UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 
 x
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.
 
 For the
quarterly period ended December
31, 2010
   ̈
                TRANSITION
      REPORT PURSUANT TO 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
                (IRS
      Employerincorporation
      or organization)
                Identification
      No.)
 
 27th Floor, Liangjiu
International Tower,
 No.5, Heyi Street, Xigang
District, Dalian City,
China     116011
 (Address
of principal executive offices)      (Zip
Code)
 
 86
0411-8367-0755
 (Issuer's
telephone number, including area code)
 
 N/A
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 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 reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x 
No  ̈
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ 
No  ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 
 Large
      accelerated filer
                 ̈
                Accelerated
      filer
                 ̈Non-accelerated
      filer
                 ̈
                Smaller
      reporting company
                x(Do
      not check if a smaller reporting
company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ 
No x
 
 APPLICABLE
ONLY TO CORPORATE ISSUERS:
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 29,715,640 shares of Common
Stock, $.001 par value, were outstanding as of February 10,
2011.
  
  TABLE
OF CONTENTS
 
 PagePART I
                                                        FINANCIAL INFORMATIONItem
      1.
                                                        Financial
      Statements.
                                                        3Consolidated
      Balance SheetsAs
      of December 31, 2010 (Unaudited) and June 30, 2010
                                                        5Consolidated
      Statements of Operations and Other Comprehensive IncomeFor
      the Three Months and Six Months Ended December 31, 2010 and 2009
      (Unaudited)
                                                        6Consolidated
      Statements of Cash FlowsFor
      the Six Months Ended December 31, 2010 and 2009
(Unaudited)
                                                        7Notes
      to Consolidated Financial Statements December 31, 2010 and 2009
      (Unaudited)
                                                        8Item
      2.
                                                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                        16Item
      3.
                                                        Quantitative
      and Qualitative Disclosures About Market Risk
                                                        27Item
      4.
                                                        Controls
      and Procedures.
                                                        27PART II
                                                        OTHER INFORMATIONItem
      6.
                                                        Exhibits
                                                        27Signatures
                                                        28Exhibits/Certifications
                                                        29
  2
  PART
I - FINANCIAL INFORMATION
 
 Item
      1.
              Financial
      Statements
  BEFUT
INTERNATIONAL CO., LTD.
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 DECEMBER
31, 2010 AND 2009
 
 (UNAUDITED)
  3
  BEFUT
INTERNATIONAL CO., LTD.
 Consolidated
Financial Statements
 December
31, 2010 and 2009
 (Unaudited)
 
 Table
of Contents
 
 PageCONSOLIDATED FINANCIAL STATEMENTSConsolidated
      Balance Sheets
                    
                    5Consolidated
      Statements of Operations and Other Comprehensive Income
                    
                    6Consolidated
      Statements of Cash Flows
                    
                    7Notes
      to Consolidated Financial Statements
                    
                    8
  4
  BEFUT
INTERNATIONAL CO., LTD.
 Consolidated
Balance Sheets
  December 31,
                              
                              
                              June 30,2010
                              
                              
                              2010(Unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              761,460
                              
                              
                              $
                              1,319,173Restricted
      cash
                              
                              
                              3,494,084
                              
                              
                              
                              1,181,095Accounts
      receivable, net of allowance for doubtful accounts of $85,783 and $83,295
      at December 31, 2010, and June 30, 2010, respectively
                              
                              
                              17,292,392
                              
                              
                              
                              9,292,310Inventory
                              
                              
                              5,234,237
                              
                              
                              
                              2,543,789Loans
      to unrelated parties
                              
                              
                              1,888,835
                              
                              
                              
                              1,054,090Bank
      loan security deposits
                              
                              
                              1,089,206
                              
                              
                              
                              1,031,100Advance
      payments
                              
                              
                              1,929,467
                              
                              
                              
                              693,473Due
      from related party
                              
                              
                              -
                              
                              
                              
                              472,838Other
      current assets
                              
                              
                              1,227,666
                              
                              
                              
                              521,739Total
      current assets
                              
                              
                              32,917,347
                              
                              
                              
                              18,109,607Property
      and equipment, net
                              
                              
                              32,394,534
                              
                              
                              
                              31,618,074Other
      assets:Intangibles,
      net
                              
                              
                              15,485,194
                              
                              
                              
                              15,669,375Advance
      payments – Research & Development
                              
                              
                              2,151,106
                              
                              
                              
                              2,088,714Total
      other assets
                              
                              
                              17,636,300
                              
                              
                              
                              17,758,089Total
      assets
                              
                              $
                              82,948,181
                              
                              
                              $
                              67,485,770LiabilitiesCurrent
      liabilities:Accounts
      payable and accrued expenses
                              
                              $
                              2,770,621
                              
                              
                              $
                              3,119,646Trade
      notes payable
                              
                              
                              3,034,000
                              
                              
                              
                              -Short-term
      bank loans
                              
                              
                              9,086,830
                              
                              
                              
                              6,039,300Current
      portion of long-term bank loans
                              
                              
                              758,500
                              
                              
                              
                              294,600Loans
      from unrelated parties
                              
                              
                              2,220,740
                              
                              
                              
                              370,000Advances
      from customers
                              
                              
                              1,007,947
                              
                              
                              
                              533,806Income
      taxes payable
                              
                              
                              3,120,515
                              
                              
                              
                              1,655,747Other
      current liabilities
                              
                              
                              1,334,564
                              
                              
                              
                              969,787Total
      current liabilities
                              
                              
                              23,333,717
                              
                              
                              
                              12,982,886Long-term
      bank loan
                              
                              
                              14,108,100
                              
                              
                              
                              14,435,400Total
      liabilities
                              
                              
                              37,441,817
                              
                              
                              
                              27,418,286EquityStockholders’
      equity:Preferred
      stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or
      outstanding
                              
                              
                              -
                              
                              
                              
                              -Common
      stock, $0.001 par value, 200,000,000 shares authorized, 29,715,640 and
      29,715,666 shares issued and outstanding at December
      31, 2010 and June 30, 2010, respectively
                              
                              
                              29,716
                              
                              
                              
                              29,716Additional
      paid-in capital
                              
                              
                              21,838,047
                              
                              
                              
                              21,838,047Statutory
      reserves
                              
                              
                              1,181,189
                              
                              
                              
                              1,181,189Retained
      earnings
                              
                              
                              17,994,979
                              
                              
                              
                              13,810,157Accumulated
      other comprehensive income
                              
                              
                              3,447,965
                              
                              
                              
                              2,166,533Total
      stockholders’ equity
                              
                              
                              44,491,896
                              
                              
                              
                              39,025,642Noncontrolling
      interest
                              
                              
                              1,014,468
                              
                              
                              
                              1,041,842Total
      equity
                              
                              
                              45,506,364
                              
                              
                              
                              40,067,484Total
      liabilities and equity
                              
                              $
                              82,948,181
                              
                              
                              $
                              67,485,770
  The
accompanying notes are an integral part of these consolidated financial
statements.
  5
  BEFUT
INTERNATIONAL CO., LTD.
 Consolidated
Statements of Operations and Other Comprehensive Income
 (Unaudited)
 
 For the Three Months Ended
                      
                      
                      For the Six Months EndedDecember 31,
                      
                      
                      December 31,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Sales
                      
                      $
                      14,871,164
                      
                      
                      $
                      7,126,044
                      
                      
                      $
                      30,801,975
                      
                      
                      $
                      12,609,703Cost
      of sales
                      
                      
                      10,954,272
                      
                      
                      
                      5,235,323
                      
                      
                      
                      22,625,032
                      
                      
                      
                      9,098,097Gross
      profit
                      
                      
                      3,916,892
                      
                      
                      
                      1,890,721
                      
                      
                      
                      8,176,943
                      
                      
                      
                      3,511,606Operating
      expenses:Selling
      expenses
                      
                      
                      149,643
                      
                      
                      
                      14,828
                      
                      
                      
                      188,250
                      
                      
                      
                      36,701General
      and administrative expenses
                      
                      
                      1,032,259
                      
                      
                      
                      442,264
                      
                      
                      
                      2,043,879
                      
                      
                      
                      1,030,549Total
      operating expenses
                      
                      
                      1,181,902
                      
                      
                      
                      457,092
                      
                      
                      
                      2,232,129
                      
                      
                      
                      1,067,250Income
      from operations
                      
                      
                      2,734,990
                      
                      
                      
                      1,433,629
                      
                      
                      
                      5,944,814
                      
                      
                      
                      2,444,356Other
      income (expenses):Government
      subsidy
                      
                      
                      180,155
                      
                      
                      
                      304,704
                      
                      
                      
                      316,642
                      
                      
                      
                      354,658Interest
      expense, net
                      
                      
                      (493,390
                      )
                      
                      
                      (5,195
                      )
                      
                      
                      (879,788
                      )
                      
                      
                      (137,504
                      )Other
      income (expenses)
                      
                      
                      107,024
                      
                      
                      
                      (403,138
                      )
                      
                      
                      138,145
                      
                      
                      
                      (397,441
                      )Total
      other income (expenses)
                      
                      
                      (206,211
                      )
                      
                      
                      (103,629
                      )
                      
                      
                      (425,001
                      )
                      
                      
                      (180,287
                      )Income
      before provision for income tax
                      
                      
                      2,528,779
                      
                      
                      
                      1,330,000
                      
                      
                      
                      5,519,813
                      
                      
                      
                      2,264,069Provision
      for income tax
                      
                      
                      614,895
                      
                      
                      
                      336,819
                      
                      
                      
                      1,422,030
                      
                      
                      
                      585,723Net
      income
                      
                      
                      1,913,884
                      
                      
                      
                      993,181
                      
                      
                      
                      4,097,783
                      
                      
                      
                      1,678,346Less:
      Net loss attributable to noncontrolling interest
                      
                      
                      (22,681
                      )
                      
                      
                      (963
                      )
                      
                      
                      (87,038
                      )
                      
                      
                      (6,121
                      )Net
      income attributable to BEFUT International Co., Ltd.
                      
                      
                      1,936,565
                      
                      
                      
                      994,144
                      
                      
                      
                      4,184,821
                      
                      
                      
                      1,684,467Other
      comprehensive incomeForeign
      currency translation adjustment
                      
                      
                      597,575
                      
                      
                      
                      263
                      
                      
                      
                      1,281,432
                      
                      
                      
                      48,070Comprehensive
      income
                      
                      $
                      2,534,140
                      
                      
                      $
                      994,407
                      
                      
                      $
                      5,466,253
                      
                      
                      $
                      1,732,537Basic
      earnings per share
                      
                      $
                      0.07
                      
                      
                      $
                      0.03
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.06Diluted
      earnings per share
                      
                      $
                      0.07
                      
                      
                      $
                      0.03
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.06Weighted
      average number of common shares outstanding:Basic
                      
                      
                      29,715,640
                      
                      
                      
                      29,511,277
                      
                      
                      
                      29,715,640
                      
                      
                      
                      29,511,277Diluted
                      
                      
                      29,786,677
                      
                      
                      
                      30,280,532
                      
                      
                      
                      29,771,813
                      
                      
                      
                      30,280,532
  The
accompanying notes are an integral part of these consolidated financial
statements.
  6
  BEFUT
INTERNATIONAL CO., LTD.
  Consolidated
Statements of Cash Flows
 (Unaudited)
  For the Six Months EndedDecember 31,2010
                          
                          
                          2009Cash
      flows from operating activities:Net
      Income
                          
                          $
                          4,097,783
                          
                          
                          $
                          1,678,346Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                          
                          
                          1,583,652
                          
                          
                          
                          718,680Changes
      in current assets and current liabilities:Accounts
      receivable
                          
                          
                          (7,894,969
                          )
                          
                          
                          (53,500
                          )Inventory
                          
                          
                          (2,574,960
                          )
                          
                          
                          (1,000,998
                          )Advance
      payments
                          
                          
                          (1,066,359
                          )
                          
                          
                          (197,666
                          )Other
      current assets
                          
                          
                          (935,345
                          )
                          
                          
                          (1,032,681
                          )Accounts
      payable and accrued expenses
                          
                          
                          (176,022
                          )
                          
                          
                          1,637,214Trade
      notes payable
                          
                          
                          2,983,200
                          
                          
                          
                          (1,173,120
                          )Advances
      from customers
                          
                          
                          450,523
                          
                          
                          
                          (174,496
                          )Income
      taxes payable
                          
                          
                          1,391,612
                          
                          
                          
                          585,724Other
      current liabilities
                          
                          
                          711,714
                          
                          
                          
                          104,016Total
      adjustments
                          
                          
                          (5,526,954
                          )
                          
                          
                          (586,827
                          )Net
      cash provided by (used in) operating activities
                          
                          
                          (1,429,171
                          )
                          
                          
                          1,091,519Cash
      flows from investing activities:Due
      from related party
                          
                          
                          478,809
                          
                          
                          
                          -Additions
      to property and equipment
                          
                          
                          (755,610
                          )
                          
                          
                          (1,594,161
                          )Additions
      to construction in progress
                          
                          
                          (39,808
                          )
                          
                          
                          (2,442,107
                          )Advance
      payment for fixed assets
                          
                          
                          (104,131
                          )
                          
                          
                          (8,011,520
                          )Acquisition
      of intangible assets
                          
                          
                          (5,964
                          )
                          
                          
                          (6,452
                          )Long-term
      investment
                          
                          
                          -
                          
                          
                          
                          2,933Loans
      to unrelated parties
                          
                          
                          (789,809
                          )
                          
                          
                          1,521,543Net
      cash used in investing activities
                          
                          
                          (1,216,513
                          )
                          
                          
                          (10,529,764
                          )Cash
      flows from financing activities:Restricted
      cash
                          
                          
                          (2,239,572
                          )
                          
                          
                          586,000Bank
      loan security deposits
                          
                          
                          (26,849
                          )
                          
                          
                          (163,877
                          )Loans
      from unrelated party
                          
                          
                          1,819,753
                          
                          
                          
                          2,274,251Proceeds
      (repayment) of short-term bank loans
                          
                          
                          2,844,524
                          
                          
                          
                          (2,786,160
                          )Proceeds
      (repayment) of long-term bank loans
                          
                          
                          (298,320
                          )
                          
                          
                          14,664,000Proceeds
      from minority shareholders
                          
                          
                          59,183
                          
                          
                          
                          43,992Net
      cash provided by financing activities
                          
                          
                          2,158,719
                          
                          
                          
                          14,618,206Effect
      of foreign currency translation on cash
                          
                          
                          (70,748
                          )
                          
                          
                          (4,369
                          )Net
      increase (decrease)  in cash and cash
equivalents
                          
                          
                          (557,713
                          )
                          
                          
                          5,175,592Cash
      and cash equivalents – beginning
                          
                          
                          1,319,173
                          
                          
                          
                          210,301Cash
      and cash equivalents – ending
                          
                          $
                          761,460
                          
                          
                          $
                          5,385,893
  The
accompanying notes are an integral part of these consolidated financial
statements.
  7
  BEFUT
INTERNATIONAL CO., LTD.
  Notes
to Consolidated Financial Statements
 (Unaudited)
  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 interests) 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 January 1, 2010 and raised its
equity ownership percentage in Befut Zhong Xing to 73.5%. BEFUT Zhong Xing
manufactures switch appliances, including high/low voltage distribution cabinet
switches and crane electronic control switches.
  8
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
1 – Organization and Nature of Business (continued)
 
 On July
16, 2010, Dalian Befut acquired 60% of the equity interests of Dalian Yuansheng
Technology Co., Ltd. (“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.
 
 Note
2 – Summary of Significant Accounting Policies
 
 Basis
Of Presentation
 
 The Company’s consolidated financial
statements include the accounts of its controlled subsidiaries. All intercompany
balances and transactions are eliminated in consolidation.The
accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles applicable to interim
financial information and the requirements of Form 10-Q and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. Interim results are not necessarily indicative of results
for a full year. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations and cash flows for the interim periods have been
included.
 
 In
preparing the accompanying unaudited consolidated financial statements, the
Company evaluated the period from December 31, 2010
through the date the financial statements were issued for material subsequent
events requiring recognition or disclosure. No such events were identified for
this period.
 
 Interim
Financial Statements
 These
interim financial statements should be read in conjunction with the audited
consolidatedfinancial statements for the years ended June 30, 2010 and 2009, as not all
disclosures required by generally accepted accounting principles for annual
financial statements are presented. The interim financial statements follow the
same accounting policies and methods of computations as the audited consolidatedfinancial statements for the years ended June 30, 2010 and 2009.
 Reclassification
 Certain
amounts as of June 30, 2010 and December 31, 2010 were reclassified for
presentation purposes.
 Note
3– Restricted Cash
 Cash
balances in the amount of $1,218,584 and $1,181,095
wererestricted as of December 31, 2010 and June 30, 2010, respectively, as collateral forthe construction loan obtained from the PRC National Development Bank
Joint Equity Corporation, which is exhibited in Note 14. The balance of $758,500
as of December 31, 2010 was restricted as collateral for the Bank of East Asia.
The balance of $1,517,000as ofDecember31, 2010 was restricted for
the settlement of trade notes payable in connection with
inventory purchases.
 
 Note
4– Inventory
 
 Inventory
consisting of material, labor and manufacturing overhead as of December
31, 2010 and
June 30, 2010 consists of the following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Raw
      materials
                        
                        $
                        2,339,670
                        
                        
                        $
                        1,093,193Work
      in process
                        
                        
                        365,680
                        
                        
                        
                        323,275Finished
      goods
                        
                        
                        2,528,887
                        
                        
                        
                        1,127,321Total
                        
                        $
                        5,234,237
                        
                        
                        $
                        2,543,789
  9
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
5– Loans to Unrelated Parties
 
 As of
December
31, 2010 and
June 30, 2010, the Company had outstanding loans to unrelated parties of
$1,888,835 and $1,054,090,
respectively. These loans represent advances to unrelated parties at an annual
interest rate of 50% above the applicable bank interest rate. Interest payments
are made semi-annually with no principal payments required until on or before
the due date, as per the terms of the applicable loan agreements.
 
 Note
6– Advance Payments
 
 Advance
payments as of December 31, 2010 and June
30, 2010 consist of the following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Advance
      payments for inventory
                        
                        $
                        1,521,188
                        
                        
                        $
                        399,868Advance
      payments for land and equipment
                        
                        
                        408,279
                        
                        
                        
                        293,605Total
                        
                        $
                        1,929,467
                        
                        
                        $
                        693,473
  Note
7– Property and Equipment
 
 Property
and equipment as of December 31, 2010 and June 30, 2010 consist of the
following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Buildings
                        
                        $
                        20,475,630
                        
                        
                        $
                        19,877,285Machinery
      and equipment
                        
                        
                        13,679,454
                        
                        
                        
                        12,673,324Office
      equipment and furniture
                        
                        
                        173,121
                        
                        
                        
                        100,927Vehicles
                        
                        
                        521,273
                        
                        
                        
                        466,380Subtotal
                        
                        
                        34,849,478
                        
                        
                        
                        33,117,916Less:
      Accumulated depreciation
                        
                        
                        2,495,322
                        
                        
                        
                        1,499,84232,354,156
                        
                        
                        
                        31,618,074Add:
      Construction in progress
                        
                        
                        40,378
                        
                        
                        
                        -Total
                        
                        $
                        32,394,534
                        
                        
                        $
                        31,618,074
 
 Depreciation
expense for the three months ended December 31, 2010 and 2009 was $503,245 and
$78,604, respectively. Depreciation expense for the six months ended December
31, 2010 and 2009 was $936,460 and $169,816, respectively.
 
 Note
8 – Intangible Assets
 
 Intangible
assets as of December 31, 2010 and June 30, 2010 consist of the
following
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Software
                        
                        $
                        29,326
                        
                        
                        $
                        22,684Trademark
                        
                        
                        86,469
                        
                        
                        
                        83,961Land
      use rights
                        
                        
                        5,669,469
                        
                        
                        
                        5,505,028Patent
                        
                        
                        11,947,892
                        
                        
                        
                        11,601,348Subtotal
                        
                        
                        17,733,156
                        
                        
                        
                        17,213,021Less:
      Accumulated amortization
                        
                        
                        2,247,962
                        
                        
                        
                        1,543,646Total
                        
                        $
                        15,485,194
                        
                        
                        $
                        15,669,375
  Amortization
expense for the three months ended December 31, 2010 and 2009 was $326,576 and
$288,022, respectively. Amortization expense for the six months ended December
31, 2010 and 2009 was $647,192 and $548,864, respectively.
  10
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
9 – 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 December 31, 2010 and June 30, 2010was $2,151,106 and $2,088,714, respectively.
 
 Note
10 – Accounts Payable and Accrued Expenses
 
 Accounts
payable and accrued expenses as of December 31, 2010 and June 30, 2010 consist
of the following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Accounts
      payable
                        
                        $
                        2,705,013
                        
                        
                        $
                        3,009,646Accrued
      expenses
                        
                        
                        65,608
                        
                        
                        
                        110,000Total
                        
                        $
                        2,770,621
                        
                        
                        $
                        3,119,646
 
 The
carrying value of accounts payable and accrued expenses approximate their fair
values due to the short-term nature of these obligations.
 
 Note
11 – Trade Notes Payable
 
 Trade
notes payable consist of uncollateralized non-interest bearing promissory notes
issued in connection with the acquisition of certain inventory and equipment.
Balances outstanding under such notes as of December 31, 2010 and June 30, 2010
were $3,034,000 and $-0-, respectively.
 
 Note
12 – Short-Term Bank Loans
 
 Short-term
bank loans consist of the following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010On
      September 16, 2009, the Company obtained a loan from Harbin Bank, the
      principal and accrued interest of which was paid in full by September 15,
      2010. The interest was calculated using an annual fixed interest rate of
      6.372% and paid monthly. The loan was secured by the Company’s property
      and equipment.
                        
                        $
                        -
                        
                        
                        $
                        2,946,000On
      October 30, 2009, the Company obtained a loan from Bank of Dalian, the
      principal and accrued interest of which was paid in full by October 29,
      2010. The interest was calculated using an annual fixed interest rate of
      6.903% and paid monthly. The loan was guaranteed by Dalian Fangyuan
      Financial Guarantee Co. ,Ltd., an unaffiliated third
party.
                        
                        $
                        -
                        
                        
                        $
                        2,356,800On
      June 25, 2010, the Company obtained a loan from the Bank of East Asia, the
      principal and accrued interest of which was paid in full by December 25,
      2010. The interest was calculated using an annual fixed interest rate of
      6.318% and paid monthly. The loan was guaranteed by the Company’s accounts
      receivables.
                        
                        $
                        -
                        
                        
                        $
                        736,500On
      September 14, 2010, the Company obtained a loan from Harbin Bankwith
      a maturity date of September 13, 2011. The interest is paid monthly at a
      variable rate equal to 30% per annum above the floating base interest for
      loans of the same term issued by the People’s Bank of China, the PRC’s
      central bank. The loan is secured by the Company’s property and
      equipment.
                        
                        $
                        3,034,000
                        
                        
                        $
                        -
  11
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
 
 Note
12 – Short-Term Bank Loans (continued)
 
 On
      October 21, 2010, the Company obtained a loan from the Dalian Economic
      Development Zone Xinhui Town Bank with a maturity date of October 20,
      2011. The interest is paid monthly at a variable rate equal to 50% per
      annum above the floating base interest for loans of the same term issued
      by the People’s Bank of China. The loan is secured by the Company’s
      inventory.
                        
                        $
                        1,501,830
                        
                        
                        $
                        -On
      November 23, 2010, the Company obtained a loan from the Bank of Dalian
      with a maturity date of November 22, 2011. The interest is paid monthly
      at  a variable rate equal to 30% per annum above the floating
      base interest for loans of the same term issued by the  People’s
      Bank of China,. The loan is guaranteed by Dalian Zhongdingxin Investment
      Guarantee Co., Ltd., an unaffiliated third party.
                        
                        $
                        1,517,000
                        
                        
                        $
                        -On
      November 23, 2010, the Company obtained a loan from the Bank of Dalian
      with a maturity date of November 22, 2011. The interest is paid monthly at
      a variable rate equal to 30% per annum above the floating base interest
      for loans of the same term issued by the People’s Bank of China. The loan
      is guaranteed by Dalian Tiansi Joint Guarantee Co., Ltd., an unaffiliated
      third party.
                        
                        $
                        1,517,000
                        
                        
                        $
                        -On
      December 30, 2010, the Company obtained a loan from the Bank of East Asia
      with a maturity date of June 30, 2011. The interest is paid monthly at a
      variable rate equal to 30% per annum above the floating base interest for
      loans of the same term issued  by the  People’s Bank
      of China.. The loan is secured by the Company’s accounts
      receivables.
                        
                        $
                        1,517,000
                        
                        
                        $
                        -Total
                        
                        $
                        9,086,830
                        
                        
                        $
                        6,039,300
 
 Note
13 – Loans From Unrelated Parties
 
 These
loans are based on good-faith, and are unsecured and non-interest bearing. The
proceeds from these loans are utilized for working capital. As of December 31,
2010 and June 30, 2010, the Company had outstanding loans from unrelated parties
of $2,220,740 and $370,000, respectively.
  12
  Note
14 – Long-Term Bank Loans
 
 Long-term bank loans consist
of the following:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010On
      November 2, 2009, Dalian Befut entered into a Loan Agreement with the PRC
      National Development Bank Joint Equity Corporation (“NDB”) pursuant to
      which Dalian Befut borrowed RMB100,000,000 (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 the same
      term promulgated by the  People’s Bank of China. The Loan was
      designated to finance the construction of Dalian Befut’s planned specialty
      cable production lines with a production capacity of 4,000 KM. The Loan
      was secured by, among other liens, a first priority lien on Dalian Befut’s
      land use right and its building property ownership and guaranteed by,
      among other guarantees, Mr. Hongbo Cao and Mr. Tingmin Li, Dalian BEFUT’s
      two major shareholders.
                        
                        $
                        14,866,600
                        
                        
                        $
                        14,730,000Total
                        
                        $
                        14,866,600
                        
                        
                        $
                        14,730,000Less:
      Current portion
                        
                        
                        758,500
                        
                        
                        
                        294,600Total
      noncurrent portion
                        
                        $
                        14,108,100
                        
                        
                        $
                        14,435,400
 
 Note
15 –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
Share Exchange Agreement with Befut Nevada.
 
 For the Three Months Ended December 31,2010
                                
                                
                                2009Net
      income attributable to BEFUT International Co., Ltd.
                                
                                $
                                1,936,565
                                
                                
                                $
                                994,144Weighted
      average common shares (denominator for basic earnings per
      share)
                                
                                
                                29,715,640
                                
                                
                                
                                29,511,277Effect
      of dilutive securities:
                                
                                
                                71,037
                                
                                
                                
                                769,255Weighted
      average common shares (denominator for diluted earnings per
      share)
                                
                                
                                29,786,677
                                
                                
                                
                                30,280,532Basic
      earnings per share
                                
                                $
                                0.07
                                
                                
                                $
                                0.03Diluted
      earnings per share
                                
                                $
                                0.07
                                
                                
                                $
                                0.03
 
 For the Six Months Ended December 31,2010
                                
                                
                                2009Net
      income attributable to BEFUT International Co., Ltd.
                                
                                $
                                4,184,821
                                
                                
                                $
                                1,684,467Weighted
      average common shares (denominator for basic earnings per
      share)
                                
                                
                                29,715,640
                                
                                
                                
                                29,511,277Effect
      of dilutive securities:
                                
                                
                                56,173
                                
                                
                                
                                769,255Weighted
      average common shares (denominator for diluted earnings per
      share)
                                
                                
                                29,771,813
                                
                                
                                
                                30,280,532Basic
      earnings per share
                                
                                $
                                0.14
                                
                                
                                $
                                0.06Diluted
      earnings per share
                                
                                $
                                0.14
                                
                                
                                $
                                0.06
 
 13
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
16– 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.
 
 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
17– 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
six months ended December 31, 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 private-run
enterprises, which are generally subject to a statutory tax rate of 25% and were
previously, until January 2008, subject to a statutory tax 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 six months ended
December 31, 2010 and 2009, the income tax provision for the Company was
$1,422,030 and $585,723, respectively.
  14
  BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)
  Note
17– Income Taxes (continued)
  In July
2006, the FASB issued FASB Interpretation No.48, Accounting for Uncertainty in
Income Taxes (FIN 48). 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
six monthended
December 31, 2010 and 2009.
 
 Note
18 – 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 insurance
and 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
19 – 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.
 
 Note
20 – Risk of Concentration and Credit Risk
 
 During
the six months ended December 31, 2010, five vendors accounted for approximately
76% of the Company’s purchases of raw materials, while during the six months
ended December 31, 2009, two major vendors accounted for approximately 56.19% of
the Company’s purchases of raw materials. Total purchases from these vendors
were $20,227,944 and $6,524,876 for the six months ended December 31, 2010 and
2009, respectively.
 
 Five
major customers accounted for 24% and 44.01% of the net revenue for the six
months ended December 31, 2010 and 2009, respectively. Total sales to these
customers were $6,919,765 and $5,550,159, for the six months ended December 31,
2010 and 2009, respectively.
 
 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
21 – Supplemental Cash Flow Disclosures
 
 The
following is supplemental information relating to the consolidated statements of
cash flows:
 
 Six Months Ended December 31,2010
                          
                          
                          2009Cash
      paid for interest
                          
                          $
                          357,993
                          
                          
                          $
                          137,504Cash
      paid for income taxes
                          
                          $
                          -
                          
                          
                          $
                          -
  15
 Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results 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
strategy, (c) our anticipated trends in our industry (d) our future financing
plans, and (e) our anticipated needs for, and use of, working capital.
Forward-looking Statements 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.
 
 Any 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.
  16
  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
manufacture specialty cables in northeastern China for sale to industries,
including, ship building, nuclear power plants, mining and
petrochemical.  Our cable products consist of (i) traditional electric
power system cable and (ii) an assortment of specialty cable, including marine
cable, mining specialty cable, petrochemical cable.  We have recently
begun to develop carbon fiber composite cable products. We also have developed
the capability to produce other types of special cables such as submarine cable
and certain “new energy” cable, including cable for wind and solar energy. Our
switch application business mainly includes high and low voltage distribution
cabinet switches and crane electronic control switches, which products
compliment our cable product offerings.
 
 Results
of Operations
 
 Three
and six months ended December 31, 2011 compared to the three and six months
ended December 31, 2010
 
 Item
                    
                    Three-
                      months
                      ended
                      December
                      31, 2010
                    
                    
                    Three-
                      months
                      ended
                      December
                      31, 2009
                    
                    
                    %
                      Change
                    
                    
                    Six months
                      ended
                      December
                      31, 2010
                    
                    
                    Six months
                      ended
                      December
                      31, 2009
                    
                    
                    %
                      ChangeSales
                    
                    $
                    14,871,164
                    
                    
                    $
                    7,126,044
                    
                    
                    
                    109
                    %
                    
                    $
                    30,801,975
                    
                    
                    $
                    12,609,703
                    
                    
                    
                    144
                    %Cost
      of sales
                    
                    $
                    10,954,272
                    
                    
                    $
                    5,235,323
                    
                    
                    
                    109
                    %
                    
                    $
                    22,625,032
                    
                    
                    $
                    9,098,097
                    
                    
                    
                    149
                    %Gross
      profit
                    
                    $
                    3,916,892
                    
                    
                    $
                    1,890,721
                    
                    
                    
                    107
                    %
                    
                    $
                    8,176,943
                    
                    
                    $
                    3,511,606
                    
                    
                    
                    133
                    %Total
      operating expenses
                    
                    $
                    1,181,902
                    
                    
                    $
                    457,092
                    
                    
                    
                    159
                    %
                    
                    $
                    2,232,129
                    
                    
                    $
                    1,067,250
                    
                    
                    
                    109
                    %Total
      other income/(expenses)
                    
                    $
                    (206,211
                    )
                    
                    $
                    (103,629
                    )
                    
                    
                    (99
                    )%
                    
                    $
                    (425,001
                    )
                    
                    $
                    (180,287
                    )
                    
                    
                    (136
                    )%Net
      income
                    
                    $
                    1,913,884
                    
                    
                    $
                    993,181
                    
                    
                    
                    93
                    %
                    
                    $
                    4,097,783
                    
                    
                    $
                    1,678,346
                    
                    
                    
                    144
                    %Gross
      profit margin
                    
                    
                    26.34
                    %
                    
                    
                    26.53
                    %
                    
                    
                    (0.19
                    )%
                    
                    
                    26.55
                    %
                    
                    
                    27.85
                    %
                    
                    
                    (1.30
                    )%Basic
      earnings per share
                    
                    $
                    0.07
                    
                    
                    $
                    0.03
                    
                    
                    
                    133
                    %
                    
                    $
                    0.14
                    
                    
                    $
                    0.06
                    
                    
                    
                    133
                    %Diluted
      earnings per share
                    
                    
                    0.07
                    
                    
                    
                    0.03
                    
                    
                    
                    133
                    %
                    
                    
                    0.14
                    
                    
                    
                    0.06
                    
                    
                    
                    133
                    %Weighted
      average number of common shares outstanding:Basic
                    
                    
                    29,715,640
                    
                    
                    
                    29,511,277
                    
                    
                    
                    0.69
                    %
                    
                    
                    29,715,640
                    
                    
                    
                    29,511,277
                    
                    
                    
                    0.69
                    %Diluted
                    
                    
                    29,786,677
                    
                    
                    
                    30,280,532
                    
                    
                    
                    -1.63
                    %
                    
                    
                    29,771,813
                    
                    
                    
                    30,280,532
                    
                    
                    
                    -1.68
                    %
  17
  THREE
MONTHS ENDED DECEMBER 31, 2010 AS COMPARED TO THREE MONTHS ENDED DECEMBER 31,
2009
 
 Sales
 
 Our sales for the three months ended
December 31, 2010 were $14,871,164, representing an increase of $7,745,120, or
109%, as compared to $7,126,044 in the three months ended December 31, 2009.
This increase was primarily due to two factors: (i) significantly increased
demand for our traditional cables, specialty cables and switch products from new
and existing customers, and (ii) increased production capacity as a result of
the relocation of our production facilities at the end of 2009 to our Phase I
Changxing facility in Dalian’s Changxing Island Harbor Industrial
Zone.
 
 In terms of our product mix, for the
three months ended December 31, 2010, approximately 42.2% of our revenues were
generated from sales of traditional cable, approximately 49.4 % of revenues were
generated from sales of specialty cable and approximately 8.4% of revenues were
generated from our switch application business, as compared to 34.5%, 57.6% and
7.9%, respectively, in the three months ended December 31, 2009.
 
 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 three
months ended December 31, 2010 was $10,954,272, representing an increase of
$5,718,949, or 109%, as compared to $5,235,323 in the three months ended
December 31, 2009. The increase in our cost of sales was in line with the
increase in our sales.
 
 Gross
Profit
 
 Gross profit for the quarter ended
December 31, 2010 was $3,916,892, representing an increase of $2,026,171, or
107%, three months as compared to the three months ended December 31, 2009.
Gross profit as a percentage of sales was 26.34% for the three months ended
December 31, 2010, which was not materially different from gross profit
percentage at December 31, 2009.
 
 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 $149,643 in
the three months ended December 31, 2010, as compared to $14,828 in the three
months ended December 31, 2009, representing an increase of $134,815, or
909.19%. General and administrative expenses were $1,032,259 for the three
months ended December 31, 2010, representing an increase of $589,995, or
133.40%, as compared to $442,264 in the three months ended December 31,
2009.  The increase of general and administrative expenses was mainly
due to the increase in expenses from salary, depreciation and expenses from
Dalian Yuansheng and WOFE.
  18
  Income
from Operations
 
 Our operating income was $2,734,990 for
the three months ended December 31, 2010,  representing an increase of
$1,301,361, or 90.77%, as compared to $1,433,629 for the three months ended
December 31, 2009.  This increase was a result of a significant
increase in the gross profit of our overall business of wire and cable
manufacturing, partially offset by an increase of selling, general and
administrative expenses.
 
 Government
Subsidy
 
 In the three months ended December 31,
2010, we received subsidies from various PRC governmental bureaus in the
aggregate amount of $180,155, as compared to subsidies of $304,704 received in
the quarter ended December 31, 2009. The subsidies we received in the three
months ended December 31, 2010 consisted of (i) approximately $150,000 from the
Appropriation of Technology Innovation Fund of the Department of Finance of
Dalian City and (ii) approximately $30,000 from the Appropriation of Technology
Innovation Fund of the Department of Finance of Liaoning Province.
 
 Interest
Expense
 
 Interest expense was $493,390 for the
three months ended December 31, 2010, representing an increase of $488,195, or
9,193.40%, as compared to $5,195 for the three months ended December 31,
2009.  This increase was due to the increase of our total bank loans,
proceeds of which were used for working capital and our Phase I Changxing
facility.
 
 Income
Taxes
 
 In the three months ended December 31,
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% on the goods sold.
 
 Provision for income taxes was $614,895
for the three months ended December 31, 2010, an increase of $278,076, or
82.56%, compared to $336,819 for the three months ended December 31,
2009.
  19
  Net
Income
  Net income for the three months ended
December 31, 2010 was $1,913,884, representing an increase of $920,703, or
92.70%, as compared to net income of $993,181 for the three months ended
December 31, 2009. The increase was mainly attributable to the increase of
$2,026,171 in gross profit and the increase of $510,162 in other income, which
was partially offset by an increase in selling, general and administrative
expenses of $724,810, an increase in interest expense of $488,195 and an
increase in income tax provision of $278,076.
 
 SIX
MONTHS ENDED DECEMBER 31, 2010 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2009
 
 Sales
 
 Our sales for the six months ended
December 31, 2010 were $30,801,975, representing an increase of $18,192,272, or
144.27%, as compared to $12,609,703 in the six months ended December 31, 2009.
The increase was primarily due to three factors: (i) significantly increased
demand for our traditional cables, specialty cables and switch products from new
and existing customers, (ii) our increased production capacity as a result of
the relocation of our production facilities to our Phase I Changxing facility in
Dalian’s Changxing Island Harbor Industrial Zone 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 six months ended
December 31, 2010, most of which we passed on to our customers.
 
 In terms of our product mix, for the
six months ended December 31, 2010, approximately 48.0% of our revenues were
generated from sales of traditional cable, approximately 47.4% of revenues were
generated from sales of specialty cable and approximately 4.6% of revenues
were generated from our switch application business, as compared to 37.5%,
58.0% and 4.5%, respectively, in the six months ended December 31,
2009.
 
 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 six months
ended December 31, 2010 was $22,625,032, representing an increase of
$13,526,935, or 148.68%, as compared to $3,511,606 in the six months ended
December 31, 2009. Our cost of sales increased at a higher rate than our
sales because we produced a lower percentage of specialty cable, which typically
has higher gross margins, than in the prior period.
 
 Gross
Profit
 
 Gross profit for the six months ended
December 31, 2010 was $8,176,943, representing an increase of $4,665,337, or
132.85%, as compared to $3,511,606 in the six months ended December 31, 2009.
Gross profit as a percentage of sales was 26.55% for the six months ended
December 31, 2010, representing a decrease of 1.30%, as compared to 7.85% in the
six months ended December 31, 2009.  The decrease of gross profit rate
was primarily due to that we produced a lower percentage of specialty cable
products, as compared to the six months ended December
31, 2009.
  20
  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 $188,250 in
the six months ended December 31, 2010, as compared to $36,701 in the six months
ended December 31, 2009, representing an increase of $151,549, or 412.93%.
General and administrative expenses were $2,043,879 for the six months ended
December 31, 2010, representing an increase of $1,013,330, or 98.33%, as
compared to $1,030,549 in the six months ended December 31, 2009. The increase
of general and administrative expenses was mainly due to the increase in
expenses, including for salary, depreciation and entertainment,
from  Dalian Yuansheng, Befut Zhong Xing and WFOE.
 
 Income
from Operations
 
 Our operating income was $5,944,814 for
the six months ended December 31, 2010, an increase of $3,500,458, or 143.21%,
as compared to $2,444,356 for the six months ended December 31,
2009.  This increase was a result of a significant increase in the
gross profit of our overall business of wire and cable manufacturing, partially
offset by an increase of selling, general and administrative
expenses.
 
 Government
Subsidy
 
 In the six months ended December 31,
2010, we received subsidies from various PRC governmental bureaus in the
aggregate amount of $316,642, as compared to subsidies of $354,658 received in
the six months ended December 31, 2009. The subsidies received by the Company in
the six months ended December 31, 2010 consisted of: (i) approximately $74,000
received from the Finance Bureau of Dalian and the Economic and Information
Commission of Dalian recognizing the Company as a Newly Identified Municipal
Technical Center, (ii) approximately $30,000 received from the Appropriation of
Technology Innovation Fund of the Department of Finance of Liaoning Province,
and (iii) approximately $178,000 received from the Appropriation of Technology
Innovation Fund of the Department of Finance of Dalian City and (iv) a refund of
$27,000 for value added taxes we paid at the end of 2009.
 
 Interest
Expenses
 
 Interest expense was $879,788 for the
six months ended December 31, 2010, an increase of $742,284, or 539.83%, as
compared to $137,504 for the six months ended December 31, 2009. This increase
is due to the increase in borrowings under our bank loans.
 
 Income
Taxes
 
 In the six months ended December 31,
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% on the goods sold.
  21
  Provision for income taxes was
$1,422,030 for the six months ended December 31, 2010, an increase of $836,307,
or 142.78%, compared to $585,723 for the six months ended December 31,
2009.
 
 Net
Income
 
 Net income for the six months ended
December 31, 2010 was $4,097,783 an increase of $2,419,437, or 144.16%, as
compared to net income of $1,678,346 for the six months ended December 31, 2009.
The increase was mainly attributable to the increase of $4,665,337 in gross
profit and the increase of $535,586 in other income, which was partially offset
by an increase in selling, general and administrative expenses of $1,164,879, an
increase in interest expense of $724,284 and an increase in income tax provision
of $836,307.
 
 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)
                              
                              December 31,
                                2010
                              
                              
                              June 30,
                                2010Cash
      and cash equivalents and restricted cash
                              
                              $
                              4,256
                              
                              
                              $
                              2,500Working
      capital
                              
                              $
                              9,584
                              
                              
                              $
                              7,215Ratio
      of current assets to current liabilities
                              
                              1.4:1
                              
                              
                              1.5 :1
 
 Our approximately  $2.4
million increase in working capital from June 30, 2010 to December 31, 2010 was
primarily due to the increase of $12.8 million of current assets and the
increase of  $10.4 million of current liabilities. The increase of
current assets mainly includes the increase of $1.8 million of cash, cash
equivalents and restricted cash, the increase of $8.0 million of account
receivables and the increase of $2.7 million of inventory. The increase of
current liabilities mainly includes the increase of $3 million of trade notes
payable, the increase of $3 million of short term bank loans, the increase of
$1.8 million of loans from unrelated parties, and the increase of $1.5 million
of income tax payable.
  22
  Cash
Flows
 
 We had a net decrease of $557,713 in
cash and cash equivalents from June 30, 2010 to December 31, 2010, as compared
to a net increase of $5,175,592 from June 30, 2009 to December 31, 2009,
respectively. The following table summarizes such changes:
 
 For the six months ended(dollars in thousands)
                      
                      December 31, 2010
                      
                      
                      December 31, 2009Net
      cash provided by (used in) operating activities
                      
                      $
                      (1,429
                      )
                      
                      $
                      1,092Net
      cash used in investing activities
                      
                      $
                      (1,217
                      )
                      
                      $
                      (10,530
                      )Net
      cash provided by financing activities
                      
                      $
                      2,159
                      
                      
                      $
                      14,618Net
      increase (decrease) in cash, cash equivalents
                      
                      $
                      (558
                      )
                      
                      $
                      5,176
 
 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 six months ended December
31, 2010, net cash used in operating activities was $1,429,171,  a
decrease of $2,520,690, or 230.93%, as compared to net cash of $1,091,519
provided by operating activities during the six months ended December 31, 2009.
The decrease in net cash of approximately $2.5 million was mainly due to the
increase of net income of $2.4 million, the increase of account receivables of
$7.8 million, the increase in inventory of $1.6 million and the increase of
trade notes payable of $4.2 million.
 
 Investing
Activities
 
 During the six months ended December
31, 2010, we used net cash in investing activities of $1,216,513, a decrease of
$9,313,251, or 88.45%, as compared to net cash of $10,529,764 used in investing
activities for the six months ended December 31, 2009. We had significantly less
investment activities following the completion of our Phase I Changxing Island
facility in December, 2009.
  23
  Financing
Activities
 
 During the six months ended December
31, 2010, net cash provided by financing activities was $2,158,719, representing
a decrease of $12,459,487, or 85.23%, as compared to net cash of $14,618,206
provided by financing activities during the six months ended December 31, 2009.
We significantly reduced our financing activities with the completion of our
Phase I Changxing Island facility.
 
 Financial
Obligations
 
 As of December 31, 2010, our
outstanding loans were as follows:
 
 Creditors
                          
                          LoanAmount
                          
                          
                          InterestRate
                          
                          Term
                          
                          MaturityDateHarbin
      Bank
                          
                          $
                          3,034,000
                          
                          
                          
                          7.55
                          % *
                          1
      year
                          
                          09/13/11Bank
      of Dalian
                          
                          $
                          3,034,000
                          
                          
                          
                          7.55
                          % *
                          1
      year
                          
                          11/22/11Dalian
      Economic Zone Xinhui Town Bank
                          
                          $
                          1,501,830
                          
                          
                          
                          8.72
                          % +
                          1
      year
                          
                          10/20/11Bank
      of East Asia
                          
                          $
                          1,517,000
                          
                          
                          
                          7.55
                          % *
                          6
      months
                          
                          06/30/11PRC
      Development Bank Joint Equity Corporation
                          
                          $
                          14,866,600
                          
                          
                          
                          6.72
                          % #
                          7
      years
                          
                          11/01/16
 
 *  Variable
interest rate equal to 30% per annum above the floating base rate issued by the
People’s Bank of China.
 
 +  Variable
interest rate equal to 50% per annum above the floating base rate issued by the
People’s Bank of China.
 
 #  Variable
interest rate equal to 5% per annum above the floating base rate issued by the
People’s Bank of China.
 
 Accounts
Receivable
 
 The balance of our accounts receivable
was $17,292,392, net of allowance for doubtful accounts of $85,783, as of
December 31, 2010, as compared to $9,292,310, net of allowance for doubtful
accounts of $83,295, as of June 30, 2010. The average age of receivables for the
last twelve months ended December 31, 2010 was 94 days, compared to 103 days for
the fiscal year ended June 30, 2010.
 
 Inventories
 
 Inventories consisted of the following
as of December 31, 2010 and June 30, 2010, respectively:
  24
 
 December 31,
                        2010
                      
                      
                      June 30,2010CategoryRaw
      materials
                      
                      $
                      2,339,670
                      
                      
                      $
                      1,093,193Work-in-process
                      
                      
                      365,680
                      
                      
                      
                      323,275Finished
      goods
                      
                      
                      2,528,887
                      
                      
                      
                      1,127,321Total
      inventories
                      
                      $
                      5,234,237
                      
                      
                      $
                      2,543,789
 
 We had total inventory of $5,234,237 as
of December 31, 2010, an increase of $2,690,448, or 105.77%, as compared to
inventory of $2,543,789 as of June 30, 2010. The average number of days of
inventory for the last twelve months ended December 31, 2010 was 66 days,
compared to 40 days for the fiscal year ended June 30, 2010. This increase was
primarily due to the significant increases in our production in last two
quarters.
 
 Off-Balance
Sheet Arrangements
 
 At December 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 (“U.S. 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 U.S. 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.
 
 Revenue
Recognition
 
 We derives our 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.
  25
  Cash
and Cash Equivalents
 
 In accordance with FASB ASC Topic 230,
"Statement of Cash Flows", we consider 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. We provide 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, we reserve 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.
  26
  Item 3.
              Quantitative and Qualitative
      Disclosures About Market
Risk
 
 As a
smaller reporting company, we are not required to provide this
information.
 
 Item
      4.
              Controls
      and Procedures
  (a)            Evaluation of disclosure controls
and procedures. At the conclusion of the period ended December 31, 2010,
we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this report.
 
 (b)            Changes in internal controls.
During the period covered by this report, there was no change in our internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect our internal control over financial
reporting.
 
 PART
II     OTHER INFORMATION
 
 Item
      6.
              Exhibits
 
 The
exhibits required by this item are set forth in the Exhibit Index attached
hereto.
  27
  SIGNATURES
 
 Pursuant
to the requirements 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:
      February 14, 2011
                          By:
                          /s/ Hongbo CaoName:
      Hongbo CaoTitle:
      President and Chief Executive Officer(principal
      executive officer)Date:
      February 14, 2011
                          By:
                          /s/ Mei YuName:
      Mei YuTitle:
      Chief Financial Officer(principal
      financial officer and principal accounting
  officer)
  28
  EXHIBIT
INDEX
 
 No.
                
                Description31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
                
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.32.2
                
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.
  29