BEFUT International Co., Ltd. - FORM 10-Q/A

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - BEFUT International Co., Ltd.	v235049_ex31-2.htm
EX-32.2 - EXHIBIT 32.2 - BEFUT International Co., Ltd.	v235049_ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - BEFUT International Co., Ltd.	v235049_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - BEFUT International Co., Ltd.	v235049_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(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

¨ 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 Employer
incorporation or organization)		Identification No.)

27th Floor, Liangjiu International Tower,

No.5, Heyi Street, Xigang District, Dalian City, China 116011

(Address of principal executive offices) (Zip Code)

86 0411-8367-0755

(Issuer's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 29,715,640 shares of Common Stock, $.001 par value, were outstanding as of November 15, 2010.

EXPLANATORY NOTE

This Amendment No. 1 to the Quarterly Report on Form 10-Q (the “Amended 10-Q”) of BEFUT International Co., Ltd. (the “Company”) amends the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2010 (the “Original 10-Q”). In connection with the preparation of its responses to comments received from the SEC, the Company identified certain reporting errors and omissions in the Original 10-Q and in its previously issued financial statements, some of which the Company considers material. The Amended 10-Q is being filed to amend the Original 10-Q as follows:

Revise the Consolidated Balance Sheet to reclassify advance payments for fixed assets and research and development as non-current assets;

Revise the Consolidated Statements of Operations and Other Comprehensive Income into two separate statements: Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income;

Revise the Statements of Operations to present interest expenses separately from interest income;

Reclassify certain line items in the Consolidated Statement of Cash Flows resulting in changes from net cash used in operating activities of $882,182 to $2,362,255 for the three months ended September 30, 2010 and from net cash used in operating activities of $294,225 to net cash provided by operating activities of $291,775 for the three months ended September 30, 2009, and changes from net cash provided from financing activities of $178,888 to $1,658,961 for the three months ended September 30, 2010 and from net cash provided by financing activities of $233,448 to net cash used in financing activities of $352,552;

Revise “Note 1 – Organization and Nature of Business” to include the description of interest in Dalian Yuansheng;

Revise Basis of Presentation under “Note 2 – Summary of Significant Accounting Policies” to include consolidation as a critical accounting policy;

Revise “Note 5 – Loans to Unrelated Parties” to identify the unrelated parties;

Add a footnote for Bank Loan Security Deposits;

Revise “Note 9 – Advance Payments – Research and Development” to address that these amounts are determined to be recoverable;

Revise “Note 11 – Trade Notes Payable” to include the maturity date of the promissory notes;

Revise “Note 13 – Loans from Unrelated Parties” to include information regarding maturity dates and financial or non-financial covenants associated with these loans;

Add a footnote for Government Subsidy Income;

Revise “Note 16 – Stockholders’ Equity and Related Financing Agreements” to include a summary of intangible assets received for ownership;

Revise “Note 17 – Income Taxes” to address the timing of the Company’s payments for income taxes;

Add a footnote for Restatement to Reflect Correction of Accounting Errors;

Add the words “Restated”, as applicable, to column headings of certain financial tables;

Make several minor, miscellaneous corrections in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and

Amend and restate, in its entirety, Item 4 “Controls and Procedures,” due to the errors and omissions in the Company’s financial statements, to state that the Company had material weaknesses in its disclosure controls and procedures and internal control over financial reporting at September 30, 2010.

Except as set forth above, the Amended 10-Q is identical to the Original 10-Q. The Amended 10-Q does not reflect events occurring after the filing of the Original 10-Q and no attempt has been made in the Amended 10-Q to modify or update other disclosures as presented in the Original 10-Q. Accordingly, this Amended 10-Q should be read in conjunction with the Company’s filings with the SEC subsequent to the filing of the Original Form 10-Q. Additionally, the Company has attached to the Amended 10-Q updated certifications executed as of the date of the Amended 10-Q by the Company’s chief executive officer and chief financial officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. These updated certifications are attached as Exhibits 31.1, 31.2, 32.1 and 32.2 to the Amended 10-Q.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements.	3
	Restated Consolidated Balance Sheets
	As of September 30, 2010 (Unaudited) and December 31, 2009	5
	Restated Consolidated Statements of Operations
	For the Three Months and Nine Months Ended September 30, 2010 and 2009 (Unaudited)	6
	Restated Consolidated Statements of Comprehensive Income
	For the Three Months and Nine Months Ended September 30, 2010 and 2009 (Unaudited)	7
	Restated Consolidated Statements of Cash Flows
	For the Nine Months Ended September 30, 2010 and 2009 (Unaudited)	8
	Notes to Restated Consolidated Financial Statements
	September 30, 2010 and 2009 (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Item 4	Controls and Procedures.	27
PART II	OTHER INFORMATION	29
Item 6.	Exhibits	29
Signatures		30
Exhibits/Certifications		31

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

BEFUT INTERNATIONAL CO., LTD.

RESTATED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

BEFUT INTERNATIONAL CO., LTD.

Consolidated Financial Statements

September 30, 2010 and 2009

(Unaudited)

Table of Contents

	Page

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets	5

Consolidated Statements of Operations	6

Consolidated Statements of Comprehensive Income	7

Consolidated Statements of Cash Flows	8

Notes to Consolidated Financial Statements	9

BEFUT INTERNATIONAL CO., LTD.

Consolidated Balance Sheets

	September 30,		June 30,
	2010		2010
	(Restated)		(Restated)
Assets
Current assets:
Cash and cash equivalents	$	462,446	$	1,319,173
Restricted cash		2,698,425		1,181,095
Accounts receivable, net of allowance for doubtful accounts of $84,625 and $83,295 at September 30, and June 30, 2010, respectively		14,236,184		9,292,310
Inventory		3,829,212		2,543,789
Loans to unrelated parties		1,060,471		1,054,090
Bank loan security deposits		1,074,846		1,031,100
Advance payments		590,139		399,868
Due from related party		-		472,838
Other current assets		898,704		521,739
Total current assets		24,850,427		17,816,002

Property and equipment, net		32,312,046		31,618,074

Other assets:
Advance payments – non-current		1,448,124		293,605
Advance payments – R&D		2,122,746		2,088,714
Intangibles, net		15,600,162		15,669,375
Total other assets		19,171,032		18,051,694

Total assets	$	76,333,505	$	67,485,770

Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	2,936,817	$	3,119,646
Trade notes payable		2,994,000		-
Short-term bank loans		6,137,700		6,039,300
Current portion of long-term bank loans		598,800		294,600
Loans from unrelated parties		2,016,700		370,000
Advances from customers		721,980		533,806
Income taxes payable		2,477,092		1,655,747
Other current liabilities		1,084,815		969,787
Total current liabilities		18,967,904		12,982,886

Long-term bank loan		14,371,200		14,435,400

Total liabilities		33,339,104		27,418,286

Equity
Stockholders’ 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		29,716
Additional paid-in capital		21,838,047		21,838,047
Statutory reserves		1,181,189		1,181,189
Retained earnings		16,058,414		13,810,157
Accumulated other comprehensive income		2,850,390		2,166,533
Total stockholders’ equity		41,957,756		39,025,642

Noncontrolling interest		1,036,645		1,041,842

Total equity		42,994,401		40,067,484

Total liabilities and equity	$	76,333,505	$	67,485,770

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

BEFUT INTERNATIONAL CO., LTD.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended
	September 30,
	2010			2009
	(Restated)			(Restated)

Sales	$	15,930,811		$	5,483,659

Cost of sales		11,670,760			3,862,774

Gross profit		4,260,051			1,620,885

Operating expenses:
Selling expenses		38,607			21,873
General and administrative expenses		1,011,620			588,285
Total operating expenses		1,050,227			610,158

Income from operations		3,209,824			1,010,727

Other income (expenses):
Government subsidy		136,487			49,954
Interest income		8,504			-
Interest expense		(394,902	)		(132,309	)
Other income (expenses), net		31,121			5,697
Total other income (expenses)		(218,790	)		(76,658	)

Income before provision for income taxes		2,991,034			934,069

Provision for income taxes		807,135			248,904

Net income		2,183,899			685,165

Less: net loss attributable to noncontrolling interest		(64,358	)		(5,158	)

Net income attributable to BEFUT International Co., Ltd.		2,248,257			690,323

Basic earnings per share	$	0.08		$	0.02
Diluted earnings per share	$	0.08		$	0.02

Weighted average number of common shares outstanding:
Basic		29,715,640			29,510,971
Diluted		29,752,094			30,280,226

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

BEFUT INTERNATIONAL CO., LTD.

Consolidated Statements of Comprehensive Income

	For the Three Months Ended
	September 30,
	2010			2009
	(Restated)			(Restated)

Net income	$	2,183,899		$	685,165

Other comprehensive income
Foreign currency translation adjustment		743,018			92,326

Comprehensive income		2,926,917			777,491

Less: comprehensive income (loss) attributable to noncontrolling interest		(5,197	)		39,361

Comprehensive income attributable to BEFUT International Co., Ltd.	$	2,932,114		$	738,130

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

BEFUT INTERNATIONAL CO., LTD.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	September 30,
	2010			2009
	(Restated)			(Restated)
Cash flows from operating activities:
Net Income	$	2,183,899		$	685,165
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		753,831			352,054
Changes in current assets and current liabilities:
Restricted cash		(1,480,073	)		586,000
Accounts receivable		(4,751,564	)		75,238
Inventory		(1,231,133	)		(1,357,491	)
Advance payments		(1,318,366	)		138,122
Other current assets		(429,085	)		45,108
Accounts payable and accrued expenses		(229,105	)		243,714
Trade notes payable		2,958,000			(1,172,880	)
Advances from customers		177,334			158,553
Income taxes payable		784,816			248,904
Other current liabilities		219,191			289,288
Total adjustments		(4,546,154	)		(393,390	)

Net cash provided by (used in) operating activities		(2,362,255	)		291,775

Cash flows from investing activities:
Due from related party		474,764			-
Additions to property and equipment		(622,725	)		(534,875	)
Long-term investment		-			2,932
Loans to unrelated parties		10,664			559,117

Net cash provided by (used in) investing activities		(137,297	)		27,174

Cash flows from financing activities:
Bank loan security deposits		(26,622	)		585,752
Loans from unrelated parties		1,626,900			(249,237	)
Capital contribution from noncontrolling interest for BEFUT Zhong Xing		58,683			43,983
Repayment of short-term bank loans		-			(733,050	)

Net cash provided by (used in) financing activities		1,658,961			(352,552	)

Effect of foreign currency translation on cash		(16,136	)		1,377

Net decrease in cash and cash equivalents		(856,727	)		(32,226	)

Cash and cash equivalents – beginning		1,319,173			210,301

Cash and cash equivalents – ending	$	462,446		$	178,075

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

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 (approximately $147,000). Dalian Befut invested RMB700,000 (approximately $103,000) for its 70% equity interest in Befut Zhong Xing. In January, 2010, Dalian Befut increased its investment capital to RMB14.7 million (approximately $2 million) with a transfer of intangible assets to Befut Zhong Xing on 1/1/2010 and raised its equity ownership percentage in Befut Zhong Xing to 73.5%. The noncontrolling interest also increased its equity investment by contributing additional cash of RMB 5,000,000 (approximately $733,350). There were no equity transactions (purchasing or selling the noncontrolling interest) between the Company and the noncontrolling interest shareholders for the three months ended September 30, 2010.

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Nature of Business (continued)

Dalian Yuansheng was established on June 3, 2009 with a registered capital of RMB 1,000,000 (approximately $146,700). Two individual shareholders, Chengnian Yan and Xianjun Cheng, owned 60% and 40% of Dalian Yuansheng, respectively. On July 23, 2010, Dalian Befut contributed RMB 5,000,000 (approximately $735,294) and purchased the original 60% interest from Chengnian Yan at RMB 600,000 (approximately $88,235). As a result, Dalian Befut became 93.3% owner of Dalian Yuansheng. For the periods ended September 30, 2010, the Company consolidated the financial statements of Dalian Yuansheng with intercompany transactions, including investment in Dalian Yuansheng of RMB 5,600,000 (approximately $823,529), eliminated and reported noncontrolling interest per ASC 810-10 as part of the Company’s equity. The purchase of Chengnian Yan’s interest in Dalian Yuansheng at RMB 600,000 (approximately $88,235) was recorded as an equity transaction at cost and no gain or loss was recorded.

Note 2 – Summary of Significant Accounting Policies

Basis Of Presentation

As disclosed in Note 1, WFOE entered into an Original Equipment Manufacturer Agreement, an Intellectual Property License Agreement and a Non-competition Agreement (collectively, the “OEM Agreements”) with Dalian Befut. Under FASB ASC 810-10 (formerly FIN 46R), Dalian Befut is the variable interest entity, or VIE, of WFOE by virtue of the OEM Agreements. As Dalian Befut’s sole purpose and objective is to provide resources and benefits to WFOE, WFOE is the primary beneficiary that can consolidate Dalian Befut. Therefore, Dalian Befut and its controlled subsidiaries, Dalian Marine Co., Dalian Yuansheng and Befut Zhong Xing, are consolidated into the Company’s financial statements.

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 15. 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.

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

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		2010

Raw materials	$	1,262,275	$	1,093,193
Work in process		555,545		323,275
Finished goods		2,011,392		1,127,321

Total	$	3,829,212	$	2,543,789

Note 5– Loans to Unrelated Parties

As of September 30, 2010, the Company had outstanding loans to unrelated parties in the aggregate amount of $1,060,471, consisting of $529,410 to Dalian Haide Electric Power Equipment Co., Ltd, a research and development partner of the Company (“Dalian Haide”) and $531,061 to Dalian Chenglian Electrical Installation Engineering Co., Ltd, a customer of the Company (“Dalian Chenglian”). These loans are made to primarily fund working capital requirements and are payable on demand. In addition, the loans are unsecured and non-interest bearing.

As of June 30, 2010, the Company had outstanding loans to unrelated parties in the aggregate amount of $1,054,090, consisting of $531,544 to Dalian Haide and $522,546 to Dalian Chenglian.

Note 6 – Bank Loan Security Deposits

The Company obtained financing from various banks guaranteed by third parties According to the guarantee agreements, the Company is required to make security deposits to the third party guarantors. The balances of these security deposits as of September 30, 2010 and June 30, 2010 consists of the following:

	September 30,		June 30,
	2010		2010
Bank loan security deposits – short-term	$	775,446	$	736,500
Bank loan security deposits – long-term		299,400		294,600
Total	$	1,074,846	$	1,031,100

Note 7– Advance Payments

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

	September 30,		June 30,
	2010		2010

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

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 8– Property and Equipment

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

	September 30,		June 30,
	2010		2010

Buildings	$	20,205,681	$	19,877,285
Machinery and equipment		13,165,436		12,673,324
Office equipment and furniture		149,067		100,927
Vehicles		493,929		466,380
Subtotal		34,014,113		33,117,916
Less: Accumulated depreciation		1,961,989		1,499,842
		32,052,124		31,618,074
Add: 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 9 – Intangible Assets

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

	September 30,		June 30,
	2010		2010

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

Note 10 – 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 the future research and development activities. The Company made the original advance payments for research and development to a third party in August 2008 for the development of twenty patents. The Company realizes the advance payments when certain progress targets are achieved, including, but not limited to, obtaining the intellectual property certificate issued by the PRC State Intellectual Property Office and passing the two-year declaration period, and related costs have been incurred and reported by the third party to the Company. Such advance payments are amortized as research and development expense in the years in which the patents have passed the two- year declaration period. As of September 30, 2010 and June 30, 2010, the Company determined that these advance payments are recoverable.

Note 11 – 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		2010

Accounts payable	$	2,888,090	$	3,009,646
Accrued expenses		48,727		110,000

Total	$	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.

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 12 – 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. The maturity date of the promissory notes is March 28, 2011. Balances outstanding under such notes as of September 30, 2010 and June 30, 2010 were $2,994,000 and $-0-, respectively.

Note 13 – Short-Term Bank Loans

Short-term bank loans consist of the following:

	September 30,		June 30,
	2010		2010
On 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.	$	-	$	2,946,000

On 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 Financial Guarantee Co., Ltd.	$	2,395,200	$	2,356,800

On 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	$	736,500

On 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

Note 14 – Loans From Unrelated Parties

These loans are based on good faith, and are unsecured and non-interest bearing The term of each loan is for a period for 15 days. There are no financial or non-financial covenants associated with these loans. 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.

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 15 – Long-Term Bank Loans

Long term bank loans consist of the following:

	September 30,		June 30,
	2010		2010
On 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	$	14,730,000

Total	$	14,970,000	$	14,730,000

Less: Current portion		598,800		294,600

Total noncurrent portion	$	14,371,200	$	14,435,400

Note 16 – Government Subsidy Income

Government subsidy income for the three months ended September 30, 2010 and 2009 consists of the following:

	For the Three Months Ended September 30,
	2010		2009
Newly Identified Municipal Technical Center Subsidy	$	73,950	$	-
Appropriation of Technology Innovation Subsidy		35,792		-
Value added tax refund for employing physically-challenged workers		26,745		49,954
Total	$	136,487	$	49,954

Note 17 –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		2009

Net income	$	2,248,257	$	690,323

Weighted average common shares (denominator for basic earnings per share)		29,715,640		29,510,971

Effect of dilutive securities:		36,454		769,255

Weighted average common shares (denominator for diluted earnings per share)		29,752,094		30,280,226

Basic earnings per share	$	0.08	$	0.02
Diluted earnings per share	$	0.08	$	0.02

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 18– Stockholders’ Equity And Related Financing Agreements

On March 13, 2009, as part of the reverse merger transaction, the Company 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 the Company’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 the Company.

On March 13, 2009, the Company 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 the Company and the investors named in the Purchase Agreement.

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

On June 18, 2009, the 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 was 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 an aggregate principal amount of $130,000 were converted into 200,000 shares of common stock of the Company at the conversion price of $0.65 per share on May 6, 2010.

During the year ended June 30, 2009, the Company received cash contributions from shareholders in the amount of $5,301,971 and intangible assets with an aggregate fair value of $11,383,050 in exchange for ownership, both of which were accounted for as additional paid-in-capital. During the year ended June 30, 2009, two shareholders of the Company, Tingmin Li and Hongbo Cao, contributed two patents into the Company as increases to their respective capital contributions. The two patents were Intelligent Reactive Power Compensation and Automatic Protection Ni-mh Battery Screen, which were valued as $11,383,050 in total by a professional valuation firm. The contribution was treated as capital transaction per ASC 505-10.

Note 19– 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.

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

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.

The Company’s provision for income taxes consists of:

	For the Three Months Ended
	September 30,
	2010		2009

Current – PRC	$	807,135	$	248,904
Deferred		-		-
Total provision for income taxes	$	807,135	$	248,904

A reconciliation of the provision for income taxes with amounts determined by applying the statutory income tax rate to income before income taxes is as follows:

	For the Three Months Ended
	September 30,
	2010			2009
Computed tax @ statutory rate of 25%
($2,991,03425% and $934,06925% for September 30, 2010 and 2009, respectively)	$	747,759		$	233,517

Entertainment expense add-back		1,146			5,410
Government subsidy income		(6,686	)		-
Deductions permitted for salaries paid to physically-challenged employees		(4,350	)		(4,115	)
Additional deductions permitted for R&D costs		(16,177	)		-
Current year losses from PRC subsidiaries		74,941			-
Current year losses from U.S. parent holding company not subject to PRC income taxes		10,502			14,092

Total provision for income taxes
Computed tax @ statutory rate of 25%	$	807,135		$	248,904

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.

The Company has not paid income taxes for the three months ended September 30, 2010 and 2009 although it has accrued a liability for income tax payable on its balance sheet. To date, the Company has not been granted an extension to pay its income tax obligations, however, the Company intends to commence negotiations with the local tax authorities regarding the availability of tax exemptions relating to the manufacturing of specialty cables and the payment of any remaining income tax obligations after application of available exemptions. In addition, the Company is applying for the electronic remittance of outstanding tax payments due the local tax bureau, if any. The Company expects a final determination on this matter and payment of any tax amounts due within two years

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 20 – 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 21 – 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 22 – 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 23 – Supplemental Cash Flow Disclosures

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

	Three Months Ended September 30,
	2010		2009

Cash paid for interest	$	337,068	$	113,143
Cash paid for income taxes	$	-	$	-

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 24 – Restatement to Reflect Correction of Accounting Errors

Consolidated Balance Sheets

	September 30,		September 30,		Effect of
	2010		2010
	(Restated)		(Originally)		changes
Assets
Current assets:
Cash and cash equivalents	$	462,446	$	462,446	$	-
Restricted cash		2,698,425		2,698,425		-
Accounts receivable, net of allowance for doubtful accounts of $84,625 at September 30, 2010		14,236,184		14,236,184		-
Inventory		3,829,212		3,829,212		-
Loans to unrelated parties		1,060,471		1,060,471		-
Bank loan security deposits		1,074,846		1,074,846		-
Advance payments		590,139		2,038,263		(1,448,124	)
Due from related party		-		-		-
Other current assets		898,704		898,704		-
Total current assets		24,850,427		26,298,551		(1,448,124	)

Property and equipment, net		32,312,046		32,312,046		-

Other assets:
Advance payments – non-current		1,448,124		-		1,448,124
Advance payments – R&D		2,122,746		2,122,746		-
Intangibles, net		15,600,162		15,600,162		-
Total other assets		19,171,032		17,722,908		1,448,124

Total assets	$	76,333,505	$	76,333,505		-

Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	2,936,817	$	2,936,817		-
Trade notes payable		2,994,000		2,994,000		-
Short-term bank loans		6,137,700		6,137,700		-
Current portion of long-term bank loans		598,800		598,800		-
Loans from unrelated party		2,016,700		2,016,700		-
Advances from customers		721,980		721,980		-
Income tax payable		2,477,092		2,477,092		-
Other current liabilities		1,084,815		1,084,815		-
Total current liabilities		18,967,904		18,967,904		-
Long-term bank loan		14,371,200		14,371,200		-

Total liabilities		33,339,104		33,339,104		-
Equity
Stockholders’ 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		29,716		-
Additional paid-in capital		21,838,047		21,838,047		-
Statutory reserves		1,181,189		1,181,189		-
Retained earnings		16,058,414		16,058,414		-
Accumulated other comprehensive income		2,850,390		2,850,390		-
Total stockholders’ equity		41,957,756		41,957,756		-

Noncontrolling interest		1,036,645		1,036,645		-

Total equity		42,994,401		42,994,401		-

Total liabilities and equity	$	76,333,505	$	76,333,505		-

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 24 – Restatement to Reflect Correction of Accounting Errors (continued)

Consolidated Statements of Operations

	For the Three			For the Three
	Months Ended			Months Ended
	September 30,			September 30,			Effect of
	2010			2010			changes
	(Restated)			(Originally)

Sales	$	15,930,811		$	15,930,811			-

Cost of sales		11,670,760			11,670,760			-

Gross profit		4,260,051			4,260,051			-

Operating expenses:
Selling expenses		38,607			38,607			-
General and administrative expenses		1,011,620			1,011,620			-
Total operating expenses		1,050,227			1,050,227			-

Income from operations		3,209,824			3,209,824			-

Other income (expenses):
Government subsidy		136,487			136,487			-
Interest income		8,504			-			8,504
Interest expense		(394,902	)		(386,398	)		(8,504	)
Other income (expenses), net		31,121			31,121			-
Total other income (expenses)		(218,790	)		(218,790	)		-

Income before provision for income taxes		2,991,034			2,991,034			-

Provision for income taxes		807,135			807,135			-

Net income		2,183,899			2,183,899			-

Less: net loss attributable to noncontrolling interest		(64,358	)		(64,358	)		-

Net income attributable to BEFUT International Co., Ltd.		2,248,257			2,248,257			-

Basic earnings per share	$	0.08		$	0.08			-
Diluted earnings per share	$	0.08		$	0.08			-

Weighted average number of common shares outstanding:
Basic		29,715,640			29,715,640			-
Diluted		29,752,094			29,752,094			-

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 24 – Restatement to Reflect Correction of Accounting Errors (continued)

Consolidated Statements of Cash Flows

				For the Three
	For the Three			Months
	Months Ended			Ended
	September 30,			September			Effect of
	2010			30, 2010			changes
	(Restated)			(Originally)
Cash flows from operating activities:
Net Income	$	2,183,899		$	2,183,899			-
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		753,831			753,831			-
Changes in current assets and current liabilities:
Restricted cash		(1,480,073	)					(1,480,073	)
Accounts receivable		(4,751,564	)		(4,751,564	)		-
Inventory		(1,231,133	)		(1,231,133	)		-
Advance payments		(1,318,366	)		(1,318,366	)		-
Other current assets		(429,085	)		(429,085	)		-
Accounts payable and accrued expenses		(229,105	)		(229,105	)		-
Trade notes payable		2,958,000			2,958,000			-
Advances from customers		177,334			177,334			-
Income taxes payable		784,816			784,816			-
Other current liabilities		219,191			219,191			-
Total adjustments		(4,546,154	)		(3,066,081	)		(1,480,073	)

Net cash provided by (used in) operating activities		(2,362,255	)		(882,182	)		(1,480,073	)

Cash flows from investing activities:
Due from related party		474,764			474,764			-
Additions to property and equipment		(622,725	)		(622,725	)		-
Long-term investment		-			-			-
Loans to unrelated parties		10,664			10,664			-

Net cash provided by (used in) investing activities		(137,297	)		(137,297	)		-

Cash flows from financing activities:
Restricted cash		-			(1,480,073	)		1,480,073
Bank loan security deposits		(26,622	)		(26,622	)		-
Loans from unrelated parties		1,626,900			1,626,900			-
Capital contribution from noncontrolling interest for BEFUT Zhong Xing		58,683			58,683			-
Repayment of short-term bank loans		-			-			-

Net cash provided by (used in) financing activities		1,658,961			178,888			1,480,073

Effect of foreign currency translation on cash		(16,136	)		(16,136	)		-

Net decrease in cash and cash equivalents		(856,727	)		(856,727	)		-

Cash and cash equivalents – beginning		1,319,173			1,319,173			-

Cash and cash equivalents – ending	$	462,446		$	462,446			-

BEFUT INTERNATIONAL CO., LTD.

Notes to Consolidated Financial Statements

(Unaudited)

Note 24 – Restatement to Reflect Correction of Accounting Errors (continued)

Consolidated Statements of Cash Flows

	For the Three			For the Three
	Months Ended			Months
	September 30,			Ended
	2009			September			Effect of
				30, 2009			changes
	(Restated)			(Originally)
Cash flows from operating activities:
Net Income	$	685,165		$	685,165			-
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		352,054			352,054			-
Changes in current assets and current liabilities:
Restricted cash		586,000			-			586,000
Accounts receivable		75,238			75,238			-
Inventory		(1,357,491	)		(1,357,491	)		-
Advance payments		138,122			138,122			-
Other current assets		45,108			45,108			-
Accounts payable and accrued expenses		243,714			243,714			-
Trade notes payable		(1,172,880	)		(1,172,880	)		-
Advances from customers		158,553			158,553			-
Income taxes payable		248,904			248,904			-
Other current liabilities		289,288			289,288			-
Total adjustments		(393,390	)		(979,390	)		586,000

Net cash provided by (used in) operating activities		291,775			(294,225	)		586,000

Cash flows from investing activities:
Due from related party		-			-			-
Additions to property and equipment		(534,875	)		(534,875	)		-
Long-term investment		2,932			2,932			-
Loans to unrelated parties		559,117			559,117			-

Net cash provided by (used in) investing activities		27,174			27,174			-

Cash flows from financing activities:
Restricted cash		-			586,000			(586,000	)
Bank loan security deposits		585,752			585,752			-
Loans from unrelated parties		(249,237	)		(249,237	)		-
Capital contribution from noncontrolling interest for BEFUT Zhong Xing		43,983			43,983			-
Repayment of short-term bank loans		(733,050	)		(733,050	)		-

Net cash provided by (used in) financing activities		(352,552	)		233,448			(586,000	)

Effect of foreign currency translation on cash		1,377			1,377			-

Net decrease in cash and cash equivalents		(32,226	)		(32,226	)		-

Cash and cash equivalents – beginning		210,301			210,301			-

Cash and cash equivalents – ending	$	178,075		$	178,075			-

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.

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. As of the date of Dalian Befut’s acquisition, Dalian Yuansheng had no material operations. The transaction was accounted for as a business acquisition pursuant to ASC 805-10. The business acquisition will not have a significant impact on the Company’s future financial statements and results of operations.

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.

OEM Agreements

We conduct substantially all of our operations through, and generate substantially all of our revenues from Dalian Befut, pursuant to an Original Equipment Manufacturer Agreement, an Intellectual Property Rights License Agreement and a Non-competition Agreement (collectively, the “OEM Agreements”). We have no direct ownership interest in Dalian Befut nor do we have voting control of any shares of Dalian Befut. As a result, these OEM Agreements may not be as effective in providing us with control over Dalian Befut as direct ownership of Dalian Befut would be. For example, Dalian Befut may breach the OEM Agreements by deciding not to manufacture products for WFOE, and consequently the Company. In the event of any such breach, we would have to rely on legal remedies under PRC law, which may not always be available or effective to enforce our rights, particularly in light of uncertainties in the PRC legal system. To mitigate such a risk, WFOE has the exclusive right under the OEM Agreements, exercisable in its sole discretion, to purchase all or part of the assets and/or equity of Dalian Befut.

All cash flows generated under the OEM Agreements are maintained in the custody of Dalian Befut instead of in the custody of the Company. There are no prohibitions under applicable PRC law on the transfer of cash from Dalian Befut to WFOE . Accordingly, except for the relevant PRC laws, regulations and government policies on capital outflow, as disclosed under Item 1A - Risk Factors of our Annual Report on Form 10-K, as amended, no risks exist as to the movement of cash balances from the Company’s PRC operating subsidiaries or Dalian Befut up to the Company. Transfer of cash may be made from Dalian Befut to WFOE and up to the Company, when necessary to meet the Company’s cash requirements, including, for example, to satisfy any debt obligations or make cash dividends. Such transfers must be made in compliance with applicable PRC laws regarding, among other things, currency controls, tax and payment of dividends.

Results of Operations

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

Item	September 30, 2010			September 30, 2009			Change
Sales	$	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	%

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.

Interest Expenses

Interest expense was $394,902 for the quarter ended September 30, 2010, an increase of $262,593, or 198.5%, 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 $262,593 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, 2010
Cash and cash equivalents and restricted cash	$	3,161	$	2,500
Working capital	$	5,883	$	4,833
Ratio of current assets to current liabilities	1.3:1		1.4:1

Our approximately $1 million increase in working capital from June 30, 2010 to September 30, 2010 was primarily due to the increase of $7 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.

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, 2009
Net cash provided by (used in) operating activities	$	(2,362	)	$	292
Net cash used in investing activities	$	(137	)	$	27
Net cash provided by financing activities	$	1,659		$	(353	)
Net decrease in cash and cash equivalents and restricted cash	$	(857	)	$	(32	)

We used net cash of $2,362,255 for our operating activities in the quarter ended September 30, 2010, an increase of $2,654,030, or 910.0%, as compared to $291,775 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 provided by 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 $1,658,961 , significantly more 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 in operating activities was $2,362,255, an increase of $2,654,030, as compared to $291,775 of net cash provided by operating activities during the quarter ended September 30, 2009. The variance was primarily due to the increase of accounts receivable, advance payments and trade notes payable. The $4.7 million increase of accounts receivable for the three months ended September 30, 2010 was mainly due to our significant increase of quarterly sales from approximately $5.48 million for the three months ended September 30, 2009 to approximately $15.93 million for the three months ended September 30, 2010. The increase of advance payments was mainly due to payments made for new facilities in connection with the construction of Phase I of the Changxing Island project. Trade notes payable also increased significantly, which was mainly due to the increased purchases of raw materials, primarily copper rods.

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 $27,174 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 $1,658,961, an increase of $2,011,513, as compared to net cash of $352,552 used in financing activities for the quarter ended September 30, 2009.

Financial Obligations

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

Creditors	Loan Amount		Interest Rate			Term	Maturity Date
Harbin Bank	$	2,994,000		6.372	%	1 year	09/13/11
Bank of Dalian	$	2,395,200		6.903	%	1 year	10/29/10
Bank of East Asia	$	748,500		6.318	%	6 months	12/25/10
China 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. The Company’s sales strategy has shifted to large customers since the Company moved its manufacturing operations to its Changxing Island facility. As a result, the credit terms are longer for large customers, such as China National Petroleum Corporation. As at September 30, 2010, the balance for accounts receivable with the aging of more than one year was approximately $80,000. The Company believes the allowance for doubtful accounts was adequate.

Inventories

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

(dollars)	Sept. 30, 2010		June 30, 2010
Category
Raw materials	$	1,262,275	$	1,093,193
Work-in-process		555,545		323,275
Finished goods		2,011,392		1,127,321
Total 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.

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.

Cost of Sales

Cost of sales includes the expenses incurred to produce inventory for sale, including raw materials, direct labor, depreciation of manufacturing facilities and machinery, overheads, amortization of land use right as well as changes in reserves for shrinkage and inventory obsolescence.

Cash and Cash Equivalents

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

Accounts Receivable

Accounts receivable are recorded net of allowance for doubtful accounts. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. Periodically, management assesses customer credit history and relationships as well as performs accounts receivable aging analysis. Based on the results, management determines whether certain balances are deemed uncollectible at the end of period. Using its past collection experience, the 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. The Company generally provides customers with credit terms of three to four months. However, we provide our “large” customers, those with average annual specialty cable orders of over $7 million, with credit terms of five to six months. We generally do not conduct further business with customers that have significant unpaid accounts receivable balances beyond 12 months, unless we receive advance payments from such customers.

Consolidation

Pursuant to ASC 810-10-15-14, an entity is deemed to be a variable interest entity, or VIE, and thus to be consolidated by its primary beneficiary, if, by intention, any one of the following conditions is present:

The total equity investment at risk in the legal entity to be consolidated is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, including equity holders; or

As a group, holders of the equity investment at risk lack any one of the following characteristics of a controlling financial interest:

The power, through voting rights or similar rights to direct the activities of an entity that most significantly impact that entity’s economic performance.

The obligation to absorb the expected losses of the legal entity. Such an obligation does not exist if the shareholders/investors are directly or indirectly protected from losses or are guaranteed a return on their investment by the legal entity itself or by other parties involved with the legal entity.

The right to receive expected residual returns of the legal entity. Such right is not considered to be present if the residual returns are capped by the legal entity's governing documents or by other arrangements with other variable interest holders or the legal entity itself.

On February 16, 2009, WFOE entered into an Original Manufacturer Agreement (the "Manufacturing Agreement") with Dalian Befut, pursuant to which (i) Dalian Befut is the exclusive manufacturer of cable and wire products for WFOE, and may not manufacture products for any other third party without the written consent of WFOE; (ii) WFOE provides all the raw materials and advance related costs to Dalian Befut, as well as provide the design requirements of the products to be manufactured; and (iii) in no event may Dalian Befut use the arrangements under the Manufacturing Agreement for commercial or noncommercial marketing or promotional activities in any form. In addition, on February 16, 2009, WFOE and Dalian Befut entered into (i) an Intellectual Property Rights License Agreement, pursuant to which WFOE shall be permitted to use the intellectual property rights such as trademark, patents and knowhow for the marketing and sale of the products (the “IP Agreement”); and (ii) a Non-competition Agreement, pursuant to which Dalian Befut shall not compete against WFOE (the “Noncompete Agreement”, together with the IP Agreement and Manufacturing Agreement, collectively, the “OEM Agreements”). Under the OEM Agreements, Dalian Befut can only manufacture products for WFOE and cannot compete with WFOE in the same or similar lines of business. Dalian Befut is a captive manufacturer with the sole business purpose of providing manufacturing services to WFOE and is solely dependent on the business provided by WFOE, its primary beneficiary. As WFOE controls all of the potential and future risks and benefits of Dalian Befut, WFOE has the power to significantly impact the economic performance of Dalian Befut. Furthermore, while Messrs. Hongbo Cao and Tingmin Li are the two controlling shareholders of Dalian Befut, collectively owning an aggregate of 90% of the equity interests in Dalian Befut, the Company believes that, due to the OEM Agreements, WFOE, instead of Messrs. Cao and Li, has the power to direct the activities of Dalian Befut to significantly impact the economic performance of Dalian Befut. Based on the aforementioned assessment, Dalian Befut is a VIE of the Company under ASC 810-10-15-14-B.1. above, and as such, is consolidated into the Company. Although the Company is only required to meet one criteria under ASC 810-10-15-14 in order to consolidate Dalian Befut, the Company believes that facts and circumstances exist that would allow it to meet certain other qualifying criteria set forth in ASC 810-10-15-14.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer reviewed and evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on their evaluation, in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 as originally filed with the SEC on November 15, 2010, our Chief Executive Officer and Chief Financial Officer each concluded that, as of September 30, 2010, our disclosure controls and procedures were effective.

However, in connection with the preparation of our responses to comments received from the SEC, we identified certain reporting errors and omissions in our previously issued financial statements. We subsequently determined that a restatement was required for our consolidated financial statements for the quarter ended September 30, 2010. As a result of the foregoing, management determined that a material weakness existed with respect to our financial reporting. This weakness was a result of our insufficient disclosure of certain required information by inexperienced staff, which required the restatement of our consolidated financial statements as of and for the quarter ended September 30, 2010.

As a result of the material weakness identified with respect to our financial reporting, our Chief Executive Officer and Chief Financial Officer have reevaluated our disclosure controls and procedures and have concluded that our disclosure controls and procedures were not effective as of September 30, 2010. As of the date of this amended report on Form 10-Q/A, we are undertaking steps to correct the aforementioned material weakness by:

•

Establishing policies and procedures of transaction level and type to improve our internal control environment;

•

Implementing a financial closing process check list including major book closure steps to perform consolidation and reviews; and

•

Recruiting qualified accounting professionals with sufficient US GAAP knowledge to enhance the quality of our financial reporting preparation.

Changes in Internal Control Over Financial Reporting

In our Annual Report on Form 10-K for the fiscal year ended June 30, 2010, our Chief Executive Officer and Chief Financial Officer concluded that under the framework set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our internal control over financial reporting was effective. However, due to the restatement of our financial statements for the year ended June 30, 2010 and for the quarter ended September 30, 2010 as described above, our Chief Executive Officer and Chief Financial Officer reassessed that conclusion and determined that there existed a material weakness in our internal controls over financial reporting as of September 30, 2010. Management has determined that the design and operation of internal control over financial reporting that we had in place at September 30, 2010 was not effective to allow our management, employees and consultants, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely and reasonable basis. That material weakness was due to our short staffing of accounting professionals with sufficient knowledge of US GAAP and relevant disclosure requirements.

Because we were not aware of this material weakness until after the quarter ended March 31, 2011, there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As of the date of this amended report on Form 10-Q/A, we are undertaking the aforementioned steps to remediate the weakness in our internal controls over financial reporting.

PART II OTHER INFORMATION

Item 6.

Exhibits

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

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: September 16, 2011	By:	/s/ Hongbo Cao
		Name: Hongbo Cao
		Title: President and Chief Executive Officer
		(principal executive officer)

Date: September 16, 2011	By:	/s/ Mei Yu
		Name: Mei Yu
		Title: Chief Financial Officer
		(principal financial officer and principal accounting officer)

EXHIBIT INDEX

No.		Description
31.1		– 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.

BEFUT International Co., Ltd. - FORM 10-Q/A - September 16, 2011

Attached files

BEFUT International Co., Ltd. Reports