UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
——————————
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED ON APRIL 30, 2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-32505
L & L ENERGY, INC.
(Exact name of small Business Issuer as specified in its charter)
NEVADA |
91-2103949 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
130 Andover Park East, Suite 200, Seattle, WA |
|
98188 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant's telephone number, including area code: (206) 264-8065
Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 past 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 (and was required to file) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendments to this Form 10-K. [X]
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] 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]
The aggregate market value of the common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of November 6, 2009 was: $111,868,711
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of July 12, 2010 there were 29,136,212 shares of common stock outstanding, with par value of $0.001.
1
EXPLANATORY NOTE
L & L Energy, Inc. (“L&L” or the “Company”) is filing this Amendment to Form 10-K (this “Form 10-K/A”) to amend that Form 10-K filed on July 28, 2010 corresponding to the annual report for the Company’s fiscal year ended on April 30, 2010 (the “Original 10-K”). This Form 10-K/A amends the Original 10-K’s Part II, Items 6 and 8 to:
(i) (a) reclassify $3,729,784 recorded as “Intangible assets, net” in the Original 10-K as “Property, plant, equipment, and mine development, net” in this Form 10-K/A, (b) reclassify 557,202 recorded as “Current Assets – Prepaid and other current assets” in the Original 10-K as “Equity – Deferred stock compensation,” and (c) make conforming changes to “Working Capital,” “Total assets” and Total Shareholders” Equity under Item 6 – Selected Financial Date – Balance Sheets Data,”; and
(ii) file herewith two updated reports issued by Kabani & Co. Inc., the Company’s independent auditing firm (the “Independent Auditing Firm”) to disclose the firm’s adverse opinion on the Company’s internal control over financial reporting as of April 30, 2010 (originally the Independent Auditing Firm issued a “disclaimer” opinion on the Company’s internal control over financial reporting).
Please note that some of the aforementioned reclassifications, adjustments, and additional disclosures contained herein have resulted from comments issued by the Securities and Exchange Commission of the United States (the “SEC”) during the review process related to filings made by the Company. . For clarification, the filing of this Form 10-K/A shall not be deemed any indication that the original Form 10-K, when filed, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement therein not misleading.
2
Table of Content |
||
Page | ||
PART II |
||
Item 6. |
Selected Financial Data |
4 |
Item 8. |
Financial Statements and Supplementary Data |
5 |
PART IV |
||
Item 15. |
Exhibits and Financial Statement Schedules |
40 |
Signatures |
40 | |
When we use the terms “we,” “us,” “our,” “L & L” and “the Company,” we mean L & L ENERGY, INC., a Nevada corporation, and its subsidiaries.
3
Part II
Item 6. Selected Financial Data
|
Years Ended April 30, |
|
| ||||||
|
|
|
| ||||||
|
2010 |
2009 |
2008 |
|
| ||||
Statements of Operations Data: |
|
|
| ||||||
Revenues |
$ 109,217,838 |
$ 40,938,128 |
$ 23,381,508 |
|
| ||||
Cost of Revenues |
57,036,887 |
17,946,206 |
21,994,429 |
|
| ||||
Gross Profit |
52,180,951 |
22,991,922 |
1,387,079 |
|
| ||||
Total Operating Expenses |
9,855,351 |
3,996,795 |
887,464 |
|
| ||||
Income from Operations |
42,325,600 |
18,995,127 |
499,615 |
|
| ||||
Total Other Income (Expense) |
301,626 |
(265,356) |
(25,174) |
|
| ||||
Income Before Income Taxes, Discontinued Operations, Net of Tax, and Non-Controlling Interests |
42,627,226 |
18,729,771 |
474,441 |
|
| ||||
Income Tax Provision |
4,531,088 |
1,219,457 |
186,461 |
|
| ||||
Income from Discontinued Operations, Net of Tax |
834,181 |
145,220 |
806,368 |
|
| ||||
Net Income Attributable to Non-Controlling Interests |
7,040,555 |
7,315,330 |
119,879 |
|
| ||||
Gain (Loss) on Disposal |
1,017,928 |
(382,961) |
0 |
|
| ||||
Net Income |
$32,907,692 |
$ 9,957,243 |
$ 974,469 |
|
| ||||
|
|
|
|
|
| ||||
Earnings per share: |
|
|
|
|
| ||||
Basic |
$1.35 |
$0.46 |
$0.05 |
|
| ||||
Diluted |
$1.28 |
$0.46 |
$0.05 |
|
| ||||
Weighted average shares outstanding: |
|
|
|
|
| ||||
Basic |
24,375,508 |
21,492,215 |
20,854,212 |
|
| ||||
Diluted |
25,748,036 |
21,822,215 |
21,255,210 |
|
| ||||
|
As of April 30, |
|
| |||||||
|
|
|
| |||||||
|
2010 |
2009 |
2008 |
|
| |||||
Balance Sheets Data: |
|
|
| |||||||
Cash and Cash Equivalents |
$ 7,327,369 |
$ 5,098,711 |
$ 948,210 |
| ||||||
Working Capital |
31,416,055 |
20,496,386 |
15,393,309 |
| ||||||
Total Assets |
128,604,524 |
54,275,375 |
29,740,415 |
| ||||||
Total Shareholders’ Equity |
$ 77,665,240 |
$ 22,432,979 |
$ 12,238,137 |
| ||||||
4
Item 8. Financial Statements and Supplementary Data
L &L Energy, Inc. and Subsidiaries
Consolidated Financial Statements
For the Years Ended April 30, 2010, 2009 and 2008
Contents |
|
Page | |
Reports of Independent Registered Public Accounting Firm, both dated July 22, 2011 |
6 |
Consolidated Financial Statements: |
|
Consolidated Balance Sheets as of April 30, 2010 and 2009 |
9 |
Consolidated Statements of Income and Other Comprehensive Income |
|
for the years ended April 30, 2010, 2009 and 2008 |
10 |
Consolidated Statement of Stockholders' Equity for the years ended |
|
April 30, 2010, 2009 and 2008 |
11 |
Consolidated Statements of Cash Flows for the years ended |
|
April 30, 2010, 2009 and 2008 |
12 |
Notes to Consolidated Financial Statements |
14 |
5
Exhibit A
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
L&L Energy, Inc. and its subsidiaries
We have audited L&L Energy, Inc. and its subsidiaries’ (the “Company”) internal control over financial reporting as of April 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
6
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weakness that has not been identified as a material weakness in Management’s Report, included with the Company’s Form 10-K filed on July 28, 2010. The Company did not maintain effective controls over its process to ensure the timely completeness and accuracy of the preparation and review of its consolidated financial statements. This resulted in several adjustments to the Company’s consolidated financial statements, principally including timely transfer of completed construction projects to property, plant and equipment, as well as reclassification of negative balances in accounts payable and accounts receivable. It was also determined that the Company’s entity level controls were not adequately designed and that weaknesses were noted in the financial reporting process. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2010 financial statements, and this report does not affect our report dated July 28, 2010 on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, L&L Energy, Inc. and its subsidiaries have not maintained effective internal control over financial reporting as of April 30, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets as of April 30, 2010 and 2009, and the related statements of income and other comprehensive income, stockholders’ equity, and cash flows of L&L Energy, Inc. and its subsidiaries for each of the years in the three-year period ended April 30, 2010, and our report dated July 28, 2010 expressed an unqualified opinion.
Kabani & Company
KABANI & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
Los Angeles, CA
July 22, 2011
7
Exhibit B
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
L&L Energy, Inc. and its subsidiaries
We have audited the accompanying consolidated balance sheets of L&L Energy, Inc. and its subsidiaries’ (the “Company”) as of April 30, 2010 and 2009, and the related consolidated statements of income and other comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2010. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of L&L Energy, Inc. and its subsidiaries’ as of April 30, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended April 30, 2010 in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), L&L Energy, Inc. and its subsidiaries’ internal control over financial reporting as of April 30, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated July 22, 2011 expressed an adverse opinion on the Company’s internal control over financial reporting.
Kabani & Company
KABANI & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
Los Angeles, CA
July 22, 2011
8
L & L ENERGY, INC. | |||||
CONSOLIDATED BALANCE SHEETS | |||||
AS OF APRIL 30, | |||||
2010 |
2009 | ||||
ASSETS |
|||||
CURRENT ASSETS: |
|||||
Cash and cash equivalents |
$ |
7,327,369 |
$ |
5,098,711 | |
Accounts receivable |
17,304,949 |
16,906,010 | |||
Prepaid and other current assets |
22,113,327 |
12,611,760 | |||
Other receivables |
7,956,069 |
465,821 | |||
Inventories |
9,605,103 |
1,524,493 | |||
Total current assets |
64,306,817 |
36,606,795 | |||
Property, plant, equipment, and mine development, net |
37,387,194 |
6,518,802 | |||
Construction-in-progress |
17,211,093 |
2,085,134 | |||
Intangible assets, net |
1,298,469 |
2,507,331 | |||
Equity interest held in a subsidiary for sale |
0 |
573,677 | |||
Long term receivable |
1,259,151 |
0 | |||
Related party notes receivable |
7,141,800 |
5,983,636 | |||
Total non-current assets |
64,297,707 |
17,668,580 | |||
|
| ||||
TOTAL ASSETS |
$ |
128,604,524 |
$ |
54,275,375 | |
LIABILITIES AND EQUITY |
|||||
CURRENT LIABILITIES: |
|||||
Accounts payable |
$ |
1,995,513 |
$ |
4,930,866 | |
Accrued and other liabilities |
1,225,294 |
953,395 | |||
Other payables |
15,344,920 |
3,000,000 | |||
Taxes payable |
10,387,265 |
6,014,922 | |||
Customer deposits |
3,937,770 |
300,435 | |||
Due to shareholder |
0 |
910,791 | |||
|
Total current liabilities |
32,890,762 |
16,110,409 | ||
LONG-TERM LIABILITIES |
|||||
Bank loans |
4,146,950 |
3,000,000 | |||
Long-term payable |
800,000 |
0 | |||
Asset retirement obligation |
507,279 |
0 | |||
Total long-term liabilities |
5,454,229 |
3,000,000 | |||
Total Liabilities |
38,344,991 |
19,110,409 | |||
Commitments and contingencies |
|||||
EQUITY: |
|||||
L&L ENERGY STOCKHOLDERS' EQUITY: |
|||||
Preferred stock, no par value, 2,500,000 shares authorized, none issued and outstanding |
- |
- | |||
Common stock, $0.001 par value, 120,000,000 shares authorized: 28,791,735 and 28,391,735 shares issued and outstanding at April 30, 2010, respectively; 21,202,200 and 20,802,200 shares issued and outstanding at April 30, 2009, respectively |
28,792 |
21,202 | |||
Additional paid-in capital |
32,781,365 |
10,000,693 | |||
Deferred stock compensation |
(557,202) |
(63,667) | |||
Accumulated other comprehensive income |
699,755 |
669,913 | |||
Retained Earnings |
45,108,530 |
12,200,838 | |||
Treasury stock (400,000 shares) |
(396,000) |
(396,000) | |||
|
Total L & L Energy stockholders' equity |
77,665,240 |
22,432,979 | ||
Non-controlling interest |
12,594,293 |
12,731,987 | |||
Total equity |
90,259,533 |
35,164,966 | |||
TOTAL LIABILITIES AND EQUITY |
$ |
128,604,524 |
$ |
54,275,375 |
The accompanying notes are an integral part of these consolidated financial statements.
9
L & L ENERGY, INC. | ||||||
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME | ||||||
FOR THE YEARS ENDED APRIL 30, | ||||||
2010 |
2009 |
2008 | ||||
NET REVENUES |
$ |
109,217,838 |
$ |
40,938,128 |
$ |
23,381,508 |
COST OF REVENUES |
57,036,887 |
17,946,206 |
21,994,429 | |||
GROSS PROFIT |
52,180,951 |
22,991,922 |
1,387,079 | |||
OPERATING COSTS AND EXPENSES: |
||||||
Salaries & wages—selling, general and administrative |
2,560,128 |
481,128 |
191,808 | |||
Selling, general and administrative expenses, excluding salaries and wages |
7,295,223 |
3,515,667 |
695,656 | |||
Total operating expenses |
9,855,351 |
3,996,795 |
887,464 | |||
INCOME FROM OPERATIONS |
42,325,600 |
18,995,127 |
499,615 | |||
OTHER INCOME (EXPENSE): |
||||||
Interest expense |
(196,558) |
(265,186) |
(24,935) | |||
Other income (expense) |
498,184 |
(170) |
(239) | |||
Total other income (expense) |
301,626 |
(265,356) |
(25,174) | |||
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST |
42,627,226 |
18,729,771 |
474,441 | |||
LESS PROVISION FOR INCOME TAXES |
4,531,088 |
1,219,457 |
186,461 | |||
INCOME FROM CONTINUED OPERATIONS BEFORE NON-CONTROLLING INTEREST |
38,096,138 |
17,510,314 |
287,980 | |||
LESS: NONCONTROLLING INTEREST |
7,040,555 |
7,315,330 |
119,879 | |||
NET INCOME FROM CONTINUED OPERATIONS |
31,055,583 |
10,194,984 |
168,101 | |||
DISCONTINUED OPERATIONS |
||||||
Gain (loss) on disposal |
1,017,928 |
(382,961) |
- | |||
Net income from discontinued operations |
834,181 |
145,220 |
806,368 | |||
TOTAL INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
1,852,109 |
(237,741) |
806,368 | |||
NET INCOME |
32,907,692 |
9,957,243 |
974,469 | |||
OTHER COMPREHENSIVE INCOME: |
||||||
Foreign currency translation gain |
29,842 |
569,574 |
100,339 | |||
COMPREHENSIVE INCOME |
$ |
32,937,534 |
$ |
10,526,817 |
$ |
1,074,808 |
INCOME PER COMMON SHARE – basic from continued operation |
$ |
1.27 |
$ |
0.47 |
$ |
0.01 |
INCOME PER COMMON SHARE – basic from discontinued operation |
$ |
0.08 |
$ |
(0.01) |
$ |
0.04 |
INCOME PER COMMON SHARE – basic |
$ |
1.35 |
$ |
0.46 |
$ |
0.05 |
INCOME PER COMMON SHARE – diluted from continued operation |
$ |
1.21 |
$ |
0.47 |
$ |
0.01 |
INCOME PER COMMON SHARE – diluted from discontinued operation |
$ |
0.07 |
$ |
(0.01) |
$ |
0.04 |
INCOME PER COMMON SHARE – diluted |
$ |
1.28 |
$ |
0.46 |
$ |
0.05 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – basic |
24,375,508 |
21,492,215 |
20,854,212 | |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - diluted |
25,748,036 |
21,822,215 |
21,255,210 | |||
The accompanying notes are an integral part of these consolidated financial statements. |
L&L ENERGY, INC. | ||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY | ||||||||||||||||
FOR THE YEARS ENDED APRIL 30, 2010, 2009 AND 2008 | ||||||||||||||||
Accumulated |
||||||||||||||||
Additional |
Deferred |
Other |
||||||||||||||
Common Stock |
Paid-in |
Compensa- |
Comprehensive |
Retained |
Treasury |
|||||||||||
Shares |
Amount |
Capital |
tion |
Income |
Earnings |
Stock |
Total | |||||||||
Balance as of May 1, 2007 |
$ |
19,706,584 |
$ |
19,706 |
$ |
9,147,847 |
$ |
(147,667) |
$ |
107,883 |
$ |
1,269,126 |
$ |
- |
$ |
10,396,895 |
Issuance of Shares |
555,018 |
555 |
245,176 |
- |
- |
- |
- |
245,731 | ||||||||
Warrants converted to shares |
596,362 |
596 |
480,248 |
- |
- |
- |
- |
480,844 | ||||||||
Issuance of common stock for service |
201,750 |
202 |
105,539 |
- |
- |
- |
- |
105,741 | ||||||||
Amortization of deferred compensation |
- |
- |
- |
42,000 |
- |
- |
- |
42,000 | ||||||||
Foreign currency translation adjustment |
- |
- |
- |
- |
(7,544) |
- |
- |
(7,544) | ||||||||
Net income |
- |
- |
- |
- |
- |
974,469 |
- |
974,469 | ||||||||
Balance as of April 30, 2008 |
21,059,714 |
$ |
21,059 |
$ |
9,978,810 |
$ |
(105,667) |
$ |
100,339 |
$ |
2,243,595 |
$ |
- |
$ |
12,238,136 | |
Issuance of Shares |
698,015 |
698 |
854,496 |
- |
- |
- |
- |
855,194 | ||||||||
Warrants converted to shares |
92,374 |
93 |
64,885 |
- |
- |
- |
- |
64,978 | ||||||||
Issuance of common stock for acquisition |
400,000 |
400 |
1,599,600 |
- |
- |
- |
- |
1,600,000 | ||||||||
Issuance of common stock for service |
663,713 |
664 |
1,273,404 |
- |
- |
- |
- |
1,274,068 | ||||||||
Cancellation of Shares |
(1,711,616) |
(1,712) |
(4,166,502) |
- |
- |
- |
- |
(4,168,214) | ||||||||
Amortization of deferred compensation |
- |
- |
- |
42,000 |
- |
- |
- |
42,000 | ||||||||
Shareholder sold 400,000 shares to the |
||||||||||||||||
Company for $1 |
- |
- |
396,000 |
- |
- |
(396,000) |
- | |||||||||
Foreign currency translation adjustment |
- |
- |
- |
- |
569,574 |
- |
- |
569,574 | ||||||||
Net income |
- |
- |
- |
- |
- |
9,957,243 |
- |
9,957,243 | ||||||||
Balance as of April 30, 2009 |
$ |
21,202,200 |
$ |
21,202 |
$ |
10,000,693 |
$ |
(63,667) |
$ |
669,913 |
$ |
12,200,838 |
$ |
(396,000) |
$ |
22,432,979 |
Issuance of common stock for cash |
3,258,911 |
3,259 |
9,173,972 |
- |
- |
- |
- |
9,177,231 | ||||||||
Exercise 3,211,176 warrants |
3,211,176 |
3,211 |
3,912,744 |
- |
- |
- |
- |
3,915,955 | ||||||||
Cashless exercise of 511,700 warrants |
295,348 |
296 |
(296) |
- |
- |
- |
- |
- | ||||||||
Beneficial conversion feature for convertible debt |
- |
- |
100,000 |
- |
- |
- |
- |
100,000 | ||||||||
Conversion of $100,000 note and $4,000 interest |
160,000 |
160 |
103,840 |
- |
- |
- |
- |
104,000 | ||||||||
Issue 29,902 shares for compensation |
29,902 |
30 |
139,148 |
- |
- |
- |
- |
139,178 | ||||||||
Issue 634,198 shares for services |
634,198 |
634 |
1,287,485 |
- |
- |
- |
- |
1,288,119 | ||||||||
Issuance of 336,000 warrants for compensation |
- |
- |
302,955 |
- |
- |
- |
- |
302,955 | ||||||||
Increase controlling interest in subsidiary |
- |
- |
7,760,824 |
- |
- |
- |
- |
7,760,824 | ||||||||
Amortization of deferred compensation |
- |
- |
- |
(493,535) |
- |
- |
- |
63,667 | ||||||||
Foreign currency translation adjustment |
- |
- |
- |
- |
29,842 |
- |
- |
(493,535) | ||||||||
Net income |
- |
- |
- |
- |
- |
32,907,692 |
- |
32,907,692 | ||||||||
Balance as of April 30, 2010 |
$ |
28,791,735 |
$ |
28,792 |
$ |
32,781,365 |
$ |
(557,202) |
$ |
699,755 |
$ |
45,108,530 |
$ |
(396,000) |
$ |
77,665,240 |
The accompanying notes are an integral part of these consolidated financial statements. |
L & L ENERGY, INC. | |||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
FOR THE YEARS ENDED APRIL 30, | |||||||
2010 |
2009 |
2008 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||
Net income including noncontrolling interest |
$ |
32,907,692 |
$ |
9,957,243 |
$ |
974,469 | |
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||
Income from non-controlling interest |
7,040,555 |
7,315,330 |
119,879 | ||||
Depreciation and amortization |
1,398,727 |
481,863 |
16,010 | ||||
Stock compensation |
302,955 |
- |
- | ||||
Amortization of debt discount |
100,000 |
- |
- | ||||
Gain on sale of subsidiary |
(1,017,928) |
382,961 |
- | ||||
Amortization for deferred compensation |
63,667 |
42,000 |
42,000 | ||||
Issuance of common stock for services |
139,178 |
1,310,453 |
105,741 | ||||
Changes in assets and liabilities, net of businesses acquisitions: |
|||||||
Accounts receivable |
(95,469) |
(16,403,858) |
11,934 | ||||
Prepaid and other current assets |
(10,237,627) |
(12,020,070) |
89,086 | ||||
Inventories |
(7,459,437) |
(188,004) |
(743,302) | ||||
Other receivable |
(9,766,579) |
- |
- | ||||
Long term receivable |
(1,259,151) |
- |
- | ||||
Accounts payable and other payable |
9,208,435 |
7,667,605 |
162,915 | ||||
Customer deposit |
4,185,463 |
(11,244) |
147,951 | ||||
Accrued and other liabilities |
275,517 |
1,468,957 |
133,750 | ||||
Taxes payable |
3,833,131 |
3,811,741 |
1,016,652 | ||||
Net cash provided by (used in) discontinued operation |
- |
13,109,093 |
(1,967,271) | ||||
Net cash provided by operating activities |
29,619,129 |
16,924,070 |
109,814 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||
Acquisition of property and equipment |
(18,310,477) |
(7,820,446) |
- | ||||
Acquisition of intangible assets |
- |
(2,507,331) |
- | ||||
Construction-in-progress |
(15,125,959) |
(2,085,133) |
- | ||||
Change in non-controlling interest due to acquisition and disposal |
(427,894) |
(2,451,697) |
853,025 | ||||
Acquisition of businesses, net of cash acquired |
(4,561,561) |
- |
- | ||||
Increase in investments |
- |
(1,405,461) |
(43,376) | ||||
Increase in related party receivable |
(1,158,164) |
(956,861) |
(726,775) | ||||
Net cash (used in) provided by investing activities |
(39,584,055) |
(17,226,929) |
82,874 |
12
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||
Long-term payable |
- |
3,000,000 |
- | ||||
Payment on bank loans |
(141,703) |
- |
- | ||||
Payment to shareholder |
(910,791) |
- |
- | ||||
Proceeds from issuance of convertible debt |
100,000 |
- |
- | ||||
Proceeds from issuance of common stock |
9,865,629 |
833,786 |
246,165 | ||||
Payments for costs related to issuance of common stock |
(688,398) |
- |
- | ||||
Warrants converted to common stock |
3,915,955 |
50,000 |
480,844 | ||||
Net cash provided by financing activities |
12,140,692 |
3,883,786 |
727,009 | ||||
Effect of exchange rate changes on cash and cash equivalents |
52,892 |
569,574 |
(31,350) | ||||
INCREASE IN CASH AND CASH EQUIVALENTS |
2,228,658 |
4,150,501 |
888,347 | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
5,098,711 |
948,210 |
59,863 | ||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
7,327,369 |
$ |
5,098,711 |
$ |
948,210 | |
SUPPLEMENTAL NON CASH FLOW INFORMATION: |
|||||||
INTEREST PAID |
$ |
196,558 |
$ |
265,186 |
$ |
24,935 | |
INCOME TAX PAID |
$ |
158,746 |
$ |
1,219,457 |
$ |
186,461 | |
NON-CASH INVESTING AND FINANCING ACTIVITY: |
|||||||
The Company issued 400,000 shares to acquire 60% interest in L&L Coal Partners |
$ |
- |
$ |
1,600,000 |
$ |
- | |
1,708,283 shares returned by subsidiary as part of spin off |
$ |
- |
$ |
4,168,214 |
$ |
- | |
Increase controlling interest in subsidiary |
7,760,824 |
|
| ||||
Issue 160,000 shares on conversion of $100,000 note and accrued interest |
$ |
104,000 |
$ |
- |
$ |
- | |
The accompanying notes are an integral part of these consolidated financial statements. |
L & L Energy, Inc.
Notes to Consolidated Financial Statements
For the Years Ended April 30, 2010, 2009 and 2008
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
L & L ENERGY, INC. (“L&L” and/or the “Company”) was incorporated in Nevada, and is headquartered in Seattle, Washington. Effective January 4, 2010, the State of Nevada approved the Company’s name change from L&L International Holdings, Inc. to L & L Energy, Inc. The Company is a coal (energy) company, and started its operations in 1995. Coal sales are made entirely in China, from coal mining, clean coal washing, coking and coal wholesales operations. At the present time, the Company conducts its coal (energy) operations in Yunnan and Guizhou provinces, southwest China. As of April 30, 2010, the Company had three operating subsidiaries; KMC which has coal wholesale operations and Ping Yi Coal Mine (mining operations “PYC”), two coal mining operations (DaPuAn Mine and SuTsong Mine) including DaPuAn’s coal washing operations (the “2 Mines” or “LLC”), and L&L Yunnan Tianneng Industry Co. Ltd. (including Hong Xing coal washing and ZoneLin coking operations) (“TNI”). On August 1, 2009, the Company increased its ownership of the two coal mining operations (the “2 Mines”), from 60% to 80%.
KMC acquired 100% equity of PYC on January 18, 2010 with an effective acquisition date of November 1, 2009. L&L formed a new subsidiary TNI in the Yunnan province, China, which owns 98% of controlling interest of TNI. Through TNI, L&L acquired 100% equity of ZoneLin Coal Coking Factory in China (“ZoneLin”) on February 3, 2010 with an effective acquisition date of November 1, 2009; and acquired 100% equity of SeZone County Hong Xing Coal Washing Factory (“Hong Xing”) on January 1, 2010 with an effective acquisition date of November 30, 2009.
The Company disposed of its majority interest of LEK air-compressor operations in January of 2009. The Company acquired 93% equity interest in Hon Shen Coal Co., Ltd. (“HSC”) in July 2009 and October 2009, then disposed of HSC to Guangxi Luzhou Lifu Machinery Co. Limited in April 2010 resulting a discontinued operation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and summary of significant accounting policies
The Company prepares its Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S. (“US GAAP”). In doing so, the Company makes estimates and assumptions based on information available as of the date of the financial statements. Therefore, actual results could differ from those estimates. Many of the Company’s estimates and assumptions may have a material impact on reported financial condition, and results of operations and on the comparability of such reported information over different reporting periods.
14
Principles of Consolidation - The consolidated financial statements include the accounts of the Company, and its 100% ownership of KMC subsidiary including coal wholesale and PYC coal mine, 80% of operations of 2 Mines including both coal mining and coal washing, and 93% of HSC and 98% of TNI (coal washing and coking operations). The Company consolidates 100% of the assets, liabilities of its subsidiaries and shows the non-controlling interests owned by their respective owners as Non-Controlling Interests. The results of operations of the Company’s subsidiaries less amounts attributable to non-controlling interest owners are net income attributable to the Company. Inter-company accounts and transactions are eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalent consist of cash on deposit with banks and cash on hand. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents, for cash flow statement purposes. Cash includes cash on hand and demand deposits in accounts maintained with state owned banks within the PRC and with banks in the United States. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. Balances at financial institutions or state owned banks within the PRC are not insured and amounted to $2,428,509 and $639,832 at April 30, 2010 and 2009, respectfully. As of April 30, 2010 and 2009, the Company had deposits in excess of federally insured limits totaling $2,529,565 and $0, respectfully, in the US Banks. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
Revenue Recognition - In accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 13, “Revenue Recognition,” the Company recognizes revenue when it is realized or realizable and earned. The Company must meet all of the following four criteria under SAB 104 to recognize revenue:
- Persuasive evidence of an arrangement exists
- Delivery has occurred
- The sales price is fixed or determinable
- Collection is reasonably assured
Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.
Accounts receivable - The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of April 30, 2010 and 2009, the Company determined that no reserve for accounts receivable was necessary. No allowance for doubtful accounts or sales returns deemed necessary.
Inventories - Inventories are stated at the lower of cost and net realizable value, as determined on a moving average basis.
Use of Estimates - The preparation of financial statements, in conformity 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that its believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from management’s estimates.
15
Noncontrolling Interest - In 2009, the Company purchased 60% interests in 2 Mines and subsequently increased the ownership to 80% during 2010. Certain amounts presented for prior periods previously designated as minority interest have been reclassified to conform to the current year presentation. Effective January 1, 2009, the Company adopted Financial Accounting Standards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, which established new standards governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case), that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The provisions of the standard were applied to all NCI prospectively, except for the presentation and disclosure requirements, which were applied retrospectively to all periods presented. As a result, upon adoption, the Company retroactively reclassified the “Minority interest” balance previously included in the “Other liabilities” section of the consolidated balance sheets to a new component of equity with respect to NCI in consolidated subsidiaries. The adoption also impacted certain captions previously used on the consolidated statements of income and other comprehensive income, largely identifying net income including NCI and net income attributable to the Company.
The net income (loss) attributed to the NCI has been separately designated in the accompanying statements of income and other comprehensive income. Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to be attributed its share of losses even if that attribution results in a deficit NCI balance.
Foreign Currency Translation - The accounts of the Company’s Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. The accounts of the Chinese subsidiaries were translated into USD in accordance with ASC Topic 830, Foreign Currency Matters, with the RMB as the functional currency for the Chinese subsidiaries. According to ASC 830, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement of income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, Comprehensive Income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statements of income.
Asset Retirement Cost and Obligation – The Company’s asset retirement costs arise from the requirement to restore mines to specified standards and approved reclamation plans. Asset retirement costs are accounted for in accordance with ASC Topic 410-20, Asset Retirement Obligations. Pursuant to ASC 410-20, the Company recognizes the fair value of the liability for an asset retirement obligation to be recognized in the period in which the obligation is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The fair value of the liability is estimated based upon the present value of estimated future expenditures. In subsequent periods, the retirement obligation is accreted to its future value, which is the estimate of the obligation at the asset retirement date. The capitalized cost is depreciated or depleted over the useful lives of the respective assets. If the liability is settled for an amount other than the recorded amount, a gain or loss would be recognized at such time.
16
Property, Plant, Equipment, and Mine Development- Property, Plant, Equipment and Mine Development are stated at cost, less accumulated depreciation. Costs of mine development, expansion of the capacity of or extending the life of the Company’s mine are capitalized and principally amortized using the units-of-production method over the actual tons of coals produced directly benefiting from the capital expenditure. Mobile mining equipment and other fixed assets are stated at cost and depreciated on a straight-line basis over the estimated useful lives. Leasehold improvements are amortized over their estimated useful lives or the term of the lease, whichever is shorter. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are generally expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Building, mining structure, and plant are related to the Company’s coal mining related operations. The mining structure includes the main and auxiliary mine shafts, underground tunnels, and other integrant mining infrastructure. Depreciation for the mine shafts is provided to write off the cost of the mining structure using the units of production method based on salable reserves.
The estimated useful lives for each category of the fixed assets are as follows:
Building, Mining Structure and Plant |
20 to 25 Years |
Motor Vehicles and Equipment |
5 Years |
Machinery |
10 to 12.5 Years |
Impairment of Long-Lived Assets - The Company applies the provisions of ASC Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company evaluates the recoverability of its long-lived assets if circumstances indicate impairment may have occurred. This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review, the Company believes that as of April 30, 2010 and 2009, there was no impairment of its long-lived assets.
Intangibles - The Company applies Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other Intangible Assets, to record goodwill and intangible assets. In accordance with ASC 350, certain intangible assets are to be assessed periodically for impairment using fair value measurement techniques. Goodwill is tested for impairment on an annual basis as of the end of the Company's fiscal year, or more frequently when impairment indicators arise. The Company evaluates the recoverability of intangible assets periodically and takes into account events and circumstances which indicate that impairment exists. The Company believes that as of April 30, 2010 and 2009, there was no impairment of its goodwill.
Income Taxes - The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. GAAP also requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. As of April 30, 2010, income tax positions must meet a more-likely-than-not recognition threshold to be recognized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
17
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. No material deferred tax amounts were recorded at April 30, 2010 and 2009, respectively. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
The charge for taxation is based on the results for the reporting period as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
The Company’s operating subsidiaries located in PRC are subject to PRC income tax. The new Chinese Enterprise Income Tax (“EIT”) law was effective on January 1, 2008. Under the new Income Tax Laws of PRC, a company is generally subject to income tax at an effective rate of 25% on income reported in the statutory financial statements after appropriated tax adjustments.
Stock-Based Compensation - The Company records stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. Under ASC 718, the Company’s volatility is based on the historical volatility of the Company’s stock or the expected volatility of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The Company uses the Black-Scholes option-pricing model which was developed to estimate the fair value of options. Option-pricing models require the input of highly complex and subjective variables including the expected life of warrants granted and the Company’s expected stock price volatility over a period equal to or greater than the expected life of the warrants. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee warrants, it is management’s opinion that the Black-Scholes option-pricing model may not provide an accurate measure of the fair value of the Company’s employee warrants. Although the fair value of employee warrants is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.
Fair Value Measurements - For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, other receivable, accounts payable and other payables, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has long-term debt with financial institutions. The carrying amounts of the line of credit and other long-term liabilities approximate their fair values based on current rates of interest for instruments with similar characteristics.
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables, certain other current assets and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
· Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.
18
Earnings Per Common Share - Earnings per share is calculated in accordance with the ASC Topic 260, Earnings Per Share. Basic earnings per share is calculated dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants and options are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Concentration of Risk - For the year ended April 30, 2010, the Company had one major customer who purchased 21% of the Company’s total sales and represented $250,367 or 1.5% of accounts receivable. In addition, that year the Company had one major supplier provided 13% of its total purchases. This supplier represents $335,652 or 17% of the accounts payable.
For the year ended April 30, 2009, the Company had two major customers who purchased over 10% of its total sales. They collectively accounted for approximately 48% (approximate $19.6 million) of the Company’s total sales and approximately 55% (approximate $7.6 million) of accountant receivables. There are two major suppliers each provided over 10% of the Company’s total purchases. They collectively supplied approximately 60% (approximate $8.5 million) of the Company’s inventory and 56% (approximate $0.9 million) of total accounts payable.
Advertising Costs - The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the years ended April 30, 2010, 2009 and 2008 were not significant.
Statement of Cash Flows - In accordance with ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Reclassification - Certain reclassifications have been made to the 2009 and 2008 consolidated financial statements to conform to the 2010 consolidated financial statement presentation. These reclassifications had no effect on net loss or cash flows as previously reported.
19
New accounting pronouncements
In April 2009, the FASB issued ASC 320-10-65, “Recognition and Presentation of Other-Than-Temporary Impairments”. This amended the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. It does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. It is effective for interim and annual periods ending after June 15, 2009. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.
In April 2009, the FASB issued ASC 820-10-65, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. It provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP does not change the definition of fair value under ASC 820. The FSP is effective for interim and annual periods ending after June 15, 2009. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.
In May 2009, the FASB issued ASC 855, Subsequent Events. It established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.
In June 2009, the FASB issued FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the Codification). The Codification became the single official source of authoritative, nongovernmental U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.
In September 2009, the New FASB Accounting Standards Update 2009-08 issued in Earnings Per Share (amendments to Section 260-10-S99). This update includes technical corrections to Topic 260-10-S99 Earnings Per Share, based on EITF Topic D-53, “Computation of Earnings Per Share for a Period that includes redemption or an induced conversion of a portion of a class of preferred stock” and EITF Topic D-42, “The effect of the calculation of Earnings Per Share for the redemption or induced conversion of preferred stock.” The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.
ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) was issued in January 2010. This ASU amends ASC Subtopic 820-10, Fair Value Measurements and Disclosures—Overall, to require new disclosures regarding transfers in and out of Level 1 and Level 2, as well as activity in Level 3, fair value measurements. This ASU also clarifies existing disclosures over the level of disaggregation in which a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. This ASU further requires additional disclosures about valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The Company does not believe that the adoption will have a material impact on the Company’s consolidated financial position or results of operations.
NOTE 3. BUSINESS COMBINATIONS
The Company has been actively acquiring smaller coal companies who lack the capital and/or management expertise to maximize growth and safety. The Company will continue to seek opportunities to purchase other mining operations as well as coal washing and coal coking operations.
Acquisition of Hon Shen Coal Co. LTD (“HSC”)
On July 16, 2009, the Company entered into an agreement to acquire a 65% equity interest in the coal washing facility (a distinctive operation) of HSC in Yunnan Province for a purchase price of 10,000,000 RMB (equivalent to approximately US$1,464,129). Aggregate cash payments of 2,000,000 RMB (equivalent to approximately US$292,826) were made in August 2009.
20
Subsequently, the Company entered into an Acquisition and Capital Increase Agreement, effective as of October 23, 2009, pursuant to which the Company increased its equity interest in HSC’s coal washing facility from 65% to 93% and acquired a 93% equity interest in HSC’s coking facilities (another distinctive operation of HSC), resulting in the Company acquiring a 93% equity interest in HSC’s entire coal washing and coking operations. In connection with such acquisition, HSC’s registered capital was increased from 3,600,000 RMB to 60,000,000 RMB and then subsequently reduced to 30,000,000 RMB (equivalent to approximately US$4,400,000).
Initially, the total purchase price for the Company’s 93% equity interest in HSC’s coal washing and coking operations was 55,800,000 RMB Subsequently, pursuant to an Acquisition and Capital Increase Agreement dated December 9, 2009 (the “December Agreement”), the total purchase price was reduced to 26,400,000 RMB (equivalent to approximately US$3,865,300). Under the December Agreement, 6,000,000 RMB is payable within three months after signing and 20,400,000 RMB is payable within two years after receipt from the Chinese Government of necessary approvals for the parties to cooperate.
The Company made additional payments of 200,000 RMB in October 2009 and 400,000 RMB in November 2009, for a total of 2,600,000 RMB (equivalent to approximately US$380,000) of the aggregate 26,400,000 RMB purchase price.
The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition of the HSC coal washing facility:
Allocation of purchase price: | |
Current assets |
$3,162 |
Fixed assets |
2,137,251 |
Intangible assets |
405,007 |
Fair value of assets |
$2,545,420 |
Less: Fair value of liabilities |
(297,028) |
Net assets acquired |
$2,248,392 |
Non-controlling interest |
$786,937 |
The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition of the HSC coking facility:
Allocation of purchase price: | |
Current assets |
$542,148 |
Property, plant and equipment |
2,734,277 |
Intangible assets |
1,048,097 |
Fair value of assets |
$4,324,522 |
Less: Fair value of liabilities |
(2,204,983) |
Net assets acquired |
$2,119,539 |
Non-controlling interest |
$148,368 |
21
Sale of HSC
On April 18, 2010, the Company entered into an Equity Sale and Purchase Agreement (the “Equity Sale Agreement”) with Guangxi Liuzhou Lifu Machinery Co, Ltd, whereby the Company sold its 93% equity ownership interest in HSC for 41,000,000 RMB (equivalent to approximately US$6,000,000). Guangxi Liuzhou Lifu Machinery Co, Ltd assumed the obligation of the Company to pay to HSC 23,800,000 RMB (equivalent to approximately US$3,485,300) that remained payable to HSC pursuant to the December Agreement. Guangxi Liuzhou Lifu Machinery Co, Ltd also agreed to pay the remaining balance of 17,200,000 RMB (equivalent to approximately US$2,514,700) to the Company in three installments, (1) 3,440,000 RMB (approximately $502,940 USD) within six months of the sale, (2) 5,160,000 RMB (approximately $754,410 USD) between six months and twelve months after the sale, and (3) 8,600,000 RMB (approximately $1,257,350) between twelve and twenty-four months after the sale. Pursuant to the Equity Sale Agreement, if Guangxi Liuzhou Lifu Machinery Co, Ltd does not make such scheduled payments, a penalty of 1% of the applicable payment will be assessed. Additionally, interest of 3.5% per annum of the applicable payment will be assessed as of the day after the applicable payment date. The portions of the purchase price that are due within twelve months after the sale (i.e., the first two installments) are included as “Other receivables” on the Company’s consolidated balance sheets and the portion of the purchase price due within 24 months of the sale (i.e., the third installment) is included as a “Long term receivable” on the Company’s consolidated balance sheets. The Company recorded US$834,181 as income from discontinued operations and recognized a gain of US$1,017,928 on the sale.
Ping Yi Mine
On January 18, 2010, the Company, through an indirect subsidiary, Baoxing Economic and Trade Co., entered into an Acquisition Agreement to acquire 100% of the Ping Yi Coal Mine (“PYC”), with an effective date of November 1, 2009, for a purchase price of 27,042,593 RMB (equivalent to approximately US$3,955,041). The Company paid 23,042,593 RMB (equivalent to US$3,369,390) upon signing of the Acquisition Agreement. An installment of 1,000,000 RMB (equivalent to US$146,412) was payable in February 2010, but has not yet been paid by the Company. The remaining balance of 3,000,000 RMB (equivalent to US$439,239) is payable two years after signing of the Acquisition Agreement.
The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition:
Allocation of purchase price: | |
Current assets |
$2,305,108 |
Property, plant and equipment |
4,637,562 |
Intangible assets |
1,909,020 |
Fair value of assets |
$8,851,690 |
Less: Fair value of liabilities |
4,896,649 |
Net assets acquired |
$3,955,041 |
22
SeZone County Hong Xing Coal Washing Factory (“Hong Xing”)
On January 1, 2010, the Company, through its 98% owned subsidiary, L&L Yunnan Tianneng Industry Co. LTD (“TNI”), acquired 100% of the equity of Hong Xing by entering into an Acquisition Agreement, effective as of November 30, 2009, with a purchase of 6,828,500 RMB (equivalent to US $1,000,000). The total amount of the purchase price was contributed by the Company to TNI and subsequently paid.
The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition:
Allocation of purchase price: | |
Current assets |
$186,017 |
Property, plant and equipment |
1,098,381 |
Intangible assets |
169,946 |
Fair value of assets |
$1,454,344 |
Less: Fair value of liabilities |
454,344 |
Net assets acquired |
$980,000 |
Noncontrolling interest |
$20,000 |
Luping County ZoneLin Coal Coking Factory in China (“Zonelin”)
On February 3, 2010, the Company, through its 98% owned subsidiary, TNI, acquired 100% equity of Zonelin by entering into an Acquisition Agreement for a purchase price of 13,675,000 RMB (equivalent to US$2,000,000). The Company has paid 6,837,500 RMB (equivalent to US$1,000,000) of the purchase price and the remaining balance of 6,837,500 RMB (equivalent to US$1,000,000) is payable in five annual installments with the first payment due by the second anniversary of the signing of the acquisition agreement.
The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition:
Allocation of purchase price: | |
Current assets |
$3,170,432 |
Property, plant and equipment |
2,892,758 |
Intangible assets |
662,472 |
Fair value of assets |
$6,725,662 |
Less: Fair value of liabilities |
4,725,662 |
Net assets acquired |
$2,000,000 |
| |
Noncontrolling interest |
$40,000 |
The following unaudited pro forma condensed combined financial information presents the results of operations of the Company as they may have appeared if the acquisition of PYC, Zonelin and Hong Xing, presented in the aggregate, collectively, had been completed on May 1, 2009 and May 1, 2008.
For the year ended | ||||
April 30, 2010 |
April 30, 2009 | |||
Net revenue |
$ |
144,962,340 |
$ |
55,007,374 |
Income from operation |
45,131,080 |
20,344,569 | ||
Net income |
$ |
33,878,563 |
$ |
10,721,692 |
Basic proforma earnings per share |
$1.39 |
$0.50 | ||
Diluted proforma earnings per share |
$1.32 |
$0.49 |
23
NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The Company makes cash advances to coal suppliers to guarantee delivery of amounts of coal to the Company for its coal washing and coking facilities at a specified time and price.
The bill receivable was related to payments that were promised to be received by the Company from its customers.
The Company provides cash advances to certain employees to handle incidentals in the Company’s mines, washing and coking expansion projects as these facilities are located far away from the Company’s China headquarters in Kunming. There were no advances made to any officers or directors of the Company.
Description |
2010 |
2009 | ||
Advances to suppliers |
$ |
10,770,087 |
$ |
11,451,314 |
Bill receivable |
8,713,763 |
- | ||
Advances to employees |
2,580,222 |
1,050,215 | ||
Other |
49,255 |
110,231 | ||
$ |
22,113,327 |
$ |
12,611,760 |
NOTE 5. OTHER RECEIVABLES
Other receivables consist of the following at April 30:
Description |
2010 |
2009 | ||
Short term loans to business associates |
$ |
6,608,247 |
$ |
- |
HSC receivable (note 3) |
1,259,151 |
- | ||
Other |
88,671 |
465,821 | ||
$ |
7,956,069 |
$ |
465,821 |
24
NOTE 6. INVENTORIES
Inventories are primarily related to coal located at KMC, 2 Mines, and TNI. Inventories consist of the following as of April 30:
Description |
2010 |
2009 | ||
Raw coal |
$ |
9,054,714 |
$ |
574,607 |
Washed coal |
395,233 |
- | ||
Coke coal |
155,156 |
949,886 | ||
$ |
9,605,103 |
$ |
1,524,493 |
NOTE 7. PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT
Property, plant, equipment and mine development consist of the following as of April 30:
2010 |
2009 | |||
Mine Development |
$ |
22,553,879 |
$ |
1,275,660 |
Mineral rights |
3,832,288 |
2,507,331 | ||
Building and improvements |
2,025,661 |
188,625 | ||
Machinery and equipment |
12,872,896 |
6,095,840 | ||
RuiLi Project(property, at cost) |
- |
400,687 | ||
41,284,724 |
10,468,143 | |||
Accumulated depreciation |
(3,897,530) |
(1,442,010) | ||
Property, Plant and Equipment, net |
$ |
37,387,194 |
$ |
9,026,133 |
Depreciation expense was $1,085,798, $481,863, and $16,010 for the years ended April 30, 2010, 2009, and 2008, respectively.
The Company has reclassified Mineral Rights as Property, Plant, Equipment and Mine Development. Mineral Rights were disclosed as Intangible Assets in prior financial statements. Mineral rights represent the exclusive right, granted by the Chinese government, to operate the 2 Mines and PYC. The rights were acquired in the first quarter of 2008 as a result of the acquisition of the 2 Mines on May 1, 2008 and on November 1, 2009, respectively. The Company has elected to use units-of-production method of amortization to amortize its mineral rights.
25
NOTE 8. CONSTRUCTION IN PROGRESS
Construction in progress includes mine development, ventilation and electrical system improvements for the PYC mine, building of staff quarters, and beginning construction of a sewage treatment system and road expansion for the washing facilities. Construction in progress was $17,211,093 and $2,085,134 at April 30, 2010 and 2009, respectfully.
NOTE 9. INTANGIBLE ASSETS
The Company has allocated to intangible assets of $2,668,305 of the price paid for various acquisitions made during the year ended April 30, 2010. Customer relationship and technology assets are being amortized over a period of 7 years. Amortization expense was $143,712 for the year ended April 30, 2010. No amortization expense was recorded for the years ended April 30, 2009 and 2008.
2010 |
2009 | |||
Customer relationship |
$ |
831,428 |
$ |
- |
Technology |
|
260,002 |
- | |
Goodwill |
248,247 |
- | ||
|
|
1,339,677 |
- | |
Accumulated amortization |
|
(41,208) |
- | |
$ |
1,298,469 |
$ |
- |
The Company has reclassified Mineral Rights to Property, Plant, Equipment and Mine Development. Mineral Rights were disclosed as Intangible Assets in prior financial statements.
26
NOTE 10. ASSET RETIREMENT OBLIGATION
The Company accounts for asset retirement obligations in accordance with, ASC 410-20-25, Accounting for Asset Retirement Obligations. This statement generally requires that the Company’s legal obligations associated with the retirement of long-lived assets are recognized at fair value at the time the obligations are incurred. Obligations normally are incurred at the time development of a mine commences for underground mines or construction begins for support facilities and refuses areas. The obligation’s fair value is determined using discounted cash flow techniques and is accreted over time to its expected settlement value. Upon initial recognition of a liability, a corresponding amount is capitalized as part of the carrying amount of the related long-lived asset. Amortization of the related asset is calculated on a unit-of-production method. The Company reviews the asset retirement obligation at least annually and makes necessary adjustments for permitted changes as granted by government authorities and for revisions of estimates of the amount and timing of costs. For ongoing operations, adjustments to the liability result in an adjustment to the corresponding asset.
As for the 2 Mines, Yunnan Province government authority established 3 RMB per extracted ton for natural resource surcharge for mine clean up. The Company expects to extract approximately ten million tons of coal over the remaining forty years of mining rights. The interest rate used in the net present value calculation is 8%. As for the Ping Yi Mine, Gui Zhou Province government established 2 RMB per extracted ton for natural resource surcharge for mine clean up. The Company expects to extract approximately 13.5 million tons of coal over the remaining fifty years of mining rights. The interest rate used in the net present value calculation is 8%.
The following is a summary of the change in the carrying amount of the asset retirement obligation during the years ended April 30, 2010 and 2009.
|
|
2010 |
|
2009 |
|
|
|
|
|
Beginning balance at May 1 |
$ |
- |
$ |
- |
Liabilities incurred during the period |
|
469,700 |
|
- |
Increase in estimated costs |
|
- |
|
- |
Liabilities settled during the period |
|
- |
|
- |
Accretion of interest |
|
37,579 |
|
- |
|
$ |
507,279 |
$ |
- |
NOTE 11 – OTHER PAYABLES
Other Payables consist of the following at April 30:
Item |
April 30, 2010 |
April 30, 2009 |
Payable to previous owners of ZoneLin (less non-current) |
$ 200,000 |
$ - |
Payable to previous owners of Ping Ying Coal Mine |
433,670 |
- |
Payable to business associates (1) |
9,098,023 |
- |
Others (1) |
5,613,227 |
3,000,000 |
Total current other payables |
15,344,920 |
3,000,000 |
Payable to previous owners of ZoneLin (non-current) (2) |
800,000 |
- |
Other non-current |
- |
3,000,000 |
|
$ 16,144,920 |
$ 6,000,000 |
(1) Payments are short-term, it will be settled before 12/2010.
(2) Four annual installments will be paid.
Total Other Payables was $16.1 million as of April 30, 2010. None of these payables bear interest and they are not collateralized by any assets of the Company. $7.4 million was a temporary interest free loan from a business partner, which was repaid in the first quarter ended July 31, 2010. $1.4 million is part of the consideration payable to the non-controlling interest owners of the coal mines acquired during the year ended April 30, 2010, which will be paid according to the terms of the acquisition agreement. The other $5.6 million was related to miscellaneous payment of fees related to maintenance, safety, employee training for security and environmental matter.
27
NOTE 12 – TAXES PAYABLE
Taxes payable consist of the following at April 30:
Description |
2010 |
2009 | ||
VAT payable |
$ |
5,109,967 |
$ |
4,031,541 |
Income tax payable |
3,878,426 |
1,429,919 | ||
Other taxes payable |
1,398,872 |
553,462 | ||
$ |
10,387,265 |
$ |
6,014,922 |
NOTE 13. BANK LOANS
During the third quarter, as part of the acquisitions of TNI and PYC, the Company assumed two loan agreements with banks in China. The first loan with TNI was for RMB 14,300,000 or approximately $1,951,000. This loan carried an interest rate of 5.4% per annum and matures on December 23, 2011. The second loan with PYC was for RMB 15,000,000 or approximately $2,196,000. The loan carries an interest rate of 9.7% per annum and matures on February 26, 2011. Both loans are unsecured.
28
NOTE 14. CONVERTIBLE DEBT
On May 12, 2009, the Company issued to Silver Rock II, Ltd. an 8% convertible debenture due on May 6, 2012.
The interest is paid semi-annually in L & L Common Shares. The debt can be converted at (1) $0.65 if converted in the period between the Commencement Date and six months thereafter, (2) $1.20, if converted between the date of six months after Commencement Date and that of one year after Commencement date, or (3) 80% of the three months average closing price, if converted after one year from Commencement Date. The closing share price at May 12, 2009 was $1.85.
In addition, the Company issued 500,000 warrants. The warrants expire on May 06, 2012, and have an exercise price of $1.40 per share. At May 12, 2009, the Company determined the fair value of the warrants to be $543,123, respectively using the Black Sholes model with the following assumptions:
- risk free rate of return of 1.34%
- volatility of 80%;
- dividend yield of 0%;
- expected term of 3 years.
The Company determined that the convertible debt contained an embedded beneficial conversion feature as the conversion price of $0.10 was less than the $1.85 closing market price for the Company’s common stock on the date of the agreement. The Company calculated the beneficial conversion feature to be $269,066; however, the Company is only able to record a debt discount of up to the principal of the convertible debt. Silver Rock II, LTD converted the debt in November 2009 for 153,846 shares of the Company’s common stock. The Company fully amortized the $100,000 discount due to the conversion of the note. The amortization is recorded as interest costs in the consolidated statements of income.
NOTE 15. INCOME TAXES
The Company’s main operations are located in China. The Company is subject to corporate income taxes primarily in two taxing jurisdictions, China, and the United States of America. The income of the Company is mainly generated via its 2 Mines , KMC, and TNI which are foreign entities located in China. The Company incurs tax liability for the coal operations charged at 25% of net profit. As the 2 Mines (DaPuAn Mine and SuTsong Mine) are in a heavily regulated resource business in China, and HongXing and ZoneLin are in a form of proprietorship (are not incorporated as a corporation), thus they are subject a special tax rate equal to a 5% of total revenue proceeds, subject to provisional adjustments when the coal sale changes. As no cash or funds were repatriated from China to the U.S., the Company’s income was not subject to the U.S. federal taxation, under subpart F, income from controlled foreign company, of the U.S. Internal Revenue Code.
There is immaterial amount of deferred income taxes for the differences between financial accounting and tax bases of assets and liabilities. For the years ended on April 30, 2010 and 2009, there were no material temporary book/tax differences or differences between financial accounting and tax bases of assets and liabilities.
The Company’s income tax liability for the years ended April 30, 2010 and 2009 was $3,878,426 and $1,429,919, respectively. These tax payables to Chinese local governments can be postponed temporarily as the Company is a U.S. company bringing in U.S. management skills and investing capital to increase coal production and safety standards, beneficial to the Chinese local communities. According to Chinese law, a new joint venture located in the western part of China may benefit under the “Go-West” policy to enjoy a special Chinese tax rebates from the government, thus there is a high probability that the 2 Mines, KMC and TNI tax liability payments may be delayed or mitigated.
29
The significant component for income taxes is described for both US and PRC operation as of April 30, 2010 and 2009 are described below.
United States of America
As of April 30, 2010, the Company in the United States had $6,558,089 in net operating loss carry forwards available to offset future taxable income. Federal net operating losses can generally be carried forward twenty years. The deferred tax assets at April 30, 2010 consist mainly of net operating loss carry forwards. Due to the uncertainty of the realization of the related deferred tax assets of $2,298,331, a reserve equal to the amount of deferred income taxes has been established at April 30, 2010. The Company has provided 100% valuation allowance to the deferred tax assets as of April 30, 2010.
People’s Republic of China (PRC)
Pursuant to the PRC Income Tax Laws, the Company's subsidiaries are generally subject to Enterprise Income Taxes (“EIT”) at a statutory rate of 25% for KMC. The LLC and TNI entities are owned in the form of partnerships, thus, the statutory rate is 5%.
Tax Rate Reconciliation
Substantially all of the Company’s income before income taxes and related tax expense are from PRC sources. Actual income tax benefit reported in the consolidated statements of operations and comprehensive income differ from the amounts computed by applying the US statutory income tax rate of 34% to income before income taxes for the year ended April 30, 2010 , 2009 and 2008 for the following reasons:
For the year ended April 30, | ||||||
2010 |
2009 |
2008 | ||||
Consolidated pretax income |
$ |
42,627,226 |
$ |
18,729,771 |
$ |
474,441 |
Expected income tax expense |
14,761,622 |
6,651,091 |
167,483 | |||
Difference between statutory rate and foreign effective tax rate |
(11,509,351) |
(5,993,527) |
(61,677) | |||
Change in valuation allowance |
1,278,817 |
561,893 |
80,655 | |||
Actual tax expense |
$ |
4,531,088 |
$ |
1,219,457 |
$ |
186,461 |
Consolidated effective tax rate |
11% |
7% |
39% |
30
NOTE 16. RELATED PARTY TRANSACTIONS
The Company loaned money to various entities that have non-controlling interests in the Company. Those loans are notes receivables, secured by assets and machinery of the various mines or businesses and are for the establishment of good business practice and long-term relationships with these non-controlling interest owners. Because the borrowers under the notes have business in which the Company has an interest, the Company believes the borrowers are considered as related parties. As of April 30, 2010, the total amount of relation party transactions was approximately $10 million, as set forth in the table below. As of April 30, 2009, the total amount of related party transactions was approximately $5.0 million, which included a loan of approximately $4.3 million to a non controlling interest shareholders of 2 Mines, an advance of approximately $1.7 million to a KMC manager for the development of the Tian-Ri Coal Mine, and a loan of approximately $911,000 from the CEO of the Company to the Company.
Borrowers |
USD |
Maturity |
Collateralized by |
Associates to DaPuAn |
$ 930,697 |
May 1, 2015 |
Mine Assets |
Lieurkong Machinery |
460,393 |
May 1, 2015 |
Machinery |
Kunming Kemandi Technology Dev. Co LTD |
181,372 |
May 1, 2015 |
Machinery |
Associates to Tian Ri Coal Mine |
1,464,129 |
May 1, 2015 |
Mining equipment |
Associates to SuTsong |
2,637,683 |
May 1, 2015 |
Mine Assets |
Yunnan Tinnan Co. Ltd. |
1,464,129 |
May 1, 2015 |
Machinery |
Others |
3,397 |
Various dates |
|
$ 7,141,800 |
NOTE 17. STOCKHOLDERS’ EQUITY
On August 20, 2008, the Company issued 400,000 shares of common stock (valued at $4.00 per share) for 60% equity in connection with the purchase of the 2 Mines (DaPuAn Mine and SuTsong Mine, called L&L Coal Partners).
On January 23, 2009, the Company disposed of its air compressor subsidiary LEK. As a result of the disposal, LEK returned shares to the Company. The Company cancelled 1,711,616 shares of common stock received from LEK during the quarter ended January 31, 2009.
During the year ended April 30, 2009, the Company sold 663,363 shares of common stock to various investors with an average price of $1.23 per share. Investors exercised 92,374 warrants with the average exercise price of $0.70 per warrant. The Company issued 698,015 shares of its common stock for goods and services.
On May 6, 2009, the Company issued a convertible note to Silver Rock in the amount of $100,000. The Company determined that the convertible note contained a beneficial conversion feature which was not required to be bifurcated from the debt instrument. The Company recorded a debt discount of $100,000 with a corresponding entry to additional paid in capital. (see Note 14) On November 6, 2009, Silver Rock converted their $100,000 convertible note and $4,000 of accrued interest for 160,000 shares at a conversion price of $0.65.
On August 1, 2009, after renegotiations with the Company, the owners of non-controlling interest assigned 20% of the 2 Mines to the Company. The fair value of the additional interest was $7,298,126 on the agreement date. In addition, the Company increased its interest in HSC from 65% to 93%. The Company paid $427,894 to acquire additional interest with a fair value of $890,592. The Company recorded a $7,760,824 increase in addition-paid-capital for these two transactions.
On October 8, 2009, the Company sold 1,371,021 units (each unit consisting of one share of the Company’s common stock and 6/10th of a five year warrant to purchase one share of common stock) at $3.90 per unit for gross proceeds of $5,346,980 to accredited investors. Additionally, the Company issued 822,613 five year warrants to purchase shares of common stock of the Company at an exercise price of $5.62 per share. The Company paid $427,758 for fees associated with the equity issuance and issued to a placement agent 109,682 five year warrants with an exercise price of $6.11.
On November 6, 2009, the Company sold 835,389 units (each unit consists of one share and 6/10 of a five-year warrant to purchase one share of common stock at $3.90 for gross proceeds of $4,081,185 to accredited investors. Additionally, the Company issued 501,236 five year warrants to purchase shares of common stock of the Company at an exercise price of $5.62 per share. The Company paid $260,460 for fees associated with the equity issuance and issued to a placement agent 66,832five year warrants with an exercise price of $6.11.
31
During the year ended April 30, 2009, the Company issued 1,052,501 shares of common stock for gross proceeds of $568,992 at an average price of $1.19.
During the year ended April 30, 2010, the Company issued 29,920 warrants valued at $139,178 to directors and officers as compensation.
During the year ended April 30, 2010, the Company issued 634,198 shares of common stock for services with a value of $1,287,485.
During the year ended April 30, 2010, 3,211,176 warrants were exercised at an average exercise price of $0.22 for cash proceeds of 3,912,744.
During the year ended April 30, 2010, 511,700 warrants were exercised in accordance with the cashless exercise provisions resulting in the issuance of 295,348 shares.
NOTE 18. WARRANTS
Warrants Issued for Compensation
The Company has no qualified employee stock option plan; however, the Company has authorized 1,100,000 Class D warrants to be issued to executives and 4,000,000 Class E warrants to be issued to Directors.
During the year ended April 30, 2010, the Company issued 96,000 Class D warrants and $240,000 Class E warrants. The warrants were fully vested as of April 30, 2010 and expire five years after issuance. The weighted average grant date fair value for the warrants granted in the year ended April 30, 2010 was $0.90. The fair value was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
April 30, 2010 | ||
Expected life (years) |
2.83 to 3 .0 | |
Risk-free interest rate |
1.29% to 1.57% | |
Expected volatility |
80% | |
Expected dividend yield |
0% |
Following is a summary of the status of warrants outstanding at April 30, 2010:
Type of Warrants |
Range of Exercise Prices |
Total Warrants Outstanding |
Weighted Average Remaining Life (Years) |
Weighted Average Exercise Price | |||
Executives-Class D |
$ 2.25 |
192,000 |
2.31 |
$ 2.25 | |||
Directors - Class E |
$ 3.00 |
466,666 |
3.65 |
$ 3.00 | |||
Total |
658,666 |
3.26 |
$ 2.78 |
32
Warrants Issued to Investors
On May 12, 2009, the Company issued 500,000 seven year warrants to purchase shares of the Company’s common stock pursuant to a security purchase agreement. The exercise price is $5.62 per common stock and is exercisable immediately.
On June 28, 2009, The Company issued to various investors 3,498,800 one year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement. The warrants are immediately exercisable and the exercise price varies between $1.00 and $2.60 depending on the class of warrant.
On October 8, 2009, the Company issued to various investors 882,613 five year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement. The exercise price is $5.62 per common stock and is exercisable immediately. In connection with the stock issuance, the Company issued 109,682 five year warrants to the placement agent with an exercise price of $6.11 that are immediately exercisable.
On November 6, 2009, the Company issued to various investors 501,236 five year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement. The exercise price is $5.62 per common stock and is exercisable immediately. In connection with the stock issuance, the Company issued 66,832 five year warrants to the placement agent with an exercise price of $6.11 that are immediately exercisable.
The table below is a summary of all warrants activity as of April 30, 2010.
Warrants Roll-forward Summary |
|||||
Weighted |
|||||
Average |
Aggregate | ||||
Exercise |
Intrinsic | ||||
Units |
Price |
Value | |||
Outstanding at April 30, 2008 |
2,780,348 |
$1.62 |
|||
Issued |
1,085,263 |
$2.50 |
|||
Exercised |
(92,374) |
$0.71 |
|||
Cancelled |
- |
- |
|||
Expired |
(1,611,725) |
$0.81 |
|||
Outstanding at April 30, 2009 |
2,161,512 |
$2.50 |
|||
Issued |
5,835,276 |
$2.75 |
|||
Exercised |
(3,722,876) |
$1.83 |
|||
Cancelled |
(888,583) |
$3.00 |
|||
Expired |
- |
||||
Outstanding at April 30, 2010 |
3,385,329 |
$2.09 |
$46,778,928 | ||
Exercisable at April 30, 2010 |
3,385,329 |
$2.09 |
$46,778,928 | ||
33
NOTE 19. NON-CONTROLLING INTEREST
As described in Note 1, to the consolidated financial statements, the Company has the majority controlling interest of L&L Coal Partners (2 coal mining operations) and TNI. During the fiscal year 2010, the Company increased its ownership interest in L&L Coal Partners to 80% from 60% at April 30, 2009. The equity related to non-controlling interest as of April 30, 2010 represent 20% third party interest in L&L Coal Partners and 2% third party interests in TNI.
Included below is a schedule of changes in ownerships interest for the year ended April 30, 2010:
2010 |
2009 | |||
Beginning balance at May 1 |
$ |
12,731,987 |
$ |
7,868,354 |
Non-controlling interest related to acquisitions |
|
995,305 |
|
- |
Net income related to non-controlling interest |
7,040,555 |
7,315,330 | ||
Increase in controlling interest |
(7,760,824) |
(2,451,697) | ||
Non-controlling interest related to disposal |
(412,730) |
- | ||
Ending balance at April 30 |
$ |
12,594,293 |
$ |
12,731,987 |
NOTE 20. EARNINGS PER SHARE
The Company only has common shares and warrants issued and outstanding as of April 30, 2010. Under the treasury stock method of Earnings Per Share, the Company computed the diluted earnings per share, as if all issued warrants were converted to common stock, and cash proceeds were used to buy back common stock.
For the Years Ended April 30, | ||||||
2010 |
|
2009 |
|
2008 | ||
Net income |
$32,907,692 |
$9,957,243 |
$974,469 | |||
Number of Shares |
24,375,508 |
21,492,215 |
20,854,212 | |||
Per Share - Basic |
$1.35 |
$0.46 |
$0.05 | |||
Effect of dilutive shares |
1,372,528 |
330,000 |
400,998 | |||
Number of dilutive shares |
25,748,036 |
21,822,215 |
21,255,210 | |||
Per Share - Diluted |
$1.28 |
$0.46 |
$0.05 |
Warrants to purchase 120,000 and 1,115,249 shares of common stock at $2.25 and $3.00 per share were outstanding as of April 30, 2009, but not included in the computation of diluted EPS because the option’s exercise price was greater than market price of the common shares on April 30, 2009. As of April 30, 2010 and 2008, all warrants outstanding were dilutive. Thus, all warrants were included in the computation of diluted EPS.
34
NOTE 21. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company has two operating leases for the Seattle office and GuangZhou office. Both are non-cancelable leases, expiring in September of 2010 and November 2011, respectively. The Company entered into a six-month lease agreement effective August 2010 in leasing office space in the Seattle office building. The non-cancelable operating lease agreements require that the Company pays certain operating expenses, including management fees to the leased premises. The future minimum rental payments for 2011 and 2012 are $147,423 and $32,226, respectfully.
Commitments
The PRC adopted extensive environmental laws and regulations that affect the operations of the coal mining industry. The outcome of environmental liabilities under proposed or future environmental legislation cannot be reasonably estimated at present, and could be material. Under existing legislation, however, Company management believes that there are no probable liabilities that will have a material adverse effect on the financial position of the Company.
The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in the governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions and remittance abroad, and rates and methods of taxation, among other things.
The majority of the Company sales, purchases and expense transactions are denominated in RMB and most of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.
NOTE 22. SEGMENT INFORMATION
The Company reports its operations primarily through the following reportable operating segments: coal mining, coal wholesaling, coking and coal washing revenue. The Company’s chief operating decision maker uses operating income as the primary measure of segment profit and loss.
For the year ended April 30, | ||||||
Total Revenues (including intersegment sales) |
||||||
Coal mining revenue |
2010 |
2009 |
2008 | |||
Coal wholesale revenue |
$ |
55,811,737 |
$ |
27,406,869 |
$ |
- |
Coking revenue |
16,190,761 |
13,531,259 |
23,381,508 | |||
Coal washing revenue |
13,380,737 |
- |
- | |||
27,285,179 |
- |
- | ||||
$ |
112,668,414 |
$ |
40,938,128 |
$ |
23,381,508 | |
Intersegment revenues |
||||||
Coal mining revenue |
2010 |
2009 |
2008 | |||
Coal wholesale revenue |
$ |
- |
$ |
- |
$ |
- |
Coking revenue |
- |
- |
- | |||
Coal washing revenue |
- |
- |
- | |||
3,450,576 |
- |
- | ||||
$ |
3,450,576 |
$ |
- |
$ |
- | |
Net revenues |
||||||
Coal mining revenue |
2010 |
2009 |
2008 | |||
Coal wholesale revenue |
$ |
55,811,737 |
$ |
27,406,869 |
$ |
- |
Coking revenue |
16,190,761 |
13,531,259 |
2,381,508 | |||
Coal washing revenue |
13,380,737 |
- |
- | |||
Less intersegment revenues |
27,285,179 |
- |
- | |||
(3,450,576) |
- |
- | ||||
$ |
109,217,838 |
$ |
40,938,128 |
$ |
2,381,508 | |
Net income attributable to L&L |
||||||
Coal mining |
2010 |
2009 |
2008 | |||
Coal wholesale |
$ |
28,829,427 |
$ |
13,531,259 |
$ |
23,381,508 |
Coking |
1,327,310 |
- |
- | |||
Coal washing |
1,170,982 |
- |
- | |||
Parent Company |
5,106,648 |
- |
- | |||
(3,526,675) |
(3,574,016) |
(22,407,039) | ||||
$ |
32,907,692 |
$ |
9,957,243 |
$ |
974,469 | |
Depreciation expense |
||||||
Coal mining |
2010 |
2009 |
2008 | |||
Coal wholesale |
$ |
758,913 |
$ |
440,467 |
$ |
14,409 |
Coking |
24,607 |
- |
- | |||
Coal washing |
143,708 |
- |
- | |||
Parent Company |
59,893 |
- |
- | |||
45,995 |
41,396 |
1,601 | ||||
$ |
1,033,116 |
$ |
481,863 |
$ |
16,010 | |
Total assets |
||||||
Coal mining |
2010 |
2009 |
2008 | |||
Coal wholesale |
$ |
95,128,900 |
$ |
37,873,037 |
||
Coal coking |
13,678,836 |
10,841,114 |
||||
Coal washing |
6,969,256 |
- |
||||
Parent Company (intercompany) |
17,958,153 |
- |
||||
(4,196,217) |
5,561,224 |
|||||
$ |
128,604,524 |
$ |
54,275,375 |
35
NOTE 23. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
The following table contains selected statements of operations information, which is unaudited and should be read in conjunction with the Company’s financial statements and related notes included elsewhere in this report. The Company believes that the following unaudited information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Operating results for each quarter of 2010 and 2009 are summarized as follows:
Quarterly Period Ended | ||||||||
July 31 |
October 31, |
January 31, |
April 30, | |||||
2009 |
2009 |
2009 |
2010 | |||||
Net Revenue |
$ |
12,745,050 |
$ |
24,482,676 |
$ |
37,956,263 |
$ |
34,033,849 |
Gross Profit |
$ |
6,060,410 |
$ |
12,673,264 |
$ |
16,048,159 |
$ |
17,399,118 |
Income from operations |
$ |
4,906,525 |
$ |
9,149,661 |
$ |
13,062,115 |
$ |
15,207,299 |
Other income (expense) |
$ |
(96,760) |
$ |
(498,993) |
$ |
47,765 |
$ |
849,614 |
Net income |
$ |
2,694,129 |
$ |
6,946,781 |
$ |
9,558,125 |
$ |
13,708,657 |
Earnings per shares (basic) |
$ |
0.13 |
$ |
0.31 |
$ |
0.37 |
$ |
0.54 |
Earnings per shares (dilutive) |
$ |
0.13 |
$ |
0.29 |
$ |
0.34 |
$ |
0.52 |
Quarterly Period Ended | ||||||||
July 31 |
October 31, |
January 31, |
April 30, | |||||
2008 |
2008 |
2008 |
2009 | |||||
Net Revenue |
$ |
10,665,981 |
$ |
10,244,949 |
$ |
9,989,470 |
$ |
10,037,728 |
Gross Profit |
$ |
5,741,686 |
$ |
5,703,303 |
$ |
5,668,334 |
$ |
5,878,599 |
Income from operation |
$ |
4,687,297 |
$ |
4,556,679 |
$ |
4,159,034 |
$ |
5,592,117 |
Other income (expense) |
$ |
69,115 |
$ |
111,108 |
$ |
257,020 |
$ |
(171,887) |
Net income |
$ |
2,580,365 |
$ |
2,353,872 |
$ |
1,768,007 |
$ |
3,254,999 |
Earnings per shares (basic) |
$ |
0.12 |
$ |
0.11 |
$ |
0.08 |
$ |
0.15 |
Earnings per shares (dilutive) |
$ |
0.12 |
$ |
0.10 |
$ |
0.08 |
$ |
0.16 |
NOTE 24. RESTRICTED NET ASSETS
The Company’s operations are primarily conducted through its PRC subsidiaries, which may only pay dividend out of their retained earnings determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements for appropriation to statutory reserves.
In addition, the Company’s businesses and assets are primarily denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of the Company’s PRC subsidiaries to transfer their net assets to the Company through loans, advances or cash dividends, which consisted of paid-up capital, retained earnings and statutory reserves and which aggregate amount of approximately $90 million as of April 30, 2010 exceeded 25% of the Company’s consolidated net assets. Accordingly, condensed parent company financial statements have been prepared in accordance with Rule 5-04 and Rule 12-04 of SEC Regulation S-X, and are as follows.
37
PARENT COMPANY FINANCIAL INFORMATION OF L & L ENERGY, INC.
Condensed Balance Sheets (000s)
As of April 30, | ||||
Current assets |
2010 |
2009 | ||
Cash and bank |
$ |
3,290 |
$ |
62 |
Prepayments |
1,639 |
3,021 | ||
Other receivable |
2,574 |
1,499 | ||
Total current assets |
7,503 |
4,582 | ||
Properties plant and equipment |
144 |
405 | ||
Due from minority shareholders |
975 |
- | ||
Investments |
83,317 |
26,680 | ||
Total long term assets |
84,436 |
27,085 | ||
Total assets |
$ |
91,939 |
$ |
31,667 |
Current liabilities |
||||
Accounts payable and accrued expenses |
$ |
636 |
$ |
8,324 |
Other payables |
13,638 |
- | ||
Due to controlling shareholder |
- |
911 | ||
Total current liabilities |
14,274 |
9,234 | ||
Equities |
||||
Shares capital |
29 |
21 | ||
Paid in Capital |
32,781 |
9,605 | ||
Deferred stock compensation |
(557) |
(64) | ||
Treasury stock |
(396) |
- | ||
Foreign currency translation |
700 |
670 | ||
Retain earnings |
45,108 |
12,201 | ||
Total equities |
77,665 |
22,433 | ||
Total liabilities and equities |
$ |
91,939 |
$ |
31,667 |
38
PARENT COMPANY FINANCIAL INFORMATION OF L & L ENERGY, INC.
– CONTINUED
Condensed Statements of Income (000s)
Year ended April 30, | ||||
2010 |
2009 | |||
Administrative expenses |
$ |
(2,857) |
$ |
(404) |
Consulting Expenses |
- |
(730) | ||
Personnel costs |
(2,560) |
(384) | ||
Finance charges |
(121) |
(31) | ||
Other income |
529 |
- | ||
Gain/(Loss) on disposal |
1,303 |
(383) | ||
Equity in income of subsidiaries |
36,364 |
11,889 | ||
Net income Continued Operation |
$ |
(3,706) |
$ |
(1,932) |
PARENT COMPANY FINANCIAL INFORMATION OF L & L ENERGY, INC.
– CONTINUED
Condensed Statements of Cash Flows (000s)
2010 |
2009 | |||
Net cash provided by operating activities |
$ |
36,175 |
$ |
14,522 |
Net cash used in investing activities |
(58,130) |
(14,766) | ||
Net cash provided by financing activities |
25,184 |
238 | ||
Cash and cash equivalents, beginning of year |
62 |
68 | ||
Cash and cash equivalents, end of year |
$ |
3,290 |
$ |
62 |
Note to Condensed Parent Company Financial Information:
The Company records its investment in subsidiaries under the equity method of accounting as prescribed in ASC Topic 323, “Investments – Equity Method and Joint Ventures”. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investments in subsidiaries” and the income of the subsidiaries is presented as “Equity in income of subsidiaries” on the statement of income.
These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company’s Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
As of April 30, 2010 and 2009, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Consolidated Financial Statements, if any.
39
Part IV
Item 15. Exhibits and Financial Statement Schedules
- Independent auditor’s report on Financial Statements.
The following list describes the exhibits filed as part of this report on Form 10-K:
EXHIBIT DESCRIPTION
NUMBER
23.1 Consent of Independent Registered Public Accounting Firm
31.1 Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
L & L ENERGY, INC. | |
|
|
|
Date: July 29, 2011 |
By: |
/s/ Dickson V. Lee |
|
Name: |
Dickson V. Lee |
|
Title: |
Chief Executive Officer |
40
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-172316) of L & L Energy, Inc. of our report dated July 22, 2011, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K/A.
/s/ Kabani & Co. Inc.
Kabani & Co. Inc.
July 29, 2011
41
EXHIBIT 31.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
I, Dickson V Lee, certify that:
1. I have reviewed this annual report on Form 10-K/A of L&L Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
L&L ENERGY, INC. | |
|
|
|
Date: July 29, 2011 |
By: |
/s/ Dickson V. Lee |
|
Name: |
Dickson V. Lee, CPA |
|
Title: |
CEO |
42
EXHIBIT 31.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
I, Ian G. Robinson certify that:
1. I have reviewed this annual report on Form 10-K/A of L&L Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
L&L ENERGY, INC. | |
|
|
|
Date: July 29, 2011 |
By: |
/s/ Ian G. Robinson |
|
Name: |
Ian G. Robinson |
|
Title: |
CFO |
43
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-K/A of L&L Energy, Inc. (the “Registrant”) for the year ended April 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dickson V. Lee, Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge based upon the review of the Report:
1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
L&L ENERGY, INC. | |
|
|
|
Date: July 29, 2011 |
By: |
/s/ Dickson V. Lee |
|
Name: |
Dickson V. Lee, CPA |
|
Title: |
CEO |
44
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-K/A of L&L Energy, Inc. (the “Registrant”) for the year ended April 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ian G. Robinson, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge based upon a review of the Report:
1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
L&L ENERGY, INC. | |
|
|
|
Date: July 29, 2011 |
By: |
/s/ Ian G. Robinson |
|
Name: |
Ian G. Robinson, |
|
Title: |
CFO |
45