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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended April 4, 2010

OR



| ̈ | 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 000-17297





BTU INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                       |  | 04-2781248                             
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification Number)
|                                                               | 
|23 Esquire Road, North Billerica,
Massachusetts                |  | 01862-2596                             
|(Address of principal executive offices)                       |  | (Zip Code)                             

Registrants telephone number, including area code: (978) 667-4111





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 website, 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 than the registrant was required to submit and post such
files.)    Yes   ̈    No   ̈ (Registrant is not subject to the requirements of Rule 405 of
Regulation S-T at this time)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of the Registrants Common Stock, par value $.01 per share, as of the latest practicable date: As of
May 3, 2010: 9,265,851 shares.









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##### Table of Contents

BTU INTERNATIONAL, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION



|                                                                                                    |  |      
|--------------------------------------------------------------------------------------------------- |  | -----
|Item 1. Financial Statements (Unaudited)                                                            |  |      
|                                                                                                    | 
|Unaudited Condensed Consolidated Balance Sheets                                                     |  | 1    
|Unaudited Condensed Consolidated Statements of Operations                                           |  | 2    
|Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
(Loss) |  | 3    
|Unaudited Condensed Consolidated Statements of Cash Flows                                           |  | 4-5  
|Notes to Unaudited Condensed Consolidated Financial Statements                                      |  | 6-10 
|                                                                                                    | 
|Item 
2. Managements Discussion and Analysis of Financial Condition and Results of Operations      |  | 11-14
|                                                                                                    | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  |  | 14   
|                                                                                                    | 
|Item 4. Controls and Procedures                                                                     |  | 14   
|                                                                                                    | 
|PART II. OTHER INFORMATION                                                                          |  |      
|                                                                                                    | 
|Item 1A. Risk Factors                                                                               |  | 14   
|                                                                                                    | 
|Item 6. Exhibits                                                                                    |  | 14   
|                                                                                                    | 
|Signatures                                                                                          |  | 15   
|Exhibit 10.1 Pledge and Assignment Agreement, dated August 31, 2009 with Sovereign Bank             |  |      
|EX-31.1 Section 302 Certification of C.E.O.                                                         |  |      
|EX-31.2 Section 302 Certification of C.F.O.                                                         |  |      
|EX-32.1 Section 906 Certification of C.E.O.                                                         |  |      
|EX-32.2 Section 906 Certification of C.F.O.                                                         |  |      



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BTU INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)



|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                                                                                                                                                            |  | April 4,2010 |        |   | December 31,2009 |  
|Assets                                                                                                                                                                                                                      |  |              |        |   |                  |   |        |  
|Current assets                                                                                                                                                                                                              |  |              |        |   |                  |   |        |  
|Cash and cash equivalents                                                                                                                                                                                                   |  | $            | 21,850 |   |                  | $ | 25,397 |  
|Accounts receivable, net                                                                                                                                                                                                    |  |              | 10,734 |   |                  |   | 10,333 |  
|Inventories, net                                                                                                                                                                                                            |  |              | 14,244 |   |                  |   | 14,533 |  
|Other current assets                                                                                                                                                                                                        |  |              | 2,451  |   |                  |   | 1,283  |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total current assets                                                                                                                                                                                                        |  |              | 49,279 |   |                  |   | 51,546 |  
|                                                                                                                                                                                                                            |  |             
|Property, plant and equipment, net                                                                                                                                                                                          |  |              | 6,014  |   |                  |   | 6,332  |  
|                                                                                                                                                                                                                            |  |             
|Other assets, net                                                                                                                                                                                                           |  |              | 689    |   |                  |   | 916    |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total assets                                                                                                                                                                                                                |  | $            | 55,982 |   |                  | $ | 58,794 |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Liabilities and stockholders equity                                                                                                                                                                                        |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Current liabilities                                                                                                                                                                                                         |  |              |        |   |                  |   |        |  
|Current portion of long-term debt                                                                                                                                                                                           |  | $            | 315    |   |                  | $ | 310    |  
|Accounts payable                                                                                                                                                                                                            |  |              | 5,243  |   |                  |   | 5,527  |  
|Other current liabilities                                                                                                                                                                                                   |  |              | 6,126  |   |                  |   | 8,577  |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total current liabilities                                                                                                                                                                                                   |  |              | 11,684 |   |                  |   | 14,414 |  
|                                                                                                                                                                                                                            |  |             
|Long-term debt, less current portion                                                                                                                                                                                        |  |              | 8,610  |   |                  |   | 8,687  |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total liabilities                                                                                                                                                                                                           |  |              | 20,294 |   |                  |   | 23,101 |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Commitments and contingencies                                                                                                                                                                                               |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Stockholders equity                                                                                                                                                                                                        |  |              |        |   |                  |   |        |  
|Preferred stock, $1.00 par value - 5,000,000 shares authorized; no shares issued or outstanding                                                                                                                             |  |              |       |   |                  |   |       |  
|Common stock, $0.01 par value - 25,000,000 shares authorized; 10,631,566 shares issued and 9,263,599 shares outstanding at
April 4, 2010 and 10,619,589 shares issued and 9,251,622 shares outstanding at December 31, 2009 |  |              | 106    |   |                  |   | 106    |  
|Additional paid in capital                                                                                                                                                                                                  |  |              | 47,411 |   |                  |   | 47,054 |  
|Accumulated deficit                                                                                                                                                                                                         |  |              | (8,140 | ) |                  |   | (7,847 | )
|Treasury stock, at cost, 1,367,967 shares at April 4, 2010 and December 31, 2009                                                                                                                                            |  |              | (4,990 | ) |                  |   | (4,990 | )
|Accumulated other comprehensive income                                                                                                                                                                                      |  |              | 1,301  |   |                  |   | 1,370  |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total stockholders equity                                                                                                                                                                                                  |  |              | 35,688 |   |                  |   | 35,693 |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |             
|Total liabilities and stockholders equity                                                                                                                                                                                  |  | $            | 55,982 |   |                  | $ | 58,794 |  
|                                                                                                                                                                                                                            |  |              |        |   |                  |   |        |  

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



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BTU INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)



|                                               |  |                    |           |   |                |   |           |  
|---------------------------------------------- |  | ------------------ | --------- | - | -------------- | - | --------- | -
|                                               |  | Three Months Ended |          
|                                               |  | April 4, 2010      |           |   | March 29, 2009 |  
|                                               |  |                   
|Net sales                                      |  | $                  | 17,192    |   |                | $ | 9,806     |  
|Costs of goods sold                            |  |                    | 10,096    |   |                |   | 8,367     |  
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Gross profit                                   |  |                    | 7,096     |   |                |   | 1,439     |  
|                                               |  |                   
|Operating expenses:                            |  |                    |           |   |                |   |           |  
|Selling, general and administrative            |  |                    | 5,539     |   |                |   | 3,930     |  
|Research, development and engineering          |  |                    | 1,638     |   |                |   | 1,977     |  
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Operating loss                                 |  |                    | (81       | ) |                |   | (4,468    | )
|                                               |  |                   
|Interest income                                |  |                    | 2         |   |                |   | 82        |  
|Interest expense                               |  |                    | (159      | ) |                |   | (155      | )
|Foreign exchange gain (loss)                   |  |                    | 65        |   |                |   | (59       | )
|Other income                                   |  |                    | 17        |   |                |   | 29        |  
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Loss before provision for income taxes         |  |                    | (156      | ) |                |   | (4,571    | )
|                                               |  |                   
|Provision (benefit) for income taxes           |  |                    | 137       |   |                |   | (17       | )
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Net loss                                       |  | $                  | (293      | ) |                | $ | (4,554    | )
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Loss per share:                                |  |                    |           |   |                |   |           |  
|Basic                                          |  | $                  | (0.03     | ) |                | $ | (0.49     | )
|Diluted                                        |  | $                  | (0.03     | ) |                | $ | (0.49     | )
|                                               |  |                   
|Weighted average number of shares outstanding: |  |                    |           |   |                |   |           |  
|Basic shares                                   |  |                    | 9,253,081 |   |                |   | 9,284,318 |  
|Effect of dilutive options                     |  |                    |          |   |                |   |          |  
|                                               |  |                    |           |   |                |   |           |  
|                                               |  |                   
|Diluted shares                                 |  |                    | 9,253,081 |   |                |   | 9,284,318 |  
|                                               |  |                    |           |   |                |   |           |  

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



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BTU INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED APRIL 4, 2010

(in thousands)

(unaudited)



|                                             |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|-------------------------------------------- | ----------- | ------------ | - | ------------------------- | --- | -------------------------------------- | ----------- | ---------------- | -------------- | - | ------ | ----------------------------------- |  | ----- | ----- | - | ------ | - |  | - | ----- | - |  | - | ------ | -
|                                             |             | Common Stock |   | AdditionalPaid-In
Capital |     | RetainedEarnings/
(AccumulatedDeficit) |             |                  | Treasury Stock |   |        | AccumulatedOtherComprehensiveIncome |  |       | Total |  
|                                             |             |              |   |                           |    
|                                             |             |              |   |                           |    
|                                             | # of shares |              | $ |                           |     |                                        | # of shares |                  | $              |   |        |                                    
|                                             |             |              |   |                           |     |                                        |             |                 
|Balance at December 31, 2009                 |             | 10,620       |   | $                         | 106 |                                        | $           | 47,054           |                | $ | (7,847 | )                                   |  | 1,368 |       | $ | (4,990 | ) |  | $ | 1,370 |   |  | $ | 35,693 |  
|                                             |             |              |   |                           |     |                                        |             |                 
|Net loss                                     |             |             |   |                           |    |                                        |             |                 |                |   | (293   | )                                   |  |      |       |   |       |   |  |   |      |   |  |   | (293   | )
|                                             |             |              |   |                           |     |                                        |             |                 
|Exercise of stock options                    |             | 12           |   |                           |    |                                        |             | 40               |                |   |       |                                     |  |      |       |   |       |   |  |   |      |   |  |   | 40     |  
|                                             |             |              |   |                           |     |                                        |             |                 
|Stock-based compensation                     |             |             |   |                           |    |                                        |             | 317              |                |   |       |                                     |  |      |       |   |       |   |  |   |      |   |  |   | 317    |  
|                                             |             |              |   |                           |     |                                        |             |                 
|Translation adjustment                       |             |             |   |                           |    |                                        |             |                 |                |   |       |                                     |  |      |       |   |       |   |  |   | (69   | ) |  |   | (69    | )
|                                             |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|                                             |             |              |   |                           |     |                                        |             |                 
|Balance at April 4, 2010                     |             | 10,632       |   | $                         | 106 |                                        | $           | 47,411           |                | $ | (8,140 | )                                   |  | 1,368 |       | $ | (4,990 | ) |  | $ | 1,301 |   |  | $ | 35,688 |  
|                                             |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|                                             |             |              |   |                           |     |                                        |             |                 
|                                             |             |              |   |                           |     |                                        |             | ThreeMonthsEnded |                |   |        |                                     |  |       |       |   |        |   |  |  
|                                             |             |              |   |                           |     |                                        |             | April 4, 2010    |                |   |        |                                     |  |       |       |   |        |   |  |  
|Comprehensive loss is calculated as follows: |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|Net loss                                     |             |              |   |                           |     |                                        |             |                  |                | $ | (293   | )                                   |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|Other comprehensive loss:                    |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|Foreign currency translation adjustment      |             |              |   |                           |     |                                        |             |                  |                |   | (69    | )                                   |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|                                             |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|                                             |             |              |   |                           |     |                                        |             |                 
|Comprehensive loss                           |             |              |   |                           |     |                                        |             |                  |                | $ | (362   | )                                   |  |       |       |   |        |   |  |   |       |   |  |   |        |  
|                                             |             |              |   |                           |     |                                        |             |                  |                |   |        |                                     |  |       |       |   |        |   |  |   |       |   |  |   |        |  

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



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BTU INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED APRIL 4, 2010 AND MARCH 29, 2009

(in thousands)

(unaudited)



|                                                                |  |              |        |   |               |   |        |  
|--------------------------------------------------------------- |  | ------------ | ------ | - | ------------- | - | ------ | -
|                                                                |  | April 4,2010 |        |   | March 29,2009 |  
|Cash flows from operating activities:                           |  |              |        |   |               |   |        |  
|Net loss                                                        |  | $            | (293   | ) |               | $ | (4,554 | )
|Adjustments to reconcile net cash used in operating activities: |  |              |        |   |               |   |        |  
|Depreciation and amortization                                   |  |              | 522    |   |               |   | 631    |  
|Provision for bad debts                                         |  |              | 58     |   |               |   | 20     |  
|Provision for inventory obsolescence                            |  |              | 305    |   |               |   | 847    |  
|Stock-based compensation                                        |  |              | 317    |   |               |   | 302    |  
|Net change in operating assets and liabilities:                 |  |              |        |   |               |   |        |  
|Accounts receivable                                             |  |              | (462   | ) |               |   | 3,151  |  
|Inventories                                                     |  |              | (22    | ) |               |   | 1,318  |  
|Other current assets                                            |  |              | (1,158 | ) |               |   | 52     |  
|Customer deposits                                               |  |              | (1,944 | ) |               |   | 106    |  
|Other assets                                                    |  |              | (18    | ) |               |   | (5     | )
|Accounts payable                                                |  |              | (259   | ) |               |   | (1,273 | )
|Accrued expenses                                                |  |              | (391   | ) |               |   | (606   | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Net cash used in operating activities                           |  |              | (3,345 | ) |               |   | (11    | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Cash flows used in investing activities:                        |  |              |        |   |               |   |        |  
|Purchases of property, plant and equipment                      |  |              | (68    | ) |               |   | (135   | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Net cash used in investing activities                           |  |              | (68    | ) |               |   | (135   | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Cash flows from (used in) financing activities:                 |  |              |        |   |               |   |        |  
|Principal payments under loan and capital lease agreements      |  |              | (72    | ) |               |   | (68    | )
|Purchase of treasury stock                                      |  |              |       |   |               |   | (568   | )
|Proceeds from the exercise of stock options                     |  |              | 40     |   |               |   |       |  
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Net cash used in financing activities                           |  |              | (32    | ) |               |   | (636   | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Effects of exchange rates on cash                               |  |              | (102   | ) |               |   | (45    | )
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Net decrease in cash and cash equivalents                       |  |              | (3,547 | ) |               |   | (827   | )
|Cash and cash equivalents, beginning of period                  |  |              | 25,397 |   |               |   | 27,464 |  
|                                                                |  |              |        |   |               |   |        |  
|                                                                |  |             
|Cash and cash equivalents, end of period                        |  | $            | 21,850 |   |               | $ | 26,637 |  
|                                                                |  |              |        |   |               |   |        |  

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



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BTU INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

FOR THE THREE MONTHS ENDED APRIL 4, 2010 AND MARCH 29, 2009

(in thousands)

(unaudited)



|                                                   |  |              |     |               |   |    
|-------------------------------------------------- |  | ------------ | --- | ------------- | - | ---
|                                                   |  | April 4,2010 |     | March 29,2009
|Supplemental disclosures of cash flow information: |  |              |     |               |   |    
|Cash paid during the periods for:                  |  |              |     |               |   |    
|Interest                                           |  | $            | 164 |               | $ | 110
|Income taxes                                       |  |              | 94  |               |   | 57 

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



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BTU INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Basis
of Presentation

The condensed consolidated balance sheet, financial information and related disclosures as of and for the year ended
December 31, 2009 have been derived from our consolidated financial statements, which have been audited as of that date. The condensed consolidated balance sheet as of April 4, 2010 and the related condensed statements of
stockholders equity and comprehensive loss for the three months ended April 4, 2010 are unaudited. The condensed consolidated statements of operations and consolidated statements of cash flows for the three months ended April 4, 2010
and March 29, 2009 are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are
not necessarily indicative of results for any other period or for the full year. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the footnotes
contained in the Companys consolidated financial statements as of and for the year ended December 31, 2009, together with the auditors report, included in the Companys Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission.

(2) Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited condensed consolidated financial statements are those set forth in Note 1 to the
consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission.

Subsequent Events  The Company evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q. We are not aware of
any significant events that occurred subsequent to the balance sheet date, but prior to the filing of this report that would have a material impact on our condensed consolidated financial statements.

(3) Inventories, net



|                                          |  |                |        |                   |   |       
|----------------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                          |  | April 4,2010   |        | December 
31,2009
|                                          |  | (in thousands)
|                                          |  |               
|Raw materials and manufactured components |  | $              | 6,343  |                   | $ | 6,051 
|Work-in-process                           |  |                | 5,526  |                   |   | 5,970 
|Finished goods                            |  |                | 2,375  |                   |   | 2,512 
|                                          |  |                |        |                   |   |       
|                                          |  |               
|                                          |  | $              | 14,244 |                   | $ | 14,533
|                                          |  |                |        |                   |   |       

(4) Accrued Expenses



|                                               |  |                |       |                   |   |      
|---------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                               |  | April 4,2010   |       | December 
31,2009
|                                               |  | (in thousands)
|                                               |  |               
|Accrued commissions                            |  | $              | 844   |                   | $ | 1,176
|Accrued warranty                               |  |                | 516   |                   |   | 486  
|Accrued income taxes                           |  |                | 741   |                   |   | 774  
|Accrued audit                                  |  |                | 251   |                   |   | 366  
|Accrued legal                                  |  |                | 360   |                   |   | 265  
|Accrued bonus                                  |  |                | 17    |                   |   | 305  
|Accrued Atmoplas acquisition-related royalties |  |                | 500   |                   |   | 600  
|Payroll and payroll taxes                      |  |                | 875   |                   |   | 836  
|Accrued royalties                              |  |                | 75    |                   |   | 179  
|Accrued cost of sales                          |  |                | 321   |                   |   | 157  
|Customer deposits                              |  |                | 1,366 |                   |   | 3,310
|Other                                          |  |                | 260   |                   |   | 123  
|                                               |  |                |       |                   |   |      
|                                               |  | $              | 6,126 |                   | $ | 8,577
|                                               |  |                |       |                   |   |      



6



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##### Table of Contents

BTU INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



Warranties

The Company provides standard warranty coverage for labor for 12 months and special extended material-only coverage on certain other products. The
Company estimates and records an accrual for anticipated warranty claims based on revenue. The accrual for warranty covers the estimated costs of material, labor and travel. Actual warranty claims incurred are charged to the accrual. Factors that
affect the Companys product warranty liability include the number of installed units, the anticipated cost of warranty repairs and historical and anticipated rates of warranty claims.

The following table reflects changes in the Companys accrued warranty account during the three months ended April 4, 2010 (in thousands):



|                                                      |  |                                 |      |  
|----------------------------------------------------- |  | ------------------------------- | ---- | -
|                                                      |  | Three Months EndedApril 4, 2010 |     
|                                                      | 
|Beginning balance, December 31, 2009                  |  | $                               | 486  |  
|Plus: accruals related to new sales                   |  |                                 | 243  |  
|Less: warranty claims incurred and reserve adjustment |  |                                 | (213 | )
|                                                      |  |                                 |      |  
|Ending balance, April 4, 2010                         |  | $                               | 516  |  
|                                                      |  |                                 |      |  



(5) Debt

Long-term debt at April 4, 2010 and December 31, 2009 consisted of:



|                                              |  |                |       |                   |   |      
|--------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                              |  | April 4,2010   |       | December 
31,2009
|                                              |  | (in thousands)
|Mortgage note payable, interest rate of 6.84% |  | $              | 8,925 |                   | $ | 8,997
|Less - current maturities                     |  |                | 315   |                   |   | 310  
|                                              |  |                |       |                   |   |      
|                                              |  |               
|                                              |  | $              | 8,610 |                   | $ | 8,687
|                                              |  |                |       |                   |   |      

On March 30, 2006, the Company entered into a mortgage note that
is secured by our real property in Billerica, MA, in the amount of $10 million. The mortgage note requires monthly payments of $76,280, which includes interest calculated at the rate of 6.84% per annum. This mortgage note payable has a
balloon payment of $6.8 million due and payable at maturity on December 23, 2015.

On August 31, 2009, the Company entered into
a pledge and assignment agreement with a bank. The bank agrees, at the Companys request, to issue letters of credit in the banks name and the Company agrees to cash collateralize letters of credit via restricted cash deposits at the
bank. As of April 4, 2010 the value of the outstanding letters of credit issued by the bank for the Company and cash collateralized by the Company was $ 1,614,502. This restricted cash value is included in the Companys balance sheet in
other current assets.

(6) Earnings Per Share (EPS)

Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period.
Diluted EPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period, using the treasury stock method. Due to their antidilutive effect, approximately 1,153,365 and 880,361 options to
purchase common stock were excluded from the calculation of diluted earnings per share for the three months ended April 4, 2010 and March 29, 2009, respectively. However, these options could become dilutive in future periods.

(7) Accounting for Stock-Based Compensation

The Companys stock option compensation expense was $ 316,790 and $ 298,445 for the three months ended April 4, 2010 and March 29, 2009
respectively. These amounts do not include expense related to restricted stock awards.



7



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##### Table of Contents

BTU INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing
model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying
common stock. The Company is also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data was used to estimate pre-vesting forfeitures
and record stock-based compensation expense only for those awards that are expected to vest. Accordingly, awards ultimately expected to vest have been reduced by annualized estimated forfeiture rate of 4% and 5% for the periods ended April 4,
2010 and March 29, 2009. We used the following assumptions for options granted in the following periods:



|                                              |  |                    |   |  |               
|--------------------------------------------- |  | ------------------ | - |  | --------------
|                                              |  | Three months ended
|                                              |  | April 4, 2010      |   |  | March 29, 2009
|Calculation of Fair Value - Assumptions Used: |  |                    |   |  |               
|Expected Volatility                           |  | 65.38              | % |  |              
|Expected Life                                 |  | 3.00               |   |  |              
|Risk-Free Interest Rate                       |  | 1.63               | % |  |              
|Expected Dividend Yield                       |  | 0                  |   |  | 0             

Expected volatilities are based on the
historical volatility of the Companys common stock. The Company had significant historical data to help evaluate the expected lives of options in developing its assumption. The risk-free interest rate is based upon quoted market yields for
United States Treasury debt securities. The expected dividend yield is based upon the Companys history of having never issued a dividend and managements current expectation of future action surrounding dividends.

The following table summarizes the stock option activity during the three months ended April 4, 2010.



|                                 |  |           |   |  |                               |      |                                 |      |                         |   |          
|-------------------------------- |  | --------- | - |  | ----------------------------- | ---- | ------------------------------- | ---- | ----------------------- | - | ---------
|                                 |  | Shares    |   |  | Weighted-AverageExercisePrice |      | AverageRemainingContractualTerm |      | AggregateIntrinsicValue
|Options                          |  |           |   |  |                               |      |                                 |      |                         |   |          
|Outstanding at December 31, 2009 |  | 1,177,028 |   |  | $                             | 6.55 |                                 |      |                         |   |          
|Granted                          |  | 5,024     |   |  | $                             | 5.97 |                                 |      |                         |   |          
|Exercised                        |  | (11,977   | ) |  | $                             | 3.41 |                                 |      |                         |   |          
|Forfeited                        |  | (11,900   | ) |  | $                             | 4.62 |                                 |      |                         |   |          
|                                 |  |           |   |  |                               |      |                                 |      |                         |   |          
|                                 |  |           |   | 
|Outstanding at April 4, 2010     |  | 1,158,175 |   |  | $                             | 6.60 |                                 | 4.96 |                         | $ | 1,210,890
|Exercisable at April 4, 2010     |  | 362,668   |   |  | $                             | 7.75 |                                 | 3.13 |                         | $ | 435,738  

The weighted-average grant-date
fair values of options granted during the three-month period ended April 4, 2010 was $2.64. The fair value of options exercised during the three-month period ended April 4, 2010 was $ 23,660.

As of April 4, 2010 there was $2,381,137 of total unrecognized compensation cost related to non-vested options granted under the Companys
option plans. That cost is expected to be recognized over a weighted average period of 2.18 years. The total fair value of shares vested during the three-month period ended April 4, 2010 was $27,448.

(8) Revenue Recognition

For the three
months ended April 4, 2010, there was $789,112 of revenue recognized using the percentage of completion method. For the three months ended March 29, 2009, there was $1,051,287 of revenue recognized using the percentage of completion
method. For additional information on the Companys revenue recognition policies, please see note 1 in the notes to the Companys audited consolidated financial statements included in the Companys Annual Report on Form 10-K filed
March 4, 2010 with the Securities and Exchange Commission.



8



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##### Table of Contents

BTU INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



(9) Fair Value of Financial Instruments

In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC), the Company groups its financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the
assumptions used to determine fair value. These levels are:



| |  |  | Level 1  Valuation is based upon quoted market price for identical instruments traded in active markets.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Level 2  Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques
include use of discounted cash flow models and similar techniques.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In accordance with the requirements of the Fair Value
Measurements and Disclosures Topic of the FASB ASC, it is the Companys policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, the Company uses quoted
market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including interest rate yield curves, option volatilities and currency rates. In
certain cases, where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying assumptions
used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.

a. Cash and Cash EquivalentsThe carrying amount of these assets on the Companys consolidated balance sheets approximates their fair
value because of the short maturities of these instruments.

b. Receivables, Payables and AccrualsThe recorded amounts of financial
instruments, including accounts receivable, accounts payable, and accrued liabilities, approximate their fair value because of the short maturity of these instruments.

c. Long-term DebtThe fair value of long-term indebtedness as of April 4, 2010 was approximately $8,610,000. The current market rate
approximates the rate of the mortgage note payable of 6.84%.

(10) Contingent Liabilities

As an equipment manufacturer, the Company generates and disposes of small quantities of solid waste that is considered hazardous under EPA regulations.
Because the Company used a waste disposal firm that disposed the solid waste at a site that the EPA has designated as a Superfund site, the Company has been named by the EPA as one of the entities responsible for a portion of the expected clean-up
costs. Based on the Companys proportional responsibility, as negotiated with and agreed to by the EPA, the Companys liability related to this matter is $225,140. This amount is included in other current liabilities on the balance sheet
as of April 4, 2010. On October 2, 2009, in accordance with the agreement, the Company established a letter of credit for $225,140 to the benefit of the EPA for potential cash payments as settlements for the Companys proportional
liability.

(11) Recent Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The ASU reports on new disclosure requirements
 and clarifications of existing requirements  under ASC Subtopic 820-10 (originally issued as FAS 157). The new rules require companies to provide greater detail about the methods and inputs they use to measure the fair value of assets,
bringing U.S. Generally Accepted Accounting Principles (GAAP) in line with International Financial Reporting Standards (IFRS) 7, which already requires similar disclosures. The adoption of this Standard has not had an impact on the Companys
consolidated financial statements.



9



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##### Table of Contents

BTU INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



In February 2010, the Financial Accounting Standard Board (FASB) finalized Accounting Standard Update
(AUS) 2010-09, Subsequent Events  Amendments to Certain Recognition and Disclosure Requirements. The ASU clarifies the requirements that apply to SEC filers, conduit debt obligators and other entities in relation to evaluating events or
transactions that occur after the balance sheet date, but before financial statements are issued or available to be issued. See footnote 2 for the Companys subsequent events disclosure.

(12) Segment Reporting

Segments are
defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company operates
as a single business segment called Thermal Processing Capital Equipment.

The Thermal Processing Capital Equipment segment consists of the
designing, manufacturing, selling and servicing of thermal processing equipment and related process controls for use in the electronics, alternative energy, automotive and other industries. This business segment includes the supply of solder reflow
systems used for surface mount applications in printed circuit board assembly. Thermal processing equipment is used in: low temperature curing/encapsulation; hybrid integrated circuit manufacturing; integrated circuit packaging and sealing; and
processing multi-chip modules. In addition, the thermal process equipment is used for solar cell processing, sintering nuclear fuel for commercial power generation, as well as brazing and the sintering of ceramics and powdered metals, and the
deposition of precise thin film coatings. The business segments customers are multinational original equipment manufacturers and contract manufacturing companies.

Tangible long-lived assets by geographic location are as follows (in thousands):



|              |  |              |       |                  |   |      
|------------- |  | ------------ | ----- | ---------------- | - | -----
|              |  | April 4,2010 |       | December 31,2009
|              |  |             
|United States |  | $            | 5,424 |                  | $ | 5,679
|Asia Pacific  |  |              | 590   |                  |   | 653  
|              |  |              |       |                  |   |      
|              |  | $            | 6,014 |                  | $ | 6,332
|              |  |              |       |                  |   |      



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##### Table of Contents

|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW
|------- | ----------------------------------------------------------------------------------------------

BTU International, Inc. (BTU), founded in 1950 and headquartered in North Billerica, Massachusetts, is a market-leading, global supplier of
advanced thermal processing equipment to the alternative energy and electronics manufacturing markets. BTU equipment is used in the production of solar cells and nuclear fuel, as well as in printed circuit board assembly and semiconductor packaging.

Our customers require high throughput, high yield and highly reliable thermal processing systems with tightly controlled temperature and
atmospheric parameters. In the solar market, BTU offers processing equipment for both silicon and thin film photovoltaics. Also in alternative energy, our customers use our thermal systems for the processing of nuclear fuel. Our convection solder
reflow systems are used to attach electronic components to the printed circuit boards, primarily in the advanced, high-density, surface mount segments of this market. In the semiconductor market, we participate in both wafer level and die level
packaging, where our thermal processing systems are used to connect and seal integrated circuits into a package.

In 2004, we began
manufacturing and material sourcing operations in a leased facility in Shanghai, China. These additional facilities were needed for further expansion into the Asia Pacific region. In addition, we expanded our product development capability to China,
creating a global engineering team. This team has developed and commercially introduced our latest PYRAMAX and TRITAN products and continues to collaborate with our U.S. headquarters on additional product initiatives.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated selected items in our statements of operations expressed as a percentage of net sales.



|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   
|------------------------------------------------ |  | ------------------ | ------ | - | -------------- | ----- | -- |  | - | ------ | ------------- |  | ----- | ------------- |  | ------ | --
|                                                 |  | Three Months Ended |        |   |                |      
|                                                 |  | April 4, 2010      |        |   | March 29, 2009 |       |    |  |  
|                                                 |  | ( $ in thousands)  |        |   |                |      
|                                                 |  |                    |        |   | % ofNet Sales  |       |    |  |   |        | % ofNet Sales |  |       | PercentChange | 
|                                                 |  |                    |        |   |               
|Net sales                                        |  | $                  | 17,192 |   |                | 100.0 | %  |  | $ | 9,806  |               |  | 100.0 | %             |  | 75.3   | % 
|Cost of goods sold                               |  |                    | 10,096 |   |                | 58.7  | %  |  |   | 8,367  |               |  | 85.3  | %             |  | 20.7   | % 
|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   
|Gross profit                                     |  |                    | 7,096  |   |                | 41.3  | %  |  |   | 1,439  |               |  | 14.7  | %             |  | 393.1  | % 
|                                                 |  |                    |        |   |               
|Selling, general and administrative expenses     |  |                    | 5,539  |   |                | 32.2  | %  |  |   | 3,930  |               |  | 40.1  | %             |  | 40.9   | % 
|Research, development and engineering expenses   |  |                    | 1,638  |   |                | 9.5   | %  |  |   | 1,977  |               |  | 20.2  | %             |  | (17.1  | )%
|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   
|Operating loss                                   |  |                    | (81    | ) |                | (0.5  | )% |  |   | (4,468 | )             |  | (45.6 | )%            |  | (98.2  | )%
|                                                 |  |                    |        |   |               
|Loss before provision (benefit) for income taxes |  |                    | (156   | ) |                | (0.9  | )% |  |   | (4,571 | )             |  | (46.6 | )%            |  | (96.6  | )%
|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   
|                                                 |  |                    |        |   |               
|Provision (benefit) for income taxes             |  |                    | 137    |   |                | 0.8   | %  |  |   | (17    | )             |  | (0.2  | )%            |  | (905.9 | )%
|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   
|                                                 |  |                    |        |   |               
|Net loss                                         |  | $                  | (293   | ) |                | (1.7  | )% |  | $ | (4,554 | )             |  | (46.4 | )%            |  | (93.6  | )%
|                                                 |  |                    |        |   |                |       |    |  |   |        |               |  |       |               |  |        |   

QUARTER ENDED APRIL 4, 2010 AS COMPARED TO QUARTER ENDED MARCH 29, 2009

Net Sales. Net sales in Q1 2010 increased by $7.4 million or 75.3% compared to Q1 2009. Net sales in Q1 2010 for the Companys alternative
energy systems increased by 37.5%, or $2.2 million, to $7.9 million compared to $5.8 million in Q1 2009. Net sales in Q1 2010 for the Companys electronics market systems increased by 260% or $5.5 million to $7.6 million compared to $2.1
million in Q1 2009. Net sales in Q1 2010 for the Companys parts, service and other market systems decreased by 15.8%, or $0.3 million, to $1.6 million from $1.9 million in Q1 2009. The alternative energy systems growth in Q1 2010 as compared
to the same quarter in 2009 is the result of increased revenue for both nuclear and solar products. The substantial growth in electronic market systems revenue, particularly in China in Q1 2010, as compared to Q1 2009, represents the continuing
recovery of demand for our electronic products from the economic recession, for which Q1 2009 was a low point.



11



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##### Table of Contents

The following table sets forth, for the periods indicated, revenues from sales into select geographies
expressed in dollars per thousand and as a percentage of total revenue. The values shown represent the amount sold into each of the listed geographical areas.



|                  |  |                    |        |              |                |   |   |   |              |  |      |  
|----------------- |  | ------------------ | ------ | ------------ | -------------- | - | - | - | ------------ |  | ---- | -
|                  |  | Three Months Ended |       
|                  |  | April 4, 2010      |        |              | March 29, 2009 |  
|                  |  | ($ in thousands)   |       
|                  |  | $                  |        | % ofRevenues |                |   | $ |   | % ofRevenues | 
|                  |  |                    |        |             
|United States     |  | $                  | 1,148  |              | 6.7            | % |   | $ | 1,938        |  | 19.8 | %
|Europe, Near East |  |                    | 4,082  |              | 23.7           | % |   |   | 2,315        |  | 23.6 | %
|Asia Pacific      |  |                    | 11,396 |              | 66.3           | % |   |   | 4,642        |  | 47.3 | %
|Other Americas    |  |                    | 566    |              | 3.3            | % |   |   | 911          |  | 9.3  | %
|                  |  |                    |        |              |                |   |   |   |              |  |      |  
|                  |  |                    |        |             
|Total Revenue     |  | $                  | 17,192 |              |                |   |   | $ | 9,806        |  |      |  
|                  |  |                    |        |              |                |   |   |   |              |  |      |  

The Asia Pacific revenue and percent of revenue reflect increases in Q1 2010 versus Q1 2009. This Q1 2010 Asia
Pacific improvement is primarily represented by a partial recovery from the economic decline in Asia in our electronics markets for which Q1 2009 was the low point. The European revenue increase Q1 2010 versus Q1 2009 was due to increases in
alternative energy sales. The decline in United States revenue in Q1 2010 versus Q1 2009 is due primarily to a reduction in alternative energy sales.

Gross Profit. Gross profit increased to $7.1 million or 41.3% of sales for Q1 2010, from $1.4 million or 14.7% of sales for Q1 2009. The increase
in gross profit percentage was due to the increase in demand for our electronic products, primarily in China, as the global economic recovery increased demand for these products. Our Chinese and American factories had significantly improved
utilization levels when compared to Q1 2009, and consequently our overhead per unit decreased. Demand for our higher margin alternative energy products was greater in Q1 2010 when compared to the comparable period in 2009.

Selling, General and Administrative. SG&A expenses increased in Q1 2010 versus Q1 2009 by $1.6 million, or 40.1%, from $3.9 million in Q1 2009
to $5.5 million in Q1 2010. Approximately 40%, or $0.6 million, of the Q1 2010 increase occurred in commission expense as the result of increased revenues. The remaining portion or $1.0 million of the Q1 2010 increase occurred in each of the expense
functions of service, sales, marketing and administration related to the volume increase and the hiring of critical personnel in support of the Companys strategies related to the alternative energy market.

Research, Development and Engineering RD&E expenses decreased by approximately $0.3 million, or 17.1%, from $2.0 million in Q1 2009 to $1.6
million in Q1 2010. The decrease is the result of the Companys actions of reducing R&D prototype model costs, as new products were introduced.

Operating Income (LossFirst quarter near break-even was primarily driven by the increase in both revenue and gross margin when compared to the
operating loss of $4.6 million, in the first quarter of 2009.

Interest Income (Expense) Net In comparing Q1 2010 versus Q1 2009,
interest expense remained relatively stable; interest income was nearly non-existent in Q1 2010 due to interest rates that were at near zero levels.

Foreign Exchange Gain (Loss) The Companys primary exposure to foreign exchange gains or losses are from U.S. dollar denominated balance
sheet accounts recorded at the Companys China and UK operations and China RMB denominated balance sheet accounts recorded at the Companys U.S. headquarters.

Income Taxes During Q1 2010 The Company recorded an income tax provision of approximately $0.1 million, as compared to a benefit of $17 thousand
for Q1 2009. The Q1 2010 income tax provision primarily relates to withholding taxes for our China operations.



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##### Table of Contents

The significant fluctuations in the Companys annual tax rate, as a percent of consolidated pre-tax
income or loss, are the result of the varying ratio of the consolidated pre-tax profit or loss by tax entity to the consolidated tax provision. In Q1 2010, approximately 70% of the consolidated tax provision relates to China withholding taxes which
are not directly related to pre-tax income in China. China withholding taxes primarily result from corporate royalty charges based on our China manufacturing subsidiary net sales.

In the U.S., the Company has federal net operating loss carry forwards of approximately $6.1 million. The Company has recorded a full valuation allowance
to offset the deferred tax assets arising as a result of these losses carry forwards because of uncertainty surrounding realization. Our United States statutory federal income tax rate is 34.0%. The China statutory income tax rate is 22.0%

LIQUIDITY AND CAPITAL RESOURCES

As of April 4, 2010, we had $21.9 million in cash and cash equivalents, a decrease of $3.5 million compared to $25.4 million at the end of 2009.

During Q1 2010, The Company used net cash of approximately $3.3 million from operating activities. This use of cash was primarily the result
of a reduction in customer deposits of $1.9 million, an increase in restricted cash of $1.1 million, an increase in accounts receivable of $0.5 million, a decrease in accrued expenses of $0.4 million, and a decrease in accounts payable of $0.3
million, and our net loss of $0.3 million; offset by depreciation and amortization of $0.5 million, an increase in reserves of $0.4 million, and stock based compensation of $0.3 million.

On August 31, 2009, the Company entered into a pledge and assignment agreement with a bank. The bank agrees, at the Companys request, to issue
letters of credit in the banks name and the Company agrees to cash collateralize the letters of credit via restricted cash deposits at the bank. At April 4, 2010 the value of the outstanding letters of credit issued by the bank for the
Company and cash collateralized by the Company was $1,614,502. This restricted cash value is included in the Companys Balance Sheet in other Current Assets.

On March 30, 2006, the Company entered into a mortgage note that is secured by our real property in North Billerica, MA, in the amount of
$10 million. The mortgage note requires monthly payments of $76,280, which includes interest calculated at the rate of 6.84% per annum. This mortgage note payable has a balloon payment of $6.8 million due and payable at maturity on
December 23, 2015. The mortgage note had an outstanding balance at April 4, 2010 of approximately $8.9 million.

As of April 4,
2010, the Company has no material commitments for capital expenditures. There were no significant changes in Company commitments that were outlined in the Companys 10-K filing for 2009.

Our business forecasts project that our cash position and cash flow will be sufficient to meet our corporate, operating and capital requirements for the
next twelve months.

CRITICAL ACCOUNTING POLICIES

During the three months ended April 4, 2010, we believe that there have been no significant changes to the items that we disclosed as our critical
accounting policies and estimates in the Critical Accounting Policies and Significant Estimates section of Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2009.

OTHER MATTERS

Given that the Company invoices the vast majority of its sales in U.S. dollars, that the Company has a substantial manufacturing presence in China and
that sales into China are primarily in U.S. dollars, should the U.S. dollar decline in relation to the Chinese RMB, the Companys financial results will be adversely affected.

FORWARD LOOKING STATEMENTS

This Report contains express or implied forward-looking statements. The words or phrases will likely result, are expected to,
will continue, is anticipated, may, intends, believes, estimate, project or similar expressions are intended to identify forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are neither promises nor guarantees but rather are subject to risks and uncertainties described in this report, which could cause actual results to differ
materially from those described in the forward-looking statements. Such statements are made pursuant to the safe harbor provisions established by the federal securities laws, and are based on the assumptions and expectations of our
management at the time such statements are made. Important factors that could cause actual results to differ include, but are not limited to, the condition of the world economy, the timely availability and acceptance of new products in the
electronics, semiconductor and



13



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##### Table of Contents

alternative energy generation industries, manufacturing problems with our foreign operations in China, the impact of competitive products and pricing, particularly from companies in Asia, and
other risks detailed above under Risk Factors. Actual results may vary materially. Unless otherwise required by law, we disclaim any obligation to revise or update this information in order to reflect future events or developments,
whether or not anticipated. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made.



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We have international subsidiaries in China, the United Kingdom, Singapore, the Philippines and Malaysia. These subsidiaries transact business in their
functional or local currency. Therefore, we are exposed to foreign currency exchange risks and fluctuations in foreign currencies, along with economic and political instability in the foreign countries in which we operate, all of which could
adversely impact our results of operations and financial condition.

As of April 4, 2010 and December 31, 2009, all of our long-term
debt obligations are fixed rate financial instruments. Therefore we are not exposed to interest rate risk resulting from variable interest rate of our debt.



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Controls and Procedures.

Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial
Reporting. There have been no changes in our internal control over financial reporting (as defined by Rule 13a-15(f)), that occurred during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



|Item 1A. | RISK FACTORS
|-------- | ------------

Risk factors are disclosed
in the Companys 2009 Annual Report on Form 10-K. During the quarter ended April 4, 2010, there were no material changes to the risk factors for the business.



|Item 6. | Exhibits
|------- | --------



| | (a) | Exhibits
| | --- | --------

Exhibit 10.1 - Pledge and Assignment Agreement, dated August 31, 2009 with Sovereign Bank

Exhibit 31.1 - Section 302 Certification

Exhibit 31.2 - Section 302 Certification

Exhibit 32.1 - Section 906 Certification

Exhibit 32.2 - Section 906 Certification



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##### Table of Contents

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.



|                  |  |                         |  |                                                                                                      
|----------------- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------
|                  |  | BTU INTERNATIONAL, INC.
|                  |  |                        
|DATE: May 5, 2010 |  | BY:                     |  | /S/    PAUL J. VAN
DER WANSEM                                                                        
|                  |  |                         |  | Paul J. van der Wansem                                                                               
|                  |  |                         |  | President, Chief Executive Officer                                                                   
|                  |  |                         |  | (principal executive officer)
and Chairman of the Board of Directors                                 
|                  |  |                        
|DATE: May 5, 2010 |  | BY:                     |  | /S/    PETER J.
TALLIAN                                                                              
|                  |  |                         |  | Peter J. Tallian                                                                                     
|                  |  |                         |  | Chief Financial Officer
and Principal Accounting Officer
(principal financial and accounting officer)



15