SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

______________________

AMENDMENT NO. 5

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

______________________

L & L ENERGY, INC.

(Exact name of registrant as specified in its charter)

130 Andover Park East

Suite 200

Seattle, WA 98188

(206) 264-8065

(Address, Including zip code, and telephone number, including area code, of registrant’s principal executive offices)

______________________

Dickson V. Lee, Chief Executive Officer
L & L Energy, Inc.
130 Andover Park East

Suite 200
Seattle, WA 98188

(206) 264-8065

(Name, address, including zip code, and telephone number, including area code, of agent for service)

______________________

Copies of all communications, including communications sent to agent for service, shall be sent to:

______________________

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

                If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. T 

                If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £ 

                If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £ 

                If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £ 

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

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED DECEMBER 8, 2011

Preliminary Prospectus

4,206,773 shares

L & L ENERGY, INC.

Common Stock

________________________

This prospectus covers the resale by selling security holders named starting on page 44, of up to 4,206,773 shares of our common stock, $0.001 par value per share (the “Common Stock”), which includes:

·            1,371,021 shares of common stock issued in conjunction with our private placement financing completed on October 8, 2009 (the “October Financing”); 

·            932,295 shares of common stock underlying the warrants issued in conjunction with the October Financing;

·            835,389 shares of common stock issued in conjunction with our private placement financing completed on November 6, 2009 (the “November Financing”); 

·            568,068 shares of common stock underlying the warrants issued in conjunction with the November Financing;

·            250,000 shares of common stock underlying the warrants issued in conjunction with our private placement financing completed on May 6, 2009 (the “May Financing”); and

·            250,000 shares of common stock issued upon the exercise of warrants issued in the May Financing.

These securities will be offered for sale from time to time by the selling security holders identified in this prospectus in accordance with the terms described in the section of this prospectus entitled “Plan of Distribution.”  We will not receive any of the proceeds from the sale of the common stock by the selling security holders.

Our common stock is listed on the Nasdaq Stock Market and is traded under the symbol “LLEN”.  The last reported per share sales price for our common stock was $2.96 on, November 31, 2011.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is [leave blank until declared effective]

You should rely only on the information contained in this prospectus.  Neither we, the selling stockholders nor the underwriters, if any, have authorized anyone to provide you with information different from that contained in this prospectus. We and the selling security holders are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted.  The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction.  Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Market data and other statistical information used throughout this prospectus are based upon independent industry publications, government publications and other published information from third-party sources that we believe are reliable. None of the publications, reports or other published industry sources referred to in this prospectus were commissioned by us or prepared at our request and, except as we deemed necessary, we have not sought or obtained the consent from any of these sources to include their data in this prospectus.

RISK FACTORS

The reader should carefully consider the risks described below together with all of the other information included in this prospectus.  The statements contained in or incorporated into this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed.  In that case, the trading price of our common stock could decline, and an investor in our securities may lose all or part of their investment.

RISKS RELATING TO THE COMPANY AND OUR BUSINESS

Our business and results of operations depend on the volatile People’s Republic of China domestic coal markets.

Substantially all of our coal business is conducted in the People’s Republic of China (“PRC” or “China”), and as a result, our business and operating results depend on the domestic supply and demand for coal and coal products in China. The domestic coal markets are cyclical and have historically experienced pricing volatility, which reflects, among other factors, the conditions of the PRC and global economies and demand fluctuations in key industries that have high coal consumption, such as the power generation and steel industries. Difficult economic conditions in recent periods have resulted in lower coal prices, which in turn negatively affect our operational and financial performance. For example, after reaching record high levels in 2008, the price of domestic coal in China fell in 2009 due to weakening demand as a result of the global economic downturn. The domestic and international coal markets are affected by supply and demand. The demand for coal is primarily affected by the global economy and the performance of power generation, chemical, metallurgy and construction materials industries. The availability and prices of alternative sources of energy, such as natural gas, oil, hydropower, solar and nuclear power also affect the demand for coal. The supply of coal, on the other hand, is primarily affected by the geographical location of coal reserves, the transportation capacity of coal transportation railways, the volume of domestic and international coal supplies and the type, quality and price of competitors’ coal. A significant rise in global coal supply or a reduction in coal demand may have an adverse effect on coal prices, which in turn, may reduce our profitability and adversely affect our business and results of operations.

Our mining operations are inherently subject to changing conditions that could adversely affect our profitability.

Our coal operations are inherently subject to changing conditions that can adversely affect our levels of production and production costs for varying lengths of time and can result in decreases in profitability. We are exposed to commodity price risk related to the purchase of diesel fuel, wood, explosives and steel. In addition, weather and natural disasters (such as earthquakes, landslides, flooding, and other similar occurrences), unexpected maintenance problems, key equipment failures, fires, variations in thickness of the layer, or seam, of coal, amounts of overburden, rock and other natural materials, variations in rock and other natural materials and variations in geological conditions can be expected in the future to have, a significant impact on our operating results. Prolonged disruption of production at the mine would result in a decrease in our revenues and profitability, which could be material. Other factors affecting the production and sale of our coal and coke that could result in decreases in our profitability include:

• sustained high pricing environment for raw materials, including, among other things, diesel fuel, explosives and steel;  
• changes in the laws and/or regulations that we are subject to, including permitting, safety, labor and environmental requirements;  
• labor shortages; and  
• changes in the coal markets and general economic conditions.  

 Our results of operations depend on our ability to acquire new coal mines and other coal-related businesses.

The recoverable coal reserves in mines decline as coal is extracted from them. In addition, the coal related business in China is heavily regulated by the PRC government, which, among other things, imposes limits on the amount of coal that may be extracted. As a result, our ability to significantly increase our production capacity at existing mines is limited, and our ability to increase our coal production will depend on acquiring new mines. Our existing mines are the DaPuAn, SuTsong, Ping Yi and Da Ping coal mines.

Our ability to acquire new coal mines and to expand production capacity in China and to procure related licenses and permits is subject to approval of the PRC government (including local governments.) Delays in securing or failure to secure relevant PRC government approvals, licenses or permits, as well as any adverse change in government policies, may hinder our expansion plans, which may materially and adversely affect our profitability and growth prospects. We cannot assure you that our future acquisitions, expansions, or investments will be successful.

If we fail to obtain additional financing we will be unable to execute our business plan.

As we continue to expand our business, we require capital infusions from the capital market. Under our current business strategy, our ability to grow will depend on the availability of additional funds, suitable acquisition targets at an acceptable cost, and working capital. Our ability to compete effectively, to reach agreements with acquisition targets on commercially reasonable terms, to secure critical financing and to attract professional managers is critical to our success. We will require additional funds to complete recent acquisitions, as well as to make future acquisitions, continue improving our current coal mines and other coal processing facilities, and to obtain regulatory approvals for our operations. We intend to seek additional funds through public or private equity or debt financing, strategic transactions and/or from other sources. However, there are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we will need to reduce, defer or cancel development programs, planned initiatives or overhead expenditures, to the extent necessary. The failure to fund our capital requirements would have a material adverse effect on our business, financial condition and results of operations.

Coal reserve estimates may not be indicative of reserves that we actually recover.

The coal reserves disclosed for the mines from which we have the right to extract coal are the estimated quantities (based on applicable reporting regulations) that under present and anticipated conditions have the potential to be economically mined and processed. However, the amount of coal that we may extract from a given mine is limited by the mining rights granted to us by local governmental authorities. In addition, there are numerous uncertainties inherent in estimating quantities of coal reserves and in projecting potential future rates of coal production including many factors beyond our control. Reserve engineering is a subjective process of estimating underground deposits of reserves that cannot be measured in an exact manner and the accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Estimates of different engineers may vary (e.g., in coal grade and reserve quantity) and results of our mining/drilling and production subsequent to the date of an estimate may justify revision of estimates. Reserve estimates may require revision based on actual production experience and other factors. In addition, several factors including the market price of coal, reduced recovery rates or increased production costs due to inflation or other factors may render certain estimated proved and probable coal reserves uneconomical to exploit and may ultimately result in a restatement of reserves. This may have a material adverse effect on our business, operating results, cash flows and financial condition.

U.S.-listed companies with substantial business operations in China have recently become subject to increased scrutiny, criticism and negative publicity.

                Since 2010, a number of U.S. publicly-listed companies with substantial operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the United States Securities and Exchange Commission (“SEC”) resulting in loss of share value. Much of the scrutiny and negative publicity has centered around accounting weaknesses, inadequate corporate governance and, in some cases, allegations of fraud. As a result of such scrutiny and negative publicity, the stock prices of most U.S. public companies with operations in China have sharply decreased in recent months.   

Our industry is heavily regulated and we may not be able to remain in compliance with all such regulations and we may be required to incur substantial costs in complying with such regulation.

We are subject to extensive regulation by China’s Mining Ministry and by other provincial, county and local authorities in jurisdictions in which our products are processed or sold, regarding the processing, storage, and distribution of our product. Our processing facilities are subject to periodic inspection by national, province, county and local authorities. We may not be able to comply with current laws and regulations, or any future laws and regulations. To the extent that new regulations are adopted, we will be required to adjust our activities in order to comply with such regulations. We may be required to incur substantial costs in order to comply. Our failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material and adverse effect on our business, operations and finances. Changes in applicable laws and regulations may also have a negative impact on our sales.

Government regulation of our operations imposes additional costs on us, and future regulations could increase those costs or limit our ability to mine, crush, clean, process and sell coal. China’s central, provincial and local authorities regulate the coal mining industry with respect to matters such as employee health and safety, permitting and licensing requirements, air quality standards, water pollution, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. We are required to prepare and present to China’s central, provincial and local authorities data pertaining to the effect or impact that any proposed processing of coal may have upon the environment. The costs, liabilities and requirements associated with these regulations may be costly and time-consuming and may delay commencement, expansion or continuation of our coal processing operations. The possibility exists that new legislation and/or regulations and orders may be adopted that may materially and adversely affect our operations, our cost structure and/or our customers’ ability to use coal. New legislation or administrative regulations (or judicial interpretations of existing laws and regulations), including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us and our customers to change operations significantly or incur increased costs. Certain sales agreements contain provisions that allow a purchaser to terminate its contract if legislation is passed that either restricts the use or type of coal permissible at the purchaser’s plant or results in specified increases in the cost of coal or its use. These factors and legislation, if enacted, could have a material adverse effect on our financial condition and results of operations.

Our business is highly competitive and increased competition could reduce our sales, earnings and profitability.

The coal business is highly competitive in China and we face substantial competition in connection with the marketing and sale of our products. Some of our competitors are well established, have greater financial, marketing, personnel and other resources, have been in business for longer periods of time than we have, and have products that have gained wide customer acceptance in the marketplace. The greater financial resources of our competitors will permit them to implement extensive marketing and promotional programs. We could fail to expand our market share, and could fail to maintain our current share. Increased competition could also result in overcapacity in the Chinese coal industry in general. The coal industry in China has experienced overcapacity in the past. During the mid-1970s and early 1980s, a growing coal market and increased demand for coal in China attracted new investors to the coal industry, spurred the development of new mines and resulted in added production capacity throughout the industry, all of which led to increased competition and lower coal prices. Similarly, an increase in future coal prices could encourage the development of expanded capacity by new or existing coal processors. Any overcapacity could reduce coal prices in the future and our profitability would be impaired.

               We operate coal mines and related facilities that may be affected by water, gas, fire or structural problems and earthquakes. As a result, we, like other companies operating coal mines, have experienced accidents that have caused property damage and personal injuries. Although we continuously review our existing operational standards, including insurance coverage and have implemented safety measures, fire training at our mining operations and provided on-the-job training for our employees and workers, there can be no assurance that industry-related accidents, earthquakes or other disasters will not occur in the future. The insurance industry in China is still in its development stage, and Chinese insurance companies offer only limited business insurance products. We currently only have work-related injury insurance for our employees at the DaPuAn, SuTsong, Ping Yi and Da Ping mines and limited accident insurance for staff and miners working in China. Any uninsured losses and liabilities incurred by us could have a material adverse effect on our financial condition and results of operations.

Disruptions to the Chinese railway transportation system and the other limited modes of transportation by which we deliver our products may adversely affect our ability to sell our coal products.

A substantial portion of the coal products we sell is transported to our customers by the Chinese national railway system. As the railway system has limited transportation capacity and cannot fully satisfy coal transportation requirements, discrepancies between capacity and demand for transportation exist in certain areas of the PRC. No assurance can be given that we will continue to be allocated adequate railway transport capacity or acquire adequate rail cars, or that we will not experience any material delay in transporting our coal as a result of insufficient railway transport capacity or rail cars.

Some of our business operations depend on a single transportation carrier or a single mode of transportation to deliver our coal products. Disruption of any of these transportation services due to weather-related problems, flooding, drought, accidents, mechanical difficulties, strikes, lockouts, bottlenecks, and other events could temporarily impair our ability to supply coal to our customers. Our transportation providers may face difficulties in the future that may impair our ability to supply coal to our customers, resulting in decreased revenues.   

Our continued operation of coal mines is dependent on our ability to obtain and maintain mining licenses and other PRC government approvals for our mining operations.

Unlike land in the United States, much of which is owned by private individuals, the land and underlying minerals in China belongs to the PRC government and is only leased to lessees such as us on a long-term basis, ranging from 40 to 70 years. Further, coal reserves are owned by the PRC government, which issues mining licenses and exclusive mining rights for a particular mine to a mining operator on a long term basis (normally 50 years). This license allows the mining operators to operate and extract coal from the mine. Thus, coal mining licenses are the exclusive evidence of approval of a coal mine’s mining rights by the PRC government. The government charges all mining operators an upfront fee plus a surcharge ranging from 2%-3% of the value of the coal excavated from the ground. There can be no assurances that we will be able to obtain additional mining licenses (including licenses to expand our production capacity at our existing mines) and rights for additional mines or to maintain such licenses for our existing operations. The loss or failure to obtain or maintain these licenses in full force and effect will have a material adverse impact on our ability to conduct our business and on our financial condition. 

Furthermore, the coal industry in China is heavily regulated by the government for safety and operational reasons. Several licenses and permits are required in order to operate a coal mine. These licenses and permits, once issued, are reviewed typically once a year. Failure to comply with such regulations could result in fines or temporary or permanent shutdowns of our mining operations, which would adversely impact our business and results of operations.

Underground mining is also subject to certain risks such as methane outbursts and accidents caused by roof weakness and ground-falls. There can be no assurance that the occurrence of such events or conditions would not have a material adverse impact on our business and results of operations.

We have not maintained sufficient documentation of our internal control over financial reporting for the year ended April 30, 2010 and 2011, and have identified material weaknesses in our system of internal controls relating to the same.   

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its Annual Report, which contains management’s assessment of the effectiveness of our internal controls over financial reporting. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of April 30, 2010 and 2011 concluded that we did not maintain effective controls over the process of ensuring timely preparation of our financial reporting as of and for the fiscal years ended April 30, 2010 and 2011. In addition, the Company has completed the documentation supporting our assessment to our auditor Kabani & Co. Inc.  As a result, Kabani & Co. Inc. has  given an opinion that identified material weaknesses in our system of internal controls relating to the same periods. During the last two fiscal years, we have taken several steps to improve our internal control procedures, including adding additional internal and external resources. Until we are able to ensure the effectiveness of our internal controls, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in a timely and reliable manner. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. We also expect these developments will make it more difficult and more expensive for us to attract and retain additional members to the board of directors (both independent and non-independent), and additional executives. 

RISKS RELATED TO DOING BUSINESS IN CHINA

Our Chinese operations pose certain risks because of the evolving state of the Chinese economy and Chinese political, legislative and regulatory systems.  Changes in the interpretations of existing laws and the enactment of new laws may negatively impact our business and results of operation.

Although our principal executive office is located in Seattle, Washington, all of our current coal business operations are conducted in China.  Accordingly, our results of operations, financial condition and prospects are subject to economic, political and legal developments in China.  China’s economy differs from the economies of most developed countries in many respects, including its levels of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.  Doing business in China involves various risks including internal and international political risks, evolving national economic policies, governmental policy on coal industry, as well as financial accounting standards, expropriation and the potential for a reversal in economic conditions.  Since the late 1970s, the Chinese government has been reforming its economic system.  These policies and measures may from time to time be modified or revised.  While the Chinese economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China.  Furthermore, while the Chinese government has implemented various measures to encourage economic development and guide the allocation of resources, some of these measures may also have a negative effect on us.  For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.  Also, since early 2004, the Chinese government has implemented certain measures to control the pace of economic growth including certain levels of price controls on raw coking coal.  Such controls could cause our margins to be decreased.  In addition, such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.  Adverse changes in economic policies of the Chinese government or in the laws and regulations, if any, could have a material and adverse effect on the overall economic growth of China, and could adversely affect our business operations.

Our Chinese subsidiaries, Kunming Biaoyu Industrial Boiler Co., Ltd. (“KMC”) and L&L Yunnan Tianneng Industry Co. Ltd. (“TNI”), have been registered as American subsidiaries, and all required capital contributions have been made into them. We own our equity ownership interest in the DaPuAn and SuTsong Mines through a nominee who is a Chinese citizen that holds our equity ownership in trust for our benefit under an agency agreement executed in April 2008, and we refer to the operations as “L & L Coal Partners” Because this equity will be held by a nominee, no SAFE approval is necessary for it. We believe that Circular 75 and other related Circulars or regulations may likely be further clarified by SAFE, in writing or through oral comments by officials from SAFE, or through implementation by SAFE in connection with actual transactions. However, if we fail to obtain the required PRC government approvals for our acquisitions or fail to remit all of the required payments for acquisitions, such acquisitions may be deemed void or unwound. Should this occur, we may seek to acquire the equity interest of our subsidiaries through other means, although no assurance can be given that we will be able to do so, nor can we assure that we will be successful if we do.

We may have to incur unanticipated costs because of the unpredictability of the Chinese legal system.

The Chinese legal system has many uncertainties. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, Chinese legislation and regulations have enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.   

It will be difficult for any shareholder to commence a legal action against our executives. Most of our assets are located in China.

Because our directors and officer(s) reside both within and outside of the United States, it may be difficult for an investor to enforce his or her rights against them or to enforce United States court judgments against them if they live outside the United States. Most of our assets are located outside of the United States in China. Additionally, we plan to continue acquiring other energy-related entities in China in the future. It may therefore be difficult for investors in the United States to enforce their legal rights, to effect service of process upon us or our directors or officers, or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on us or our directors and officers under federal securities laws. Moreover, China currently does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgments of courts.

We are subject to currency fluctuations from our Chinese operations and fluctuations in the exchange rate may negatively affect our expenses and results of operations, as well as the value of our assets and liabilities.

                Effective July 21, 2005, The People’s Bank of China announced that the Renminbi (RMB) exchange rate regime changed from a fixed rate of exchange based upon the U.S. dollar to a managed floating exchange rate regime based upon market supply and demand of a basket of currencies. On July 26, 2005, the exchange rate against the Renminbi was adjusted to 8.11 Renminbi per U.S. dollar from 8.28 Renminbi per U.S. dollar, which represents an adjustment of approximately two percent. As of July 22, 2011, the Renminbi appreciated to approximately RMB 6.45 per U.S. Dollar. It is expected that the revaluation of the Renminbi and the exchange rate of the Renminbi may continue to change in the future. Fluctuations in the exchange rate between the RMB and the United States dollar could adversely affect our operating results. Results of our business operations are translated at average exchange rates into United States Dollars for purposes of reporting results. As a result, fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Fluctuations may adversely affect the comparability of period-to-period results. We do not use hedging techniques to eliminate the effects of currency fluctuations. Thus, exchange rate fluctuations could have a material adverse impact on our operating results and stock prices.

New governmental regulation relating to greenhouse gas emissions may subject us to significant new costs and restrictions on our operations.

                Climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. There are bills pending in Congress that would regulate greenhouse gas emissions. While US regulations are not applicable in China, China has agreed to reduce greenhouse gas emissions per unit of GDP which may reduce the rate of growth in coal consumption in China. Additionally as China begins to implement more stringent environmental and safety regulations our mining and operational costs may increase.    

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO OUR COMMON STOCK

The market price of our stock may be volatile.

      The market price of our stock may be volatile and subject to wide fluctuations in response to factors including the following:

• actual or anticipated fluctuations in our quarterly operating results;  
• changes in financial estimates by securities research analysts;  
• conditions in coal energy markets;  
• changes in the economic performance or market valuations of other coal energy companies;  
• announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;  
• addition or departure of key personnel;  
• fluctuations of exchange rates between RMB and the U.S. dollar; and  
• general economic or political conditions in China.  

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.    

Our corporate actions are substantially influenced by our principal stockholders and affiliated entities.

Members of our management and their affiliated entities own or have the beneficial ownership right to approximately 30% of our outstanding common shares, representing approximately 30% of our voting power. These stockholders, acting individually or as a group, could exert substantial influence over matters such as approving mergers or other business combination transactions. In addition, because of the percentage of ownership and voting concentration in these principal stockholders and their affiliated entities, elections of our board of directors will generally be within the control of these stockholders and their affiliated entities. While all of our stockholders are entitled to vote on matters submitted to our stockholders for approval, the concentration of shares and voting control presently lies with these principal stockholders and their affiliated entities. As such, it would be difficult for stockholders to propose and have approved proposals not supported by management. There can be no assurances that matters voted upon by our officers and directors in their capacity as stockholders will be viewed favorably by all stockholders of the company.

 Our authorized preferred stock constitutes what is commonly referred to as “blank check” preferred stock. This type of preferred stock allows our board of directors to divide the preferred stock into series, to designate each series, to fix and determine separately for each series any one or more relative rights and preferences and to issue shares of any series without further stockholder approval. This authorized preferred stock allows our board of directors to hinder or discourage an attempt to gain control of us by a merger, tender offer at a control premium price, proxy contest or otherwise. Consequently, the preferred stock could entrench our management. In addition, the market price of our common stock could be materially and adversely affected by the existence of the preferred stock.

Certain SEC rules and FINRA sales practices may limit a stockholder’s ability to buy and sell and our stock, which could adversely affect the price of our common stock.

                The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. If the trading price of our common stock falls below $5.00 per share, the open-market trading of our common stock is subject to the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 Stockholders should have no expectation of any dividends.

The holders of our common stock are entitled to receive dividends only when, as and if declared by the board of directors out of funds legally available therefore. To date, we have not declared nor paid any cash dividends. Our board of directors does not intend to declare any dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our business operations.

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Consequently, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements, and there can be no assurance that the actual results or developments that we anticipate will be realized or, even if realized, that they will have the expected consequences to or effects on us and our subsidiaries or our businesses or operations. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events, or other such factors that affect the subject of these statements, except where we are expressly required to do so by law.

USE OF PROCEEDS

                We will not receive any proceeds from the sale of Common Stock by the selling security holders. However, we may receive up to $8,518,532 upon exercise of the Warrants with exercise prices of $5.62 per share for the Warrants issued to accredited investors, and $6.11 per share for the warrants issued to the placement agents in the October Financing and November Financing, the underlying shares of which are included in the registration statement of which this prospectus is a part.  From August 2008 to January 2011, we received $6,835,500 from T Squared for the exercise of 4,248,800 warrants.  Such funds will be used for general corporate purposes, including working capital requirements.  All proceeds from the sale of such securities offered by the selling security holders under this prospectus will be for the account of the selling security holders, as described below in the sections entitled “Selling Security Holders” and “Plan of Distribution.”  With the exception of any brokerage fees and commissions which are the obligation of the selling security holders, we are responsible for the fees, costs and expenses of this offering.

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• First, in addition to increasing individual mine production, the provincial government is mandating that individual mines be consolidated into coal holding companies responsible for a minimum production between 800,000 and 2,000,000 tons per year, thus reducing the number of coal holding companies to 200 or less. 
• Second, safety standards will continue to rise as well as increased safety enforcement activity.  For example, a mine accident in a county will now result in a temporary shutdown of all mines operating in that county so that safety inspectors can review the safety of each mine. 
• Third, to improve efficiency, the level of mechanization will increase significantly, both in shaft drilling and coal production. 

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We may need to raise additional capital to acquire additional profit making operations.  To assist the government-mandated consolidation of the coal industry, the provincial government has made debt financing available through commercial banks for government-supported consolidators.  On September 26, 2011, the Company received a letter of endorsement from the Industrial and Commercial Bank of China stating that the Corporate Banking Department of the Guizhou Province Branch is willing to support our plan of consolidation.  The bank has indicated that it will provide up to 50% financing for acquisitions for a period of time no greater than 5 years subject to due diligence on each acquisition.  The Company is also exploring strategic partnerships that can accelerate our ability to grow organically and acquisitively and has signed a memorandum of understanding with Tianjin Fuhao Industrial Co. Ltd to explore strategic opportunities to expand and enhance the value of both companies. Tianjin Fuhao is a major coal wholesaler and logistics company in Northern China and is a wholly owned subsidiary of Tianjin Materials and Equipment Co., which ranks 57^th among China’s top 500 enterprises with recent revenues of over $16 billion.

The Company’s immediate mission is to become a leading coal energy company in the coal-rich Yunnan and Guizhou Provinces. By meeting the government-mandated production targets for each holding company in Guizhou, we believe that the Company’s production capacity will increase from the current goal of 600,000 tons per year to 2,000,000 tons per year by 2013.

Discussion of Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Management evaluates its estimates on an on-going basis. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from the estimates used. Our actual results have generally not differed materially from our estimates. However, we monitor such differences and, in the event that actual results are significantly different from those estimated, we disclose any related impact on our results of operations, financial position and cash flows. Note [2] to our audited consolidated financial statements included in Item 15 of this Annual Report on Form 10-K provides a description of our significant accounting policies. We believe that of these significant accounting policies, the following involve a higher degree of judgment or complexity:

Use of Estimates - The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, 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.  We base these estimates on historical and anticipated results and trends and on various other assumptions that we believe 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.

Estimate of recoverable coal reserves.  The Company capitalizes its mineral rights at fair value when acquired, including amounts associated with any value beyond proven and probable reserves, and amortized to operations as depletion expense using the units-of-production method over the estimated recoverable coal.  

Estimate 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, 2011 and 2010, there was no impairment of its long-lived assets.

Estimate Impairment 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, 2011 and 2010, there was no impairment of its goodwill.

Estimate of the Fair Value Measurements - For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, 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.

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’s policy is to maintain 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, 2011 and 2010, 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 moving average basis.

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

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Asset Retirement Cost and Obligation - 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, which is recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset.  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 liability is accreted to its present value each period, and 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.

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, 2011, 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.

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, 2011 and 2010, 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 by using the Black-Scholes option pricing model,. 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.

Comparison of Three Months Ended July 31, 2011 and Three Months Ended July 31, 2010

The following table presents our operating results as a percentage of our revenues for the periods indicated:

The following table presents revenues by operating segment:

*Reclassification

In this quarter, our net revenues decreased from $55 million during the three months ended July 31 2010 to $36.6 million during the three months ended July 31, 2011, representing approximately a 34% decrease. The decrease was primarily due to the government’s temporary slowdown and idling of all mines in our region including our mines, and the historical low season of summer.

Segment Analysis

Coal Mining. During the three months ended July 31, 2011, our coal mining net revenues decreased by $12,082,682 approximately a 65% decrease compared to the three months ended July 31, 2010. Similar to the fourth quarter of the fiscal year ended 2011, this sales decrease was due to lack of inventory caused mainly by the government mandated temporary slowdown and idling of all the mines in the regions we operate.  The government took action because of nearby fatal mine accidents (our mines had no accidents), and the subsequent visits by safety officials and regulators performing safety inspections from the middle of the fourth quarter of year ended April through June 2011.  In addition, on August 15, 2011 there was another fatal accident in Pan County in Guizhou Province near our mines.  Our Yunnan mines have resumed production and our Da Ping mine has been approved for resuming production and is currently expanding its production capacity.  However, our Ping Yi mine remains idle as of July 31, 2011.

Coal Wholesaling. Wholesale revenues decreased by 12% during the three months ended July 31, 2011 compared to the three months ended July, 31, 2010 because the volume of sales dropped due to decreased supplies of raw coal and fine coal in Yunnan and Guizhou area resulting from the government mandated temporary slowdowns and idling of coal mines in the regions we operate.

Coal Washing.  Coal washing revenue decreased in 2011 because government mandated temporary slowdowns and idling of coal mines in the regions we operate led to limited supply of raw coal to our washing facilities.

Coal Coking.  Coking revenue decreased by 6% of revenue due to the government mandated temporary slowdowns and idling of coal mines in the county our coking facility operates, which resulted in limited supply of raw coal to our coking facility.

Gross Profit

Our gross profit percentage in this quarter decreased to 22% from 34% of the same quarter last fiscal year mainly as a result of the government-mandated temporary coal-mine slowdowns and idling that have significantly reduced our revenue from the coal mining segment, which has historically been the Company’s most profitable business segment.  The corresponding change in product/segment mix and the relatively stagnant fixed costs accordingly have reduced the gross profit of the current period.

Selling general & administrative

Total selling, general, and administrative expense were staying the same as 7% relatively to revenue during the three months ended July 31 2011 compare to the same period 2010.

Provision for income taxes

Our provision for income taxes decreased from the three months ended July 31, 2010 to the three months ended July 31, 2011, primarily as a result of decreased in net income.

Our effective tax rate increased slightly from 15.04% during the three months ended July 31, 2010 to 15.97% during the three months ended July 31, 2011, primarily because our new established Tai Fung with effective tax rate of 25% slightly pulled up the total effective tax rate.

Net Income Attributable to Common Stockholders

The following table presents net income attributable to common stockholders:

Our net income attributable to non-controlling interest was $696,884 lower than prior year because we have a lower net income compared to last year.

Comparison of the fiscal years ended April 30, 2011 and 2010

Our operating results during the year ended April 30, 2011 compared to the year ended April 30, 2010 reflect strong growth and, in particular, organic expansion of current operations. In the year ended April 30, 2011, we invested in and increased the capacity of two of our current mines, DaPuAn and SuTsong (each from 150,000 tons to 300,000 tons), and we finished construction of a 600,000 ton DMS coal washing facility at Ping Yi mine site. During the year ended April 30, 2011, we also acquired a majority interest in DaPing Mine, which added additional capacity of 300,000 tons per year.

The individual segment analysis of the results of operations attributable to each of our 4 segments -- coal mining, wholesale coal, coke, and coal washing is discussed in detail below.

Coal Mining Segment

The following table is a summary of important year-to-year operating data for our coal mining segment:

Total coal mining revenue increased 23.2% during the year ended April 30, 2011 compared to the year ended April 30, 2010, primarily as a result of strong organic growth. Revenue from the DaPing mine generally did not impact revenue in the year ended April 30, 2011, as the acquisition of such mine was completed late in the year

Strength in our organic coal sales in the year ended April 30, 2011 is chiefly attributable to our investment in mechanization and mine infrastructure, both of which allow us to increase the productivity of our mines. We also continued to benefit from growth in China’s economy and the resultant demand for energy. In particular, the China Central Government Western Development Program, a government mandate for additional energy to fuel economic growth, creates significant demand for coal and coal-related products in our markets.

 Average price per ton during the year ended April 30, 2011remained steady, compared to the year ended April 30, 2010, primarily due to a price freeze implemented by the government. The Company is vertically integrated and was able to manage price volatility in the year ended April 30, 2010, to a certain extent, by selling some production from Ping Yi coal mine to Ping Yi coal washing plant (the net effect of which is eliminated via inter-company sales in our financial statements). Ping Yi mine accounted for 37% of the Company’s total production volume in the year ended April 30, 2011.

Our coal mining sales in the fourth quarter of the year ended April 30, 2011 decreased relative to the rest of the year, partly due to normal seasonal adjustment (coal prices typically fall as the weather gets warmer), and partly due to government mandated temporary slowdown and idling at several of our mines.  A key element of China’s coal consolidation policy is mine safety, and the policy increases safety standards and regulatory enforcement.  As a result, we are occasionally obligated to either slow down production or idle our mines, through no fault of our own, when other mines in our regions experience accidents or safety violations. There were several fatal mining accidents in Yunnan Province and in Pan County of Guizhou Province during the fourth quarter of the year ended April 30, 2011, and these events prompted several shut downs at our facilities. None of these accidents or fatalities happened in the Company’s coal mines.

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Coal Mining Cost of Sales

Total coal mining cost of goods sold increased 102% during the year ended April 30, 2011 compared to the year ended April 30, 2010 and 10.9% during the year ended April 30, 2011 relative to revenues for the same period. The relative increase in coal mining cost of sales was primarily due to an increase in the cost of both direct labor (wages) and direct materials (inflation in price of raw materials).  To a lesser extent, we experienced an increase in the direct cost of extraction due to increased safety measures and the maintenance costs in our mining operations. Lastly, the depreciation related to our investments in infrastructure, allocated as a direct expense, increased during the period.

Total coal mining selling, general, and administrative expense increased by approximately $1 million during the year ended April 30, 2011, but was comparatively unchanged relative to revenues. Our increase in real dollar fixed cost was related to hiring additional personnel for sales, maintenance, safety, and training.

Wholesale Segment

The following table is a summary of important year-to-year operating data for our Wholesale segment:

Wholesale Revenue  

Wholesale revenues increased by 98.9% during the year ended April 30, 2011 compared to the year ended April 30, 2010. The increase in revenue was fueled both by a large increase in average price per ton sold (up nearly $23 per ton) and a sizeable increase in year over year tonnage bought by its KMC subsidiary (50% more) and sold (almost 84,000 more tons).  .

Wholesale Cost of Sales  

Wholesale cost of sales increased 104.7% during the year ended April 30, 2011 compared to the year ended April 30, 2010.  This increase was primarily a result of a doubling of tons sold. Wholesale cost of goods sold increased 2.5% relative to sales due to inflation in the cost of fine coal.

Wholesale SG&A increased 52% during the year ended April 30, 2011 compared to the year ended April 30, 2010.  This increase was primarily a result of a large increase in sales. Wholesale SG&A increased approximately 50% relative to sales due to increased selling expense related to shipping terms and increases in the price of fuel.

Coke Segment

The following table is a summary of important year-to-year operating data for our Coke segment:

Coke Revenue  

Coking revenue for the year ended April 30, 2011 increased 112% compared to the year ended April 30, 2010, this was primarily attributable to revenue from our Zone Lin facility’s first complete year of service, which began coking operations during the third quarter of the year ended April 30, 2010. On a prorated basis, increased average price offset a slight decrease in average tonnage sold. Management continues to be pleased with the facility’s progress and plans to add to its existing 150,000 tons per year capacity in the future.

Coke Cost of Sales  

Coking cost of goods sold was essentially flat during the year ended April 30, 2011 compared to the year ended April 30, 2010.

Coke SG&A  

Coke SG&A was essentially flat during the year ended April 30, 2011 compared to the year ended April 30, 2010 (when adjusted pro rata).

Coal Washing Segment

The following table is a summary of important year-to-year operating data for our Coal Washing segment:

Coal Washing Revenue

Coal Washing revenue increased 325% in the year ended April 30, 2011 compared to the year ended April 30, 2010. This reflected an additional 600,000 tons of capacity added to its Ping Yi facility at the end of the 1st quarter of the year ended April 30, 2011. Average selling price per ton and quarterly tonnage (on a pro rata basis) both increased nominally throughout the year due to steady customer demand.

Coal Washing Cost of Sales

Coal Washing cost of sales increased approximately 321% in the year ended April 30, 2011 compared to the year ended April 30, 2010. This was primarily attributable to the increased capacity added to our Ping Yi facility.  We were also able to benefit from a slight decrease in our washing cost inputs during the year ended April 30, 2011, which included buying coal more cheaply and efficiently, while managing to increase its selling prices. The average selling price of coal increased over 7% while average direct costs per ton slightly increased about 5%. The effect was that gross profits increased about $2 per ton during the year. 

Coal Washing SG&A

Coal Washing SG&A increased approximately $2 million in the year ended April 30, 2011 compared to the year ended April 30, 2010. This was primarily due to our investment to expand  the Ping Yi facility. Depreciation related to the facility increased markedly during the year ended April 30, 2011 because the facility transferred from in-process construction status to a fixed asset.  As part of the ramp up to full production capacity, the Company also added administrative and safety staff and bought maintenance, safety, and training equipment that, in total, equated to a $1.40 per ton additional expense. 

Coal Mining Segment:

The following table is a summary of important year-to-year operating data for our coal mining segment:

Coal Mining Revenue

Total coal mining revenue increased 103.6% during the year ended April 30, 2010, . Our revenues increased, relative to the prior period, both due to acquisitions and expansion of current operations. We increased the capacity of DaPuAn and SuTsong mines (each to 300,000 tons) during the year ended April 30, 2010, and we acquired Ping Yi Mine during the third quarter of the fiscal year.

Coal Mining Cost of Sales

Total coal mining cost of goods sold decreased 4.2% relative to sales. The positive margin movement was primarily a result of decreased extraction costs, including both labor and direct materials, related to efficiencies and economies of scale in our mines.

Coal Mining SG&A

Total coal mining selling, general, and administrative expense increased by approximately $1.5 million during the year ended April 30, 2010, but was down 1.2% relative to revenues due to operating leverage in our fixed expenses. Our increase in real dollar fixed cost was related to startup costs and hiring personnel associated with sales, maintenance, safety, and training.

Wholesale Segment

The following table is a summary of important year-to-year operating data for our Wholesale segment:

Wholesale Revenue  

Wholesale revenues increased by 19.7% during the year ended April 30, 2010 compared to the year ended April 30, 2009. The increase in revenue was the result of a 26% increase in tonnage that compensated for a drop in average price per ton sold. We acquired a large new customer in the first quarter of fiscal year 2010 who significantly affected revenues and  accounted for 27% of total wholesale revenues for the year.

Wholesale Cost of Sales  

Wholesale cost of goods sold decreased by 4.5% relative to sales during the year ended April 30, 2010 due to the lowered cost of inputs, particularly fine coal.

Wholesale SG&A  

Wholesale SG&A decreased approximately $67,000, or 18%, relative to sales due to lower warehouse rental and staffing costs.

Coke Segment

The following table is a summary of important operating data for our Coke segment for the year ended April 30, 2010, as we did not have any operations in our Coke segment during the year ended April 30, 2009:

Coking revenues during the year ended April 30, 2010 reflect the acquisition of our Zone Lin facility during the third quarter of fiscal 2010.

Coke Cost of Sales  

Coking cost of goods sold were 87.4% of sales during the year ended April 30, 2010.

Coke SG&A  

Coke SG&A of $129,000 reflects staffing and transition costs.

Coal Washing Segment

The following table is a summary of important year-to-year operating data for our Coal Washing segment:

Coal Washing Revenue  

The Company’s Coal Washing revenues during the year ended April 30, 2010 reflect the acquisition of Hong Xing (Q2) and construction of Ping Yi (Q3). Management believes vertical integration increases the overall value of its coal and adds the stability to the supply chain.

Coal Washing Cost of Sales  

Coal Washing COGS were 89.6% of sales during the startup year of operations. 

Coal Washing SG&A   

Coal Washing SG&A reflected startup costs, new administrative and safety staff, and the acquisition of maintenance, safety, and training equipment equating to about $1.67 per ton expense. 

• Capital expenditures were approximately $42 million for the year ended April 30, 2011.
• We expect our total capital expenditures will be approximately $35 million for equipment and infrastructure, based on our existing coal operations, for the year ending April 30, 2012.

Construction in Progress

• Construction in progress includes mine development, ventilation and electrical system improvements for the PYC mine and the two coal mines, building of staff quarters, and beginning construction of a sewage treatment system and road expansion for the washing facilities.  Construction in progress was $ 55,189,117and $ 44,943,609 as of July 31, 2011 and April 30, 2011, respectively. Capitalized interest costs were approximately $41,390 and $320,788 for July 31, 2011 and April 30, 2011, respectively.

Management believes that cash flow from operations and increasing access to credit will provide the company sufficient capital resources for the infrastructure, mechanization, and safety improvements toour existing operations.  However, if the government increases individual mine production targets above 300,000 tons per year or raises environmental or safety standards, the Company may consider the issuance of additional debt or equity securities to fund the expansion of individual mine production capacity or comply with new, more stringent regulatory standards.

To comply with the government-mandated consolidation policy in Guizhou, the Company will need to acquire additional mines to increase production capacity from 600,000 tons per year to 2,000,000 tons per year by 2013.  Based on prior acquisitions, the Company anticipates acquiring an interest between majority and wholly-owned in coal mines at a low multiple of EBITDA and spreading the payments over a period of time. The Company is in the process of due diligence for a number of potential acquisitions.  Acquisition costs will vary per mine, depending on but not limited to the size of the reserves, the production capacity, the quality of the coal, the level of mechanization.

To implement its acquisition strategy, the Company may need to raise additional capital to acquire additional coal mines and may consider the issuance of additional debt or equity securities.  To assist the government-mandated consolidation of the coal industry, the provincial government has made debt financing available through commercial banks for government-supported consolidators.  On September 26, 2011, the Company received a letter of endorsement from the Industrial and Commercial Bank of China stating that the Corporate Banking Department of the Guizhou Province Branch is willing to support our plan of consolidation. The bank has indicated that it will provide up to 50% financing for acquisitions for a period of time no greater than 5 years subject to due diligence on each acquisition. 

The Company is also exploring strategic partnerships that can accelerate our ability to grow organically and acquisitively and have signed a memorandum of understanding with Tianjin Fuhao Industrial Co. Ltd to explore strategic opportunities to expand and enhance the value of both companies. Tianjin Fuhao is a major coal wholesaler and logistics company in Northern China and is a wholly owned subsidiary of Tianjin Materials and Equipment Co., which ranks 57^th among China’s top 500 enterprises with recent revenues of over $16 billion.  In addition to potential externally raised funds, the Company intends to utilize a combination of existing cash on hand, cash flow from operations, and seller paper to finance the acquisition of mines.  

Current Assets and Current Liabilities

The current assets of the Company were $61,339,273 and $61,106,290 on July 31, 2011 and July 31, 2010, respectively. The increase in current assets of $232,983 was primarily due to a decrease of cash and cash equivalents of $3,379,545, an increase in accounts receivable of $11,965,578, an increase in prepaid and other current assets of $2,398,990, a decrease of other receivables of $6,856,732 and a decrease of inventories of $3,895,308. The current assets of the Company were $66,792,444 on April 31, 2011. The decrease in current assets amounted $5,453,171 compared to July 31, 2011 was mainly due to a decrease in prepaid and other current assets. The current liabilities of the Company were $58,596,694 on April 30, 2011. The decrease in current liabilities amounted $3,431,683 compared to July 31, 2011 and was mainly due to decrease in other payables.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet financing arrangements.

During the third quarter of 2010, as part of the acquisitions of TNI and PYC, the Company assumed two loan agreements with banks in China.  The first loan, related to TNI, was for RMB 14,300,000 or approximately $1,951,000.  This loan carried an interest rate of 5.4% per annum and matured on December 23, 2010 and has been paid in full.  The second loan, related to PYC, is for RMB 15,000,000 or approximately $2,307,870.  The loan carries an interest rate of 9.7% per annum and matures February 26, 2012. During the fourth quarter of 2011, as part of the acquisition of DaPing mine, the Company assumed a RMB 20 million bank loan or approximately $3,077,160 with an interest rate of 9.18% per annum that matures on October 29, 2011.

Insurance

We operate coal mines and related facilities that are inherently dangerous. We, like other similar companies, have experienced accidents that have caused property damage and personal injuries. Although we have implemented safety measures such as fire training and job-specific safety training, and we continuously review our existing operational standards, there can be no assurance that natural disasters and industry-related accidents will not occur in the future. The insurance industry in China is in a developmental stage, and Chinese insurance companies offer only limited business insurance products. We currently purchase work-related injury insurance for our employees at the DaPuAn, SuTsong Ping Yi and Da Ping mines, and limited accident insurance for staff working in China. Insurance-related liabilities and losses above our coverage could have a material adverse effect on our financial condition.

Environmental Compliance

We are subject to significant, extensive and increasingly stringent environmental protection laws. These laws and regulations impose fees for the discharge of waste substances and pollutants; require the establishment of reserves for reclamation and rehabilitation; impose fines for serious environmental offenses; and authorize the PRC government, at its discretion, to close or suspend any facility that it determines has failed to comply with environmental regulations.

The PRC government has tightened enforcement of applicable laws and regulations and adopted more stringent environmental and operational standards. While we believe that our coal mining, washing, and coking operations currently comply in all material respects with existing Chinese environmental standards, future environmental-related issues could have a material adverse effect on our financial condition and the results of our operations.

Internal Controls

                Regarding the fiscal year ended April 30, 2010, the Company was in the final stages of designing, documenting, implementing, and testing additional internal controls for purposes of our obligations under the rules of the PCAOB and the SEC. Although we believe that our internal control structure had been sufficient to mitigate significant risks within our financial reporting processes, we conducted an internal assessment of our compliance with the COSO framework (as adopted by the Company) and determined further improvements and documentation were necessary. As a result, our auditors were unable to provide an opinion on internal controls over financial reporting, primarily as a result of a lack of documentation.

The Company has been placing a significant amount of effort on improving and strengthening our internal control processes to fully remedy all deficiencies noted by us. In this regard, the Company has engaged and has been working closely with an independent internal controls consulting firm during the entire 2011 fiscal year to assist in assessing design deficiencies and documentation needs. We have completed our work related to the year-ended April 30, 2010 and disclosed in our 10-K/A for FYE2010 that we received our auditor’s opinion on internal controls on July 29, 2011. The Company also disclosed in our 10-K for FYE2011 that we received our auditor’s opinion on internal controls over financial reporting as of April 30, 2011 concurrent with the filing of annual report with the SEC on July 29, 2011.

                  The Company, with the assistance of our independent internal controls consultant, has made specific changes to address the deficiencies of our internal controls that have materially affected our internal control over financial reporting including:

1.       Improved the design and documentation related to multiple levels of review over financial statements included in our SEC forms 10-Q and 10-K;

2.       Expanded the design and assessment test work over the monitoring function of entity level controls;

3.       Enhanced documentation retention policies over test work related to our continuous management assessments of internal control effectiveness;

4.       Expanded documentation practices and policies related to various key controls to provide support and audit trails for both internal management assessment as well as external auditor testing; and

5.       Improved the design and documentation related to multiple levels of review over financial statements included in our quarterly SEC form 10-Q.

Since April 30, 2011, the Company has also completed the necessary improvements to our internal controls with the assistance of independent internal controls consulting firm and from comments received from our auditors while in the performance of their annual audit and reviews of our quarterly filings. Further, our internal control consultants conducted extensive internal controls testing in the following areas: equity grants and stock administration, financial reporting (including impairment testing, period end reconciliation, and financial reporting), IT general and application controls (security and access, capturing and processing information, end user computing, data backup and restoration), and each internal control tested effective.  The Company believes that all deficiencies will be fully remediated by the reporting period of October 31, 2011.

Recent Financings

                Please see Item 15 (Recent Sales of Unregistered Securities).

May 2009 Financing

On May 12, 2009, the Company issued to Silver Rock II, Ltd. (“Silver Rock”) an 8% convertible debenture (the “Debenture”) in the original principal amount of $100,000 which was due and payable on May 6, 2012. 

On November 5, 2009, Silver Rock converted the debenture plus accrued interest into 160,000 shares of Common Stock.  In connection with the issuance of the Debenture, the Company issued to Silver Rock a three-year warrant to purchase up to 500,000 shares of Common Stock at an exercise price of $1.40 per share (the “May Warrant Shares”).  On January 17, 2010, Silver Rock exercised its warrant and purchased 250,000 May Warrant Shares for an aggregate purchase price of $350,000.

October 2009 Financing

               On October 8, 2009, the Company entered into a Securities Purchase Agreement with accredited investors (the “October Buyers”), pursuant to which the Company sold Units (the “October Units”) to the October Buyers.  Each Unit purchased consisted of one share of unregistered common stock of the Company (the “Common Stock”) and 6/10ths of a warrant (the “October Warrants”) to purchase a share of common stock at an exercise price of $5.62 per share and expiring in October 2014 (as exercised, collectively the “October Warrant Shares”). Each Unit was priced at $3.90.  On October 8, 2009, our common stock closed at $5.58 per share on the OTCBB.  The Company sold a total of 1,371,021 October Units for gross proceeds of $5,346,980 and representing 1,371,021 shares of Common Stock.  Pursuant to the terms of the October Warrants, the October Buyers also became entitled to purchase 822,613 shares of Common Stock of the Company at an exercise price of $5.62 per share.  The October Warrants have a term of 60 months after the issue date of October 8, 2009.  The exercise price and number of shares issuable upon exercise of the October Warrants are subject to customary adjustment provisions for stock splits, stock dividends, recapitalizations and the like.  The October Warrants also have a cashless exercise provision that such holders may utilize after six months from the issuance date of such warrant if a registration statement covering the shares of Common Stock underlying the October Warrants is not available to the Warrant holders and a provision which limits the October Warrant holders right to exercise the October Warrant if such exercise would result in the holder owning more than 9.99% of the Common Stock.  Laidlaw & Co. (UK) Ltd., a member of FINRA, acted as the placement agent for the transaction which was closed on October 8, 2009.

                Also, in connection with October Financing, Mr. Dickson V. Lee, the Company’s Chief Executive Officer, the Company and the October Buyers entered into a Make Good Escrow Agreement (the “October Make Good Agreement”) pursuant to which Mr. Lee agreed to place  up to 1.5 million of the Company's common shares that he owns into escrow (the “October Escrow Shares”).  These Company’s common shares are his personal shares, which are not in connection with the Company financial Statements. Pursuant to the terms of the October Make Good Agreement, one-half of the October Escrow Shares will be released back to Mr. Lee if the Company has equal to or more than $32,040,000 in after tax net income before non-controlling interest (calculated in accordance with U.S. GAAP, as reported in the Company’s Annual Report on Form 10-K for the fiscal year ending April 30, 2010 (“2010 Form 10-K”) and as adjusted under the terms of the October Make Good Agreement) for the fiscal year ending April 30, 2010; otherwise, these October Escrow Shares will be distributed to the October Buyers in proportion to each October Buyer’s purchase price for its October Units.  Likewise, the remaining half of the October Escrow Shares will be released back to Mr. Lee if the Company has equal to or more than $108,118,950 in net revenues (calculated in accordance with U.S. GAAP, as reported in the 2010 Form 10-K and as adjusted under the terms of the October Make Good Agreement); otherwise, these October Escrow Shares will be proportionately distributed to the October Buyers.  Based upon the Statements of Income reported in the 2010 Form 10-K, the October Escrow Shares have been released back to Mr. Lee.

                The October Financing was completed through a private placement to accredited investors and is exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”).  Laidlaw & Company (UK) Ltd. (“Laidlaw”) acted as the placement agent and financial advisor for this transaction.  Laidlaw received cash fees consisting of eight percent (8%) of the gross proceeds and warrants to purchase 109,682 shares of the Company's common stock at $6.11 per share under the same terms as the Unit warrants.

November 2009 Financing

                On November 6, 2009, the Company entered into a Securities Purchase Agreement with accredited investors (the “November Buyers”), pursuant to which the Company sold Units (the “November Units”) to the November Buyers.  Each Unit purchased consisted of one share of Common Stock and 6/10ths of a warrant (the “November Warrants”) to purchase a share of common stock at an exercise price of $5.62 per share and expiring in November 2014 (as exercised, collectively the “November Warrant Shares”). Each Unit was priced at $3.90.  On November 6, 2009, our common stock closed at $5.65 per share on the OTCBB.  The Company sold a total of 835,389 November Units for gross proceeds of $3,258,000 and representing 835,389 shares of Common Stock.  Pursuant to the terms of the November Warrants, the November Buyers also became entitled to purchase 501,236 shares of Common Stock of the Company at an exercise price of $5.62 per share.  The November Warrants have a term of 60 months after the issue date of November 6, 2009.  The exercise price and number of shares issuable upon exercise of the November Warrants are subject to customary adjustment provisions for stock splits, stock dividends, recapitalizations and the like.  The November Warrants also have a cashless exercise provision that such holders may utilize after six months from the issuance date of such warrant if a registration statement covering the shares of Common Stock underlying the November Warrants is not available to the Warrant holders and a provision which limits the November Warrant holders right to exercise the November Warrant if such exercise would result in the holder owning more than 9.99% of the Common Stock.  The November Financing closed on November 6, 2009.

                Pursuant to the Registration Rights Agreements (the “Registration Rights Agreement”) executed by and between the Company and the November Buyers in connection with the November Financing, the Company was required to file a registration statement on Form S-1 or Form S-3 (the “Registration Statement”) within 90 days after the closing of the transaction for purposes of registering the resale of all of the Common Stock and any shares of capital stock of the Company issued or issuable with respect to the November Warrant Shares and the November Warrants as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on exercises of the November Warrants (together with the November Warrant Shares, the “November Registrable Securities”).  Since the Registration Statement was not declared effective by the SEC by August 3, 2010, the deadline for the Registration Statement to be declared effective, the Company is required to pay cash penalties in the amount of one percent (1%) of the November Unit price up to a maximum of six percent (6%), subject to the terms of the Registration Rights Agreement.

33

The November Financing was completed through a private placement to accredited investors and is exempt from registration pursuant to Section 4(2) of the Securities Act.  Barretto Securities Inc. (“Barretto”) acted as the placement agent and financial advisor for this transaction.  Barretto received cash fees consisting of eight percent (8%) of the gross proceeds and warrants to purchase 66,832 shares of the Company's common stock at $6.11 per share under the same terms as the November Unit warrants.

DESCRIPTION OF BUSINESS

OVERVIEW

History and Background

L & L Energy, Inc. (the “Company”, “L&L”, and generally referred to as “we”) was founded in 1995 and is engaged in coal operations in Yunnan and Guizhou provinces in southwestern part of the People’s Republic of China (“China” or “PRC”).  Currently we have four coal mines, three coal washing plants, one coking facility, and three coal wholesale and distribution networks. Our China Operations Center is in Kunming City, the capital of Yunnan province. We have several marketing offices throughout China and our corporate headquarters are located in Seattle, Washington.

                The Company started operations as Lee and Lam Financial Consultants Company, Ltd. in 1995 as a financial consulting firm in Hong Kong (“Lee and Lam”). Dickson Lee, a partner of Lee and Lam, also began investing in other business ventures: in 1997, he incorporated L & L Investment Holdings, Inc., a British Virgin Island Corporation (“LLIH”); and in 1999, he incorporated Royal Coronado Co Ltd., a Nevada Corporation (“Royal Coronado”). 

                In late 2000/early 2001, Mr. Lee began his foray into the Chinese market and began investing in Chinese private businesses on a small scale, to gain hands-on knowledge of operating in China. He incorporated L & L Financial Holdings, Co. Ltd, a Nevada Corporation, at the end of 2000, as a subsidiary of LLIH.

In 2001 Mr. Lee began consolidating his entities. Royal Coronado became a Securities and Exchange Commission reporting company when it registered its common stock on Form 10-SB (General Form of Registration of Securities of Small Business Issuers).  Lee and Lam was acquired by LLIH as its second subsidiary and thereafter renamed L & L Financial Investment Co, Ltd. Then in August, Royal Coronado acquired all of the shares of LLIH, and as a result of the share exchange, all former stockholders of LLIH became majority shareholders of Royal Coronado.    

In September 2001, the Company changed its name to L & L Financial Holdings, Inc. (“LLFH”) and we would continue to hold two subsidiaries for the next few years. L & L Financial Investment Co. Ltd, the Hong Kong based subsidiary later changed its name to Global Future Company, Ltd.

In December 2004 we purchased our third subsidiary, a 51% equity interest in Liu Liuzhou Liuerkong Machinery Co., Ltd (“LEK”) in China which manufactured and marketed air compressors for industrial usage, and manufactured plastic injection molding machineries.  In June 2005, we increased our ownership in LEK to 60.4%.  In February 2008, we were assigned another 20% of LEK’s equity ownership from the minority shareholders.

In 2006, we ceased operations of our two other subsidiaries, moving away from consulting to focus on LEK and similar opportunities.  In October 2006, we purchased 60% of the equity in Kunming Biaoyu Industrial Boiler Co., Ltd (“KMC”), a coal consolidator and wholesaler in business since 1996.

 In December 2007, KMC entered into a Joint Coal Exploration Cooperation Agreement with the owner of the Tian Ri coal mine. In 2007, the remaining 40% of the equity of KMC was assigned to us by the minority shareholder. In January 2008, we expanded KMC’s operations by injecting additional capital and began the initial development (i.e., mainly mining exploration) of the Tian Ri mine.

In March 2008, we changed our name to “L & L International Holdings, Inc.”

 Effective May 1, 2008, we acquired a 60% equity interest in the DaPuAn mine and the SuTsong mine. 

 In August 2008, our common stock started to trade on the Over-the-Counter Bulletin Board (“OTC Bulletin Board”) in the U.S. under the symbol “LLFH”.

 On January 23, 2009, we entered into an agreement to dispose of our equity interest in LEK. According to the terms of the agreement, we returned all of the shares we owned in LEK to the minority shareholders of LEK; and the minority shareholders of LEK returned all the shares it owned in L&L to us. Accordingly, we received 1,708,283 of our common stock valued at $4,168,211 while we returned 1,517,057 shares of LEK which we owned. We hold 191,226 shares or 9% of the shares as a remaining interest in LEK.

In July 2009, we acquired a 65% equity interest in Hon Shen Coal Co LTD (HSC) coal washing facilities in China.

Effective August 2009, we increased our ownership in the DaPuAn and SuTsong mines to 80%.In October 23, 2009, we increased our ownership interest from 65% of HSC’s coal washing facilities to 93% of HSC’s overall business operations: coal washing and coking.

 Effective November 1, 2009, our subsidiary L & L Yunnan Tiannen Industry, Ltd (“TNI”), of which we own a 98% equity interest, acquired 100% of the equity interest of Zone Lin Coal Coking Factory in China (“ZoneLin”). 

 Also effective November 1, 2009, KMC through its subsidiary Baoxing Co., entered into an agreement to acquire 100% of Ping Yi mine operations.  9% of the Company’s interest in LEK was transferred as a part of the paid consideration. 

 In December 2009, L & L Energy, Inc., a Nevada corporation, merged into L & L International Holdings, Inc. and L & L International Holdings, Inc., the surviving entity after the merger, changed its name to “L & L Energy, Inc.”

 In December 2009, the Chinese government approved the Company’s newly formed subsidiary L&L Yunnan Tiannen Industry Co Ltd (“TNI”).  The Company currently owns a 98% equity interest.  On January 1, 2010 but effective November 30, 2009, TNI acquired 100% of the equity of SeZone County Hong Xing Coal Washing Factory (“Hong Xing”).

 In January 2010, L & L Energy, Inc.’s shares of common stock began trading under the symbol “LLFH” on the OTC Bulletin Board.

 On February 18, 2010, our shares of common stock started to trade on the NASDAQ Global Market under the symbol “LLEN”.

 On April 18, 2010, we executed an Equity Sale and Purchase Agreement with Guangxi Liuzhou Lifu Machinery Co, Ltd, selling our 93% equity ownership in Hon Shen Coal Co. Ltd (“HSC”) for a total of 41,000,000 RMB or approximately US $6 Million. Our original purchase price for our aggregate 93% interest in HSC was approximately US $3.86 Million.

 In June 2010, we opened the Ping Yi coal washing plant near the Ping Yi mine. The coal washing plant washes coal from the Ping Yi mine as well as from third-party mines.

In March of 2011, we acquired a majority controlling interest of the DaPing coal mine in China.  We agreed to pay approximately USD $18 million to the original owner of the mine over a period of time in exchange for management control and 60% equity interests. 

 In March 2011, we established a coal wholesale and distributor corporation in China (“Yunnan L & L Tai Fung” or “Tai Fung”) and own a 98% equity interest in Tai Fung. We also transferred Hong Xing from TNI to Tai Fung.

In November 2011, we established a coal wholesale and distributor corporation in China (DaXing L & L Coal Co., Ltd.). DaXing L & L Coal Company is the third coal wholesale operation under L & L and the Company’s first in the Guizhou Province.

⁽¹⁾  In accordance with applicable PRC regulations on ownership of mining-related companies, this equity ownership is held in  

   trust for the benefit of the Company by a Chinese citizen nominee.

(1)   The reserves reported are in-place reserves as reported in the engineering reports provided when the mines were acquired by the Company, which refer to coal reserves in-situ   prior to the deduction of pillars of support, barriers or constraints for mining.  Please note that “In-Place Reserve” as used here is a term used in China to mean coal-reserve quantity computed by (Chinese) government-authorized mining engineer(s) or engineering firms.  In China, the Chinese government limits the annual production volume of coal from each coal mine by imposing production benchmarks in governmentally-issued coal production permits.  Therefore, the Company is not in the position to produce coal at rates or volumes significantly above those set forth in the corresponding coal-production permits.

(2)    Coal preparation plant recovery rate refers to the percentage of clean coal extracted/ recovered from raw coal after the washing process at the coal washing facilities owned/controlled by the Company.  Currently only the Ping Yi mine and the DaPuAn Mine have washing facilities on-site. 

(3)    In China, all mines are owned by the Chinese government. See expanded disclosure below.

The following definitions apply to our mining operations:

•          Reserve. That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.  Note: Reserves are customarily stated in terms of “ore” when dealing with metalliferous minerals; when other materials such as coal, oil, shale, tar, sands, limestone, etc. are involved, an appropriate term such as “recoverable coal” may be substituted.

•          Proven (Measured) Reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling, and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

•          Probable (Indicated) Reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

DaPuAn Coal Mine

                DaPuAn Coal Mine is located in Bai Zi Chong, DaPuAn Village, Xiongbi Town, Shizong County, Yunnan Province, China. It is an underground coal mine and is accessible by public roads. The map below shows the location of DaPuAn Coal Mine.

 Before our acquisition of a majority controlling interest in the DaPuAn mine, the mine was operated by SeZone County DaPuAn Coal Mine pursuant to resource mining permits effective from 2009 through 2015. In May 2008, we acquired majority controlling ownership interest in the resource mining permits and the mining rights to the DaPuAn mine and assumed mining operations.

It is a general national policy that the Chinese government owns such resources as coal and other minerals. Accordingly, the amount of coal that we can extract from the mine is based on a mining right issued by the Yunnan Province Municipal Bureau of Land and Resource. The mining right is issued following a reserves appraisal report submitted by government-authorized mining engineers, and the mining right is issued upon approval of that appraisal report by the Qujing Municipal Bureau of Land and Resource in Yunnan, China. The amount of coal that can be extracted under the mining right represents the coal tonnage that the Chinese government (the Yunnan Province Municipal Bureau of Land and Resource) has authorized L & L Energy, Inc. to extract in compliance with the applicable laws and regulations in China.

Under current mining rights for the DaPuAn Mine, we are permitted to extract coal from DaPuAn mine. Mining rights are generally granted for terms of 50 years. Under our current production rate at DaPuAn, useful life of the mine is approximately 29 years. Coal selling price in Yunnan province is determined on a per ton basis, and is subject to change based on the prevailing market price as influenced by the State Bureau of Coal Industry of Yunnan. The original owner paid the one-time extraction license fee when it acquired the original mining rights to the mine prior to our acquisition of the DaPuAn Mine. We pay the required government taxes for the coal we extract from the DaPuAn Mine.

A resource mining permit issued by the Yunnan Province Municipal Bureau of Land and Resource specifies the acreage of production of the DaPuAn Mine’s mining area and the mine’s designated annual production capacity. The resource mining permit for the DaPuAn mine estimates that the acreage of production is 0.7072KM2 and the scale of production is 150,000 tons per year based on current mine operating conditions, and we are in the process of expanding the mine’s capacity to 300,000 tons per year. The Qujing Municipal Land and Mining Right Appraisal Firm report dated June 30, 2008 estimates the total In-Place Reserve for the DaPuAn Mine was 7.81 million tons.

 Coal from DaPuAn coal mine is for industrial use and is extracted from DaPuAn mine using traditional mining methods. All raw coal extracted from DaPuAn mine is loaded and transported by a chain conveyor into crates which are carried out to the surface by an electrical winch. Air compressors are provided for underground air tool use. Electrical power is supplied internally our own power stations through state-owned power lines, and supplied to the underground work site through a double-circuit cable designed to mitigate and circumvent potential power supply disruptions. Normal water inflow into the mine is controlled by a system of ditches, sumps, pumps and drainpipes installed throughout the mine tunnels. The mine’s ventilation system includes exhaust fans on the surface of the main incline. Auxiliary fans are used as needed.

              The extracted coal is transported by truck to a warehouse located near the mine site, processed at our coal-washing facility and sorted. Out of the coal produced at the DaPuAn Mine, typically a portion is sold to customers as raw coal, a portion is sold after the washing process as washed fine coal, and a portion that meets certain specific chemical requirements is sold as coking coal. Coking coal is sent to a coking plant to further process it into high valued coke. Coke is a critical material for making of steel.

              We employ approximately 360 employees at DuPuAn Mine.

              The DaPuAn Mine’s annual production volumes for the years ended April 30, 2007 through April 30, 2011 are as follows:

The Company did not acquire interests in DaPuAn mine until May 1, 2008.  Because the original owner(s) of the mine did not retain annual production information for the mine with respect to 2007 and 2008, we are unable to accurately provide the corresponding annul production numbers.

 SuTsong Coal Mine

SuTsong Coal Mine is located in A’ang Town, Luoping County, Yunnan Province, China. The SuTsong coal mine is an underground coal mine and is accessible by public roads. The map below shows the location of SuTsong Coal Mine.

Before our acquisition of majority controlling interest of the SuTsong mine, the mine was operated by LoPing County SuTsong Coal Mine pursuant to resource mining permits effective from 2009 through 2015. In May 2008, we acquired majority controlling ownership interest in the resource mining permits and the mining rights to the SuTsong mine and assumed mining operations.

                It is a general national policy that the government owns such resources as coal and other minerals. Accordingly, the amount of coal that we can extract from the mine is based on a mining right issued by the Yunnan Province Municipal Bureau of Land and Resource. The mining right is issued following a reserves appraisal report submitted by government-authorized mining engineers, and the mining right is issued upon approval of such appraisal report by the Qujing XiaGuang Geological Engineering Co. Ltd. in Yunnan, China. The amount of coal that can be extracted under the mining right represents the coal tonnage that the Chinese government (the Yunnan Province Municipal Bureau of Land and Resource) has authorized the Company to extract in compliance with the applicable laws and regulations in China.

                Under current mining rights for the SuTsong Mine, we are permitted to be extracted from SuTsong mine. These rights generally granted for terms of 50 years. Under our current production rate at SuTsong, useful life of the mine is approximately 17 years. Coal selling price in Yunnan province is determined on a per ton basis, and is subject to change based on the prevailing market price which is influenced by the State Bureau of Coal Industry of Yunnan.The original owner paid the one-time extraction license fee when it acquired the original mining rights to the mine prior to our acquisition of the SuTsong Mine. We pay the required government taxes for the coal we extract from the SuTsong Mine.

                Coal from SuTsong coal mine is for industrial use and is extracted from SuTsong mine using traditional mining methods. All raw coal extracted from SuTsong mine is loaded and transported into crates which are carried out to the surface by an electrical winch. Air compressors are provided for underground air tool use. Electrical power is supplied internally from our own power stations through state-owned power/utility lines, and supplied to the underground work site through a double-circuit cable designed to mitigate and circumvent potential power supply disruptions. Normal water inflow into the mine is controlled by a system of ditches, sumps, pumps and drainpipes installed throughout the mine tunnels. The mine’s ventilation system includes an exhaust fan on the surface of the main incline. Auxiliary fans are used as needed.

                The extracted coal is shipped via trucks to warehouses located near the mine site and processed at our coal-washing facility for washing and sorting. Samples are taken prior to and after the coal-washing process, to analyze and determine coking readiness which is based primarily on coal moisture, ash content, sulfur percentage, and volatile contents. Of the coal produced at the SuTsong Mine, typically a portion is sold to customers as raw coal, and certain portions as washed coal.

                We employ approximately 250 employees at SuTsong mine.

               The SuTsong Mine’s annual production volumes for the years ended April 30, 2009 through April 30, 2011 are as follows:

The Company did not acquire interests in SuTsong mine until May 1, 2008.  Because the original owner(s) of the mine did not retain annual production information for the mine with respect to 2007 and 2008, we are unable to accurately provide the corresponding annul production numbers.

Ping Yi Coal Mine

The Ping Yi Coal Mine is located in Yiche Village, Ping Guan Town, Liu Panshui City, Pan County, Guizhou Province, China. It is an underground coal mine and is accessible by public roads. The map below shows the location of Ping Yi Coal Mine.

Before our acquisition of a majority controlling interest in the Ping Yi mine, the mine was mainly operated by Mr. Bao Guo Zhang. In January 2010, we acquired majority controlling ownership interest in the resource mining permits and the mining rights to the Ping Yi mine and assumed mining operations.

 It is a general national policy that the Chinese government as a general national policy that the government owns such resources as coal and other minerals. Accordingly, the amount of coal that we can extract from the mine is based on a mining right issued by the Guizhou Province Municipal Bureau of Land and Resource. The mining right is issued following a reserves appraisal report submitted by government-authorized mining engineers, and the mining right is issued upon approval of such appraisal report by the Guizhou Province National Land Resources Survey and Planning Institute in Guizhou Province. The amount of coal that can be extracted under the mining right represents the coal tonnage that the Chinese government (the Guizhou Province Municipal Bureau of Land and Resource) has authorized L & L Energy, Inc. to extract in compliance with the applicable laws and regulations in China.

Under current mining rights for the Ping Yi mine, we are permitted to extract coal from Ping Yi mine. Mining rights are generally granted for terms of 50 years. Under our current production rate at Ping Yi, useful life of the mine is approximately 12 years. Coal selling price in Guizhou province is determined on a per ton basis, and is subject to change based on the prevailing market price as influenced by the State Bureau of Coal Industry of Guizhou. The original owner paid the one-time extraction license fee when it acquired the original mining rights to the mine prior to our acquisition of the Ping Yi mine. We pay the required government taxes for the coal we extract from the Ping Yi mine.

                A resource mining permit issued by the Guizhou Province Municipal Bureau of Land and Resource specifies the acreage of production of the Ping Yi mine’s mining area and the mine’s designated annual production capacity. The resource mining permit for the Ping Yi mine estimates that the acreage of production is 2.2694KM2 and the scale of production is 150,000 tons per year based on current mine operating conditions, and we are in the process of expanding the mine’s capacity to 300,000 tons per year. The Guizhou Land Survey & Plan Institute report dated January 2008 estimates the total In-Place Reserve for the Ping Yi Mine was 13.506 million tons.

Coal from Ping Yi coal mine is for industrial use and is extracted from Ping Yi mine using traditional mining methods. All raw coal extracted from the Ping Yi mine is loaded and transported by a chain conveyor into crates which are carried out to the surface by an electrical winch. Air compressors are provided for underground air tool use. Electrical power is supplied internally from our own power stations through state-owned power lines, and supplied to the underground work site through a double-circuit cable designed to mitigate and circumvent potential power supply disruptions. Normal water inflow into the mine is controlled by a system of ditches, sumps, pumps and drainpipes installed throughout the mine tunnels. The mine’s ventilation system includes exhaust fans on the surface of the main incline. Auxiliary fans are used as needed.

The extracted coal is transported by truck to a warehouse located near the mine site, processed at our coal washing facility and sorted. Of the coal produced at the Ping Yi mine, typically a portion is sold to customers as raw coal, a portion is sold after the washing process as washed fine coal, and a majority of the coal is sold as coking coal. Coking coal is sent to a coking plant to further process it into high valued coke. Coke is a critical material for making of steel.

                We employ approximately 300 employees at the Ping Yi mine.

                The Ping Yi mine’s approximate annual production volumes for the years ended April 30, 2007 through April 30, 2011 are as follows:

The Company did not acquire interests in Ping Yi mine until November 1, 2009. Because the original owner(s) of the mine did not retain annual production information for the mine with respect to 2007, 2008 and 2009, we are unable to accurately provide the corresponding annul production numbers.

Da Ping Coal Mine

The Da Ping Coal Mine is located in Shinao Village, Ping Guan Town, Pan County, Liu Panshui City, Guizhou Province, China. It is an underground coal mine and is accessible by public roads. The map below shows the location of the DaPing Coal Mine.

Before our acquisition of majority controlling interest of the Da Ping mine, the mine was wholly owned and operated by Mr. Hobin. Effective March 15, 2011, we acquired majority ownership interest in the Da Ping mine, including 60% interest in the corresponding resource mining permits and the mining rights to the Da Ping mine, and assumed the mining operations. Under the transfer agreement between the Company and Mr. Hobin effective March 15, 2011, the Da Ping mine and all related assets will be transferred to a newly formed Chinese corporate entity (“DaPing Co., Ltd.”), and 60% of the entity will be owned by L& L Energy, Inc. and the remaining 40% owned by Mr. Hobin.

It is a general national policy that the Chinese government owns such resources as coal and other minerals. Accordingly, the amount of coal that the Company can extract from the mine is based on a mining right issued by the Guizhou Province Municipal Bureau of Land and Resource. The mining right is issued following a reserves appraisal report submitted by government-authorized mining engineers, and the mining right is issued upon approval of such appraisal report by the Guizhou Province National Land Resources Survey and Planning Institute in Guizhou Province. The amount of coal that can be extracted under the mining right represents the coal tonnage that the Chinese government (the Guizhou Province Municipal Bureau of Land and Resource) has authorized the Company to extract in compliance with the applicable laws and regulations in China.

Under current mining rights for the Da Ping mine, we are permitted to extract coal from Da Ping mine. Mining rights are generally granted for terms of 50 years. Under our current production rate at Da Ping, useful life of the mine is approximately 29 years, with the approval of a new license. Coal selling price in Guizhou province is determined on a per ton basis, and is subject to change based on the prevailing market price as influenced by the State Bureau of Coal Industry of Guizhou. The original owner paid the one-time extraction license fee when it acquired the original mining rights to the mine prior to our acquisition of the Da Ping mine. We pay the required government taxes for the coal we extract from the Da Ping mine.

A resource mining permit issued by the Guizhou Province Municipal Bureau of Land and Resource specifies the coordinates of the Da Ping mine’s mining area and the mine’s designated annual production capacity. The resource mining permit for the Da Ping mine estimates that the mine’s capacity is 150,000 tons per year based on current mine operating conditions, and we are in the process of expanding the mine’s capacity to 300,000 tons per year. Da Ping mining reserve is 14.75 million tons. The quality of the coal is low sulfur, ash, metallurgical (coking) coal.

Coal from Da Ping coal mine is for industrial use and is extracted from Da Ping mine with using traditional mining methods. All raw coal extracted from Da Ping mine is loaded and transported by a conveyor belt delivery system and carried up to the surface. Air compressors are provided for underground air tool use. Electrical power is supplied internally our own power stations through state-owned power lines, and supplied to the underground work site through a double-circuit cable designed to mitigate and circumvent potential power supply disruptions. Normal water inflow into the mine is controlled by a system of ditches, sumps, pumps and drainpipes installed throughout the mine tunnels. The mine’s ventilation system includes exhaust fans on the surface of the main incline. Auxiliary fans are used as needed. The present fans are capable satisfying ventilation requirements of the mining operation.

The extracted coal is transported by truck to a warehouse located near the mine site, processed at our coal washing facility and sorted. Of the coal produced at the DaPing mine, typically a portion is sold to customers as raw coal, a portion is sold after the washing process as washed fine coal, and a portion that meets certain specific chemical requirements is sold as coking coal. Coking coal is sent to a coking plant to further process it into high valued coke. Coke is a critical material for making of steel.

We employ approximately 120 employees at DaPing mine.

Coal extracted from Da Ping coal mine is for industrial use.  The Da Ping mine’s approximate annual production volumes for the years ended April 30, 2007 through April 30, 2011 are as follows:

The Company did not acquire interests in Da Ping mine until March 15, 2011.  Because the original owner(s) of the mine did not retain annual production information, we are unable to accurately provide the corresponding annul production numbers.

TianRi Mine

TianRi Mine has an estimated reserve of 53 million tons of coal, but as of July 31, 2011, the Company has not developed the mine because it believes that, under the current coal market condition in Yunnan and Guizhou provinces, it is more cost effective to focus on acquiring existing mines with full production capability than developing a new mine, such as the TianRi mine. In addition of taking advantage of the current coal consolidation policy in Guizhou, we are also reviewing various alternatives and options in respect of the mine. 

Coal Washing Operations

The Company has three coal washing facilities.  DaPuAn coal washing plant and Hong Xing coal washing plant are located in Yunnan Province and Ping Yi coal washing plant is in Guizhou Province.

Coal washing involves crushing coal and washing out soluble sulfur compounds with water or other solvents.  This procedure eliminates impurities in the coal and improves its quality and increases its value.  Each ton of washed coal requires approximately 1.4 tons of raw coal.  Approximately 50% of washed coal qualifies as coking coal because it meets certain chemical requirements and can be processed into highly-valued coke, which is a critical material for making steel. The coal washing process eliminates impurity of the coal, and thus improves the quality of the coal and increases value of  related coal products.  Test samples are taken prior to and after the coal-washing process, to analyze and determine efficiency of the washing process, and determine if coal is suitable as coking coal, based primarily on moisture, ash content, and sulfur percentage.  

In addition to washed coal, the coal-washing process produces two byproducts:

                (1)    “Medium” coal, a PRC coal industry classification, is coal that does not have sufficient thermal value for coking, and is mixed with raw coal and even coal slurries, and sold for home and industrial heating purposes; and

                (2)    Coal slurries, sometimes called coal slime, are the castoffs and debris from the washing process.   Coal slurries can be used as a fuel with low thermal value, and are sold “as is” or mixed with “medium” coal.

DaPuAn Coal Washing Plant

DaPuAn coal washing facility is located in Bai Zi Chong, DaPuAn Village, Xiongbi Town, Shizong County, Yunnan Province, China. It is near DaPuAn mine and is accessible by public roads. The map below shows the location of DaPuAn coal washing facility.

In May 2009, we finished constructing the DaPuAn coal washing facility, which has a capacity of 300,000 tons per year and exclusively washes coal from our DaPuAn mine as needed depending on the quality of coal and customer specifications.  The employees at the DaPuAn coal washing facility are included in the DaPuAn mine employee count.

Ping Yi Coal Washing Plant

Ping Yi coal washing facility is located in Yiche Village, Ping Guan Town, Liu Panshui City, Pan County, Guizhou Province, China. It is near Ping Yi mine and is accessible by public roads. The map below shows the location of Ping Yi coal washing facility.

In June 2010, we finished constructing the Ping Yi coal washing facility, which has a capacity of 600,000 tons per year and washes coal from our Ping Yi mine in addition to third party mines. We employ approximately 80 employees at the Ping Yi coal washing facility.

Hong Xing Coal Washing Plant

Hong Xing coal washing facility is located in DaWaLu Village, Xiongbi Town, Shizong County, Yunnan Province, China. It is accessible by public roads. The map below shows the location of Hong Xing coal washing facility

On January 1, 2010 but effective November 30, 2009, our subsidiary TNI acquired 100% of the equity of SeZone County Hong Xing Coal Washing Factory (“Hong Xing”), which had a capacity of 200,000 tons per year and washes coal from third party mines. We are increasing our capacity to 600,000 tons per year.

We employ approximately 215 employees at the Hong Xing coal washing facility.

Coal Wholesale Operations

We engage in coal wholesale and distribution through three subsidiaries: Kunming Biaoyu Industrial Boiler Co., Ltd (“KMC”) and Yunnan L&L Tai Fung (“Tai Fung”) in Yunnan Province and DaXing L & L Coal Co., Ltd. (“DaXing”) in Guizhou Province.

Kunming Biaoyu Industrial Boiler Co., Ltd. (“KMC”)               

We acquired majority equity interest in KMC in October 2006. KMC has two large coal storage facilities located in Yang Wei Shao, Fuyuan County, Qujing City, Yunnan Province and Baoyuan, Fuyuan County, Qujing City, Yunnan Province for its consolidation and wholesale operations with railroad loading access. Depending on market conditions, KMC usually brokers coal from small independent mine operators in its surrounding areas who may lack the means to transport coal from their mine sites or are otherwise unable to sell their coal due the size of their operations.

Yunnan L&L Tai Fung (“Tai Fung”)

Tai Fung was formed in March 2011 and is located in No. A6-101, LuHaiHuaYuan Residential Quarter Wenbi Ave., DanFeng Town, Shizhong County, Yunnan Province, China. We expect that it will consolidate and enhance our trading, wholesale, and distribution capability in China.

DaXing L&L Coal Co., Ltd. (“DaXing”)

DaXing L & L Coal Company was formed in November 2011 and is located in Fu Yuan Lou, 320 National Highway, Hong Gou Town, Guizhou Province, China. DaXing L & L Coal Company is the third coal wholesale operation under L & L and the Company’s first in the Guizhou Province. The office in Hong Gou will act as a sales, marketing, and operational center in Guizhou and house L & L’s new DaXing coal wholesale operation. With the approval from the government, the Company will be developing coal storage space and growing its distribution network with our new entity in Guizhou.

We employ approximately 55 employees at our KMC, Tai Fung and DaXing operations.

Coke Manufacturing Operations

Coke is a hardened, solid carbonaceous residue derived from baking low-ash, low-sulfur bituminous coal in an oven without oxygen at high temperatures so that the fixed carbon and residual ash are fused together while volatile constituents of the coal such as water, coal-gas, and coal-tar are driven off. We produce metallurgical coke.

Metallurgical coke is primarily used for steel manufacturing. China has exacting national standards for coke, based upon a variety of metrics, including most importantly, ash content, volatilization, caking qualities, sulfur content, mechanical strength and abrasive resistance.  Typically, metallurgical coke must have more than 80% fixed carbon, less than 15% ash content, less than 0.8% sulfur content and less than 1.9% volatile matter.  According to national standards, metallurgical coke is classified into three grades – Grade I, Grade II and Grade III, with Grade I being the highest quality , and chemical coke is its separate grade.  Generally, customers do not provide specifications for coke.  However, we occasionally make requested adjustments, for instance to moisture content, as requested by customers from time to time.  The amount of each type of coke that our coking facility produces is based on market demands, although historically its customers have only required Grade II and III metallurgical coke.  

                In the traditional coking process, small amounts of coking gas are emitted into air. Our coking facility has equipment to capture the emitted gas, and to recycle the gas emission into benzene and other byproducts in compliance with the Chinese environmental standards and requirements.

ZongLin Coking Plant

The ZoneLin Coking Plant is located in QingPingShao Village, ALu Township, LuoPing County, Yunnan Province, China. It is accessible by public roads. The map below shows the location of the ZoneLin.

Effective November 1, 2009, we acquired the ZoneLin coking operation, which has the capacity to produce 150,000 tons of coke annually and we exploring plans to increase our capacity. we purchase suitable coal from third parties to meet the needs of our coking plant.

We employ approximately 201 employees at the ZoneLin Coking Plant.

CUSTOMERS

We derive our revenues from selling coal to customers, mainly State Owned Enterprises (SOE) in Yunnan and Guizhou Provinces. Our thermal or steam coal is sold to SOEs that are utilities that generate power, mainly electricity.  Our metallurgical coal and coking coal is sold to SOEs that make steel, though some steelmaker customers also purchase thermal coal to generate power for the steel factory. The following chart discloses the Company’s approximate number of customers and their average purchase sizes fFor the fiscal year ended April 30, 2011.

Metallurgical coal has a higher selling price than thermal coal, which increases our average unit price and revenue in our coal mining segment.

The Company sells raw coal (untreated), fine coal (processed in our coal washing facilities), and coking coal (processed at a very high temperature in the absence of air).  The following chart discloses the composition of raw, fine, and coking coal sold to our customers for the fiscal year ended April 30, 2011.

DISTRIBUTION

        During the year ended April 30, 2011, we sold approximately 87% of our coal through direct sales and approximately 13% through third-party wholesalers. The amount sold through third-party wholesalers decreased significantly in the year ended April 30, 2011.  And all such sales were made in the ordinary course of business.  

Our direct sales force consists of approximately 150 full and part time employees who market directly to our customers, who are mostly end users of coal with long-term sales agreements. While individual spot sales might be made to a customer if we have adequate capacity at the time, most of our sales are pursuant to agreements which are signed for two- to four-year terms, with monthly adjustments on pricing. Our customers are primarily located in the Yunnan and Guizhou Provinces, and are accessible by rail lines, which is the most cost effective method for coal transport and which represents the primary means of transporting coal products to our customers.

SUPPLIERS

The primary materials used in our coal mining and processing operations are: (i) steel and logs to support underground tunnels for the mining operations; (ii) cement for the construction of underground tunnels; and (iii) water used in our coal washing and coking production process. We procure logs, steel and cement principally from local suppliers and usually contract with our suppliers annually. Water is procured primarily from our own water drilling. The ultimate price of materials is set at market rates or determined through negotiation. We believe that we have well-established, cooperative relationships with our suppliers, enabling us to secure reliable supplies of the materials required in our production process. We believe that a number of alternative suppliers exist for the key materials required for our coal operations, and there is no shortage of supplier to choose from.  For the year ended April 30, 2011, we had one major supplier provided over 10% (approximately $12.9 million) of our total purchases. The corresponding accounts payable has been paid in full.

We use electricity in our operations from both local power companies and our own power facilities. Electricity prices in China are regulated by the government. Total electricity costs are not materially significant to our operations.

• China Coal Law, which regulates coal mining enterprises and their activities including addressing mining safety issues.  
• China Mineral Resources Law, which requires a mining business to have exploration and mining licenses from provincial or local land and resources agencies.  
• China Mine Safety Law, which requires a mining business to have a safe production license and provides for random safety inspections of mining facilities.  
• China Environmental Law, which requires a mining project to obtain an environmental feasibility study of the project.  
• Foreign Exchange Controls. The principal regulations governing foreign exchange in China are the Foreign Exchange Control Regulations (1996) and the Administration of Settlement, Sale and Payment of Foreign Exchange Regulations (1996), (“the Foreign Exchange Regulations”). Under the Foreign Exchange Regulations, Renminbi (“RMB”) is freely convertible into foreign currency for current account items, including the distribution of dividends. Conversion of RMB for capital account items, such as direct investment, loans and security investment, however, is still subject to the approval of the State Administration of Foreign Exchange (“SAFE”). Under the Foreign Exchange Regulations, foreign-invested enterprises are required to open and maintain separate foreign exchange accounts for capital account items. In addition, foreign-invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE.  
• Our operating subsidiaries in China have been approved by land and resources departments of local governments. Chinese regulations require that mining enterprises procure an exploration or mining license from the land and resource department of local governments before they can carry out exploration or mining activities. This license requires that an enterprise follow proper procedures in its own exploring or mining activities and in selling its products to customers. We have secured or are in the process of securing the necessary exploration or mining licenses from local governments.
• Chinese regulations also require that a mining company must have a safety certification from China’s Administration of Work Safety before it can engage in mining and extracting activities. We have secured or are in the process of securing the necessary safety certifications from the Administration of Work Safety of local governments. Our mining operations have been granted an environmental certification from China Bureau of Environmental Protection.

In March 2011, China’s National People’s Congress approved the nation’s twelfth “Five-Year Plan” (the “Plan”) which provides macro-level guidance in China with respect to national social and economic growth/development direction in the coming five years.  In the Plan, the importance of consolidating smaller coal mines into large coal holding companies via merger and acquisition was specifically mentioned. 

In line with the implementation/spirit of the Plan, the Guizhou province of China (in which the Company operates two of its four coal mines) on April 15, 2011 issued a provincial-level notice/order (the “Guizhou Consolidation Policy”) that set forth the following key points, among others—by the end of year 2013: (i) the total number of coal-mine related business enterprises in the Guizhou province (“Guizhou Coal Enterprise”) shall be limited to no more than 200; (ii) each Guizhou Coal Enterprise in Gui Yang City of Guizhou province shall reach at least the capacity to produce One Million (1,000,000) tons of coal per year; (iii) each Guizhou Coal Enterprise in Liu Pan Shu City of Guizhou province shall reach at least the capacity to produce Two Million (2,000,000) tons of coal per year; (iv) for certain coal mines, the mechanization level for coal-mine development and coal mining shall reach respectively, 70% and 45% (by the end of year 2015, 80% and 55% respectively.)    

While the Guizhou Consolidation Policy lacks specificity in some areas, it is clear that owners of smaller coal mines in the Guizhou province will face significant pressure in the next few years to sell their mines to bigger coal enterprises in the province.  Therefore, the Company believes that the Guizhou Consolidation Policy is an opportunity to accelerate our acquisition of mines to become a leading regional coal company. 

EMPLOYEES

As of January 31, 2011, we have approximately 1600 employees, of which approximately 10 work in at our Seattle headquarters, approximately 25 work in our China Operations Center in Kunming City in Yunnan Province, approximately 55 work in our coal wholesale and distribution operations, approximately 360 work at DaPuAn mine and coal washing facility, approximately 250 work at SuTsong mine, approximately 300 work at Ping Yi mine, approximately 80 work at Ping Yi coal washing facility, approximately 200 work at ZoneLin coking plant, approximately 120 work at Da Ping mine, and approximately 215 work at Hong Xing coal washing facility.  Of our approximately 1,600 employees, approximately 1,200 are employed in a direct production capacity and, approximately 400 are employed in administration, sales, or executive capacity. The Company complies with all employment and labor laws in the United States and we comply with all employment laws in China, which require we have written contracts with all of our employees in China

INTELLECTUAL PROPERTIES AND LICENSES

                We have no material patents, trademarks, or other intellectual property, except that we hold various coal operating licenses issued by the China government to operate coal mines, coal wholesaling, coal washing and coal coking operations as described above.

RESEARCH AND DEVELOPMENT

In fiscal years ended April 30, 2011, 2010 and 2009, we did not incur any material expenditure on research and development activities.

AVAILABLE INFORMATION

We make publicly available free of charge, either on our Company website (www.llenergyinc.com) or via a web link to the U.S. Securities and Exchange Commission (“SEC”) website, our periodic reports (e.g., Form 10-K and Form 10-Q), our current reports (e.g., Form 8-K), our proxy statements, and any amendments thereof, as soon as reasonably practicable after we electronically or otherwise file such material with the SEC.  Please note that those information contained on our website is not a part of this annual report on Form 10-K and information on, or that can be accessed through, our website is not deemed “filed” with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933 (as amended) or the Exchange Act of 1934 (as amended).

DESCRIPTION OF PROPERTY

Company Offices, Production Facilities and Other Property: 

                As we operate in various parts of China, we own or lease the following buildings (the PRC government granted a 70-year renewable land use right to the owners of the buildings; no land-use right (70 years) limit for Taiwan property):

·      We own approximately 9,000 square feet of office space located at 898 Beijing Road, Kunming City, China which is used as our China Operations Center.

·      We lease approximately 7,500 square feet of office space for our executive offices, located at 130 Andover Park East, Seattle, Washington 98188.

·      We lease an office building, located at Suite 2503, United Plaza, Shenzhen, China, with approximately 1,600 sq ft of office space, which is used as our Shenzhen office.

·      We lease approximately 2,500 square feet of office space located at Civic Plaza, Suite 3401, Guangzhou, China, which is used as our south China center for new business development.

·      We lease approximately 2,777 square feet of office space located at Unit F, 13th Floor, Hua Kun Development Tower, 45 Zhonghua South Road, Guiyang, Guizhou, China, which is used as our offices for our Guizhou operations.

·      We lease approximately 3,617 square feet of office space located at the 4th & 5th Floor, Fu Yuan Lou, 320 National Highway, Hong Gou Town, Guizhou, China, which is used as our regional operations center in Pan County.

·      We lease approximately 149 square feet of office space located at 19th Floor, No.171, Songde Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) Zip Code: 11085, which is used as our operational center in Taiwan.

We believe that our existing facilities are well maintained and in good operating condition.

MANAGEMENT

                The following tables set forth information regarding current executive officers and directors of the Company. The Board of Directors includes four independent directors and our Chairman, Mr. Dickson V. Lee. Except as otherwise described below, all of the directors will serve until the next annual meeting of stockholders or until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Also provided herein are brief descriptions of the business experience of each director and executive officer and an indication of directorships held by each director in other companies subject to the reporting requirements under the federal securities laws.

Dickson V. Lee, Chief Executive Officer and Chairman of the Board
Mr. Lee founded the company in 1995. He has extensive management experience with KPMG and other U.S. companies in New York. Mr. Lee obtained his CPA in 1983 and is currently licensed in Washington state. Mr. Lee is fluent in Mandarin, Cantonese, and English, served as a judicial member of the Hong Kong SEC Insider Dealing Tribunal (a trial court) for six years. He earned his MBA from Dalhousie University, and received an Honorary Doctorate Degree from CYCU in Taiwan. He travels frequently between the US and China.