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 September
30, 2010




o
            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 o





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





Indicate
by check mark 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 filero
            Accelerated
      fileroNon-accelerated
      filero
            Smaller
      reporting companyx(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 o  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 November 15, 2010.







TABLE
OF CONTENTS




PagePART
      I
            FINANCIAL
      INFORMATION
            
            3Item
      1.
            Financial
      Statements.
            
            3Report
      of Independent Registered Public Accounting Firm
            
            5Consolidated
      Balance Sheets
            
            6As
      of September 30, 2010 (Unaudited) and December 31, 2009Consolidated
      Statements of Operations and Other Comprehensive IncomeFor
      the Three Months and Nine Months Ended September 30, 2010 and 2009
      (Unaudited)
            
            7Consolidated
      Statements of Cash FlowsFor
      the Nine Months Ended September 30, 2010 and 2009
    (Unaudited)
            
            8Notes
      to Consolidated Financial StatementsSeptember
      30, 2010 and 2009 (Unaudited)
            
            9Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            16Item
      4T.
            Controls
      and Procedures.
            
            22PART
      II
            OTHER INFORMATION
            
            23Item
      6.
            Exhibits
            
            23Signatures
            
            24Exhibits/Certifications
            
            25




2




PART
I - FINANCIAL INFORMATION





Item
      1.
            Financial
      Statements





BEFUT
INTERNATIONAL CO., LTD.


CONSOLIDATED
FINANCIAL STATEMENTS


SEPTEMBER
30, 2010 AND 2009


(UNAUDITED)




3




BEFUT
INTERNATIONAL CO., LTD.




Consolidated
Financial Statements
 September
30, 2010 and 2009
 (Unaudited)




Table
of Contents




PageCONSOLIDATED
      FINANCIAL STATEMENTSReport
      of Independent Registered Public Accounting Firm
            
            5Consolidated
      Balance Sheets
            
            6Consolidated
      Statements of Operations and Other Comprehensive Income
            
            7Consolidated
      Statements of Cash Flows
            
            8Notes
      to Consolidated Financial Statements
            
            9




4




Report
of Independent Registered Public Accounting Firm





To the
Board of Directors and Stockholders


BEFUT
International Co., Ltd.




We have
reviewed the accompanying consolidated balance sheet of BEFUT International Co.,
Ltd. (the “Company”) as of September 30, 2010, and the related consolidated
statements of operations and comprehensive income, and cash flows for the three
months ended September 30, 2010 and 2009. These consolidated financial
statements are the responsibility of the Company's management.





We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.





Based on
our review, we are not aware of any material modifications that should be made
to the accompanying consolidated financial statements referred to above for them
to be in conformity with accounting principles generally accepted in the United
States of America.





We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
BEFUT International Co., Ltd. as of June 30, 2010, and the related consolidated
statements of operations and comprehensive income, stockholders’ equity, and
cash flows for the year then ended (not presented herein); and in our report
dated September 21, 2010, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of September 30, 2010, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.







Parsippany,
New Jersey


November
12, 2010


5


BEFUT
INTERNATIONAL CO., LTD.


Consolidated
Balance Sheets




September
      30,
            
            
            June
      30,2010
            
            
            2010Assets
            
            (Unaudited)Current
      assets:Cash
      and cash equivalents
            
            $
            462,446
            
            
            $
            1,319,173Restricted
      cash
            
            
            2,698,425
            
            
            
            1,181,095Accounts
      receivable, net of allowance for doubtful accounts of
      $84,625  and $83,295 at September 30, and June 30, 2010,
      respectively
            
            
            14,236,184
            
            
            
            9,292,310Inventory
            
            
            3,829,212
            
            
            
            2,543,789Loans
      to unrelated parties
            
            
            1,060,471
            
            
            
            1,054,090Bank
      loan security deposits
            
            
            1,074,846
            
            
            
            1,031,100Advance
      payments
            
            
            2,038,263
            
            
            
            693,473Due
      from related party
            
            
            -
            
            
            
            472,838Other
      current assets
            
            
            898,704
            
            
            
            521,739Total
      current assets
            
            
            26,298,551
            
            
            
            18,109,607Property
      and equipment, net
            
            
            32,312,046
            
            
            
            31,618,074Other
      assets:Intangibles,
      net
            
            
            15,600,162
            
            
            
            15,669,375Advance
      payments – Research & Development
            
            
            2,122,746
            
            
            
            2,088,714Total
      other assets
            
            
            17,722,908
            
            
            
            17,758,089Total
      assets
            
            $
            76,333,505
            
            
            $
            67,485,770LiabilitiesCurrent
      liabilities:Accounts
      payable and accrued expenses
            
            $
            2,936,817
            
            
            $
            3,119,646Trade
      notes payable
            
            
            2,994,000
            
            
            
            -Short-term
      bank loans
            
            
            6,137,700
            
            
            
            6,039,300Current
      portion of long-term bank loans
            
            
            598,800
            
            
            
            294,600Loans
      from unrelated parties
            
            
            2,016,700
            
            
            
            370,000Advances
      from customers
            
            
            721,980
            
            
            
            533,806Income
      taxes payable
            
            
            2,477,092
            
            
            
            1,655,747Other
      current liabilities
            
            
            1,084,815
            
            
            
            969,787Total
      current liabilities
            
            
            18,967,904
            
            
            
            12,982,886Long-term
      bank loan
            
            
            14,371,200
            
            
            
            14,435,400Total
      liabilities
            
            
            33,339,104
            
            
            
            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 September 30 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
            
            
            16,058,414
            
            
            
            13,810,157Accumulated
      other comprehensive income
            
            
            2,850,390
            
            
            
            2,166,533Total
      stockholders’ equity
            
            
            41,957,756
            
            
            
            39,025,642`Noncontrolling
      interest
            
            
            1,036,645
            
            
            
            1,041,842Total
      equity
            
            
            42,994,401
            
            
            
            40,067,484Total
      liabilities and equity
            
            $
            76,333,505
            
            
            $
            67,485,770





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




6




BEFUT
INTERNATIONAL CO., LTD.




Consolidated
Statements of Operations and Other Comprehensive Income


(Unaudited)




For
      the Three MonthsEnded
      September 30,2010
            
            
            2009Sales
            
            $
            15,930,811
            
            
            $
            5,483,659Cost
      of sales
            
            
            11,670,760
            
            
            
            3,862,774Gross
      profit
            
            
            4,260,051
            
            
            
            1,620,885Operating
      expenses:Selling
      expenses
            
            
            38,607
            
            
            
            21,873General
      and administrative expenses
            
            
            1,011,620
            
            
            
            588,285Total
      operating expenses
            
            
            1,050,227
            
            
            
            610,158Income
      from operations
            
            
            3,209,824
            
            
            
            1,010,727Other
      income (expenses):Government
      subsidy
            
            
            136,487
            
            
            
            49,954Interest
      expense, net
            
            
            (386,398
            )
            
            
            (132,309
            )Other
      income
            
            
            31,121
            
            
            
            5,697Total
      other expenses
            
            
            (218,790
            )
            
            
            (76,658
            )Income
      before provision for income taxes
            
            
            2,991,034
            
            
            
            934,069Provision
      for income taxes
            
            
            807,135
            
            
            
            248,904Net
      income
            
            
            2,183,899
            
            
            
            685,165Less:
      Net loss attributable to noncontrolling interest
            
            
            (64,358
            )
            
            
            (5,158
            )Net
      income attributable to BEFUT International Co., Ltd.
            
            
            2,248,257
            
            
            
            690,323Other
      comprehensive incomeForeign
      currency translation adjustment
            
            
            683,857
            
            
            
            47,807Comprehensive
      income
            
            $
            2,932,114
            
            
            $
            738,130Basic
      earnings per share
            
            $
            0.08
            
            
            $
            0.02Diluted
      earnings per share
            
            $
            0.08
            
            
            $
            0.02Weighted
      average number of common shares outstanding:Basic
            
            
            29,715,640
            
            
            
            29,510,971Diluted
            
            
            29,752,094
            
            
            
            30,280,226




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




7




BEFUT
INTERNATIONAL CO., LTD.




Consolidated
Statements of Cash Flows


(Unaudited)




For
      the Three MonthsEnded
      September 30,2010
            
            
            2009Cash
      flows from operating activities:Net
      Income
            
            $
            2,183,899
            
            
            $
            685,165Adjustments
      to reconcile net income to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            753,831
            
            
            
            352,054Changes
      in current assets and current liabilities:Accounts
      receivable
            
            
            (4,751,564
            )
            
            
            75,238Inventory
            
            
            (1,231,133
            )
            
            
            (1,357,491
            )Advance
      payments
            
            
            (1,318,366
            )
            
            
            138,122Other
      current assets
            
            
            (429,085
            )
            
            
            45,108Accounts
      payable and accrued expenses
            
            
            (229,105
            )
            
            
            243,714Trade
      notes payable
            
            
            2,958,000
            
            
            
            (1,172,880
            )Advances
      from customers
            
            
            177,334
            
            
            
            158,553Income
      taxes payable
            
            
            784,816
            
            
            
            248,904Other
      current liabilities
            
            
            219,191
            
            
            
            289,288Total
      adjustments
            
            
            (3,066,081
            )
            
            
            (979,390
            )Net
      cash used in operating activities
            
            
            (882,182
            )
            
            
            (294,225
            )Cash
      flows from investing activities:Due
      from related party
            
            
            474,764
            
            
            
            -Additions
      to property and equipment
            
            
            (622,725
            )
            
            
            (534,875
            )Long-term
      investment
            
            
            -
            
            
            
            2,932Loans
      to unrelated parties
            
            
            10,664
            
            
            
            559,117Net
      cash provided by (used in) investing activities
            
            
            (137,297
            )
            
            
            27,174Cash
      flows from financing activities:Restricted
      cash
            
            
            (1,480,073
            )
            
            
            586,000Bank
      loan security deposits
            
            
            (26,622
            )
            
            
            585,752Loans
      from unrelated parties
            
            
            1,626,900
            
            
            
            (249,237
            )Proceeds
      from minority shareholders
            
            
            58,683
            
            
            
            43,983Repayment
      of short-term bank loans
            
            
            -
            
            
            
            (733,050
            )Net
      cash provided by financing activities
            
            
            178,888
            
            
            
            233,448Effect
      of foreign currency translation on cash
            
            
            (16,136
            )
            
            
            1,377Net
      decrease in cash and cash equivalents
            
            
            (856,727
            )
            
            
            (32,226
            )Cash
      and cash equivalents – beginning
            
            
            1,319,173
            
            
            
            210,301Cash
      and cash equivalents – ending
            
            $
            462,446
            
            
            $
            178,075




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




8




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 the Securities Exchange Act of
1934, as amended, was established under the laws of Nevada on May 2, 2005. The
accompanying consolidated financial statements include the financial statements
of BEFUT International Co., Ltd. and its subsidiaries (collectively, the
“Company”). The Company’s primary business is 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 of common stock of BEFUT
Corporation, a company incorporated in the State of Nevada on January 14, 2009
(“Befut Nevada”), constituting all of the capital stock of Befut Nevada, from
Befut International Co. Limited, a British Virgin Islands company (“Befut BVI”)
in exchange for the issuance to Befut BVI of 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 stock and (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 acquisition under 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 Befut
Nevada.  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’s Republic 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 Manufacturing Co., Ltd.
(“Dalian Befut”) in accordance with applicable PRC law so that Dalian Befut
could raise capital and grow its business (the “Restructuring”). Dalian Befut
was incorporated on June 13, 2002 under the laws of the PRC. The Restructuring
included the following arrangements: First, WFOE entered into an Original
Equipment Manufacturer Agreement (the “OEM Agreement”) with Dalian Befut
containing the following material provisions: (i) Dalian Befut may not
manufacture products 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 to Dalian Befut, as well as provide design requirements for
products to be manufactured; (iii) WFOE is responsible for marketing and
distributing the products 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 of the assets and/or equity of Dalian
Befut at a mutually agreed price to the extent permitted by applicable PRC law.
In addition, 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.




9


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 September 30, 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
consolidated financial 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
consolidated financial statements for the years ended June 30, 2010 and
2009.




Reclassification




Certain
amounts as of June 30, 2010 and September 30, 2009 were reclassified for
presentation purposes.




Note
3 – Restricted Cash




Cash
balances in the amount of $1,497,000 and $1,181,095 were restricted as of
September 30, 2010 and June 30, 2010, respectively, as collateral for the
construction loan obtained from the PRC National Development Bank Joint Equity
Corporation, which is exhibited in Note 14.  The remaining balance of
$1,201,425 as of September 30, 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 September 30,
2010 and June 30, 2010 consists of the following:




September
      30,
            
            
            June
      30,2010
            
            
            2010Raw
      materials
            
            $
            1,262,275
            
            
            $
            1,093,193Work
      in process
            
            
            555,545
            
            
            
            323,275Finished
      goods
            
            
            2,011,392
            
            
            
            1,127,321Total
            
            $
            3,829,212
            
            
            $
            2,543,789




10


BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)


Note
5 – Loans to Unrelated Parties




As of
September 30, 2010 and June 30, 2010, the Company had outstanding loans to
unrelated parties of $1,060,471 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 loan agreement.




Note
6 – Advance Payments




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




September
      30,
            
            
            June
      30,2010
            
            
            2010Advance
      payments for inventory
            
            $
            590,139
            
            
            $
            399,868Advance
      payments for land and equipment
            
            
            1,448,124
            
            
            
            293,605Total
            
            $
            2,038,263
            
            
            $
            693,473





Note
7 – Property and Equipment




Property
and equipment as of September 30, 2010 and June 30, 2010 consist of the
following:




September
      30,
            
            
            June
      30,2010
            
            
            2010Buildings
            
            $
            20,205,681
            
            
            $
            19,877,285Machinery
      and equipment
            
            
            13,165,436
            
            
            
            12,673,324Office
      equipment and furniture
            
            
            149,067
            
            
            
            100,927Vehicles
            
            
            493,929
            
            
            
            466,380Subtotal
            
            
            34,014,113
            
            
            
            33,117,916Less:
      Accumulated depreciation
            
            
            1,961,989
            
            
            
            1,499,84232,052,124
            
            
            
            31,618,074Add:
      Construction in progress
            
            
            259,922
            
            
            
            -Total
            
            $
            32,312,046
            
            
            $
            31,618,074




Depreciation
expense for the three months ended September 30, 2010 and 2009 was $433,215 and
$91,212, respectively.




Note
8 – Intangible Assets




Intangible
assets as of September 30, 2010 and June 30, 2010 consist of the
following




September
      30,
            
            
            June
      30,2010
            
            
            2010Software
            
            $
            23,054
            
            
            $
            22,684Trademark
            
            
            85,329
            
            
            
            83,961Land
      use rights
            
            
            5,594,723
            
            
            
            5,505,028Patent
            
            
            11,790,372
            
            
            
            11,601,348Subtotal
            
            
            17,493,478
            
            
            
            17,213,021Less:
      Accumulated amortization
            
            
            1,893,316
            
            
            
            1,543,646Total
            
            $
            15,600,162
            
            
            $
            15,669,375




Amortization expense for the three
months ended September 30, 2010 and 2009 was $320,616 and $260,842,
respectively.




11


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 September 30, 2010 and June 30, 2010 was $2,122,746 and
$2,088,714, respectively.




Note
10 – Accounts Payable and Accrued Expenses




Accounts
payable and accrued expenses as of September 30, 2010 and June 30, 2010 consist
of the following:




September
      30,
            
            
            June
      30,2010
            
            
            2010Accounts
      payable
            
            $
            2,888,090
            
            
            $
            3,009,646Accrued
      expenses
            
            
            48,727
            
            
            
            110,000Total
            
            $
            2,936,817
            
            
            $
            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 September 30, 2010 and June 30, 2010
were $2,994,000 and $-0-, respectively.




Note
12 – Short-Term Bank Loans




Short-term
bank loans consist of the following:




September
      30,
            
            
            June
      30,2010
            
            
            2010On
      September 16, 2009, the Company obtained a loan from Harbin Bank, the
      principal 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 of which is to be paid in full by October 29, 2010. The interest
      is to be calculated using an annual fixed interest rate of 6.903% and paid
      monthly. The loan is guaranteed by a third party Dalian Fangyuan Fiancial
      Guarantee Co.,Ltd.
            
            $
            2,395,200
            
            
            $
            2,356,800On
      June 25, 2010, the Company obtained a loan from Bank of East Asia, the
      principal of which is to be paid in full by December 25, 2010. The
      interest is to be calculated using an annual fixed interest rate of 6.318%
      and paid monthly. The loan is guaranteed by accounts
      receivables.
            
            $
            748,500
            
            
            $
            736,500On
      September 14, 2010, the Company obtained a loan from Harbin Bank, the
      principal of which is to be paid in full by September 13, 2011.
      The  interest is to be calculated using an annual fixed interest
      rate of 6.372% and  paid monthly. The loan is secured by the
      Company’s property and  equipment.
            
            $
            2,994,000
            
            
            $
            -Total
            
            $
            6,137,700
            
            
            $
            6,039,300




12


BEFUT
INTERNATIONAL CO., LTD.
 
 Notes
to Consolidated Financial Statements
 (Unaudited)


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 September 30,
2010 and June 30, 2010, the Company had outstanding loans from unrelated parties
of $2,016,700 and $370,000, respectively.




Note
14 – Long-Term Bank Loans




Long term
bank loans consist of the following:




September
      30,
            
            
            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 rate  equal to 5% per
      annum above the floating base interest for loans of the  same
      term promulgated by the PRC’s central bank, China People’s
      Bank.  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.
            
            $
            14,970,000
            
            
            $
            14,730,000Total
            
            $
            14,970,000
            
            
            $
            14,730,000Less:
      Current portion
            
            
            598,800
            
            
            
            294,600Total
      noncurrent portion
            
            $
            14,371,200
            
            
            $
            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
              September
      30,2010
            
            
            2009Net
      income attributable to BEFUT International Co., Ltd.
            
            $
            2,248,257
            
            
            $
            690,323Weighted
      average common shares (denominator for basic earnings per
      share)
            
            
            29,715,640
            
            
            
            29,510,971Effect
      of dilutive securities:
            
            
            36,454
            
            
            
            769,255Weighted
      average common shares (denominator for diluted earnings per
      share)
            
            
            29,752,094
            
            
            
            30,280,226Basic
      earnings per share
            
            $
            0.08
            
            
            $
            0.02Diluted
      earnings per share
            
            $
            0.08
            
            
            $
            0.02




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
three months ended September 30, 2010 and 2009, there was no provision or
benefit for U.S. income tax purpose.




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




On March
16, 2007, the National People’s Congress of China approved the Corporate Income
Tax Law of the PRC (the “New CIT Law”), which became effective from January 1,
2008. Under the New CIT Law, the corporate income tax rate applicable to all
companies, including both domestic and foreign-invested companies, is 25%,
replacing the previous applicable tax rate of 33%. For the three months ended
September 30, 2010 and 2009, the income tax provision for the Company was
$807,135 and $248,904, 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
FIN 48 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 three month ended September 30, 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 three months ended September 30, 2010, five vendors accounted for
approximately 84% of the Company’s purchases of raw materials, while during the
three months ended September 30, 2009, two major vendors accounted for
approximately 63% of the Company’s purchases of raw materials. Total purchases
from these vendors were $15,768,196 and $3,057,510 for the three months ended
September 30, 2010 and 2009, respectively.




Five
major customers accounted for 37% and 68% of the net revenue for the three
months ended September 30, 2010 and 2009, respectively. Total sales to these
customers were $5,869,886 and $3,715,811, for the three months ended September
30, 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:




Three
      Months Ended
              September
      30,2010
            
            
            2009Cash
      paid for interest
            
            $
            337,068
            
            
            $
            113,143Cash
      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 strategies, (c) anticipated
trends in our industries, (d) our future financing plans, and (e) our
anticipated needs for, and use of, working capital. They are generally
identifiable by use of the words “may,” “will,” “should,” “anticipate,”
“estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” or the negative of these words or other variations on these
words or comparable terminology. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks and matters described in this
report generally. In light of these risks and uncertainties, there can be no
assurance that the forward-looking statements contained in this filing will in
fact occur. You should not place undue reliance on these forward-looking
statements.





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





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





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





Overview





We
believe that we are one of the most competitive manufacturers of specialty
cables in northeastern China.  For the quarter ended September 30,
2010, approximately 45% of our revenues were generated from traditional cable
and almost 55% revenues were generated from specialty cable. 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 also have developed the capability to produce other types of
special cable such as carbon fiber composite cable, submarine cable and certain
“new energy” cable, including cable for wind and solar energy. In addition, we
have recently begun to develop and produce switch applications, including high
and low voltage distribution cabinet  switches and crane electronic
control switches, which products compliment our cable product
offerings.




16




Recent
Developments





On July
16, 2010, Dalian Befut acquired 60% of equity interests of Dalian Yuansheng for
$88,235 (the registered capital value of such equity interests) from Mr.
Chengnian Yan. Dalian Befut also increased Dalian Yuansheng’s registered capital
by RMB 5 million (or US$735,294), thereby increasing Dalian Befut’s total equity
interest to 93.3%.  Dalian Yuansheng is engaged in researching,
developing and manufacturing conductive carbon-fiber to provide Dalian Befut
with the raw materials it needs to produce carbon fiber composite cable
products. One of the principal shareholders of Dalian Yuansheng holds three
patents for carbon fiber composite cable, one of which was transferred to Dalian
Yuansheng in October 2010, and the remaining two of which are expected to be
transferred to Dalian Yuansheng in April, 2011.





Carbon
fiber composite core is acknowledged in the cable industry to be the preferred
replacement for steel core inside the aluminum contained in high voltage cable
products. Compared to traditional steel core, carbon fiber composite core
possesses twice the strength, higher conductivity, lower sag, lighter weight,
less corrosion, better temperature resistance and the ability to eliminate line
freeze. After heavy ice and snow severely damaged the Hunan power grid in 2008,
the State Grid Corporation of China modified its technical standards for high
voltage cables used in the national power grid to protect against similar
disasters in the future. Carbon fiber composite cable products are widely
considered to be the best choice for complying with the new
standard.





Dalian
Yuansheng is located in Changxing Island Harbor Industrial Zone. We plan to
invest RMB4,020,000 to purchase equipment for six production lines as part of
our first phase to towards achieving an annual production capacity of 500,000
meters (500 km) of carbon fiber composite core. As of September 30, 2010,
we  invested RMB1,340,000 to purchase the equipment for two production
lines. We intend to install the remaining production lines by the end
of  2011.  Our innovative carbon fiber composite cable
provides us with a relatively higher profit margin as compared to our other
specialty cable products. We currently sell our carbon fiber composite
cable  to Xinjiang Tebian Electric Apparatus Stock Co. Ltd. for
testing in the Northwest Power Grid of China and to North China Electric Power
(Group) Co. Ltd for testing in the North Power Grid of China.  Due to
the change in standards for high voltage cables, we expect that there will be a
high demand in China for our carbon fiber composite cable products in the near
future.





Results
of Operations





Quarter
ended September 30, 2010 compared to the quarter ended September 30,
2009




Item
            
            September
      30, 2010
            
            
            September
      30, 2009
            
            
            ChangeSales
            
            $
            15,930,811
            
            
            $
            5,483,659
            
            
            
            191
            %Cost
      of sales
            
            $
            11,670,760
            
            
            $
            3,862,774
            
            
            
            202
            %Gross
      profit
            
            $
            4,260,051
            
            
            $
            1,620,885
            
            
            
            163
            %Total
      operating expenses
            
            $
            1,050,227
            
            
            $
            610,158
            
            
            
            72
            %Total
      other income/(expenses)
            
            $
            (218,790
            )
            
            $
            (76,658
            )
            
            
            -185
            %Net
      income
            
            $
            2,183,899
            
            
            $
            685,165
            
            
            
            219
            %Gross
      profit margin
            
            
            26.7
            %
            
            
            29.5
            %
            
            
            -2.8
            %Basic
      earnings per share
            
            $
            0.08
            
            
            $
            0.02
            
            
            
            300
            %Diluted
      earnings per share
            
            $
            0.08
            
            
            $
            0.02
            
            
            
            300
            %Weighted
      average number of common shares outstanding:Basic
            
            
            29,715,640
            
            
            
            29,510,971
            
            
            
            0.7
            %Diluted
            
            
            29,752,094
            
            
            
            30,280,226
            
            
            
            -1.7
            %




17




Sales





Our
sales for the quarter ended September 30, 2010 were $15,930,811, an increase of
$10,447,152, or 191%, as compared to the quarter ended September 30, 2009. The
increase was primarily due to three factors: (i) significantly increased demand
for our traditional cables and specialty cables from new and existing customers
as compared to the demand for such products in three months ended September 30,
2009, (ii) the increase of our annual production capacity after we relocated 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 quarter ended September 30, 2010, which we
passed on to our customers. However, the percentage of  sales of
specialty cable as total sales for the quarter ended September 30, 2010 was
about 55%, a decrease of 5%, as compared to the quarter ended September 30,
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 quarter ended September 30, 2010 was
$11,670,760, an increase of $7,807,986, or 202%, as compared to the quarter
ended September 30, 2009. The percentage increase in our cost of sales was
slightly higher than the percentage increase in our sales due to the cost of
traditional cable product is higher than that of specialty cable product and we
produced more traditional cable products as percentage of total sales, as
compared to the quarter ended September 30, 2009.





Gross
Profit





Gross
profit for the quarter ended September 30, 2010 was $4,260,051, an increase of
$2,639,166, or 163%, as compared to the quarter ended June 30, 2009. Gross
profit as a percentage of sales was 26.7% for the quarter September 2010, a
decrease of 2.8%, as compared to the quarter ended September 30,
2009.  The decrease of gross profit rate is again primarily due to
that we produced less percentage of specialty cable products which has usually
much higher gross margin, as compared to the same quarter last
year.





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 $38,607 in the quarter ended September 30, 2010, as
compared to $21,873 in the quarter ended September 30, 2009, an increase of
$16,734, or 76.5%. General and administrative expenses were $1,011,620 for the
quarter ended September 30, 2010 , an increase of $423,335, or 72.0%, as
compared to the quarter September 30, 2009. The increase of general and
administrative expenses are mainly due to the increase in expenses from Dalian
Yuansheng, Befut Zhong Xing and WFOE for $215,648, $33,573 and $72,426
respectively.




Income
from Operations





Our
operating income was $3,209,824 for the quarter ended September 30, 2010, an
increase of $2,199,097, or 217.6%, as compared to $1,010,727 for the quarter
ended September 30, 2009.  This increase was a result of a significant
increase in the gross profit of our business of wire and cable
manufacturing, partially offset by an increase of selling, general and
administrative expenses.





Government
Subsidy





In the
quarter ended September 30, 2010, we received subsidies from various PRC
governmental bureaus in the aggregate amount of $136,487, as compared to
subsidies of $49,954 received in the quarter ended September 30, 2009. The
subsidies received by the Company in the quarter ended September 30, 2010
consisted of (i) $73,950 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) $29,580 received from the
Appropriation of Technology Innovation Fund of the Department of Finance of
Liaoning Province, and (iii) a refund of $26,745 for value added taxes paid by
the Company at the end of 2009.




18




Interest
Expenses





Interest
expense was $386,398 for the quarter ended September 30, 2010, an increase of
$254,089, or 192.0%, as compared to $132,309 for the quarter ended September 30,
2009. Such increase is due to the increase of our total bank loans.





Income
Taxes





In
the quarter ended September 30, 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 $807,135 for the quarter ended September 30, 2010, an
increase of $558,231, or 224%, compared to $248,904 for the quarter ended
September 30, 2009.





Net
Income





Net
income for the quarter ended September 30, 2010 was $2,183,899, an increase of
$1,498,734, or 218.7%, as compared to net income of $685,165 for the quarter
ended September 30, 2009. The increase was mainly attributable to the increase
of $2,639,166 in gross profit, which was partially offset by an increase in
general and administrative expenses of $423,335, an increase in interest expense
of $254,089 and an increase in income tax provision of $558,231.





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)
            
            September
      30,
              2010
            
            
            June
      30,
              2010Cash
      and cash equivalents and restricted cash
            
            $
            3,161
            
            
            $
            2,500Working
      capital
            
            $
            7,331
            
            
            $
            7,215Ratio
      of current assets to current liabilities
            
            1.4:1
            
            
            1.5:1





Our
approximately $0.1 million increase in working capital from June 30, 2010 to
September 30, 2010 was primarily due to the increase of $6.1 million of current
assets and the increase of $6.0 million of current liabilities. The increase of
current assets mainly includes the increase of $4.9 million of account
receivables, the increase of $1.3 million of inventory and the increase of $1.3
million of advance payments and partially offset by the decrease of $2.1 million
advance payments on R&D in the part of current assets due to a
reclassification. The increase of current liabilities mainly includes the
increase of $3 million of trade notes payable, the increase of $1.6 million of
loans from unrelated parties and the increase of $0.8 million of income tax
payable.




19




Cash
Flows





We
had a net decrease of $856,727 in cash and cash equivalents from June 30, 2010
to September 30, 2010, as compared to a net decrease of $32,226 from June 30,
2009 to September 30, 2009, respectively. The following table summarizes such
changes:





For
      the three months Ended(dollars
      in thousands)
            
            September
      30, 2010
            
            
            September
      30, 2009Net
      cash provided by (used in) operating activities
            
            $
            (882
            )
            
            $
            (294
            )Net
      cash used in investing activities
            
            $
            (137
            )
            
            $
            27Net
      cash provided by financing activities
            
            $
            179
            
            
            $
            233Net
      decrease in cash and cash equivalents and restricted cash
            
            $
            (857
            )
            
            $
            (32
            )





We
used net cash of $882,182 for our operating activities in the quarter ended
September 30, 2010, an increase of $587,957, or 200%, as compared to $294,225 in
the quarter ended September 30, 2009. The net cash used in our investment
activities in the quarter ended September 30, 2010 was $137,297, an increase of
$164,471, as compared to $27,174 of net cash used in investment activities in
the quarter ended September 30, 2009. The net cash obtained from our financing
activities in the quarter ended September 30, 2010 was $178,888, slightly less
than the cash obtained in the quarter ended September 30,2009. 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 quarter ended September 30, 2010, net cash used from operating activities
was $882,182, an increase of $587,957 as compared to $294,225 of net cash used
from operating activities during the quarter ended September 30, 2009. The
increase in net cash of approximately $0.59 million was mainly due to the
increase of net income of $1.5 million, the increase of account receivables of
$4.7 million, the increase in advance payment of approximately $1.5 million and
the increase of trade notes payable of $4.1 million.





Investing
Activities





During
the quarter ended September 30, 2010, we used net cash in investing activities
of $137,297, an increase of $164,471 as compared to $27,471 in net cash we
provided in investing activities for the quarter ended September 30,
2009.





Financing
Activities





During
the quarter ended September 30, 2010, net cash provided by financing activities
was $178,888, a decrease of $54,560, as compared to net cash of $233,448
provided by financing activities in the fiscal year ended September 30,
2009.




20




Financial
Obligations





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





Creditors
            
            Loan
      Amount
            
            
            Interest
      Rate
            
            Term
            
            Maturity
      DateHarbin
      Bank
            
            $
            2,994,000
            
            
            
            6.372
            %
            1
      year
            
            09/13/11Bank
      of Dalian
            
            $
            2,395,200
            
            
            
            6.903
            %
            1
      year
            
            10/29/10Bank
      of East Asia
            
            $
            748,500
            
            
            
            6.318
            %
            6
      months
            
            12/25/10China
      Development Bank
            
            $
            14,970,000
            
            
            
            6.237
            %
            7
      years
            
            11/01/16




Accounts
Receivable





The
balance of our accounts receivable was $14,236,184, net of allowance for
doubtful accounts of $84,625, as of September 30, 2010, as compared to
$9,292,310, net of allowance for doubtful accounts of $83,295, as of June 30,
2010. The days’ sales in receivables for the last twelve months ended September
30, 2010 were 125 days, compared to 107 days for the fiscal year ended June 30,
2010.





Inventories





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





(dollars)
              
              Sept. 30,
                2010
              
              
              June
      30,
                2010CategoryRaw
      materials
              
              $
              1,262,275
              
              
              $
              1,093,193Work-in-process
              
              
              555,545
              
              
              
              323,275Finished
      goods
              
              
              2,011,392
              
              
              
              1,127,321Total
      inventories
              
              $
              3,829,212
              
              
              $
              2,543,789





We
had total inventory of $3,829,212 as of September 30, 2010, an increase of
$1,285,423, or 50.5%, as compared to inventory of $2,543,789 as of June 30,
2010. Days’ sales in inventory for the last twelve months ended September 30,
2010 were 45 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
September 30, 2010, we did not have any off-balance sheet
arrangements.





Critical
Accounting Policies and Use of Estimates





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





Use
of Estimates and Assumption





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




21




Revenue
Recognition





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





Cash
and Cash Equivalents





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





Accounts
Receivable





Accounts
receivable are recorded net of allowance for doubtful accounts. The Company
provides an allowance for doubtful accounts equal to the estimated uncollectible
amounts.  Periodically, management assesses customer credit history and
relationships as well as performs an analysis on the aging of accounts
receivable.  Based on the results of such analysis, management
determines whether certain balances are deemed uncollectible at the end of a
certain fixed period.  Using its past collection experience, the
Company reserves 0.3% of accounts receivable balances that have been outstanding
for less than one year, 3% of accounts receivable balances that have been
outstanding for more than one year but less than two years, and 10% of accounts
receivable balances that have been outstanding for more than two
years.




Item
      4T.
            Controls
      and Procedures




(a) Evaluation of disclosure controls
and procedures. At the conclusion of the period ended September 30, 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 the design and operation 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 as of the end of the period covered by this report, our
disclosure controls and procedures were effective and adequately designed to
ensure that the information required to be disclosed by us in the reports we
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the applicable rules and forms and that
such information was accumulated and communicated to our Chief Executive Officer
and Chief Financial Officer, in a manner that allowed for timely decisions
regarding required disclosure.





(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.





22




PART
II OTHER INFORMATION




Item
      6.
            Exhibits





The
exhibits required by this item are set forth in the Exhibit Index attached
hereto.





23




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:
      November 15, 2010
              By:
              /s/
      Hongbo CaoName:
      Hongbo CaoTitle:
      President and Chief Executive Officer(principal
      executive officer)


Date:
      November 15, 2010
              By:
              /s/
      Mei YuName:
      Mei YuTitle:
      Chief Financial Officer(principal
      financial officer and principal accounting officer)




24




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.




25