UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
For the
quarterly period ended
March 31,
2010
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
For the
transition period from ____________ to ____________
Commission
File Number 000-51336
BEFUT INTERNATIONAL CO.,
LTD.
(Exact
name of registrant as specified in its charter)
Nevada
|
|
20-2777600
|
(State
or other jurisdiction of
|
|
(IRS
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)
No. 90-1 Hongji Street,
Xigang District Dalian City,
Liaoning Province, _People’s
Republic of
China
116011
(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
|
o
|
Accelerated filer
|
o
|
|
|
Non-accelerated filer
|
o
|
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: 29,512,784 shares of Common
Stock, $.001 par value, were outstanding as of May 12,
2010.
TABLE
OF CONTENTS
|
|
Page
|
PART
I
|
FINANCIAL
INFORMATION
|
3
|
|
|
|
Item
1.
|
Financial
Statements
|
3
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
5
|
|
|
|
|
Consolidated
Balance Sheets As of March 31, 2010 (Unaudited) and June 30,
2009
|
6
|
|
|
|
|
Consolidated
Statements of Operations and Other Comprehensive Income For the Three
Months and Nine Months Ended March 31, 2010 and 2009
(Unaudited)
|
7
|
|
|
|
|
Consolidated
Statements of Cash Flows For the Nine Months Ended March 31, 2010 and 2009
(Unaudited)
|
8
|
|
|
|
|
Notes
to Consolidated Financial Statements March 31, 2010 and 2009
(Unaudited)
|
9
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
|
|
|
Item
4T.
|
Controls
and Procedures.
|
25
|
|
|
|
PART II
|
OTHER INFORMATION
|
25
|
|
|
|
Item
6.
|
Exhibits
|
25
|
|
|
|
Signatures
|
26
|
|
|
Exhibits/Certifications
|
|
PART
I - FINANCIAL INFORMATION
Item
1.
|
Financial
Statements
|
BEFUT
INTERNATIONAL CO., LTD.
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH
31, 2010 AND 2009
(UNAUDITED)
BEFUT
INTERNATIONAL CO., LTD.
Consolidated
Financial Statements
March
31, 2010 And 2009
(Unaudited)
Table
of Contents
|
Page
|
|
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
5
|
|
|
Consolidated
Balance Sheets
|
6
|
|
|
Consolidated
Statements of Operations and Other Comprehensive Income
|
7
|
|
|
Consolidated
Statements of Cash Flows
|
8
|
|
|
Notes
to Consolidated Financial Statements
|
9
|
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders
BEFUT
International Co., Ltd.
We have
reviewed the accompanying consolidated balance sheet of BEFUT International Co.,
Ltd. (the “Company”) as of March 31, 2010, and the related consolidated
statements of operations and comprehensive income for the three months and nine
months ended March 31, 2010 and 2009, and cash flows for the nine months ended
March 31, 2010 and 2009. These consolidated financial statements are the
responsibility of the Company's management.
We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on
our review, we are not aware of any material modifications that should be made
to the accompanying financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
BEFUT International Co., Ltd. as of June 30, 2009, and the related consolidated
statements of operations and comprehensive income, stockholders’ equity, and
cash flows for the year then ended (not presented herein); and in our report
dated September 24, 2009, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of June 30, 2009, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/
Patrizio & Zhao, LLC
Parsippany,
New Jersey
May 11,
2010
BEFUT
INTERNATIONAL CO., LTD.
Consolidated
Balance Sheets
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,415,557
|
|
|
$
|
210,301
|
|
Restricted
cash
|
|
|
-
|
|
|
|
586,000
|
|
Accounts
receivable, net of allowance for doubtful accounts of $20,241 and $20,222
at March 31, 2010 and June 30, 2009, respectively
|
|
|
13,085,108
|
|
|
|
8,560,592
|
|
Inventory
|
|
|
2,099,599
|
|
|
|
1,353,532
|
|
Loans
to unrelated parties
|
|
|
5,730,326
|
|
|
|
6,955,623
|
|
Bank
loan security deposits
|
|
|
1,416,389
|
|
|
|
733,233
|
|
Advance
payments
|
|
|
9,240,763
|
|
|
|
866,868
|
|
Advance
payments – R & D
|
|
|
2,804,904
|
|
|
|
2,956,370
|
|
Other
current assets
|
|
|
1,056,235
|
|
|
|
273,391
|
|
Total
current assets
|
|
|
36,848,881
|
|
|
|
22,495,910
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
22,889,543
|
|
|
|
18,646,274
|
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Intangibles,
net
|
|
|
10,520,735
|
|
|
|
11,335,978
|
|
Long-term
investment
|
|
|
-
|
|
|
|
2,930
|
|
Total
other assets
|
|
|
10,520,735
|
|
|
|
11,338,908
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
70,259,159
|
|
|
$
|
52,481,092
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
6,533,708
|
|
|
$
|
659,142
|
|
Short-term
bank loans
|
|
|
5,281,200
|
|
|
|
8,057,500
|
|
Current
portion of long-term bank loans
|
|
|
293,400
|
|
|
|
-
|
|
Convertible
notes payable
|
|
|
130,000
|
|
|
|
500,000
|
|
Trade
notes payable
|
|
|
-
|
|
|
|
1,172,000
|
|
Loans
from unrelated parties
|
|
|
2,924,508
|
|
|
|
249,050
|
|
Advances
from customers
|
|
|
663,253
|
|
|
|
372,417
|
|
Income
tax payable
|
|
|
1,671,344
|
|
|
|
777,497
|
|
Other
taxes payable
|
|
|
-
|
|
|
|
37,975
|
|
Other
current liabilities
|
|
|
701,359
|
|
|
|
636,514
|
|
Total
current liabilities
|
|
|
18,198,772
|
|
|
|
12,462,095
|
|
|
|
|
|
|
|
|
|
|
Long-term
bank loans
|
|
|
14,376,600
|
|
|
|
5,470,310
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
32,575,372
|
|
|
|
17,932,405
|
|
|
|
|
|
|
|
|
|
|
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, 29,512,784 and
29,488,341 shares issued and outstanding at March 31, 2010 and June 30,
2009, respectively
|
|
|
29,513
|
|
|
|
29,488
|
|
Additional
paid-in capital
|
|
|
21,708,250
|
|
|
|
21,708,275
|
|
Statutory
reserve
|
|
|
729,135
|
|
|
|
729,135
|
|
Retained
earnings
|
|
|
12,126,112
|
|
|
|
9,750,035
|
|
Accumulated
other comprehensive income
|
|
|
2,004,788
|
|
|
|
1,956,623
|
|
Total
stockholders’ equity
|
|
|
36,597,798
|
|
|
|
34,173,556
|
|
`
|
|
|
|
|
|
|
|
|
Noncontrolling
interest
|
|
|
1,085,989
|
|
|
|
375,131
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
37,683,787
|
|
|
|
34,548,687
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
|
$
|
70,259,159
|
|
|
$
|
52,481,092
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEFUT
INTERNATIONAL CO., LTD.
Consolidated
Statements of Operations and Other Comprehensive Income
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Nine
Months Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
6,708,410
|
|
|
$
|
2,299,475
|
|
|
$
|
19,318,113
|
|
|
$
|
13,183,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
5,002,973
|
|
|
|
1,738,983
|
|
|
|
14,101,070
|
|
|
|
10,000,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
1,705,437
|
|
|
|
560,492
|
|
|
|
5,217,043
|
|
|
|
3,182,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
11,300
|
|
|
|
14,211
|
|
|
|
48,001
|
|
|
|
180,827
|
|
General
and administrative expenses
|
|
|
731,346
|
|
|
|
326,198
|
|
|
|
1,761,895
|
|
|
|
740,305
|
|
Total
operating expenses
|
|
|
742,646
|
|
|
|
340,409
|
|
|
|
1,809,896
|
|
|
|
921,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
962,791
|
|
|
|
220,083
|
|
|
|
3,407,147
|
|
|
|
2,261,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
subsidy income
|
|
|
331,138
|
|
|
|
-
|
|
|
|
685,796
|
|
|
|
159,925
|
|
Interest
expense, net
|
|
|
(359,567
|
)
|
|
|
(112,397
|
)
|
|
|
(497,071
|
)
|
|
|
(392,559
|
)
|
Other
income (expenses)
|
|
|
2,930
|
|
|
|
(38,658
|
)
|
|
|
(394,511
|
)
|
|
|
(4,335
|
)
|
Total
other income (expenses)
|
|
|
(25,499
|
)
|
|
|
(151,055
|
)
|
|
|
(205,786
|
)
|
|
|
(236,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income tax
|
|
|
937,292
|
|
|
|
69,028
|
|
|
|
3,201,361
|
|
|
|
2,024,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income tax
|
|
|
306,698
|
|
|
|
43,554
|
|
|
|
892,421
|
|
|
|
145,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income before noncontrolling interest
|
|
|
630,594
|
|
|
|
25,474
|
|
|
|
2,308,940
|
|
|
|
1,878,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
net loss attributable to noncontrolling interest
|
|
|
(61,016
|
)
|
|
|
(10,278
|
)
|
|
|
(67,137
|
)
|
|
|
(11,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to BEFUT
|
|
|
691,610
|
|
|
|
35,752
|
|
|
|
2,376,077
|
|
|
|
1,889,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
95
|
|
|
|
(104,386
|
)
|
|
|
48,165
|
|
|
|
62,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$
|
691,705
|
|
|
$
|
(68,634
|
)
|
|
$
|
2,424,242
|
|
|
$
|
1,951,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.00
|
|
|
$
|
0.08
|
|
|
$
|
0.06
|
|
Diluted
earnings per share
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
$
|
0.08
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,512,784
|
|
|
|
29,488,341
|
|
|
|
29,512,784
|
|
|
|
29,488,341
|
|
Diluted
|
|
|
30,155,539
|
|
|
|
29,488,341
|
|
|
|
30,240,336
|
|
|
|
29,488,341
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEFUT
INTERNATIONAL CO., LTD.
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
For the Nine
Months Ended
|
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
Income
|
|
$
|
2,376,077
|
|
|
$
|
1,889,490
|
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,087,427
|
|
|
|
196,298
|
|
Noncontrolling
interest
|
|
|
(67,137
|
)
|
|
|
(11,082
|
)
|
Changes
in current assets and current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(4,510,985
|
)
|
|
|
(670,925
|
)
|
Inventory
|
|
|
(743,916
|
)
|
|
|
(652,768
|
)
|
Advance
payments
|
|
|
(7,726,696
|
)
|
|
|
(42,212
|
)
|
Advance
payment - R&D
|
|
|
155,438
|
|
|
|
-
|
|
Other
current assets
|
|
|
(815,103
|
)
|
|
|
84,173
|
|
Accounts
payable and accrued expenses
|
|
|
5,871,576
|
|
|
|
(89,011
|
)
|
Trade
notes payable
|
|
|
(1,173,120
|
)
|
|
|
1,171,600
|
|
Advances
from customers
|
|
|
290,209
|
|
|
|
413,093
|
|
Income
tax payable
|
|
|
892,421
|
|
|
|
-
|
|
Other
taxes payable
|
|
|
(37,983
|
)
|
|
|
54,941
|
|
Other
current liabilities
|
|
|
59,082
|
|
|
|
988,920
|
|
Total
adjustments
|
|
|
(6,718,787
|
)
|
|
|
1,443,027
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(4,342,710
|
)
|
|
|
3,332,517
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Loans
to unrelated parties
|
|
|
1,234,288
|
|
|
|
(3,986,629
|
)
|
Advance
payment for fixed assets
|
|
|
(642,672
|
)
|
|
|
(1,610,950
|
)
|
Additions
to property and equipment
|
|
|
(2,016,175
|
)
|
|
|
(64,699
|
)
|
Additions
to construction in progress
|
|
|
(2,450,795
|
)
|
|
|
(3,235,176
|
)
|
Acquisition
of intangible assets
|
|
|
(6,453
|
)
|
|
|
-
|
|
Long-term
investment
|
|
|
2,933
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(3,878,874
|
)
|
|
|
(8,897,454
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Bank
loan security deposits
|
|
|
(681,876
|
)
|
|
|
(118,625
|
)
|
Proceeds
(repayment) of short-term bank loans
|
|
|
(2,786,160
|
)
|
|
|
3,441,575
|
|
Convertible
notes payable
|
|
|
(370,000
|
)
|
|
|
-
|
|
Loans
from unrelated parties
|
|
|
2,708,908
|
|
|
|
-
|
|
Proceeds
(repayment) of long-term bank loans
|
|
|
9,188,462
|
|
|
|
(316,332
|
)
|
Additional
paid in capital
|
|
|
-
|
|
|
|
3,233,556
|
|
Contributed
from minority shareholder
|
|
|
777,192
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
8,836,526
|
|
|
|
6,240,174
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency translation on cash
|
|
|
4,314
|
|
|
|
1,346
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents and restricted cash
|
|
|
619,256
|
|
|
|
676,583
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash – beginning
|
|
|
796,301
|
|
|
|
353,049
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash – ending
|
|
$
|
1,415,557
|
|
|
$
|
1,029,632
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non cash activities
|
|
|
|
|
|
|
|
|
Other
receivable reclassified as loan to third party
|
|
$
|
-
|
|
|
$
|
538,462
|
|
Contributed
intangible assets
|
|
$
|
-
|
|
|
$
|
6,253,415
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(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 and manufacture 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 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.”.
Hong Kong
BEFUT Co., Ltd. (“Befut Hong Kong”) was incorporated on September 10, 2008 under
the laws of Hong Kong. Befut Hong Kong is a wholly-owned subsidiary
of Befut
Nevada. On
February 13, 2009, Befut Hong Kong 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 it 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 includes the
following arrangements: First, WFOE entered into an Original
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 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 Rights License Agreement,
pursuant to
which WFOE shall be permitted to use intellectual property rights such as
trademarks, patents and know-how for the marketing and sale of the products
manufactured by Dalian Befut; and (ii) a Non-competition Agreement, pursuant to
which Dalian Befut shall not compete against WFOE.
On April
14, 2006, Dalian Marine Cable Co., Ltd. (“Dalian Marine Co.”) was incorporated
in the PRC by Dalian Befut. Its current shareholders are Dalian Befut
(owning 86.6%
of the equity interest) and three individual shareholders. The three individuals
are also shareholders of Dalian Befut. Dalian Marine Co. is
intended to
conduct marketing and production of marine cables for Dalian Befut.
On July
1, 2009, Dalian Befut Wire and Cable Manufacturing Company, our captive
manufacturer, formed a joint venture under the laws of the PRC, Dalian Befut
Zhong Xing Switch Co., Ltd. (“Befut Zhong Xing”), with pre-registered capital of
RMB1,000,000. Dalian Befut invested RMB700,000 for its 70% equity interest in
Befut Zhong Xing. In January, 2010, Dalian Befut increased its investment
capital to RMB14.7 million with intangible assets and raised its equity
ownership percentage in Befut Zhong Xing to 73.5%.
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
2 – Summary of Significant Accounting Policies
Basis
Of Presentation
The Company
’
s consolidated financial
statements include the accounts of its direct wholly-owned subsidiaries and of
its indirect proportionate share of
subsidiaries
owned by the wholly-owned
subsidiaries. All intercompany balances and transactions are eliminated in
consolidation.
The accompanying unaudited financial statements ha
ve
been prepared in
accordance with generally accepted accounting principles (
“
GAAP
”
) 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, we
evaluated the period from March 31, 2010 through the date the financial
statements were issued for material subsequent events requiring recognition or
disclosure. No such events were identified for this period.
Interim
Financial Statements
These
interim financial statements should be read in conjunction with the audited
financial statements for the years ended June 30, 200
9
and 200
8
, 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 financial
statements for the years ended June 30, 200
9
and 200
8
.
Recent
Accounting Pronouncements
On July
1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched
the FASB Accounting Standards Codification (“
ASC
”), which has
become the single official source of authoritative
nongovernmental
U.S. GAAP, in addition to guidance issued by the Securities and Exchange
Commission. The
ASC
is designed to
simplify U.S. GAAP into a single, topically ordered structure. All guidance
contained in the
ASC
carries an
equal level of authority. The
ASC
is effective
for all interim and annual periods ending after September 15, 2009.
The Company’s
implementation of this guidance effective July 1, 2009 did not have a material
effect on the Company’s condensed consolidated financial
statements.
On
July
1, 2009,
the Company
adopted
the accounting and disclosure requirements of Statement of Financial Accounting
Standard (“SFAS”) No.
160,
Noncontrolling Interests in Consolidated Financial Statements, an Amendment of
ARB No. 51, which is now included with
ASC
Topic 810
C
onsolidation. This
standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation. On a
prospective basis, any changes in ownership will be accounted for as equity
transactions with no gain or loss recognized on the transactions unless there is
a change in control.
Reclassification
Certain
amounts of March 31, 2009 were reclassified for presentation
purposes.
Note
3– Accounts Receivable
Trade
accounts receivable are stated at original invoice amount less allowance for
doubtful receivables based on management
’
s periodic review
of aging of outstanding balances and customer credit history.
If the financial condition
of the
Company
’s customers were to
deteriorate, resulting in an impairment of their ability to make
payments,
additional allowances may
be required.
The
balance of allowance for doubtful accounts amounted to $20,241 and $20,222 as of
March 31, 2010 and June 30, 2009,
respectively
.
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
4 – Inventory
Inventory
at March 31, 2010 and June 30, 2009 consists of the following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
919,894
|
|
|
$
|
400,343
|
|
Work
in process
|
|
|
121,311
|
|
|
|
60,703
|
|
Finished
goods
|
|
|
1,058,394
|
|
|
|
892,486
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,099,599
|
|
|
$
|
1,353,532
|
|
Note
5 – Loans to Unrelated Parties
As of
March 31,
2010 and June 30, 2009
, the Company had
outstanding
loans to unrelated parties
of $
5,730,326 and
$
6,955,623,
respectively.
These
loans represent
advances
to
unrelated
parties
at an annual
interest rate of
5
0%
above the
applicable bank interest rate
. Interest payments are
made semi-annually with principal payments
payable on demand, as per the
terms of the
applicable
loan
agreement
.
Note
6 – Advance Payments
As a
common business practice in China, the Company is often required to make
advances to certain vendors for inventory, equipment, and construction in
progress. The balances outstanding for advances on purchase of inventory
amounted to $397,307 and $224,196 as of March 31, 2010 and June 30, 2009,
respectively. Additionally, the Company made advances on equipment purchases
amounting to $8,843,456 and $642,672 as of March 31, 2010 and
June 30, 2009, respectively.
Note
7 – Advance Payments – Research and Development
As a
common business practice in China, the Company is required to make advance
payments for goods or services that will be used in future research and
development activities. The balance of outstanding advance payments for such
activities as of March 31, 2010 and June 30, 2009 was $2,804,904 and $2,956,370,
respectively.
Note
8 – Property and Equipment
Property
and equipment at March 31, 2010 and June 30, 2009 consists of the
following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
1,025,048
|
|
|
$
|
1,019,457
|
|
Machinery
and equipment
|
|
|
3,541,228
|
|
|
|
1,663,732
|
|
Office
equipment and furniture
|
|
|
80,004
|
|
|
|
57,770
|
|
Vehicles
|
|
|
387,832
|
|
|
|
272,327
|
|
Subtotal
|
|
|
5,034,112
|
|
|
|
3,013,286
|
|
Less:
Accumulated depreciation
|
|
|
1,334,446
|
|
|
|
1,082,271
|
|
|
|
|
3,699,666
|
|
|
|
1,931,015
|
|
Add:
Construction in progress
|
|
|
19,189,877
|
|
|
|
16,715,259
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,889,543
|
|
|
$
|
18,646,274
|
|
Depreciation
expense for the three months ended March 31, 2010 and 2009 was $80,779 and
$66,077, respectively. Depreciation expense for the nine months ended March 31,
2010 and 2009 was $250,595 and $194,002, respectively.
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
9 – Intangible Assets
Intangible
assets at March 31, 2010 and June 30, 2009 consist of the
following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Software
|
|
$
|
22,526
|
|
|
$
|
16,049
|
|
Well-known
trademark
|
|
|
83,619
|
|
|
|
83,505
|
|
High-tech
patent
|
|
|
11,554,158
|
|
|
|
11,538,406
|
|
Subtotal
|
|
|
11,660,303
|
|
|
|
11,637,960
|
|
Less:
accumulated amortization
|
|
|
1,139,568
|
|
|
|
301,982
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,520,735
|
|
|
$
|
11,335,978
|
|
Amortization
expense for the three months ended March 31, 2010 and 2009 was $287,968 and
$766, respectively. Amortization expense for the nine months ended March 31,
2010 and 2009 was $836,832 and $2,296, respectively.
Note
10 – Accounts Payable and Accrued Expenses
Accounts
payable and accrued expenses at March 31, 2010 and June 30, 2009 consist of the
following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
6,525,708
|
|
|
$
|
527,142
|
|
Accrued
expenses
|
|
|
8,000
|
|
|
|
132,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,533,708
|
|
|
$
|
659,142
|
|
The
carrying value of accounts payable and accrued expenses approximates fair value
due to the short-term nature of these obligations.
Note
11 – Short-Term Bank Loans
Short-term
bank loans consist of the following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
On
July 31, 2008, the Company obtained a loan from Guangdong Development
Bank, of which the principal and interest was paid in full by July 30,
2009. The interest was calculated using an annual fixed interest rate of
9.98%
and
paid monthly. The loan was guaranteed by a third party. The guaranty was
released upon the full repayment of the loan.
|
|
$
|
-
|
|
|
$
|
586,000
|
|
|
|
|
|
|
|
|
|
|
On
August 27, 2008, the Company obtained a loan from Bank of Dalian, of which
the principal and interest was paid in full by August 27, 2009. The
interest was calculated using an annual fixed interest rate of 10.458% and
paid monthly. The loan was secured by a lien on the Company’s property and
equipment, inventory and guaranteed by a third party. Upon the repayment
in full of the loan, such lien and guaranty were released.
|
|
$
|
-
|
|
|
$
|
2,856,750
|
|
|
|
|
|
|
|
|
|
|
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
11 – Short-Term Bank Loans (continued)
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
On
November 21, 2008, the Company obtained a loan from Agricultural Bank of
China, of which the principal and interest was paid in full by August 20,
2009. The interest was calculated using an annual fixed
interest rate of 10.0485% and paid monthly. The loan was
secured by a lien on the Company’s property and equipment and guaranteed
by a third party. Upon the repayment in full of
the loan, such lien and guaranty were released.
|
|
$
|
-
|
|
|
$
|
219,750
|
|
|
|
|
|
|
|
|
|
|
On
December 24, 2008, the Company obtained a loan from Shanghai Pudong
Development Bank, of which the principal and interest was paid in full
by December 24, 2009 The interest was calculated
using an annual fixed interest rate of 6.138% and paid
quarterly. The loan was guaranteed by a third party. The
guaranty was released upon the full repayment of the loan.
|
|
$
|
-
|
|
|
$
|
1,465,000
|
|
|
|
|
|
|
|
|
|
|
On
May 6, 2009, the Company obtained a loan from China Merchants Bank, of
which the principal and interest was paid in full by October 30, 2009.
The interest was calculated using an annual fixed interest rate
of 5.841% and paid monthly. The loan was secured by a lien on
the Company’s property and equipment. The lien was released
upon the full repayment of the loan.
|
|
$
|
-
|
|
|
$
|
2,930,000
|
|
|
|
|
|
|
|
|
|
|
On
September 16, 2009, the Company obtained a loan from Harbin Bank, of which
the principal is to be paid in full by September 15, 2010. The interest is
calculated using an annual fixed interest rate of 6.372% and paid monthly.
The loan is secured by a lien on the Company’s property and
equipment.
|
|
$
|
2,934,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On
October 30, 2009, the Company obtained a loan from Bank of Dalian, of
which the principal is to be paid in full by October 29, 2010. The
interest is calculated using an annual fixed interest rate of 6.903% and
paid monthly. The loan is guaranteed by a third party.
|
|
$
|
2,347,200
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,281,200
|
|
|
$
|
8,057,500
|
|
Note
12 – Loans From Unrelated Parties
These
loans are based on good-faith, and are unsecured and non-interest bearing.
The proceeds
from these loans are utilized for working capital.
As of
March 31,
2010 and June 30, 2009
, the Company had
outstanding
loans from unrelated parties
of $
2,924,508 and
$
249,050,
respectively.
Note
13 – Long-Term Bank Loans
Long
term
bank loans
at
March 31, 2010 and
June 30,
2009
consist of the following:
|
|
March
31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
In
November 2006, the Company obtained loans from Construction
Bank of China, for the purchase of property. As per the terms
of the loan agreement, the loan will mature in November 2011.
The interest rate is to be adjusted every twelve months. The
annual
interest rate
for the first and the second year was
fixed
at 8.6879% and 7.50312
%
,
respectively.
|
|
$
|
-
|
|
|
$
|
5,470,310
|
|
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
13 – Long-Term Bank Loans (continued)
|
|
March
31,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
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 15,000 tons. 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. Cao, and Mr. Li, Dalian Befut’s two
major shareholders.
|
|
$
|
14,670,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,670,000
|
|
|
$
|
5,470,310
|
|
|
|
|
|
|
|
|
|
|
Less:
Current portion
|
|
|
293,400
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
long-term loans
|
|
$
|
14,376,600
|
|
|
$
|
5,470,310
|
|
Note
14 – Earnings Per Share
The
Company presents earnings per share on a basic and diluted basis. Basic earnings
per share is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding. Diluted earnings per share
is computed by dividing income available to common shareholders by the weighted
average number of shares outstanding plus the dilutive effect of potential
securities. All shares and per share data have been adjusted retroactively to
reflect
the
recapitalization of the Company pursuant to the Securities Exchange Agreement
with
Befut Nevada
.
On June 18, 2009,
the Company effectuated a 1 for 4.07 reverse stock split of the Company’s common
stock, and previously reported shares and earnings per share amounts have been
recalculated accordingly.
|
|
For the Three Months
Ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
691,610
|
|
|
$
|
35,752
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
(denominator
for basic earnings per share)
|
|
|
29,512,784
|
|
|
|
29,488,341
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
642,755
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
(denominator
for diluted earnings per share)
|
|
|
30,155,539
|
|
|
|
29,488,341
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.00
|
|
Diluted
earnings per share
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
14 – Earnings Per Share (continued)
|
|
For the Nine Months
Ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2,376,077
|
|
|
$
|
1,889,490
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
(denominator for basic earnings per
share)
|
|
|
29,512,784
|
|
|
|
29,488,341
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
727,522
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
(denominator
for diluted earnings per share)
|
|
|
30,240,336
|
|
|
|
29,488,341
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.08
|
|
|
$
|
0.06
|
|
Diluted
earnings per share
|
|
$
|
0.08
|
|
|
$
|
0.06
|
|
Note
15 – Stockholders’ Equity And Related Financing Agreements
On March
13, 2009, as part of the reverse merger transaction, Frezer acquired, from Befut
BVI, 100% of the outstanding shares of common stock of Befut Nevada. In
exchange, Befut BVI was issued 117,768,300 shares of Frezer’s common stock,
under a Share Exchange Agreement (“SEA”) pursuant to an exemption under Section
4(2) of the Securities Act of 1933, as amended, for issuances not involving a
public offering. As a result of the transaction, Befut Nevada became a
wholly-owned subsidiary of Frezer.
On March
13, 2009, 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 financing was a condition to the
completion of the share exchange transaction with Befut BVI and the Befut BVI
Stockholders under the Share Exchange Agreement. The securities offered in the
financing were sold pursuant to a Securities Purchase Agreement (the “Purchase
Agreement”) by and among Frezer and the investors named in the Purchase
Agreement (collectively, the “Investors”).
In
accordance with the Purchase Agreement, the Company issued securities consisting
of: (i) 3,130,869 shares of Frezer’s common stock $0.001 par value per share in
connection with the private financing; (ii) Five (5) year warrants to purchase
720,076 shares of Frezer common stock at an initial exercise price of $0.1916
per share.
On June
18, 2009, 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 were
rounded up. In addition, any shareholder owning at least 100 shares but less
than 407 shares of the Company’s common stock on June 17, 2009, would own at
least 100 shares after giving effect to the Reverse Split.
Note
16 – Income Taxes
The
Company is a Nevada corporation and conducts all of its business through its
Chinese subsidiary and its affiliated Chinese operating companies. All business
is conducted in PRC. As the U.S. holding company has not recorded any income for
the nine months ended March 31, 2010 and 2009, there was no provision or benefit
for U.S. income tax purpose.
The
Company’s Chinese subsidiary and affiliated operating companies based in China
are governed by the Income Tax Law of the PRC concerning private-run
enterprises, which are generally subject to a statutory tax rate of
25% and were, until January 2008, subject to a statutory tax rate of 33% (30%
state income tax plus 3% local income tax) on income reported in the statutory
statements after appropriate tax adjustments.
BEFUT
INTERNATIONAL CO., LTD.
Notes
to Consolidated Financial Statements
March
31, 2010 and 2009
(Unaudited)
Note
16 – Income Taxes (continued)
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 on January 1,
2008. Under the New CIT Law, the corporate income tax rate applicable to all
companies in China, both domestic and foreign-invested companies, is 25%,
replacing the previous applicable tax rate of 33%. For the nine months ended
March 31, 2010, the income tax provision by the Company was
$892,421.
Note
1
7
– Employee
Welfare Plan
The
Company has established an employee welfare plan in accordance with 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
18 – Risk Factors
The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal conditions in the PRC. The Company's
business may also be influenced by changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation, among other
things.
Note
19 – Concentrations of Credit Risk
For the
nine months ended March 31, 2010, ten vendors accounted for approximately 89% of
the Company’s raw materials. Purchases from these vendors amounted to $14.17
million. The sales to the Company’s top ten customers amounted to $12.56 million
and accounted for approximately 65% of the Company's total sales.
Financial
instruments which potentially subject the Company to credit risk consist
principally of cash on deposit with financial institutions. Management believes
that minimal credit risk exists with respect to these investments as management
believes that the financial institutions that hold the Company’s cash and cash
equivalents are financially sound.
Note
20 – Supplemental Cash Flow Disclosures
The
following is supplemental information relating to the consolidated statements of
cash flows:
|
|
Nine Months
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
497,071
|
|
|
$
|
392,559
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
102,422
|
|
Note
21 - Subsequent Events
None.
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,” “expects,” “management believes,” “we
believe,” “we 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
(“Befut Nevada”); (ii) Hongkong BEFUT Co., Ltd. (“Befut Hongkong”), a
wholly-owned subsidiary of Befut Nevada incorporated under the laws of Hong
Kong; (iii) Befut Electric (Dalian) Co., Ltd. (“WFOE”), a corporation organized
under the laws of the People’s Republic of China (the “PRC”), 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 controlled by Dalian Befut through a series of contractual
agreements; (vii) Dalian Marine Cable Co., Ltd. (“Befut Marine”), a corporation
that is 86.6% owned by Dalian Befut. and (viii) Dalian Befut Zhong Xing Switch
Co., Ltd. (“Befut Zhong Xing”), a corporation that is 73.5% owned by Dalian
Befut.
Unless
the context otherwise requires, all references to (i) “PRC” and “China” are to
the People’s Republic of China or 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 we are one of the most competitive developers, manufacturers and
distributors of cable and wire in northeastern China. We are mainly engaged in
the production of specialty cables, including marine cable, mine cable, nuclear
cable, metallurgy cable and petrochemical cable. Although not currently in
production, we also have the technical capability for the production of
large-scale submarine cable, and locomotive cable, both of which have potential
for high profit margins. Befut Zhong Xing, of which we own approximate 73.5%, is
engaged in production of electric switches and switch boxes, the supporting
equipment of cable users.
Outlook
Primarily
for the reasons described below, we believe we will experience annual sales
growth of more than 70% for our next fiscal year ending June 30,
2011.
Among our
more than 200 customers, approximately 30 are considered “large” customers with
average annual specialty cable order needs of more than $7 million. Due, in
part, to our past limited production capacity, we were not able to accept
large-volume orders from these customers. With the recent completion of our new
factory, which started operations in early 2010, we now have the ability to
produce specialty cables in large volumes. Thus, in the quarter ended March 31,
2010, we began to adjust our sales strategy to focus mainly on accepting
large-volume orders. We estimate that in our fiscal year ending June 30, 2011,
we will accept large-volume orders (more than $700,000 each) from more than 30
existing and new customers, including petrochemical companies, mining and
metallurgical companies, nuclear power plants and shipbuilding companies. We
expect these customers to generate sales of about $45 million, which we estimate
will account for approximately 80% of our total sales for our fiscal year ended
June 30, 2011. We plan to add “large” customers each year as there are currently
more than 100 companies located in northern China with average annual specialty
cable order needs of more than $7 million.
3
rd
Quarter
Highlights
Highlights
for the quarter ended March 31, 2010 include:
|
·
|
Sales
were $6,708,410, an increase of $4,408,935 or 191.7%, as compared to the
three months ended March 31, 2009.
|
|
·
|
Earnings
per share of $0.023 versus $0.001 for the quarter ended March 31, 2009,
despite the traditionally slow sales period due to the annual Spring
Festival in China.
|
|
·
|
Working
capital was $18,650,109 as of March 31, 2010, an increase of $8,616,294 or
85.9%, as compared to the amount of working capital as of June 30,
2009.
|
|
·
|
Investment
of approximately $8 million in the purchase of 20 sets of new, latest
technology equipment for wire and cable
manufacturing.
|
Results
of Operations
Three
months and nine months ended March 31, 2010 compared to the three months and
nine months ended March 31, 2009.
(in
thousands)
All numbers in
thousands
|
|
Three months ended
|
|
|
Change
in
|
|
|
Nine months ended
|
|
|
Change
in
|
|
Except % numbers
|
|
Mar. 31,10
|
|
|
Mar. 31, 09
|
|
|
%
|
|
|
Mar. 31, 10
|
|
|
Mar. 31, 09
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
6,708
|
|
|
$
|
2,299
|
|
|
|
192
|
|
|
$
|
19,318
|
|
|
$
|
13,183
|
|
|
|
47
|
|
Cost
of sales
|
|
$
|
5,003
|
|
|
$
|
1,739
|
|
|
|
188
|
|
|
$
|
14,101
|
|
|
$
|
10,001
|
|
|
|
41
|
|
Gross
profit
|
|
$
|
1,705
|
|
|
$
|
560
|
|
|
|
204
|
|
|
$
|
5,217
|
|
|
$
|
3,182
|
|
|
|
64
|
|
Total
operating expenses
|
|
$
|
743
|
|
|
$
|
340
|
|
|
|
118
|
|
|
$
|
1,810
|
|
|
$
|
921
|
|
|
|
93
|
|
Total
other income/(expenses)
|
|
$
|
(25
|
)
|
|
$
|
(151
|
)
|
|
|
83
|
|
|
$
|
(206
|
)
|
|
$
|
(237
|
)
|
|
|
13
|
|
Net
income
|
|
$
|
692
|
|
|
$
|
36
|
|
|
|
1834
|
|
|
$
|
2,376
|
|
|
$
|
1,889
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit margin
|
|
|
25.4
|
%
|
|
|
24.3
|
%
|
|
|
4.5
|
%
|
|
|
27.0
|
%
|
|
|
24.1
|
%
|
|
|
12
|
%
|
THREE
MONTHS ENDED MARCH 31, 2010 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2009
Sales
Our sales
for the three months ended March 31, 2010 were $6,708,410, an increase of
$4,408,935, or 191.7%, as compared to the three months ended March 31, 2009. The
increase was primarily due to two factors: (i) significantly
increased customer demand as compared to the demand in the comparable period a
year ago, and (ii) the average price of copper, our primary raw material, in the
quarter ended March 31, 2010 was approximately double compared to the price in
the quarter ended March 31, 2009, the increased cost of which we passed on to
our customers.
Cost of
Sales
Cost of
sales is primarily comprised of the cost of raw materials used in the production
of our cable products, direct labor and manufacturing overhead expenses. Our
cost of sales for the three months ended March 31, 2010 was $5,002,973, an
increase of $3,263,990, or 187.7%, as compared to the three months ended March
31, 2009. The percentage increase in our cost of sales, 187.7%, was
slightly lower than the percentage increase in sales, 191.7%, mainly because the
type of products we delivered for the quarter ended March 31, 2010, were more
profitable compared those products we delivered in the same period last
year.
Gross
Profit
Gross
profit for the three months ended March 31, 2010 was $1,705,437, an increase of
$1,144,945, or 204.2%, as compared to the three months ended March 31, 2009.
Gross profit as a percentage of sales was 25.4% for the three months ended March
31, 2010, an increase of 1.1% as compared to the three months ended March 31,
2009, although the price of copper, our primary raw material, increased
significantly. Following common practice in our industry, we generally pass the
cost of price increases in our raw materials to our customers.
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 $11,300 in the three months ended March 31, 2010, as
compared to $14,211 in the three months ended March 31, 2009, a slight decrease
of $2,911. General and administrative expenses were $731,346 for the three
months ended March 31, 2010, an increase of $405,148, or 124.2%, as compared to
the three months ended March 31, 2009. Such increase was primarily due to the
increase of amortization expense of $287,202 related to intangible assets we
acquired in the third and fourth quarters of fiscal 2009.
Income
from Operations
Our
operating income was $962,791 for the three months ended March 31, 2010, an
increase of $742,708, or 337.4%, as compared to $220,083 for the three months
ended March 31, 2009. This increase was primarily a result of the
significant increase in gross profit of our main business.
Government
Subsidy
In the
three months ended March 31, 2010, we received a subsidy in the amount of
$331,138 as compared to a subsidy of $0.0 received in the three months ended
March 31, 2009.
This
subsidy is determined by the local government on a yearly basis and no
assurances can be given that we will continue to receive the
subsidy.
Interest
Expenses
Interest
expense was $359,567 for the three months ended March 31, 2010, an increase of
$247,140, or 219.9%, as compared to $112,397 for the three months
ended March 31, 2009, which was primarily because the amount of our borrowing
increased as we expanded our production.
Income
Taxes
Our
business operations were conducted solely by our subsidiaries incorporated in
the PRC and we were governed by the PRC Enterprise Income Tax Laws. China
enterprise income tax is calculated based on taxable income determined under
Chinese GAAP. In accordance with the PRC Income Tax Laws, a Chinese domestic
company is subject to taxes, including but not limited to: (i) an enterprise
income tax rate of 25% effective from January 1, 2008, and (ii) a value added
tax at the rate of 17% for most of the goods sold.
Provision
for income taxes was $306,698 for the three months ended March 31, 2010, an
increase of $263,144, or 604%, compared to $43,554 for the three months ended
March 31, 2009. This increase was primarily due to (i) the increase in income,
and (ii) the fact that Dalian Befut was subject to the full 25% income tax rate
in the three months ended March 31, 2010 as compared to the lower tax rate it
paid in the corresponding period ended March 31, 2009.
Net
Income
Net
income for the three months ended March 31, 2010 was $691,610, an increase of
$655,858, or 1,834.4%, as compared to net income of $35,752 for the three months
ended March 31, 2009. The increase was mainly attributable to the increase of
$1,144,945 in gross profit, which was partially offset by an increase in general
and administrative expenses of $405,148 and an increase in income tax of
$263,144.
NINE
MONTHS ENDED MARCH 31, 2010 COMPARED WITH NINE MONTHS ENDED MARCH 31,
2009
Sales
Our sales
for the nine months ended March 31, 2010 were $19,318,113, an increase of
$6,135,098, or 46.5%, as compared to the nine months ended March 31, 2009. The
increase was primarily due to the significantly increased customer demand as
compared to the lower demand level in the comparable period last
year.
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 nine months ended March 31, 2010 was $14,101,070, an
increase of $4,100,540, or 41.0%, as compared to the nine months ended March 31,
2009. The percentage increase in our cost of sales, 41.0%, was lower than that
of the percentage increase in sales, 46.5%, mainly because the type of products
we delivered for the quarter ended March 31, 2010, was more profitable than the
products we delivered in the same period last year.
Gross
Profit
Gross
profit for the nine months ended March 31, 2010 was $5,217,043, an increase of
$2,034,558, or 63.9%, as compared to the nine months ended March 31, 2009. Gross
profit as a percentage of sales was 27.0% for the nine months ended March 31,
2010, an increase of 2.9% as compared to the nine months ended March 31, 2009.
Following common practice in our industry, we generally pass the cost of
price increases in our raw materials to our customers.
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 $48,001 in the nine months ended March 31, 2010, as
compared to $180,827 in the nine months ended March 31, 2009, a decrease of
$132,826,or 73.4%. The decrease was primarily attributable to our less spending
on advertising and promotion of our products based on our assessment of the
market condition. General and administrative expenses were $1,761,895 for the
nine months ended March 31, 2010, an increase of $1,021,590, or 137.9%, as
compared to the nine months ended March 31, 2009. Such increase was primarily
due to the increase of amortization expense of $834,536 related to intangible
assets we acquired in the third and fourth quarters of fiscal
2009.
Income
from Operations
Our
operating income was $3,407,147 for the nine months ended March 31, 2010, an
increase of $1,145,794, or 50.6% as compared to $2,261,353 for the nine months
ended March 31, 2009. This increase was primarily a result of the
significant increase in gross profit of our main business.
Government
Subsidy
In the
nine months ended March 31, 2010 we received a subsidy in the amount of $685,796
as compared to a subsidy of $159,925 received in the nine months ended March 31,
2009.
This
subsidy is determined by the local government on a yearly basis and no
assurances can be given that we will continue to receive the
subsidy.
Interest
Expenses
Interest
expense was $497,071 for the nine months ended March 31, 2010, an increase of
$104,512, or 26.6%, as compared to $392,559 for the nine months ended
March 31, 2009, primarily because the amount of our borrowing increased as we
expanded our production.
Income
Taxes
Our
business operations were conducted solely by our subsidiaries incorporated in
the PRC and we were governed by the PRC Enterprise Income Tax Laws. China
enterprise income tax is calculated based on taxable income determined under
Chinese GAAP. In accordance with the PRC Income Tax Laws, a Chinese domestic
company is subject to taxes, including but not limited to: (i) an enterprise
income tax rate of 25% effective from January 1, 2008, and (ii) a value added
tax at the rate of 17% for most of the goods sold.
Provision
for income taxes was $892,421 for the nine months ended March 31, 2010, an
increase of $746,445, or 511.3%, compared to $145,976 for the nine months ended
March 31, 2009. This increase was primarily due to (i) the increase of income,
and (ii) the fact that Dalian Befut was subject to the full 25% income tax rate
in the nine months ended March 31, 2010 as compared to the lower income tax it
paid in the corresponding period ended March 31, 2009.
Net
Income
Net
income for the nine months ended March 31, 2010 was $2,376,077, an increase of
$486,587, or 25.7%, as compared to net income of $1,889,490 for the nine months
ended March 31, 2009. The increase was mainly attributable to a $2,034,558
increase in gross profit, which was partially offset by an increase in general
and administrative expenses of $1,021,590 and an increase in income tax of
$746,445.
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)
|
|
March 31,
2010
|
|
|
June 30,
2009
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash
|
|
$
|
1,415
|
|
|
$
|
796
|
|
|
|
|
|
|
|
|
|
|
Working
capital
|
|
$
|
18,650
|
|
|
$
|
10,033
|
|
|
|
|
|
|
|
|
|
|
Ratio
of current assets to current liabilities
|
|
2.0:1
|
|
|
1.8:1
|
|
Our $8.9
million increase in working capital from June 30, 2009 to March 31, 2010 was
primarily due to the increase of $4.5 million in accounts receivable and the
advance payment of $8.3 million for purchasing new, upgraded, multiple
production lines for specialty cable manufacturing, the decrease of short term
bank loans of $2.8 million and partially offset by the increase of accounts
payable and accrued expenses of $5.9 million. We had significant increases of
accounts receivable, advance payment for purchasing new equipments and accounts
payable because we had expanded our production and prepared for more expansions
in fiscal year 2011.
Cash
Flows
We had a
net increase of $619,256 in cash, cash equivalents and restricted cash from June
30, 2009 to March 31, 2010, as compared to a net increase of $676,583 from June
30, 2008 to March 31, 2009, respectively. The following table summarizes such
changes:
|
|
For the Nine Months Ended
|
|
(dollars in thousands)
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Net
cash provided by (used in) operating activities
|
|
$
|
(4,343
|
)
|
|
$
|
3,333
|
|
Net
cash used in investing activities
|
|
$
|
3,879
|
|
|
$
|
8,897
|
|
Net
cash provided by financing activities
|
|
$
|
8,837
|
|
|
$
|
6,240
|
|
Net
increase in cash and cash equivalents and restricted cash
|
|
$
|
619
|
|
|
$
|
677
|
|
We have
historically financed our operations and capital expenditures principally
through cash provided by operations and bank loans. As we note above
that the net cash obtained from our financing activities in the nine months
ended March 31, 2010 was $5.0 million less than the amount used in investment
activities, but $7.7 million more than the amount used in operating activities
for the nine months ended March 31, 2009, as we focused investing more on
working capital after we completed the Changxing Island Phase One
Project. Our management believes that we have sufficient cash,
along with projected cash to be generated from operations, possible more short
term bank loans and equity financing 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 operating plan as expected,
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 nine months ended March 31, 2010, net cash used in operating activities was
$4,342,710, an increase of $7,675,227 as compared to the net cash of $3,332,517
provided during the nine months ended March 31, 2009. The increase in net cash
of approximately $7.7 million used in operating activities was mainly due to
the increase of accounts receivable of $3.8 million and the increase of
advance payments of $7.7 million which were partially offset by the increase of
accounts payable and accrued expenses of $5 million. It also due to our increase
in productions recently which resulted in more accounts receivable. We have
ordered more raw materials for preparing more productions in subsequent
quarters.
Investing
Activities
During
the nine months ended March 31, 2010, we used net cash in investing activities
of $3,878,874, a decrease of $5,018,580 as compared to net cash of $8,897,454
used in investing activities for the nine months ended March 31, 2009. This
decrease was primarily due to a $5.0 million decrease in the total amount in
loans we made to unrelated parties.
Financing
Activities
During
the nine months ended March 31, 2010, net cash provided by financing activities
was $8,836,526, an increase of $2,596,352, as compared to net cash of $6,240,174
provided by financing activities in the nine months ended March 31, 2009. This
increase principally reflects the increase of the long-term bank loans of
approximately $9.5 million, which are partially offset by the decrease of
short-term bank loans of approximately $6.2 million, as compared to the nine
months ended March 31, 2009.
Financial
Obligations
As of
March 31, 2010, our outstanding loans were as follows:
Creditors
|
|
Loan
Amount
|
|
|
Interest
Rate
|
|
|
Term
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
Harbin
Bank
|
|
$
|
2,934,000
|
|
|
|
6.372
|
%
|
|
1
year
|
|
09/15/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of Dalian
|
|
$
|
2,347,200
|
|
|
|
6.903
|
%
|
|
1
year
|
|
10/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National
Development Bank
|
|
$
|
14,670,000
|
|
|
|
6.237
|
%
|
|
7
years
|
|
11/01/16
|
Accounts
Receivable
The
balance of accounts receivable was $13,085,108, net of allowance for doubtful
accounts of $20,241, as of March 31, 2010, as compared to $8,560,592, net of
allowance for doubtful accounts of $20,222, as of June 30, 2009. The
increase in accounts receivable of $4.5 million is mainly due to the increase in
our production after we moved to our new factory in Changxing Island in January
2010.
Inventories
Inventories
consisted of the following as of March 31, 2010 and 2009,
respectively:
(dollars)
|
|
March 31,
2010
|
|
|
March 31,
2009
|
|
Category
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
919,894
|
|
|
$
|
400,343
|
|
Work-in-process
|
|
|
121,311
|
|
|
|
60,703
|
|
Finished
goods
|
|
|
1,058,394
|
|
|
|
892,486
|
|
Total
inventories
|
|
$
|
2,099,599
|
|
|
$
|
1,353,532
|
|
We had
total inventory of $2,099,599 as of March 31, 2010, an increase of $746,067, or
55.1%, as compared to inventory of $1,353,532 as of March 31, 2009. This
increase was primarily due to the increases in purchases of raw material to meet
anticipated higher customer demand for our products.
Loan to
Unrelated Parties
We had a
net decrease of $1,225,297, or 17.6%, in loans to unrelated parties as of March
31, 2010 as compared to June 30, 2009.
Advance
Payments
We had a
net increase of $8,373,895 in advance payments as of March 31, 2010, as compared
to June 30, 2009, which was mainly due to an increase of $8,200,784 in purchases
of new sets of equipment, after we obtained our $14.6 million long-term bank
loan in December, 2009.
Off-Balance
Sheet Arrangements
At March
31, 2010, we did not have any off-balance sheet arrangements.
Critical
Accounting Policies and Use of Estimates
Please
refer to “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report on Form 10-K for the year ended June
30, 2009 for disclosure regarding our critical accounting policies and
estimates. The interim financial statements follow the same
accounting policies and methods of computation as those for the year ended June
30, 2009. There were no new accounting policies and estimates during
the period ended March 31, 2010 affecting the Company.
Item
4T.
|
Controls
and Procedures
|
(a)
Evaluation of disclosure controls
and procedures
. At the conclusion of the period ended March 31, 2010, we
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of the end of the period covered by this report, our
disclosure controls and procedures were effective and adequately designed to
ensure that the information required to be disclosed by us in the reports we
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the applicable rules and forms and that
such information was accumulated and communicated to our Chief Executive Officer
and Chief Financial Officer, in a manner that allowed for timely decisions
regarding required disclosure.
(b)
Changes in internal
controls
. During the period covered by this report, there was no change
in our internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect our internal control over
financial reporting.
PART
II OTHER INFORMATION
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:
May 14, 2010
|
By:
|
/s/ Hongbo
Cao
|
|
|
|
Name:
Hongbo Cao
|
|
|
Title:
President and Chief Executive Officer
|
|
|
(principal
executive officer)
|
|
|
|
Date:
May 14, 2010
|
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.
|
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