalian Befut and China
      Development Bank Corporation regarding Building
  Ownership.21.1
            List
      of Subsidiaries.31.1
            Certification
      of the principal executive officer pursuant to Exchange Act Rules
      13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            Certification
      of the principal financial officer and the principal accounting officer
      pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.32.1
            Certification
      of the principal executive officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            Certification
      of the principal financial officer and treasurer pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.




49




(1)
              Filed
      as an exhibit to the Company's Current Report on Form 8-K, as filed with
      the SEC on June 18, 2009, and incorporated herein by this
      reference.(2)
              Filed
      as an exhibit to the Company's Registration Statement on Form 10-SB, as
      filed with the SEC on June 1, 2005, and incorporated herein by this
      reference.





(3)
              Filed
      as an exhibit to the Company's Current Report on Form 8-K, as filed with
      the SEC on March 19, 2009, and incorporated herein by this
      reference.(4)
              Filed
      as an exhibit to the Company's Current Report on Form 10-K, as filed with
      the SEC on October 9, 2009, and incorporated herein by this
      reference.





50


















BEFUT
INTERNATIONAL CO., LTD.





CONSOLIDATED
FINANCIAL STATEMENTS





JUNE
30, 2010 AND 2009






51




Table
of Contents
 
 Page
 Report
      of Independent Registered Public Accounting Firm
                
                
                F-1Consolidated
      Balance Sheets
                
                
                F-2Consolidated
      Statements of Operations and Comprehensive Income
                
                
                F-3Consolidated
      Statements of Stockholders’ Equity
                
                
                F-4Consolidated
      Statements of Cash Flows
                
                
                F-5Notes
      to Consolidated Financial Statements
                
                
                F-6
      - F-16






52


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders
 BEFUT
International Co., Ltd.
 
 We have audited the accompanying
consolidated balance sheets of BEFUT International Co., Ltd. (the “Company”) as
of June 30, 2010 and 2009, and the related consolidated statements of operations
and comprehensive income, stockholders’ equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
 We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform an audit of its internal control over financial reporting. Our audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
 
 In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of BEFUT International Co., Ltd. as of June
30, 2010 and 2009, and the consolidated results of their operations and their
consolidated cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Patrizio & Zhao, LLC
 
 Parsippany,
New Jersey
 September
21, 2010
  F-1
 BEFUT
INTERNATIONAL CO., LTD.
  Consolidated
Balance Sheets
  June 30, 2010
                          
                          
                          June 30, 2009AssetsCurrent
      assets:Cash and cash
      equivalents
                          
                          $
                          1,319,173
                          
                          
                          $
                          210,301Restricted cash
                          
                          
                          1,181,095
                          
                          
                          
                          586,000Accounts receivable, net of
      allowance for doubtful accounts of $83,295
                          
                          
                          9,292,310
                          
                          
                          
                          8,560,592and $20,222 at June
      30, 2010 and 2009, respectivelyInventory
                          
                          
                          2,543,789
                          
                          
                          
                          1,353,532Loans to unrelated
      parties
                          
                          
                          1,054,090
                          
                          
                          
                          6,955,623Bank loan security
      deposits
                          
                          
                          1,031,100
                          
                          
                          
                          733,233Advance payments
                          
                          
                          693,473
                          
                          
                          
                          866,868Advance payments – R &
      D
                          
                          
                          2,088,714
                          
                          
                          
                          2,956,370Due from related
      party
                          
                          
                          472,838
                          
                          
                          
                          -Other current
    assets
                          
                          
                          521,739
                          
                          
                          
                          273,391Total current
    assets
                          
                          
                          20,198,321
                          
                          
                          
                          22,495,910Property
      and equipment, net
                          
                          
                          31,618,074
                          
                          
                          
                          18,646,274Other
      assets:Intangibles, net
                          
                          
                          15,669,375
                          
                          
                          
                          11,335,978Long-term
    investment
                          
                          
                          -
                          
                          
                          
                          2,930Total other
assets
                          
                          
                          15,669,375
                          
                          
                          
                          11,338,908Total assets
                          
                          $
                          67,485,770
                          
                          
                          $
                          52,481,092LiabilitiesCurrent
      liabilities:Accounts payable and accrued
      expenses
                          
                          $
                          3,119,646
                          
                          
                          $
                          659,142Trade notes
    payable
                          
                          
                          -
                          
                          
                          
                          1,172,000Short-term bank
    loans
                          
                          
                          6,039,300
                          
                          
                          
                          8,057,500Current portion of long-term bank
      loans
                          
                          
                          294,600
                          
                          
                          
                          -Convertible notes
      payable
                          
                          
                          -
                          
                          
                          
                          500,000Loans from unrelated
      party
                          
                          
                          370,000
                          
                          
                          
                          249,050Advances from
      customers
                          
                          
                          533,806
                          
                          
                          
                          372,417Income tax
payable
                          
                          
                          1,655,747
                          
                          
                          
                          777,497Other taxes
    payable
                          
                          
                          77,895
                          
                          
                          
                          37,975Other current
      liabilities
                          
                          
                          891,892
                          
                          
                          
                          636,514Total current
      liabilities
                          
                          
                          12,982,886
                          
                          
                          
                          12,462,095Long-term
      bank loan
                          
                          
                          14,435,400
                          
                          
                          
                          5,470,310Total liabilities
                          
                          
                          27,418,286
                          
                          
                          
                          17,932,405EquityStockholders’
      equity:Preferred stock, $0.001 par
      value, 10,000,000 shares authorized,
                          
                          
                          -
                          
                          
                          
                          -no shares issued or
      outstandingCommon stock, $0.001 par value,
      200,000,000 shares authorized,
                          
                          
                          29,716
                          
                          
                          
                          29,48829,715,666 and
      29,488,341 shares issued and outstanding atJun 30, 2010 and 2009, respectivelyAdditional paid-in
      capital
                          
                          
                          21,838,047
                          
                          
                          
                          21,708,275Statutory
reserves
                          
                          
                          1,181,189
                          
                          
                          
                          729,135Retained earnings
                          
                          
                          13,810,157
                          
                          
                          
                          9,750,035Accumulated other comprehensive
      income
                          
                          
                          2,166,533
                          
                          
                          
                          1,956,623Total stockholders’
      equity
                          
                          
                          39,025,642
                          
                          
                          
                          34,173,556`Noncontrolling
      interest
                          
                          
                          1,041,842
                          
                          
                          
                          375,131Total equity
                          
                          
                          40,067,484
                          
                          
                          
                          34,548,687Total liabilities and
      equity
                          
                          $
                          67,485,770
                          
                          
                          $
                          52,481,092
 The accompanying notes are an
integral part of these consolidated financial
statements.
  F-2
 BEFUT
INTERNATIONAL CO., LTD.
 Consolidated
Statements of Operations and Other Comprehensive Income
 
 For
      the Years Ended June 30,2010
                  
                  
                  2009Sales
                  
                  $
                  31,258,662
                  
                  
                  $
                  19,308,939Cost
      of sales
                  
                  
                  22,956,708
                  
                  
                  
                  14,101,545Gross
      profit
                  
                  
                  8,301,954
                  
                  
                  
                  5,207,394Operating
      expensesSelling expenses
                  
                  
                  80,090
                  
                  
                  
                  121,393General and administrative
      expenses
                  
                  
                  3,881,655
                  
                  
                  
                  1,257,979Total operating
      expenses
                  
                  
                  3,961,745
                  
                  
                  
                  1,379,372Income
      from operations
                  
                  
                  4,340,209
                  
                  
                  
                  3,828,022Other
      income (expenses):Government subsidy
      income
                  
                  
                  705,602
                  
                  
                  
                  159,979Interest expense,
    net
                  
                  
                  (287,092
                  )
                  
                  
                  (420,618
                  )Other income (expenses),
      net
                  
                  
                  545,008
                  
                  
                  
                  (432,569
                  )Total other income
      (expenses)
                  
                  
                  963,518
                  
                  
                  
                  (693,208
                  )Income
      before provision for income taxes
                  
                  
                  5,303,727
                  
                  
                  
                  3,134,814Provision
      for income taxes
                  
                  
                  907,083
                  
                  
                  
                  887,696Net
      income before noncontrolling interest
                  
                  
                  4,396,644
                  
                  
                  
                  2,247,118Less:
      net loss attributable to noncontrolling interest
                  
                  
                  (115,532
                  )
                  
                  
                  (12,295
                  )Net
      income attributable to BEFUT
                  
                  
                  4,512,176
                  
                  
                  
                  2,259,413Other
      comprehensive incomeForeign currency translation
      adjustment
                  
                  
                  209,910
                  
                  
                  
                  142,037Comprehensive
      income
                  
                  $
                  4,722,086
                  
                  
                  $
                  2,401,450Basic
      earnings per share
                  
                  $
                  0.15
                  
                  
                  $
                  0.08Diluted
      earnings per share
                  
                  $
                  0.15
                  
                  
                  $
                  0.07Weighted
      average number of common shares outstanding:Basic
                  
                  
                  29,545,797
                  
                  
                  
                  29,488,341Diluted
                  
                  
                  30,110,241
                  
                  
                  
                  30,431,891
 
 The accompanying notes are an
integral part of these consolidated financial
statements.


F-3
 
 BEFUT
INTERNATIONAL CO., LTD.






AccumulatedAdditional
                    
                    
                    
                    
                    
                    
                    
                    
                    other
                    
                    
                    TotalPreferred
      Stock
                    
                    
                    Common
      Stock
                    
                    
                    Paid-in
                    
                    
                    Statutory
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    Stockholders’Shares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Reserve
                    
                    
                    Earnings
                    
                    
                    Income
                    
                    
                    EquityBalance
      at July 1, 2008
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    117,768,300
                    
                    
                    $
                    117,768
                    
                    
                    $
                    4,934,974
                    
                    
                    $
                    653,287
                    
                    
                    $
                    7,566,470
                    
                    
                    $
                    1,814,586
                    
                    
                    $
                    15,087,085Recapitalization upon reverse
      merger
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,090,830
                    
                    
                    
                    2,091
                    
                    
                    
                    (2,091
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Effect of reverse stock
      split
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (90,370,789
                    )
                    
                    
                    (90,371
                    )
                    
                    
                    90,371
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Additional paid-in
      capital
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    16,685,021
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    16,685,021Net income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,259,413
                    
                    
                    
                    -
                    
                    
                    
                    2,259,413Statutory
    reserve
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    75,848
                    
                    
                    
                    (75,848
                    )
                    
                    
                    -
                    
                    
                    
                    -Other comprehensive
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    142,037
                    
                    
                    
                    142,037Balance
      at June 30, 2009
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    29,488,341
                    
                    
                    $
                    29,488
                    
                    
                    $
                    21,708,275
                    
                    
                    $
                    729,135
                    
                    
                    $
                    9,750,035
                    
                    
                    $
                    1,956,623
                    
                    
                    $
                    34,173,556Issuance of common
      shares
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    227,325
                    
                    
                    
                    228
                    
                    
                    
                    129,772
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    130,000Net income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    4,512,176
                    
                    
                    
                    -
                    
                    
                    
                    4,512,176Statutory
    reserve
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    452,054
                    
                    
                    
                    (452,054
                    )
                    
                    
                    -
                    
                    
                    
                    -Other comprehensive
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    209,910
                    
                    
                    
                    209,910Balance
      at June 30, 2010
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    29,715,666
                    
                    
                    $
                    29,716
                    
                    
                    $
                    21,838,047
                    
                    
                    $
                    1,181,189
                    
                    
                    $
                    13,810,157
                    
                    
                    $
                    2,166,533
                    
                    
                    $
                    39,025,642





The accompanying notes are an
integral part of these consolidated financial
statements.




F-4





BEFUT
INTERNATIONAL CO., LTD.









For
      the Years Ended June 30,2010
                
                
                2009Cash
      flows from operating activities:Net
      Income
                
                $
                4,512,176
                
                
                $
                2,259,413Adjustments
      to reconcile net income to net cashProvided
      by (used in) operating activities:Depreciation and
      amortization
                
                
                1,644,756
                
                
                
                553,064Noncontrolling
      interest
                
                
                (115,532
                )
                
                
                (12,295
                )Donated intangible assets
      received
                
                
                -
                
                
                
                (155,290
                )Changes in current assets and
      current liabilities:Accounts
      receivable
                
                
                (687,316
                )
                
                
                (2,634,196
                )Inventory
                
                
                (1,177,807
                )
                
                
                297,172Advance
      payments
                
                
                762,442
                
                
                
                307,584Other
      current assets
                
                
                (249,487
                )
                
                
                634,375Accounts
      payable and accrued expenses
                
                
                2,454,268
                
                
                
                (854,391
                )Trade notes
    payable
                
                
                (1,173,360
                )
                
                
                1,172,000Advances from
      customers
                
                
                158,674
                
                
                
                17,522Income
      tax payable
                
                
                870,266
                
                
                
                777,497Other
      taxes payable
                
                
                39,904
                
                
                
                (9,173
                )Other
      current liabilities
                
                
                244,461
                
                
                
                191,354Total adjustments
                
                
                2,771,269
                
                
                
                285,223Net cash provided by operating
      activities
                
                
                7,283,445
                
                
                
                2,544,636Cash
      flows from investing activities:Loans to unrelated
      parties
                
                
                5,914,113
                
                
                
                (6,448,170
                )Advance payments for property and
      equipment
                
                
                (583,921
                )
                
                
                (642,672
                )Advance payments for R &
      D
                
                
                880,020
                
                
                
                (2,956,370
                )Due from related
      party
                
                
                (470,816
                )
                
                
                -Additions to property and
      equipment
                
                
                (18,715,772
                )
                
                
                (142,478
                )Additions to construction in
      progress
                
                
                -
                
                
                
                (3,395,532
                )Acquisition of intangible
      assets
                
                
                -
                
                
                
                (83,505
                )Long-term
    investment
                
                
                2,933
                
                
                
                -Net cash used in investing
      activities
                
                
                (12,973,443
                )
                
                
                (13,668,727
                )Cash
      flows from financing activities:Bank loan security
      deposits
                
                
                (292,607
                )
                
                
                (100,353
                )Proceeds (repayment) of
      short-term bank loans
                
                
                (2,053,380
                )
                
                
                5,860,000Convertible notes
      payable
                
                
                (500,000
                )
                
                
                500,000Loans from unrelated
      parties
                
                
                120,661
                
                
                
                249,050Proceeds (repayment) of long-term
      bank loans
                
                
                9,190,342
                
                
                
                (316,440
                )Additional paid-in
      capital
                
                
                130,000
                
                
                
                5,301,971Contribution from minority
      shareholder
                
                
                777,351
                
                
                
                -Net cash provided by financing
      activities
                
                
                7,372,367
                
                
                
                11,494,228Effect
      of foreign currency translation on cash
                
                
                21,598
                
                
                
                73,115Net
      increase in cash and cash equivalents and restricted cash
                
                
                1,703,967
                
                
                
                443,252Cash
      and cash equivalents  and restricted cash at beginning of
      year
                
                
                796,301
                
                
                
                353,049Cash
      and cash equivalents and restricted cash at end of year
                
                $
                2,500,268
                
                
                $
                796,301Supplemental
      schedule of non cash activities:Construction in progress
      transferred to property and equipment
                
                $
                11,246,719
                
                
                $
                -Construction in progress
      transferred to intangible assets
                
                $
                5,487,937
                
                
                $
                -Intangible assets received in
      exchange for ownership
                
                $
                -
                
                
                $
                11,383,050
 The accompanying notes are an
integral part of these consolidated financial
statements.
  F-5


BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
1 – Organization and Nature of Business





BEFUT
International Co., Ltd., formerly known as Frezer, Inc. (“Frezer”), a former
public shell company as defined in Rule 12b-2 of
theSecurities Exchange Act of
1934, as amended,was established under the laws
of Nevada onMay 2, 2005. The accompanying
consolidated financial statements include the financial statements ofBEFUT International Co., Ltd.and its
subsidiaries (collectively,
the
“Company”). TheCompany’sprimary businessis to design manufacture and sell industrial wires and
cables.





On March
13, 2009, Frezer entered into and consummated a series of transactions whereby
(a) Frezer acquired 100% of the outstanding shares ofcommon stock
of Befut Corporation, a company incorporated in the State of Nevada on January
14, 2009 (“Befut Nevada”), constituting all of the capitalstock of
Befut Nevada, from Befut International Co. Limited, a British Virgin Islands
company (“Befut BVI”) in exchange for the issuance to Befut BVIof an
aggregate of 117,768,300 shares of Frezer’s common stock and the cancellation of
an aggregate of 2,176,170 shares of Frezer’s common stockand (b)
Frezer raised $500,000 in gross proceeds from the sale to four investors of
convertible promissory notes of Frezer in the aggregate principal amount of$500,000 and
warrants to purchase an aggregate of 720,076 shares of Frezer’s common stock.
The acquisition was accounted for as a reverse acquisitionunder the
purchase method for business combinations. On June 18, 2009, the Company
effectuated a name change from its original name “Frezer, Inc.”to “BEFUT
International Co., Ltd.”.





Hongkong
BEFUT Co., Ltd. (“Befut Hongkong”) was incorporated on September 10, 2008 under
the laws of Hong Kong and is a wholly-owned subsidiary of BefutNevada.  On
February 13, 2009, Befut Hongkong invested 100% of the registered capital to
form Befut Electric (Dalian) Co., Ltd. (“WFOE”), a Chinese company incorporated
in the city of Dalian, the People’sRepublic of
China (the “PRC” or “China”).





On
February 16, 2009, WFOE entered into a series of agreements, the purpose of
which was to restructure Dalian Befut Wire & Cable ManufacturingCo., Ltd.
(“Dalian Befut”) in accordance with applicable PRC law so that Dalian Befut
could raise capital and grow its business (the “Restructuring”). Dalian Befut
wasincorporated
on June 13, 2002 under the laws of the PRC. The Restructuring included the
following arrangements: First, WFOE entered into an OriginalEquipmentManufacturer Agreement (the “OEM Agreement”) with Dalian Befut containing
the following material provisions: (i) Dalian Befut may not manufactureproducts for
any person or entity other than WFOE without the written consent of WFOE; (ii)
WFOE is to provide all raw materials and advance related costs toDalian Befut,
as well as provide design requirements for products to be manufactured; (iii)
WFOE is responsible for marketing and distributing theproducts
manufactured by Dalian Befut and will keep all related profits and revenues; and
(iv) WFOE has an exclusive right, exercisable in its sole discretion, to
purchase all or part ofthe assets
and/or equity of Dalian Befut at a mutually agreed price to the extent permitted
by applicable PRC law. Inaddition, on
February 16, 2009, WFOE entered into two ancillary agreements with Dalian Befut:
(i) an Intellectual Property License Agreement,pursuant to
which WFOE shall be permitted to use intellectual property rights such as
trademarks, patents and know-how for the marketing and sale of the products
manufactured by Dalian Befut; and (ii) a Non-competition Agreement, pursuant to
which Dalian Befut shall not compete against WFOE.





On April
14, 2006, Dalian Marine Cable Co., Ltd. (“Dalian Marine Co.”) was incorporated
in the PRC by Dalian Befut. Its current shareholders are Dalian Befut(owning 86.6%
of the equity interest) and three individual shareholders. Dalian Marine Co. was
formed to conduct marketing activities and produce marine cables for Dalian
Befut.





On July
1, 2009, Dalian Befut, our captive manufacturer, formed a joint venture under
the laws of the PRC, Dalian Befut Zhong Xing Switch Co., Ltd. (“Befut Zhong
Xing”), with pre-registered capital of RMB1,000,000. Dalian Befut invested
RMB700,000 for its 70% equity interest in Befut Zhong Xing. In January, 2010,
Dalian Befut increased its investment capital to RMB14.7 million with a transfer
of intangible assets to Befut Zhong Xing on 1/1/2010 and raised its equity
ownership percentage in Befut Zhong Xing to 73.5%.




F-6




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
2 – Summary of Significant Accounting Policies





Basis
of Presentation





The accompanying
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted intheUnited Stated of
America (“USGAAP”). The
consolidated financial statements include the financial statements of the Company and its
controlling subsidiary. All significant
intercompany balances and transactions have been eliminated upon
consolidation.





Use
of Estimates





The
preparation of consolidatedfinancial statements in accordance with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of theconsolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates include
allowance for doubtful accountsand income
taxes. Actual
results could differ from those estimates.





Cash
and Cash Equivalents





In
accordance with FASB
ASC Topic 230, "Statement of Cash Flows", the Company
considers all highly liquid instruments with original maturities of three months
or less to be cash equivalents.





Accounts
Receivable





Accounts
receivable are recorded net of allowance for doubtful accounts. The Company
provides an allowance for doubtful accounts equal to the estimated uncollectible
amounts. Periodically management assesses customer credit history and
relationships as well as performs accounts receivable aging analysis. Based on
the results, management determines whether certain balances are deemed
uncollectible at the end of period. Using its past collection experience, the
Companyreserves 0.3%
of accounts receivable balances that have been outstanding for less than one
year, 3% of accounts receivable balances that have been outstanding for more
than one year but less than two years, and 10% of accounts receivable balances
that have been outstanding for more than two years. At June 30, 2010 and 2009,
the Company had accounts receivable of $9,292,310 and $8,560,592, net of allowance for doubtful
accountsof$83,295 and $20,222, respectively.





Inventory





Inventory is stated at the
lower of cost or market.Cost is
determined using the
weighted-average cost method. Provisions are made for excess, slow moving and
obsolete inventory as well as inventory whose carrying value is in excess of net
realizable value. Managementcontinually evaluates the recoverability based on assumptions about
customer demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory reserves or
write-downs may be required that could negatively impact our gross margin and
operating results.





Property
and Equipment





Property
and equipment are stated at cost. Depreciation is calculated based
on the
straight-line method over the
estimated useful lives of the assets as
follows:




Estimated
      Useful LifeVehicles
                    5
      to 10 yearsFurniture,
      machinery and equipment
                    5
      to 10 yearsBuildings
      and improvements
                    20
      to 40 years





Construction
in progress primarily represents the construction costsof plant,
machineryand
equipment. Costs incurred are capitalized and transferred to property and
equipment upon completion, at which time depreciation commences.




F-7




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
2 – Summary of Significant Accounting Policies (continued)





Property
and Equipment (continued)





Cost of
repairs and maintenance is expensed as incurred. Gain or loss on
disposal of property and equipment, if any, is recognized in the consolidated
statements of operations.





Long-Lived
Assets





In
accordance with FASB ASC Topic 360-10, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company
reviews the recoverability of its long-lived assets on a periodic basis in order
to identify business conditions, which may indicate a possible impairment. The
assessment for potential impairment is based primarily on the Company’s ability
to recover the carrying value of its long-lived assets from expected future
discounted cash flows. If the total of the expected future discounted cash flows
is less than the total carrying value of the assets, a loss is recognized for
the difference between the fair value (computed based upon the expected future
discounted cash flows) and the carrying value of the assets.





Intangible
Assets





Intangible
assets are stated at cost. Intangible assets with finite life are amortized over
their estimated useful life using straight-line method whereas intangible assets
with infinite life are not subjectto
amortization.  Impairment test is performed at a minimum once a year
to determine possible impairment loss. Estimated useful life of intangible
assets is as follows:


Estimated
      Useful LifeSoftware
                        5
      yearsHigh-tech
      patents
                        10yearsLand
      use right
                        40
      to 50 yearsWell-known
      trademark
                        Infinite





Impairment
of Intangible Assets





The
Company applies the provisions of FASB ASC Topic 350
“Goodwill and Other Intangible Assets”which addresses
how goodwill and other acquired intangible assetsshould be
accounted for in financial statements.In this regard, the
Companytests these intangible assets for impairment annually or
morefrequently if
indicators of potential impairment are present. Such circumstances could
include, but are not limited to: (1) a significant decrease in the market value
of an asset, (2) a significant adverse change in the extent or manner in which
an asset is used, or (3) an accumulation
of costs significantly in excess of the amount originally expected for the
acquisition of an asset. The Company measures the carrying amountof
the asset against the estimated discounted future cash flows associated with
itat a risk-free
rate of interest.  Should the present value of
the expected future net cash flows be less than the carrying value of the asset
being evaluated, an impairment loss would be recognized. The impairment loss
would be calculated as the amount by which the carrying value of the asset
exceeds its fair value. The
fair value is measured based on quoted market prices, if available. If quoted
market prices are not available, the estimate of fair value is based on various
valuation techniques, including the discounted value of estimated future cash
flows. The evaluation of asset impairment requires the Company to make
assumptions about future cash flows over the life of theasset being
evaluated. These assumptions require significant judgment and actual results may
differ from assumed and estimated amounts.





Revenue
Recognition





The
Company derives its revenues primarily from designing and
manufacturing of industrial wires and cables. In accordance with the
provisions of ASC Topic 605, revenue is recognized when products are shipped,
title and risk of lossis passed to the customers
and collection is reasonably assured. Payments received before the above
criteria are satisfied are recorded as advance from customers.




F-8




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009


Note
2 – Summary of Significant Accounting Policies (continued)





Research
and Development





Research
and development costs are expensed when incurred. Research and development costs
for the years ended June 30, 2010 and 2009were $880,944
and $89,179, respectively.





Advertising
Costs





The
Company expenses the cost of advertising as incurred. Advertising costs for the
years ended June
30, 2010 and 2009were
insignificant.





Income
Taxes





Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases, and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.





A
valuation allowance is provided to reduce the carrying amount of deferred tax
assets if it is considered more likely than not that some portion, or all, of
the deferred tax assets will not be realized. No differences were noted between
the book and tax bases of the Company’s assets and liabilities, respectively.
Therefore, there are no deferred tax assets or liabilities for the years ended
June 30, 2010 and 2009. The standard corporate income tax rate was
25%.





Fair
Value of Financial Instruments





The
carrying amounts of the Company’s financial instruments, which include cash and
cash equivalents, accounts receivable, accounts payable, accrued expenses and
other obligations, approximate their fair value due to the short-term maturities
of the related instruments.





Foreign
Currency Translation and Transactions





The
financial position and results of operations of the Company is determined using
local currency (Chinese Yuan) as the functional currency. Assets and liabilities
are translated at the prevailing exchange rate in effect at each year end.
Contributed capital accounts are translated using the historical rate of
exchange when capital is contributed. Income statement accounts are translated
at the average rate of exchange during the year. Currency translation
adjustments arising from the use of different exchange rates are included in
accumulated other comprehensive income in shareholders' equity. Gains and losses
resulting from foreign currency transactions are included in the consolidated
statements of operationsand other comprehensive
income.





Comprehensive
Income





The
Company has adopted FASB ASC Topic 220,
“Reporting
Comprehensive Income”, which
establishes rules for the
reporting and display of comprehensive income, its components and accumulated
balances. ASC 220defines comprehensive income to include all changes in equity, including
adjustments to minimum pension liabilities, accumulated foreign currency
translation, and unrealized gains or losses on available-for-sale marketable
securities, except those resulting from investments by owners and distributions
to owners.




F-9


BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009


Note
2 – Summary of Significant Accounting Policies (continued)





Earnings
Per Share





In
accordance with ASC Topic 260, “Computation of Earnings Per Share” and ASC 260,
“Participating Securities and the Two-Class Method under FASB Statement No. 128”
(“EITF No. 03-6”),basic earnings per share is computed by dividing net income
attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year. The Company’s Series A redeemable
convertible preferred shares are participating securities. Diluted earnings per
share is calculated by dividing net income attributable to ordinary shareholders
as adjusted for the effect of dilutive ordinary equivalent shares, if any, by
the weighted average number of ordinary and dilutive ordinary equivalent shares
outstanding during the year. Ordinary equivalent shares consist of the ordinary
shares issuable upon the conversion of the convertible preferred shares (using
the if-converted method) and ordinary shares issuable upon the exercise of
outstanding share options (using the treasury stock method).





Recent
Accounting Pronouncements





In
January 2010, FASB expanded the disclosure requirements for fair value
measurements relating to the transfers in and out of Level 2 measurements and
amended the disclosure for the Level 3 activity reconciliation to be presented
on a gross basis. In addition, valuation techniques and inputs should be
disclosed for both Levels 2 and 3 recurring and nonrecurring measurements. The
new requirements are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about the Level 3
activity reconciliation which are effective for fiscal years beginning after
December 15, 2010. The Company adopted the new disclosure requirements on
January 1, 2010 except for the disclosure related to the Level 3 reconciliation,
which will be adopted on January 1, 2011. The adoption will not have an impact
on its consolidated financial condition, results of operations or cash
flows.





In
October 2009, the FASB issued an amendment to the accounting and disclosure for
revenue recognition. The amendment modifies the criteria for recognizing revenue
in multiple element arrangements. Under the guidance, in the absence of
vendor-specific objective evidence (“VSOE”) or other third party evidence
(“TPE”) of the selling price for the deliverables in a multiple-element
arrangement, this amendment requires companies to use an estimated selling price
(“ESP”) for the individual deliverables. Companies shall apply the
relative-selling price model for allocating an arrangement’s total consideration
to its individual deliverables. Under this model, the ESP is used for both the
delivered and undelivered elements that do not have VSOE or TPE of the selling
price. The guidance is effective for the fiscal year beginning on or after
June 15, 2010, and will be applied prospectively to revenue arrangements
entered into or materially modified after the effective date. The Company
intends to adopt the new guidance prospectively beginning January 1, 2011
and is currently evaluating the impact the adoption will have on its
consolidated financial statements.





On July
1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched
the FASB Accounting Standards Codification (“ASC”), which has
become the single official source of authoritativenongovernmental
U.S. GAAP, in addition to guidance issued by the Securities and Exchange
Commission. The ASC is designed to
simplify U.S. GAAP into a single, topically ordered structure. All guidance
contained in the ASC carries an
equal level of authority. The ASC is effective
for all interim and annual periods ending after September 15, 2009.The Company’s
implementation of this guidance effective July 1, 2009 did not have a material
effect on the Company’s condensed consolidated financial
statements.





On July 1, 2009, the Company adopted
the accounting and disclosure requirements of Statement of Financial Accounting
Standard (“SFAS”) No.160,
Noncontrolling Interests in Consolidated Financial Statements, an Amendment of
ARB No. 51, which is now included with ASC Topic 810 Consolidation.  This
standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation.  On a
prospective basis, any changes in ownership will be accounted for as equity
transactions with no gain or loss recognized on the transactions unless there is
a change in control.





Reclassification





Certain
amounts as of June 30, 2009 were reclassified for comparative presentation
purposes.




F-10




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
3– Restricted Cash





As of June 30, 2010 and 2009,
the Company had $1,181,095 and $586,000
restricted cash,respectively. These restricted
cash balancesarereserved for settlement
of tradenotes payablein connection withinventory purchases.The cash held in
custody by bankissuing thetrade notes payable, is restricted as to withdrawal or use, and is
currentlyearning
interest.





Note
4– Inventory





Inventory
consisting of material, labor and manufacturing overhead at June30, 2010 and June 30,
2009 consists of the following:





June 30, 2010
                  
                  
                  June 30,2009Raw
      materials
                  
                  $
                  1,093,193
                  
                  
                  $
                  400,343Work
      in process
                  
                  
                  323,275
                  
                  
                  
                  60,703Finished
      goods
                  
                  
                  1,127,321
                  
                  
                  
                  892,486Total
                  
                  $
                  2,543,789
                  
                  
                  $
                  1,353,532





Note
5– Loans to Unrelated Parties





As ofJune 30,
2010 and 2009, the
Company had outstandingloans to unrelated partiesof $1,054,090 and
$6,955,623,
respectively. These
loans representadvancestounrelated
partiesat an annual
interest rate of50% above the
applicable bank interest rate. Interest payments are
made semi-annually with no principal paymentsrequireduntil on or before
the due date, as per the terms of the loan agreement.





Note
6– Advance Payments





Advance
payments as of June 30, 2010 and 2009 consist of the following:





June 30, 2010
                  
                  
                  June 30, 2009Advance
      payments for inventory
                  
                  $
                  399,868
                  
                  
                  $
                  224,196Advance
      payments for land and equipment
                  
                  
                  293,605
                  
                  
                  
                  642,672Total
                  
                  $
                  693,473
                  
                  
                  $
                  866,868





Note
7 – Advance Payments – Research and Development





As a
common business practice in China, the Company is required to make advance
payments for goods or services that will be used in future research and
development activities. The balance of outstanding advance payments for such
activities as of June 30, 2010 and 2009 was $2,088,714 and $2,956,370,
respectively.





Note
8– Property and Equipment





Property
and equipment at June 30, 2010 and 2009 consist of the following:





June 30, 2010
                  
                  
                  June 30, 2009Buildings
                  
                  $
                  19,877,285
                  
                  
                  $
                  1,019,457Machinery
      and equipment
                  
                  
                  12,673,324
                  
                  
                  
                  1,663,732Office
      equipment and furniture
                  
                  
                  100,927
                  
                  
                  
                  57,770Vehicles
                  
                  
                  466,380
                  
                  
                  
                  272,327Subtotal
                  
                  
                  33,117,916
                  
                  
                  
                  3,013,286Less:
      Accumulated depreciation
                  
                  
                  1,499,842
                  
                  
                  
                  1,082,27131,618,074
                  
                  
                  
                  1,931,015Add:
      Construction in progress
                  
                  
                  -
                  
                  
                  
                  16,715,259Total
                  
                  $
                  31,618,074
                  
                  
                  $
                  18,646,274





Depreciation
expense for the years ended June 30, 2010 and 2009 was $410,043 and $261,544,
respectively.




F-11




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
9 – Intangible Assets





Intangible
assets at June 30, 2010 and 2009 consist of the following:





June 30, 2010
                  
                  
                  June 30, 2009Software
                  
                  $
                  22,684
                  
                  
                  $
                  16,049Trademark
                  
                  
                  83,961
                  
                  
                  
                  83,505Land
      use rights
                  
                  
                  5,505,028
                  
                  
                  
                  -Patent
                  
                  
                  11,601,348
                  
                  
                  
                  11,538,406Subtotal
                  
                  
                  17,213,021
                  
                  
                  
                  11,637,960Less:
      Accumulated amortization
                  
                  
                  1,543,646
                  
                  
                  
                  301,982Total
                  
                  $
                  15,669,375
                  
                  
                  $
                  11,335,978





On
October 30, 2009, the Company acquired the land use rights for its new factory,
which is located in Changxing Island, Dalian. Amortization for the land use
rights started in November 2009 and will be over a useful life of 47 years using
the straight-line method. Amortization expense of land use rights for the year
ended June 30, 2010 was $77,752.





Amortization
expense for the years ended June 30, 2010 and 2009 was $1,234,713 and $291,520,
respectively.





Note
10 – Accounts Payable and Accrued Expenses





Accounts
payable and accrued expenses at June 30, 2010 and 2009 consist of the
following:





June 30, 2010
                  
                  
                  June 30, 2009Accounts
      payable
                  
                  $
                  3,009,646
                  
                  
                  $
                  527,142Accrued
      expenses
                  
                  
                  110,000
                  
                  
                  
                  132,000Total
                  
                  $
                  3,119,646
                  
                  
                  $
                  659,142





The
carrying value of accounts payable and accrued expenses approximates fair value
due to the short-term nature of these obligations.





Note
11 – Short-Term Bank Loans





Short-term
bank loans consist of the following:





June 30, 2010
                                        
                                        
                                        June 30, 2009On
      July 31, 2008, the Company obtained a loan from GuangdongDevelopment
      Bank, of which the principal was paid in full by July 30,
      2009.The
      interest was calculated using an annual fixed interest rate of
      9.98%and
      paid monthly. The loan was secured by a third party.
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        586,000On
      August 27, 2008, the Company obtained a loan from Bank of
      Dalian,of
      which the principal was paid in full by August 27, 2009. The
      interestwas
      calculated using an annual fixed interest rate of 10.458% and
      paidmonthly.
      The loan was secured by the Company’s property and
    equipment,Inventory
      and a third party.
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        2,856,750On
      November 21, 2008, the Company obtained a loan from Agricultural
      Bankof
      China of which the principal was paid in full by August 20, 2009.
      Theinterest
      was calculated using an annual fixed interest rate of 10.0485%
      andpaid
      monthly. The loan was secured by property and equipment and a third
      party.
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        219,750
  F-12
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009


Note
11 – Short-Term Bank Loans (continued)





June 30, 2010
                                                  
                                                  
                                                  June 30, 2009On
      December 24, 2008, the Company obtained a loan from Shanghai
      PudongDevelopment
      Bank of which the principal was paid in full by December
    24,2009.
      The  interest was calculated using a quarter fixed interest rate
      of6.138%
      and paid monthly. The loan was secured by a third party.
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  1,465,000On
      May 6, 2009, the Company obtained a loan from China Merchants
      Bank,of
      which the principal was paid in full by May 5, 2010. The
      interestwas
      calculated using an annual fixed interest rate of 5.841% and
      paidmonthly.
      The loan was secured by the Company’s property and
    equipment.
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  2,930,000On
      September 16, 2009, the Company obtained a loan from Harbin
      Bank,of
      which the principal is to be paid in full by September 15, 2010. The
      interestis
      to be calculated using an annual fixed interest rate of 6.372% and
      paidMonthly.
      The loan is secured by the Company’s property and
    equipment.
                                                  
                                                  $
                                                  2,946,000
                                                  
                                                  
                                                  $
                                                  -On
      October 30, 2009, the Company obtained a loan from Bank of
      Dalian,of
      which the principal is to be paid in full by October 29, 2010. The
      interestis
      to be calculated using an annual fixed interest rate of 6.903% and
      paidmonthly.
      The loan is guaranteed by a third party.
                                                  
                                                  $
                                                  2,356,800
                                                  
                                                  
                                                  $
                                                  -On
      June 25, 2010, the Company obtained a loan from Bank of East
      Asia,of
      which the principal is to be paid in full by December 25, 2010. The
      interestis
      to be calculated using an annual fixed interest rate of 6.318% and
      paidmonthly.
      The loan is guaranteed by accounts receivables.
                                                  
                                                  $
                                                  736,500
                                                  
                                                  
                                                  $
                                                  -Total
                                                  
                                                  $
                                                  6,039,300
                                                  
                                                  
                                                  $
                                                  8,057,500





Note
12 – Long-Term Bank Loans





Long term bank loans consist
of the following:





June 30, 2010
                                                  
                                                  
                                                  June 30, 2009In
      November 2006, the Company obtained loans from Construction
      Bankof
      China, for the purchase of property. As per the terms of the
      loanagreement,
      the loan will mature in November 2011. The interest rate is
    tobe
      adjusted every twelve months. The annual interest ratefor the first andthe
      second year wasfixed
      at 8.6879% and 7.50312%,
      respectively.
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  5,470,310On
      November 2, 2009, Dalian Befut entered into a Loan Agreement
      withthe
      PRC National Development Bank Joint Equity Corporation
    (“NDB”)pursuant
      to which Dalian Befut borrowed RMB100,000 (approximately$14,670,000)
      from NDB (the “Loan”), The term of the Loan is seven
years,with
      a maturity date of November 1, 2016. The interest rate is a variable
      rateequal
      to 5% per annum above the floating base interest for loans of
      thesame
      term promulgated by the PRC’s central bank, China People’s
      Bank.The
      Loan was designated to finance the construction of Dalian
      Befut’splanned
      specialty cable production lines with a production
capacityof
      15,000 tons. The Loan was secured by, among other liens, a first
      prioritylien
      on Dalian Befut’s land use right and its building property
      ownershipand
      guaranteed by, among other guarantees, Mr. Cao and Mr. Li,
      Dalian,Befut’s
      two major shareholders.
                                                  
                                                  $
                                                  14,730,000
                                                  
                                                  
                                                  $
                                                  -Total
                                                  
                                                  $
                                                  14,730,000
                                                  
                                                  
                                                  $
                                                  5,470,310Less: Current
      portion
                                                  
                                                  
                                                  294,600
                                                  
                                                  
                                                  
                                                  -Total long-term
    loans
                                                  
                                                  $
                                                  14,435,400
                                                  
                                                  
                                                  $
                                                  5,470,310




F-13




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
13 –Earnings Per Share





The
Company presents earnings per share on a basic and diluted basis. Basic earnings
per share are computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding. Diluted earnings per
share are computed by dividing income available to common shareholders by the
weighted average number of shares outstanding plus the dilutive effect of
potential securities. All shares and per share data have been adjusted
retroactively to reflect the recapitalization of
the Company pursuant to the Securities Exchange Agreement withBefut
Nevada.





For
      the Years Ended June 30,2010
                  
                  
                  2009Net
      income
                  
                  $
                  4,512,176
                  
                  
                  $
                  2,259,413Weighted
      average common shares
                  
                  
                  29,545,797
                  
                  
                  
                  29,488,341(denominator
      for basic income per share)Effect
      of dilutive securities:Convertible
      notes
                  
                  
                  564,444
                  
                  
                  
                  943,550Weighted
      average common shares
                  
                  
                  30,110,241
                  
                  
                  
                  30,431,891(denominator
      for diluted income per share)Basic
      earnings per share
                  
                  $
                  0.15
                  
                  
                  $
                  0.08Diluted
      earnings per share
                  
                  $
                  0.15
                  
                  
                  $
                  0.07





Note
14– Stockholders’ Equity And Related Financing Agreements





On March
13, 2009, as part of the reverse merger transaction, Frezer acquired, from Befut
BVI, 100% of the outstanding shares of common stock of Befut Nevada. In
exchange, Befut BVI was issued 117,768,300 shares of Frezer’s common stock,
under a Share Exchange Agreement (“SEA”) pursuant to an exemption under Section
4(2) of the Securities Act of 1933, as amended, for issuances not involving a
public offering. As a result of the transaction, Befut Nevada became a
wholly-owned subsidiary of Frezer.





On March
13, 2009, Frezer completed a private financing totaling $500,000, for which
convertible promissory notes were issued, with four accredited investors (the
“March 2009 Financing”). Consummation of the March 2009 Financing was a
condition to the completion of the share exchange transaction with Befut BVI and
the Befut BVI Stockholders under the SEA. The securities offered in the March
2009 Financing were sold pursuant to a Securities Purchase Agreement (the
“Purchase Agreement”) by and among Frezer and the investors named in the
Purchase Agreement.





In
accordance with the Purchase Agreement, Frezer issued securities consisting of:
(i) 3,130,869 shares of Frezer’s common stock $0.001 par value per share in
connection with the private financing; and (ii) Five (5) year warrants to
purchase 720,076 shares of Frezer common stock at an initial exercise price of
$0.1916 per share.





On June
18, 2009, Company effectuated a 1 for 4.07 reverse stock split of its
outstanding common stock (the “Reverse Split”). The Reverse Split did not alter
the number of shares of the common stock the Company is authorized to issue, but
rather simply reduced the number of shares of its common stock issued and
outstanding. Any fractional shares issued as a result of the Reserve Split were
rounded up. In addition, any shareholder owning at least 100 shares but less
than 407 shares of the Company’s common stock on June 17, 2009, would own at
least 100 shares after giving effect to the Reverse Split.




F-14




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009




Note
14– Stockholders’ Equity And Related Financing Agreements
(continued)





On March
13, 2009, the Company issued convertible notes in an aggregate principal amount
of $500,000, at an annual interest of 15%. On March 12, 2010, the maturity date
of the convertible notes, the Company repaid convertible notes in the amount of
$370,000 and an interest payment of $55,500. The remaining convertible notes in
the aggregate principal amount of $130,000 were converted into 200,007 shares of
common stock of the Company at the conversion price of $0.65 per share on May 6,
2010.





Note
15– Income Taxes





The
Company is a Nevada corporation and conducts all of its business through its
Chinese subsidiaries. The Company’s business is conducted solely in the PRC. As
the Company is a U.S. holding company, it has not recorded any income for the
year ended June 30, 2010 and 2009, there was no provision or benefit for U.S.
income tax purpose.





The
Company is governed by the Income Tax Law of the PRC concerning the private-run
enterprises, which are generally subject to tax at a new statutory rate of 25%
and was, until January 2008, subject to tax at a statutory rate of 33% (30%
state income tax plus 3% local income tax) on income reported in the statutory
statements after appropriate tax adjustments.





On March
16, 2007, the National People’s Congress of China approved the Corporate Income
Tax Law of the PRC (the “New CIT Law”), which became effective from January 1,
2008. Under the New CIT Law, the corporate income tax rate applicable to all
companies, including both domestic and foreign-invested companies, is 25%,
replacing the previous applicable tax rate of 33%. For the years ended June 30,
2010 and 2009, the income tax provision for the Company was $907,083 and
$887,696, respectively.





In July
2006, the FASB issued FASB Interpretation No.48, Accounting for Uncertainty in
Income Taxes (FIN48). FIN 48
clarifies the accounting for income taxes by prescribing a minimum probability
threshold that a tax position must meet before a financial statement benefit is
recognized. The minimum threshold is defined in FIN48 as a tax
position that is more likely than not to be sustained upon examination by the
applicable taxing authority, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. The Company
does not recognize any benefits in the financial statements for
the years ended June 30, 2010 and 2009.





Note
16 – Employee
Welfare Plan





The
Company has established an employee welfare plan in accordance with applicable
Chinese laws and regulations. Full-time employees of the Company in the PRC
participate in a government-mandated multi-employer defined contribution plan
pursuant to which certain pension benefits, medical care, unemployment
insuranceand other
welfare benefits are provided to employees. PRC labor regulations require the
Company to accrue for these benefits based on a certain percentage of the
employees’ salaries.





Note
17 – Statutory Reserve





Under PRC
law, the Company’s subsidiaries in PRC are required to set aside 10% of its net
income each year to fund a designated statutory reserve fund until such funds
reach 50% of registered share capital. At June 30, 2010 and 2009, the balances
for statutory reserve were $1,181,189 and $729,135, respectively.





Note
18 – Risk Factors





The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal conditions in the PRC. The Company's business may
also be influenced by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.




F-15




BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 June
30, 2010 and 2009


Note
19 – Risk of Concentration and Credit Risk





For the
years ended June 30, 2010, five vendors accounted for approximately 77% of the
Company’s raw materials, while for the fiscal year ended June 30, 2009, five
vendors accounted for approximately 62% of the Company’s raw materials.
Purchases from these vendors were $18,270,181 and $10,041,851 for the years
ended June 30, 2010 and 2009, respectively.





For the
fiscal year ended June 30, 2010, five customers accounted for $13,223,354 in
sales, or approximately 46% of the Company’s total sales. For the fiscal year
ended June 30, 2009, five customers accounted for $8,815,511 in sales, or
approximately 46% of the Company’s total sales.





Financial
instruments which potentially subject the Company to credit risk consist
principally of cash on deposit with financial institutions. Management believes
that the financial institutions that hold the Company’s cash and cash
equivalents are financially sound and minimal credit risk exists with respect to
these investments.





Note
20 – Supplemental Cash Flow Disclosures





The
following is supplemental information relating to the consolidated statements of
cash flows:





For
      the Years Ended June 30,2010
                  
                  
                  2009Cash
      paid for interest
                  
                  $
                  1,200,270
                  
                  
                  $
                  893,865Cash
      paid for income taxes
                  
                  $
                  -
                  
                  
                  $
                  110,199





Note
21 - Subsequent Events





On July
23, 2010, Dalian Befut acquired 60% of equity interests of Dalian Yuansheng for
$88,235 (the registered capital value of such equity interests) from Mr.
Chengnian Yan. Dalian Befut also increased Dalian Yuansheng’s registered capital
by RMB 5 million (or $735,294), thereby increasing Dalian Befut’s equity
interests to 93.3%.  Dalian Yuansheng is engaged in the research and
development of carbon fiber composite cable and other specialty
cables.





On July
5, 2010, Dalian Befut signed a Guaranty Contract with Dalian Vastitude Media
Group Co., Ltd. Dalian Befut was the guarantor for the bank loan of Dalian
Vastitude Media Group Co., Ltd. The bank loan was in the amount of RMB1.8
million and with a term of five months.





F-16