10-Q 1 llen10q2.htm 10-Q llen10q2.htm - Generated by SEC Publisher for SEC Filing

 

                                                         UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

——————————

FORM 10-Q

 

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ON OCTOBER 31, 2012.

 

OR

 

[  ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number: 000-32505 

 

 

L & L ENERGY, INC.

 (Exact name of Registrant as specified in its charter)

 

 

NEVADA

91-2103949

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

130 Andover Park East, Suite 200, Seattle, WA

 

98188

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant's telephone number, including area code: (206) 264-8065

 

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

 

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

 

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

Large accelerated filer [  ]     Accelerated filer [X]    Non-accelerated filer [  ]     Smaller reporting company []

 

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

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of December 10, 2012 there were 37,495,301 shares of common stock outstanding, with par value of $0.001.

 

 

1


 
 

                                                                                                   L & L ENERGY, INC.

 

                                                                                               Form 10-Q Quarterly Report

 

 

 

Table of Contents

 
     
   

Page

PART I – FINANCIAL INFORMATION

 
     

Item 1.

Condensed Consolidated Financial Statements – Unaudited

 
 

Balance Sheets as of October  31, 2012 and April 30, 2012

3

 

Statements of Income and Other Comprehensive Income for the three months

 
 

ended October 31, 2012 and 2011

4

 

Statements of Cash Flows for the three months ended October 31, 2012 and 2011

5

 

Notes to Condensed Consolidated Financial Statement – Unaudited

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38

Item 4.

Controls and Procedures

38

     
     

PART II – OTHER INFORMATION

 
     

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 1B.

Unresolved Staff Comments

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults upon Senior Securities

49

Item 4.

Reserved

49

Item 5.

Other Information

49

Item 6.

Exhibits

49

     

Signatures

 

49

Index to Exhibits

50

 

When we use the terms "we," "us," "our," "L & L" and "the Company," we mean L & L ENERGY, INC., a Nevada corporation, and its subsidiaries.

 

This report contains forward-looking statements that involve risks and uncertainties. Please see the sections entitled "Forward-Looking Statements" and "Risk Factors" below for important information to consider when evaluating such statements.

 

 

2


 
 

                                                                                              PART I – FINANCIAL INFORMATION

 

Item 1.   Financial Statements

L & L ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

AS OF OCTOBER 31, 2012 AND APRIL 30, 2012

 

(Unaudited)

     

October 31, 2012

 

April 30, 2012

ASSETS

       
 

CURRENT ASSETS:

       
 

Cash and cash equivalents

$

3,765,662

$

3,547,953

 

Accounts receivables

 

35,763,902

 

26,032,123

 

Prepaid and other current assets

 

19,908,993

 

17,540,206

 

Other receivables

 

4,771,564

 

8,738,868

 

Inventories

 

4,724,191

 

4,701,954

 

Asset held for discontinued operations

 

74,776,538

 

68,769,279

 

Total current assets

 

143,710,850

 

129,330,383

           
 

Property, plant, equipment, and mine development, net

 

111,424,080

 

85,469,222

 

Construction-in-progress

 

6,361,387

 

26,417,686

 

Intangible assets, net

 

70,578

 

79,491

 

Goodwill

 

915,881

 

919,017

 

Other assets

 

773,041

 

404,689

 

Long term receivable

 

26,310,365

 

27,840,433

 

Related party notes receivable

 

6,055,964

 

6,096,617

 

Total non-current assets

 

151,911,296

 

147,227,155

     

 

TOTAL ASSETS

$

295,622,146

$

276,557,538

           

LIABILITIES AND EQUITY

       

CURRENT LIABILITIES:

       
 

Accounts payable

$

1,491,284

$

799,101

 

Accrued expenses and other current liabilities

 

831,193

 

916,001

 

Other payables

 

20,041,264

 

19,102,859

 

Related party payables

 

12,693,932

 

17,251,921

 

Due to officers

 

926,333

 

414,667

 

Tax payable

 

13,301,805

 

12,633,204

 

Customer deposits

 

1,390,697

 

1,381,300

 

Liabilities held for discontinued operations

 

6,982,280

 

6,126,253

Total current liabilities

 

57,658,788

 

58,625,307

           

LONG-TERM LIABILITIES

       
 

Related party payable- Long term

 

303,910

 

304,951

 

Asset retirement obligations

 

1,836,735

 

1,772,833

 

Total long-term liabilities

 

2,140,645

 

2,077,784

           
 

Total Liabilities

 

59,799,433

 

60,703,091

           

EQUITY:

       

L&L ENERGY STOCKHOLDERS' EQUITY:

       
 

Preferred stock, no par value, 2,500,000 shares authorized, none issued and outstanding

 

-

 

-

 

Common stock ($0.001 par value, 120,000,000 shares authorized: 37,381,775 and 36,991,397 shares issued and outstanding at October 31, 2012 and April 30, 2012 respectively)

 

37,382

 

36,991

 

Additional paid-in capital

 

66,805,328

 

65,752,560

 

Accumulated other comprehensive income

 

10,291,270

 

10,622,683

 

Retained Earnings

 

110,064,192

 

96,134,782

 

Treasury stock (86,595 shares and 143,093 shares at October 31, 2012 and April 30, 2012 respectively)

 

(68,035)

 

(123,968)

Total L & L Energy stockholders' equity

 

187,130,137

 

172,423,048

 

Non-controlling interest

 

48,692,576

 

43,431,399

 

Total equity

 

235,822,713

 

215,854,447

TOTAL LIABILITIES AND EQUITY

$

295,622,146

$

276,557,538

 

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

3


 
 

 

L & L ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS PERIODS ENDED OCTOBER 31, 2012 AND 2011

(Unaudited)

   

For The Three Months Periods Ended October 31,

   

For The Six Months Periods Ended October 31,

   

2012

 

2011

   

2012

 

2011

NET REVENUES

$

45,504,279

$

29,452,302

 

$

84,952,377

$

58,952,062

COST OF REVENUES

 

33,625,414

 

21,030,857

   

63,173,428

 

43,033,617

GROSS PROFIT

 

11,878,865

 

8,421,445

   

21,778,949

 

15,918,445

                   

OPERATING COSTS AND EXPENSES:

                 

Salaries & wages-selling, general and administrative

 

856,801

 

2,611,902

   

1,894,514

 

3,515,862

Selling, general and administrative expenses, excluding salaries and wages

 

3,304,418

 

2,302,624

   

5,902,374

 

4,493,423

Total operating expenses

 

4,161,219

 

4,914,526

   

7,796,888

 

8,009,285

                   

INCOME FROM OPERATIONS

 

7,717,646

 

3,506,919

   

13,982,061

 

7,909,160

OTHER INCOME (EXPENSE):

                 

Interest income (expense)

 

117,069

 

179,740

   

224,335

 

376,373

Other income, net

 

562,188

 

(482,050)

   

890,414

 

(1,117,599)

Total other income

 

679,257

 

(302,311)

   

1,114,749

 

(741,227)

                   

INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES

8,396,903

 

3,204,608

   

15,096,810

 

7,167,933

PROVISION FOR INCOME TAXES

 

805,527

 

540,310

   

1,497,967

 

1,090,327

INCOME FROM CONTINUING OPERATIONS

 

7,591,376

 

2,664,298

   

13,598,843

 

6,077,606

                   

Income attributable to non-controlling interests

 

1,949,832

 

945,361

   

3,327,195

 

1,706,870

Income attributable to L & L

 

5,641,544

 

1,718,937

   

10,271,648

 

4,370,736

                   

DISCONTINUED OPERATIONS - NET OF TAX

                 

Net income from discontinued operations attributable to non-controlling interests

1,091,865

 

520,080

   

2,060,027

 

455,884

Net income from discontinued operations attributable to L & L

 

2,101,397

 

2,071,003

   

3,657,762

 

1,805,093

TOTAL (LOSS) INCOME FROM DISCONTINUED OPERATIONS

 

3,193,262

 

2,591,083

   

5,717,789

 

2,260,977

                   

NET INCOME

$

10,784,638

$

5,255,381

 

$

19,316,632

$

8,338,583

                   

Net income attributable to non-controlling interests

$

3,041,697

$

1,465,441

 

$

5,387,222

$

2,162,754

Net income attributable to L & L

 

7,742,941

 

3,789,940

   

13,929,410

 

6,175,829

                   

OTHER COMPREHENSIVE INCOME:

                 

Foreign currency translation gain

 

1,015,096

 

3,273,921

   

(331,413)

 

4,486,501

COMPREHENSIVE INCOME

$

11,799,734

$

8,529,302

 

$

18,985,219

$

12,825,084

                   

Comprehensive income attributable to non-controlling interests

$

3,233,916

$

2,006,831

 

$

5,328,203

$

2,867,882

Comprehensive income attributable to L & L

 

8,565,818

 

6,522,471

   

13,657,017

 

9,957,202

                   

INCOME PER COMMON SHARE – basic from continuing operations

$

0.15

$

0.05

 

$

0.27

$

0.14

(LOSS) INCOME PER COMMON SHARE – basic from discontinued operations

$

0.06

$

0.07

 

$

0.1

$

0.05

INCOME PER COMMON SHARE – basic

$

0.21

$

0.12

 

$

0.37

$

0.19

                   

INCOME PER COMMON SHARE – diluted from continuing operations

$

0.15

$

0.05

 

$

0.27

$

0.13

(LOSS) INCOME PER COMMON SHARE – diluted from discontinued operations

$

0.06

$

0.06

 

$

0.1

$

0.06

INCOME PER COMMON SHARE – diluted

$

0.21

$

0.11

 

$

0.37

$

0.19

                   

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – basic

 

36,988,915

 

32,225,085

   

37,569,600

 

31,788,767

                   

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - diluted

 

36,988,915

 

33,385,777

   

37,569,600

 

32,949,459

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

4


 

 

 

 

L & L ENERGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED OCTOBER 31, 2012 AND 2011

   

For The Six Months Periods Ended October 31,

     

2012

 

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income

$

19,316,632

$

8,338,583

 

Income from discontinued operations, net of income taxes

 

(5,717,789)

 

(2,260,977)

 

Income from continuing operations, net of income taxes

 

13,598,843

 

6,077,606

Adjustments to reconcile net income to net cash provided by operating activities:

       
 

Income from non-controlling interest

       
 

Depreciation and amortization

 

1,936,195

 

3,512,864

 

Stock compensation

 

1,053,157

 

2,261,045

 

Accretion of asset retirement obligation

 

63,903

 

69,941

Changes in assets and liabilities, net of businesses acquisitions:

       
 

Accounts receivable

 

(9,731,778)

 

(1,218,393)

 

Prepaid and other current assets

 

(2,368,787)

 

4,206,102

 

Inventories

 

(22,237)

 

(1,486,658)

 

Other receivable

 

3,967,304

 

1,726,323

 

Accounts payable

 

1,415,108

 

196,031

 

Customer deposit

 

9,397

 

(1,483,066)

 

Accrued and other liabilities

 

(85,849)

 

138,424

 

Taxes payable

 

670,120

 

327,203

 

Note receivable

 

40,653

 

(3,412,052)

Net cash provided by continuing operating activities

 

10,546,028

 

10,915,369

Net cash provided by discontinued operation

 

566,557

 

2,154,032

Net cash provided by operating activities

 

11,112,585

 

13,069,401

           

CASH FLOWS FROM INVESTING ACTIVITIES:

       
 

Acquisition of property and equipment

 

(660,412)

 

(665,714)

 

Construction-in-progress

 

(9,807,917)

 

(10,722,505)

 

Increase in restricted cash

 

-

 

(118,651)

 

Proceeds from repayment of long term receivable

 

1,530,069

 

-

 

Cash received from HSC disposal

 

-

 

963,651

Net cash used in continuing investing activities

 

(8,938,260)

 

(10,543,219)

Net cash used in discontinuing investing activities

 

-

 

(4,735,424)

Net cash used in investing operation

 

(8,938,260)

 

(15,278,643)

           

CASH FLOWS FROM FINANCING ACTIVITIES:

       
 

Due to officers

 

511,666

 

(75,000)

 

Proceeds from Treasury stock sold

 

55,933

 

3,585,951

 

Payment to previous owner of acquired mine

 

(4,342,510)

 

(1,676,307)

Net cash (used in) provided by continuing finacing activities

 

(3,774,911)

 

1,834,644

Net cash (used in) provided by financing activities

 

(3,774,911)

 

1,834,644

           

Effect of exchange rate changes on cash and cash equivalents

 

1,818,295

 

1,254,471

           

INCREASE IN CASH AND CASH EQUIVALENTS

 

217,709

 

879,873

CASH AND CASH EQUIVALENTS, BEGINNING OF YEARS

 

3,547,953

 

4,914,425

CASH AND CASH EQUIVALENTS, END OF YEARS

$

3,765,662

$

5,794,298

     

-

   

SUPPLEMENTAL INFORMATION

       

INTEREST PAID

$

43,216

$

72,819

INCOME TAX PAID

$

580,334

$

400,668

           

NON-CASH INVESTING AND FINANCING ACTIVITY:

       

Recovery of treasury stock

$

-

$

1,299

Payable to Daping shareholders

$

11,045,999

$

   17,064,815  

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

5


 
 

 

 

L & L ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1.   ORGANIZATION AND BASIS OF PRESENTATION

 

Description Of Business

 

L & L Energy, Inc. (“L&L” and/or the “Company”) was incorporated in Nevada, and is headquartered in Seattle, Washington.  Effective on January 4, 2010, the State of Nevada approved the Company’s name change from L&L International Holdings, Inc. to L & L Energy, Inc.  The Company is a coal (energy) company, and started its operations in 1995.  Coal sales are generated entirely in China, from coal mining, clean coal washing, coking and coal wholesale operations.  At the present time, the Company conducts its coal (energy) operations in Yunnan and Guizhou provinces, located in Southwest China.  

 

As of October 31, 2012, the Company has the following subsidiaries or operations in China:

 

·         Kunming Biaoyu Industrial Boiler Co., Ltd (“KMC”), which owns/controls coal wholesale operations, L&L Coal Partners (the “2 Mines” or “LLC”), which owns/controls two coal mining operations (DaPuAn Mine and SuTsong Mine) and DaPuAn Mine’s coal washing operations; KMC also owns BaoXing Economic Trade Co. which is in wholesale operations.

·         L&L Yunnan Tianneng Industry Co. Ltd. (“TNI”), which owns/controls ZoneLin Coal Coking Factory (“ZoneLin”);

·         Yunnan L&L Tai Fung (“Tai Fung”), which owns/controls SeZone County Hong Xing Coal Washing Factory (“Hong Xing”) and coal wholesale and distribution operations; and

·         Da Ping Coal Mine (“DaPing”);

·         Wei She Coal Mine (“Weishe”)

·         DaXing L&L Co. Ltd

·         Guizhou LiWei Coal Co. Ltd

 

Basis Of Presentation

 

The consolidated financial statements include the accounts of L & L Energy, Inc. and its affiliates. All intercompany transactions, profits and balances have been eliminated in consolidation.

 

6


 
 

 

NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Principles

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in management’s opinion, are necessary for fair presentation of the information contained herein. These financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's audited financial statements on Form 10-K for the fiscal year ended April 30, 2012 as filed with the Securities and Exchange Commission (“SEC”) on July  31, 2012.

 

Principles of Consolidation

 

Principles of Consolidation - The fully consolidated financial statements include the accounts of (i) the Company, (ii) its 100% ownership of KMC , DaXing and Guizhou LiWei subsidiaries including coal wholesale, (iii) 80% of operations of LLC (“2 Mines”), (iv) 51% of WeiShe, (v) 98% of Tai Fung and 98% of TNI (coal washing and coking operations).  The Company fully consolidates 100% of the assets, liabilities of its subsidiaries and shows the non-controlling interests owned by their respective owners as Non-Controlling Interests.  The results of operations of our subsidiaries less amounts attributable to non-controlling interest owners are net income attributable to the Company.  All inter-company accounts and transactions are eliminated.

 

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.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results may differ from management’s estimates.

 

New accounting pronouncements

 

In July 2012, the FASB issued amended standards to simplify how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012; however, early adoption is permitted. We do not expect these new standards to significantly impact our consolidated condensed financial statements.

 

In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05 (“ASU 2011-12”). ASU 2011-12 amends certain pending paragraphs from ASU 2011-05. This amendment allows companies to defer the effective date of the change in presentation on the face of the financial statements of reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. The effective date for all other amendments put forth in ASU No. 2011-05 are unaffected by this update. This update is effective for fiscal years and interim periods within those years beginning after December 15, 2011. The Company will adopt this guidance effective May 1, 2012, and we do not expect that its implementation will have a material impact on our consolidated financial statements.

 

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”), to improve reporting and transparency of offsetting (netting) assets and liabilities and the related affects on the financial statements. ASU 2011-11 is effective for fiscal years and interim periods within those years beginning after January 1, 2013. The Company plans to adopt this guidance effective May 1, 2013, and we do not expect that its implementation will have a material effect on our consolidated financial statements.

 

 

 

7


 
 

 

NOTE 3.   BUSINESS COMBINATIONS

 

Acquisitions

 

DaPing Coal Mine

 

On March 15, 2011, the Company entered into an Acquisition Agreement to acquired 60% equity of the DaPing Coal Mine (“DaPing”), with an effective date of March 15, 2011, for a purchase price of 112,080,000 RMB (equivalent to approximately US$17,064,815). The Company had effective control of Da Ping since right after the signing of the Acquisition Agreement on March 15, 2011. An initial installment of 10,000,000 RMB (equivalent to US$1,592,686) had been paid as of July 31, 2012. The remaining balance of 102,080,000 RMB is to be paid based on the achievement of several requirements by the Company and DaPing. After meeting five requirements, 30% of the total purchase price, RMB33,624,000 (equivalent to US$5,355,249) should be paid. The remaining balance of 68,456,000 RMB (equivalent to US$10,902,894) is payable after meeting another 3 requirements subsequent. As of October 31, 2012, the remaining balance of approximately US$11.7 million is payable since the first 5 requirements haven’t been fully met. The Company paid the $6,018,817 of the total amount of purchase price in the period ended October 31, 2012.

 

The following table summarizes the allocation of the purchase price to the fair values of the assets at the date of acquisition:

 

 Allocation of purchase price: 

 Current assets

$

528,914

 Property, plant and equipment

 

3,899,314

 Intangible assets*

 

26,673,895

 Fair value of assets

 

31,102,123

 Less: Fair value of liabilities 

 

(14,037,308)

Net assets acquired 

$

17,064,815

Non-controlling interest 

$

9,626,043

 

*Includes goodwill $2,625,751

 

Tai  Fung Energy Inc. (“Tai Fung”)

 

On March 8, 2011, the Company entered into an Operating Agreement to invest up to RMB 20,000,000 (equivalent to US$3,063,069) in a newly established entity, Tai Fung, a Chinese company established in SeZone Country, Yunnan Province, PRC. Tai Fung is a marketing and distributing company of coal throughout China. The net assets on acquisition date comprise only cash contributed by the 2% non-controlling interest.

 

The investment represent 98% control of Tai Fung and the investment is accounted for in accordance with ASC 805 and consolidated with the financial statements contained herein. The Company has paid RMB 4,178,718 (equivalent to US$665,539) and RMB 8,794,246 (equivalent to US$ 1,400,648) in fiscal year 2011 and 2012, respectively. The term of Tai Fung is initially set at six (6) years, subject to renewal upon mutual agreement of the founders.

 

Weishe Coal Mine (“Weishe”)

 

On February 3, 2012, the Company entered into the Weishe Coal Mine Equity Ownership Transfer Agreement (the “Agreement”) with Guizhou Union Energy, Inc., a Chinese corporation (“Union”), Guizhou Union Capital Investment Holding Co., Ltd., a Chinese corporation (“Union Capital”), and Mr. GuoXu Zhang, a Chinese citizen (“Mr. Zhang”), to purchase 51% of the equity ownership interest of Weishe Coal Mine.      

 

Under the Agreement, the purchase price for 51% of the ownership interest in Weishe Mine is about US$9.7 million, which will be paid in full by issuing 3,000,000 shares of common stock of the Company (“LLEN Stock”).  The 3,000,000 shares of Company Stock has been paid to Union or a designee of Union in installments, based on the satisfaction of certain conditions set forth in the Agreement. The stock price on February 3, 2012 was $3.22 per share. The non-controlling interest in Weishe is measured at fair value at the acquisition date, with a discount rate approximately of 16% which reflected the factor of lack of marketability.

 

Allocation of purchase price:

Current assets

$

1,158,026

Fixed assets

 

30,188,177

Intangible assets*

 

779,075

Fair value of assets

$

32,125,278

Less: Fair value of assets

 

(14,609,871)

Net assets acquired

$

17,515,407

Non-controlling interest

$

7,822,636

 
  *Includes goodwill of $779,075

8


 
 

 

Pro-forma Information

 

The following unaudited pro forma financial information for the Company summarizes the results of operations for the periods indicated as if the PYC, Zonelin, Hong Xing, Daping, Tai Fung and Weishe (collectively, the “Companies”) acquisitions had been completed as of May 1, 2011 (depending on when the acquisitions occurred) even though the revenue for PYC, Zoneline and Daping have not been included in the “CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME” above.  This pro forma financial information considers principally (i) the Company’s audited financial results, (ii) the unaudited historical financial results of the Companies, as supplied to the Company, and (iii) select pro forma adjustments to the historical financial results of the Companies.  Such pro forma adjustments represent principally estimates of (i) the impact of the hypothetical amortization of acquired intangible assets and the recognition of fair value adjustments relating to tangible assets in pre-tax income in each period and (ii) the pro form impact of the transaction on the Company’s tax provision in each period.  These pro forma adjustments did not have a material impact on the pro forma net income attributable to L&L Energy, as presented below.  The following pro forma data does not purport to be indicative of the results of future operations or of the results that would have actually occurred had the acquisition taken place at the beginning of 2009:

 

 

For the quarter ended

 

October 31, 2012

October 31, 2011

Net revenue

$

54,945,687

$

39,459,793

Income from continuing operations

 

11,363,406

 

5,831,417

Net income attributable to L&L Energy

$

7,583,750

$

3,250,423

Basic proforma earning per share

 

0.21

 

0.10

Diluted proforma earning per share

 

0.21

 

0.10

 

 

Divestiture

 

Sale of HSC

 

In late 2009 to early 2010, the Company determined that it was in the best interest of the Company to expand on other prospective acquisitions that would provide a better return to its stockholders.  Therefore, on April 18, 2010, the Company entered into an Equity Sale and Purchase Agreement (the “Equity Sale Agreement”) with Guangxi Liuzhou Lifu Machinery Co, Ltd, whereby the Company sold its 93% equity ownership interest in HSC for 41,000,000 RMB (equivalent to approximately US$6,000,000).  Guangxi Liuzhou Lifu Machinery Co, Ltd assumed the obligation of the Company to pay to HSC 23,800,000 RMB (equivalent to approximately US$3,485,300) that remained payable to HSC pursuant to the December Agreement.  Guangxi Liuzhou Lifu Machinery Co, Ltd also agreed to pay the remaining balance of 17,200,000 RMB (equivalent to approximately US$2,514,700) to the Company in three installments, (1) 3,440,000 RMB (approximately $502,940 USD) within six months of the sale, (2) 5,160,000 RMB (approximately $754,410 USD) between six months and twelve months after the sale, and (3) 8,600,000 RMB (approximately $1,257,350) between twelve and twenty-four months after the sale.  Pursuant to the Equity Sale Agreement, if Guangxi Liuzhou Lifu Machinery Co, Ltd does not make such scheduled payments, a penalty of 1% of the applicable payment will be assessed for any deadline that is missed.  Additionally, interest of 3.5% per annum of the applicable payment will be assessed as of the day after the applicable payment date.  The portions of the purchase price that are due within twelve months after the sale (i.e., the first two installments) are included as “Other receivables” on the Company’s consolidated balance sheets and the portion of the purchase price due within 24 months of the sale (i.e., the third installment) is included as a “Long term receivable” on the Company’s consolidated balance sheets.  The Company recorded US$834,181 as income from discontinued operations and recognized a gain of US$1,017,928 on the sale on April 18, 2010.  As of October 31, 2012, outstanding receivable from the sale of HSC was USD$801, 256, which is expected to be received before April 30, 2013.

 

Sale of Ping Yi Mine

 

With consideration of several factors including continuing development strategies, the Company made the determination to dispose of the Ping Yi Mine.  On April 30, 2012, the Company entered into an Equity Sale and Purchase Agreement with Mr. Zhang, the previous owner of Ping Yi Mine, whereby the Company sold its 100% equity ownership interest in Ping Yi Mine for RMB 196,000,000, approximately $31,000,000.  The payment was agreed to take the form of receipt with  payment in two parts, (1) through receipt of coal extracted from Ping Yi Mine subsequent to the disposal, including priority receipt of future coal from Ping Yi mine at a 5% discounted price compared to the market price until 70% of the payment is received; (2) through receipt of the use of Ping Yi Mine’s washing facilities subsequent to disposal, including  usage fees charged at a 3%~5% discounted price compared to the market price until 30% of the payment is received. The terms of the agreement state that full payment must be received within five years, and that 70% of total receipts must occur by the end of year three. As of October 31, 2012, the Company received total payment of $3,575,262 which $3,387,663 as prepayment of raw coal and $187,599 as coal washing facilities service.

 

The Company recorded $408,020 as income from discontinued operations for the year-ended April 30, 2012. Additionally, the Company recorded $3,183,786 of costs to dispose related to the provision of discounting the estimated receipt of the payment over the payment term (refer to Note 5 and 11). Subsequently, the Company has written back $318,378 as income related to the provision for the six months ended October 31, 2012.

9


 
 

NOTE 4.   HELD FOR DISCONTINUED OPERATIONS

 

On October 26, 2012, the Company decided to proceed with the Sales and Purchase Agreement with Union Energy for Luozhou and Lashu mines located in the Guizhou Province, China.  This transaction was then completed on November 18, 2012.

 

Under the Agreement, the Company  acquired 95% of both Luozhou and Lashu mines from Union Energy for $37.1 million. This payment was satisfied by a cash outlay of approximate $1.7 million and transfers of the Company's interests in Zonelin Coking Plant (98%) and the DaPing Mine (60%).

 

The operating results of Zonelin Coking Plant and Da Ping Coal Mine are included in Discontinued operations––net of tax for all periods presented. In addition, the assets and liabilities associated with this business are classified as Assets  held for discontinued operations and Liabilities held for  discontinued operations, as appropriate, in the consolidated balance sheets.

 

The following table provides the components of Discontinued operations—net of tax for Zonelin Coking Plant and Da Ping Coal Mine:

 

 

Three Months Ended October 31,

 

Six Months Ended October 31,

 

2012

 

2011

 

2012

 

2011

Revenues

$

9,441,407

 

$

9,962,002

 

$

15,299,245

 

$

16,606,121

Income from discontinued operations before provision for taxes on income

$

3,592,778

 

$

2,332,546

 

$

6,434,291

 

$

2,876,541

Provision for taxes on income

 

409,276

 

 

248,568

 

 

726,262

 

 

305,954

Net Income from Discontinued operations attributable to L&L ––net of tax

$

2,101,397

 

$

1,564,235

 

$

3,657,762

 

$

2,115,039

Net Income from Discontinued operations attributable to Non controlling interest––net of tax

$

1,082,105

 

$

519,743

 

$

2,050,267

 

$

455,548

 
 
The following summarizes the assets and liabilities of our discontinued operations at October 31, 2012 and April 30, 2012 which are reported as a component of Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet related to the announced agreement to sale of ZoneLin and DaPing. According to FASB ASC 360 Rule, the assets and liabilities of discontinued operations are considered held for sale at October 31, 2012 as the Company announced on October 22, 2012 to finalize the transactions:

 

     

DaPing & ZoneLin

October 31, 2012

 

April 30, 2012

ASSETS

       
 

CURRENT ASSETS:

       
 

Cash and cash equivalents

$

746,298

$

979,116

 

Accounts receivables

 

12,894,180

 

7,070,083

 

Prepaid and other current assets

 

2,614,793

 

5,287,879

 

Inventories

 

1,321,819

 

244,373

 

Total current assets

 

17,577,090

 

13,581,451

           
 

Property, plant, equipment, and mine development, net

 

46,381,580

 

47,147,859

 

Construction-in-progress

 

7,190,056

 

4,841,574

 

Intangible assets, net

 

308,761

 

348,873

 

Goodwill

 

2,839,702

 

2,849,522

 

Other assets

 

479,350

 

-

 

Total non-current assets

 

57,199,448

 

55,187,828

TOTAL ASSETS HELD FOR DISCONTINUED OPERATIONS

$

74,776,538

$

68,769,279

           

LIABILITIES AND EQUITY

       

CURRENT LIABILITIES:

       
 

Accounts payable

$

4,857

$

4,877

 

Accrued expenses and other current liabilities

 

186,109

 

334,571

 

Other payables

 

2,227,041

 

1,866,964

 

Tax payable

 

1,573,533

 

1,003,561

 

Customer deposits

 

57,045

   
 

Bank loans

 

2,222,152

 

2,229,761

Total current liabilities

 

6,270,737

 

5,439,734

           

LONG-TERM LIABILITIES

       
 

Asset retirement obligations

 

711,543

 

686,519

 

Total long-term liabilities

 

711,543

 

686,519

     

 

 

 

 

TOTAL LIABILITIES HELD FOR DISCONTINUED OPERATIONS

$

6,982,280

$

6,126,253

10


 
 

 

NOTE 5.   PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Cash advances are made to coal suppliers to guarantee a certain delivery of coal to us at a specified time and price.  Since the demand for coal is high, we set up agreements with these suppliers, with cash deposits, to ensure a constant supply of coal to our washing and coking facilities.  By signing purchase agreements with our suppliers which provide for the payment of deposits over a certain period of time, we ensure that our suppliers will deliver their coal to us in a timely manner. Certain agreements impose penalties on the suppliers for non-compliance.

 

All of the Company’s Bill receivable is Bank Acceptance from our customers.  Bank’s Acceptance is a promised future payment, or time draft, which is accepted and guaranteed by a bank and drawn on a deposit at the bank by the buyer.  The bank acceptance specifies the amount of money, the date, and the company to which the payment is due.  After acceptance, the draft becomes an unconditional liability of the bank.  But the holder of the draft can sell (exchange) it for cash at a discount to a bank or endorse it to another company instead of cash payment.

 

Additionally, the Company provides advances to employees for them to handle incidentals in our mining operations as well as washing and coking expansion projects as these facilities are far away from our headquarters in Kunming.  There were no advances to officers or directors.

 

Advances to suppliers was $17.6 million as of October 31, 2012 increased by approximately $0.5 million compared to April 30, 2012. The raw coal’s marketing price declined a little during the period of the fourth quarter of fiscal year 2012. The company keeps a high prepayment to suppliers in order to lock up the current coal price as the company forecasts the marketing price will increase again in future. ,

 

Prepaid expenses and other current assets consisted of the following:

 

 

Description

October 31, 2012

April 30, 2012*

Advances to suppliers

$ 17,626,652

$17,133,782

Bill receivable

2,015,809

-

Advanced to employees

256,939

344,124

Other

9,593

62,300

Total

$19,908,993

$ 17,540,206

 

*Reclassification

11


 
 

 

NOTE 6.   OTHER RECEIVABLES

 

Other receivables consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2011*

HSC receivable - current (note 3)

$

801,256

$

801,256

PYC receivable - current (note 3)

 

3,824,997

 

7,094,403

Other

 

145,311

 

288,483

Short term loans to business associates

 

-

 

554,726

Total

$

4,771,564

$

8,738,868

 

*Reclassification

 

The Company made short term loans to business partners in order to develop a long term business relationship.  Such loans are considered consistent with accepted business practices in China.  These business partners are suppliers to our Company and we believe that these loans result in securing adequate supplies for the expansion of production capacity in our mines. As more fully discussed in Note 3, the Company sold its 100% equity ownership interest in Ping Yi Mine for RMB 196,000,000, approximately $31,200,000. The estimated receipt of payment is expected to generally occur of a five-year term, in accordance with the contract. As such, a valuation allowance was recorded to reflect the net present value of the payments during that term at a rate of 5%, which is with reference to the discount explicit in the agreement. The initial recording of this discount resulted in the recognition of a cost of disposal in the period when the disposal incurred, which will be accreted as interest income by effective interest method over the life of the agreement.  As of October 31, 2012, the receivable related to the disposal of the Ping Yi Mine, net of discount of $24,746,808, with a current portion of $3,824,997.

12


 
 

 

NOTE 7.  INVENTORIES

 

Inventories are primarily related to coal located at KMC, WeiShe, Tai Fung and TNI. Inventories consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2011*

Raw Coal

$

725,782

$

754,047

Coke Coal

 

-

 

-

Fine Coal

 

3,998,409

 

3,947,907

Total  

$

4,724,191

$

4,701,954

 

*Reclassification

 

 

NOTE 8.   PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT

 

Property, plant, equipment and mine development consisted of the following:

 

 

Description

 

October 31, 2012

 

April 30, 2012*

Mine development

$

73,369,311

$

43,878,467

Mineral rights

 

24,193,994

 

24,276,841

Building and improvements

 

5,538,979

 

5,554,882

Machinery and equipment

 

21,480,110

 

22,076,263

Assets retirement cost, net

 

1,466,388

 

1,488,895

Total Property, Plant and Equipment

 

126,048,782

 

97,275,348

Accumulated depreciation and amortization 

 

(14,624,702)

 

(11,806,126)

Total Property, Plant and Equipment, net

$

111,424,080

$

85,469,222

 

*Reclassification

 

Mineral rights represent the exclusive right, granted by the Chinese government, to operate the four Mines, DaPuAn, SuTsong, DaPing and WeiShe. The rights were acquired in the first quarter of 2008 as a result of the acquisition of the “2 Mines” on May 1, 2008 and on November 1, 2009, the acquisition of the DaPing on March 15, 2011 and the acquisition of the Wei She on February 3, 2012, respectively. The Company has elected to use unit-of-production method to depreciate its mineral rights. DaPing Mine is reclassified to Assets held for sales in this period.

 

Depreciation expense was $1,910,248 and $3,460,024 for the three and six months ended October 31, 2012, respectively.

Depreciation expense was $1,922,004 and $3,454,884 for the three and six months ended October 31, 2011, respectively. 

Amortization expense of Asset Retirement Cost was $17,337 and $11,578 for the six months ended October 31, 2012 and 2011.

 

13


 
 

 

NOTE 9.   CONSTRUCTION IN PROGRESS

 

Construction in progress includes mine development, ventilation and electrical system improvements, building of staff quarters, and beginning construction of a sewage treatment system and road expansion for the washing facilities.  Construction in progress was $6,361,387 and $26,417,686 as of October 31, 2012 and April 30, 2012, respectively. The $20 million decrease was primary due to construction in progress had been completed in last quarter and transferred out to fixed assets.   Capitalized interest costs included in construction in progress were approximately $0 and $57,761 for the six months ended October 31, 2012 and 2011, respectively.

 

 

NOTE 10.   INTANGIBLE ASSETS

 

Customer relationship and technology assets are being amortized over a period of 7 years.  Amortization expense for these assets was $47,059 and $82,762 for the six months ended October 31, 2012 and 2011, respectively. 

 

Intangible assets consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2012*

Technology

$

73,791

$

74,043

Customer Relationship

 

47,200

 

47,362

Total intangible assets

 

120,991

 

121,405

Accumulated amortization

 

(50,413)

 

(41,914)

Intangible Asset, net

$

70,578

$

79,491

 

*Reclassification

 

We have reclassified Mineral Rights to Property, Plant, Equipment and Mine Development. Mineral Rights were disclosed as Intangible Assets in prior financial statements

 

The amortization schedule for the upcoming five years is as below (amount in thousands):        

 

Remainder of Fiscal 2013

$

9

Fiscal 2014

 

17

Fiscal 2015

 

17

Fiscal 2016

 

17

Thereafter

 

11

Total

$

71

 

 

NOTE 11.   OTHER ASSETS

 

Other assets represent the long-term restricted cash which included bank deposits placed as guarantee for the future payments of costs related to land subsidence, restoration, rehabilitation and environment protections required by the coal authority, amount of $773,041 and $404,689 of Yunnan and Guizhou province as of October 31, 2012 and April 30, 2012, respectively.

 

 

NOTE 12.   LONG TERM RECEIVABLE

 

In fiscal year of 2011, the Company entered into several agreements with Colorado-based Bowie Resources, LLC and have loaned a total of approximately $7 million.  The loan originally carried an interest rate of 9%.  The loan is co-senior with another lender.  The total owing to the Company as of October 31, 2012 is $5,388,553 including previously accrued interest of $342,540. 

 

As more fully disclosed in Note 3 and Note 6, the Company has recorded a long-term receivable related to the disposal of the Ping Yi Mine, as of October 31, 2012, the amount is of $20,921,812, net of a present value discount of $3,005,231 provided in the 10K ended April 30, 2012.

14


 
 

NOTE 13.   RELATED PARTY TRANSACTIONS

 

Related Party Notes Receivable

 

The Company loaned money to various entities that have non-controlling interests with the Company.  Those loans are reflected in the consolidated balance sheets as related party notes receivables, and are secured by assets and machinery of the various mines or businesses, as indicated below.  Because these borrowers have business in which the Company has an interest, the Company considers these borrowers as related parties. The business purpose of these related party transactions relates to the maintenance of long-term business relationships.

 

There was no impact to the statements of income and other comprehensive income for the six months ended October 31, 2012 and year ended April 30, 2012 as a result of these loans. For the six months ended October 31, 2012, the total amount of loan repayments was approximate 6.1 million.

 

Related party notes receivable consisted of the following as of October 31, 2012:

 

Borrowers

Relationship

USD

Maturity

Collateralized by

Associates to TianRi Coal Mine

Shareholder & non-controlling interest holder

$1,363,449

May 1, 2015

Mining equipment

Associates to SuTsong

Shareholder & non-controlling interest holder

2,859,492

May 1, 2015

Mine Assets

Associates to DuPuAn

Shareholder & non-controlling interest holder

1,065,151

May 1, 2015

Mine Assets

Yunnan Tinnan Co. Ltd.

Non-controlling interest holder

368,602

May 1, 2015

Machinery

Others

Shareholder & non-controlling interest holder

399,270

Various dates

 
 

Total

$6,055,964

   

 

Related party notes receivable consisted of the following as of April 30, 2012:

 

Borrowers

Relationship

USD

Maturity

Collateralized By

Associates to TianRi Coal Mine

Shareholder & non-controlling interest holder

$1,614,984

May 1, 2015

Mining Equipment

Associates to SuTsong

Shareholder & non-controlling interest holder

2,869,284

May 1, 2015

Mine Assets

Associates to DuPuAn

Shareholder & non-controlling interest holder

973,237

May 1, 2015

Mine Assets

Yunnan Tinnan Co. Ltd.

Non-controlling interest holder

443,128

May 1, 2015

Machinery

Others

Shareholder & non-controlling interest holder

195,984

Various dates

 
 

Total

$6,096,617

   

 

Related Party Payable

 

Related party payable consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2012*

Payable to Robert Lee

 

1,647,933

 

1,647,933

Share to be issued

 

-

 

215,480

Payable to previous owners of DaPing Coal Mine

 

11,045,999

 

15,388,508

Total current related party

$

12,693,932

$

17,251,921

Payable to previous owners of ZoneLin(non-current)

$

303,910

$

304,951

Total Payable-related party

$

13,739,796

$

18,301,366

* Reclassification

Related party payables do not bear interest and are un-collateralized. These related party payable have no impact on the statements of income and other comprehensive income for the six months ended October 31, 2012 and year ended April 30, 2012.

Due to Officers

 

Due to officers consisted of the following:

 

Due to officer

 

October 31, 2012

 

April 30, 2012

Dickson Lee

$

815,000

$

243,334

Clayton Fong

 

111,333

 

111,333

Shirley Kiang*

 

-

 

60,000

Total due to officers/directors

 

926,333

 

414,667

*no longer a director as of September 1, 2012.

15


 
 

 

NOTE 14.   ASSET RETIREMENT OBLIGATION

 

With respect to the DaPuAn and SuTsong mines, the Company estimates the asset retirement obligation at a rate of 3 RMB per ton based on total reserves at the end of the useful lives of the mines. The Company expects to extract approximately 10 million tons of coal over the expected useful lives (29 and 17 years for DaPuAn and SuTsong Mine respectively).  The interest rate used in the net present value calculation is 7%.

 

As for the WeiShe Mine, which acquired in February 2012, the management estimates the asset retirement obligation at a rate of 3 RMB per ton based on total reserves at the end of the useful lives of the mine. The Company expects to extract approximately 19 million tons of coal over the expected useful life of thirty years. The interest rate used in the net present value calculation is 8%.

 

The DaPing Mine was acquired by the Company in  March 2011. According to the mine reservation report, management expects to extract approximately 15 million tons of coal over the remaining 26 years. DaPing Mine is located in Guizhou Province and the management estimates the asset retirement obligation at a rate of 2 RMB per ton based on total reserves at the end of the useful lives of the mines. The interest rate used in the net present value calculation is 7%.

 

During the quarter ended October 31, 2010, the Company revised the forecasted cash flows used for the net present value calculations for the DaPuAn, SuTsong and PingYi mines. The revisions to estimated cash flows pertain to revisions in the estimated amount and timing of required reclamation activities throughout the lives of the respective mines and reflect changes in estimates of closure volumes, disturbed acreages and third-party unit costs as of October 31, 2010. We based 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. We evaluated the forecasted cash flows as of January 31, 2012, and no revision was deemed necessary.

 

The following is a summary of the change in the carrying amount of the asset retirement obligation during the quarter ended October 31, 2012 and year ended April 30, 2012.

 

     

October 31, 2012

 

April 30, 2012*

Beginning balance

   

$ 1,772,833

 

$ 1,978,877

Liabilities incurred during the period

 

-

 

902,178

Liabilities settle during the period

 

-

 

(673,214)

Accretion of interest

   

63,902

 

251,511

ARO from discontinued operation-DaPing

 

-

 

(686,519)

Ending balance

   

$ 1,836,735

 

$ 1,772,833

 

*Reclassification

16


 
 

 

NOTE 15.   OTHER PAYABLES

 

Other Payables consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2012*

Payable to business partners

$

340,408

$

404,977

Resource surcharge payable of WeiShe Coal Mine

 

13,317,038

 

13,378,566

Others

 

6,383,819

 

5,319,316

Total other payable

$

20,041,264

$

19,102,859

 

*Reclassification

 

Total Other Payables was $20 million as of October 31, 2012. None of these payables are collateralized by any assets of the Company. $13.3 million is estimated resource surcharge payable of WeiShe Mine through acquisition. The estimated resources surcharge is determined by the coal reserve and surcharge per ton, which the guidance was issued by GuiZhou Land Resources Council. The other $6.4 million is for salary payable, notes payable, miscellaneous payment of fees related to maintenance, safety, employee training for security and environmental matters.

 

 

NOTE 16.   TAX PAYABLES

 

Taxes payable consisted of the following:

 

Description

 

October 31, 2012

 

April 30, 2012*

VAT Payable

$

4,995,117

$

5,440,378

Income Tax Payable

 

5,528,362

 

4,537,204

Other Taxes Payable

 

2,778,326

 

2,655,622

Total Tax Payable

$

13,301,805

$

12,633,204

 

*Reclassification

 

* Other Taxes Payables mainly include resources tax payable and business tax payable

17


 
 

 

NOTE 17.   BANK LOANS

 

During the fourth quarter of 2011, as part of acquisition of DaPing, the Company assumed RMB 20 million bank loan or approximately $3,077,160 with interest rate of 9.18% per annum and matured on October 29, 2011. RMB 6 million or approximately $0.95 million of this loan had been paid in early November 2011 and the other RMB 14 million or approximately $2.2 million has since been extended to November 30, 2012. All loans are unsecured. We have reclassified Bank loan to liabilities held for discontinued operation. (Note 4)

 

 

NOTE 18.   INCOME TAXES

 

Our effective tax rates were approximately 10.1% and 16.1% for the six months ended October 31, 2012 and 2011, respectively. Our effective tax rate was lower than the U.S. federal statutory rate due to the fact that our operations are carried out in foreign jurisdictions, which are subject to lower income tax rates, and the Company has net operating loss carry-forwards available to offset current and future taxable income.

 

 

NOTE 19.   STOCKHOLDERS’ EQUITY

 

Stock Issued for Compensation:

 

The Board of Directors approved to issue shares in respect to the services provided by Edmund Moy, our Vice President of Corporate Infrastructure and other key employees during this quarter. For the three months ended October 31, 2012, the Company issued 86,667 shares to Edmund Moy and 5,893 shares to other key employees, with the share value of $158,601 and $13,420 respectively.

 

For the three months ended October 31, 2012, the Company issued 37,642 shares of common stock to the Board of Directors, with the share value of $66,936.

 

For the three months ended October 31, 2012, the Company issued 27,500 shares of common stock with the share value of $48,600 for advisors.

 

The Board of Directors approved to grant 80,000 stock options in lieu of cash payment for each board member of Dickson Lee, Syd Peng, and Clayton Fong in respect to their services for the fiscal year of 2013. The exercise price is $2.00 per unit. It will be vested quarterly. During this quarter, no warrants were issued for compensation.

 

Stock issued for Cash: 

 

For the three months ended October 31, 2012, no common stock was issued for cash. During the second quarter, no warrants were issued or exercised for cash, respectively.

 

Treasury Stock:

 

For three months ended October 31, 2012, the company transferred 56,498 treasury stocks to investor as collateral, with value of $100,000. During the second quarter, no treasury stock has been purchased or sold by the Company.

 

18


 
 

 

NOTE 20.   WARRANTS

 

Warrants Issued for Compensation

 

The Company has authorized 1,100,000 Class D warrants to be issued to executives and 4,000,000 Class E warrants to be issued to Directors. 

 

During the year ended April 30, 2011, the Company issued 1,000 Class E warrants to a Director.  The warrants were fully vested as of April 30, 2011 and expire five years after issuance.  The grant date fair value was $8.92.  The Company issued 1,000 warrants to a non-employee. The warrants were fully vested as of April 30, 2011 and expire five years after issuance. The grant date fair value was $9.82.

 

The fair value was estimated on the date of the grant using the Black-Scholes option-pricing model. The following table displays the weighted average assumptions that have been applied to estimate the fair value of warrants on the date of grant for the three months ended October 31, 2012:

 

 

 

October 31, 2012

Expected life (years)

 

5.0

Risk-free interest rate

 

2.29%

Expected volatility

 

69.46%

Expected dividend yield

 

0%

 

(1)     Expected Life: The expected life was determined based on the option’s contractual term and employees’ expected early exercise and post-vesting employment termination behavior.

 

(2)     Risk Free Rate: The risk-free interest rate was based on U.S. Treasury yields with a remaining term that corresponds to the expected term of the option calculated on the granted date.

 

(3)     Expected Volatility: Expected volatility is computed based on the standard deviation of the continuously compounded rate of return of days when the stock price changed over the historical period of the expected life of the options.

 

(4)     Dividend Yield: The expected dividend yield is zero. The Company has not paid a dividend and does not anticipate paying dividends in the foreseeable future.

 

For the three months ended as October 31, 2012, no warrant was issued or exercised.

 

Following is a summary of the status of warrants outstanding at October 31, 2012:

 

Type of Warrants

 

Range of Exercise Prices

 

Total Warrants Outstanding

 

Weighted Average Remaining Life (Years)

 

Weighted Average Exercise Price

Executives-Class D

$

              2.25

 

                10,000

 

0.33

$

          2.25

Directors - Class E

$

        3.00 - 9.34

 

               210,916

 

2.04

$

              3.03

Non-employee

$

11.22

 

1,000

 

2.63

$

11.22

Total

     

                221,916

 

1.97

$

               3.03

 

 

19


 
 

 

Warrants Issued to Investors

 

On May 12, 2009, the Company issued 500,000 seven year warrants to purchase shares of the Company’s common stock pursuant to a security purchase agreement.  The exercise price is $5.62 per common stock and is exercisable immediately.

 

On June 28, 2009, The Company issued to various investors 3,498,800 one year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement.  The warrants are immediately exercisable and the exercise price varies between $1.00 and $2.60 depending on the class of warrant.

 

On October 8, 2009, the Company issued to various investors 882,613 five year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement.  The exercise price is $5.62 per common stock and is exercisable immediately.  In connection with the stock issuance, the Company issued 109,682 five year warrants to the placement agent with an exercise price of $6.11 that are immediately exercisable.

 

On November 6, 2009, the Company issued to various investors 501,236 five year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement.  The exercise price is $5.62 per common stock and is exercisable immediately.  In connection with the stock issuance, the Company issued 66,832 five year warrants to the placement agent with an exercise price of $6.11 that are immediately exercisable.

 

On June 1, 2010, the Company received a payment of $50,000 from an investor for extending the expiration date from June 1, 2010 to December 31, 2010 of the remaining 1,000,000 shares associated with warrant K that the investor owns. The investor exercised all the 1,000,000 shares before the extended expiration date. As such, no warrants K were outstanding as of October 31, 2011.

 

On January 28, 2011, the Company issued to various investors 80,000 one year warrants to purchase shares of the Company’s common stock pursuant to a stock purchase agreement. The exercise price is $9.50 per common stock and is exercisable immediately.

 

For the six months ended October 31, 2012, no warrants were issued to investors. No warrants were exercised, respectively.

 

Effective on October 28, 2011, the Company issued promissory notes (unsecured) to certain accredited investors and employees of the Company in the principal amount of $384,872 of which $210,000 has been loaned to the company and $174,872 is considered irrevocable commitment contribution.  The proceeds of the notes were used primarily for general business purposes in the U.S.  The notes mature on the 330th day from the dates of receipt of cash contribution from the holders of the notes and the Company may prepay all or any portion of the notes without penalty.  Interest is payable on the unpaid balance of the notes at an annual rate of 10%. The interest payable on the promissory notes accrued in the amount of $15,262.71 as of April 30, 2012.   As further consideration for providing this financing, the holders of the notes have also received warrants to purchase an aggregate of 96,218 shares of the Company’s common stock at an exercise price of $4.00 per share.  The warrants expire at the end of the four-year period following the maturity dates of the corresponding promissory notes.  The issuance and sale of the warrants was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

 

On November 2, 2011, the Company issued 36,000 warrants to prior investor. The warrants were completely exercised and the exercise price is $0.83, respectively.

 

During the second quarter ended October 31, 2012, the Company has no warrant issued to investors.

 

The table below is a summary of all warrants activity as of October 31, 2012:

 

Warrants Roll-forward Summary

           
 

Units

 

Weighted Average Exercise Price

 

Weighted Average Remaining Life (in Years)

Outstanding at April 30, 2012

870,692

 

$5.19

 

2.88

Issued

-

 

-

   

Exercised

-

 

-

   

Expired

-

 

-

   

Outstanding at July 31, 2012

870,692

 

$5.19

 

2.63

Exercisable at July 31, 2012

870,692

 

$5.19

 

2.63

Issued

-

 

-

   

Exercised

-

 

-

   

Expired

-

 

-

   

Outstanding at October 31, 2012

870,692

 

$5.19

 

2.37

Exercisable at October 31, 2012

870,692

 

$5.19

 

2.37

20


 
 

 

NOTE 21.   NON-CONTROLLING INTEREST

 

As described in Note 1, to the consolidated financial statements, the Company has the majority controlling interest of L&L Coal Partners (2 coal mining operations), TNI, Tai Fung, DaPing and WeiShe. During the fiscal year 2010, the Company increased its ownership interest in L&L Coal Partners to 80% from 60% at April 30, 2009. The equity related to non-controlling interest as of October 31, 2012 represents 26% third party interest in L&L Coal Partners, 2% third party interest in TNI, 2% third party interest in Tai Fung, 40% third party interest in DaPing and 49% third party interest in WeiShe. The non-controlling interest in Weishe is measured at fair value at the acquisition date, with a discount rate 16% which reflected the factor of lack of marketability.

 

Below is a schedule of changes in ownerships interest as of October 31, 2012 and April 30, 2012:

 

   

October 31, 2012

 

April 30, 2012

Beginning balance

$

43,431,399

$

29,530,133

Non-controlling interest related to acquisitions

 

-

 

7,822,636

Translation

 

(126,045)

 

1,083,961

Net income related to non-controlling interest

 

5,387,222

 

4,994,669

Ending balance

$

48,692,576

$

43,431,399

 

 

NOTE 22.   EARNINGS PER SHARE

 

The Company only had common shares, warrants and stock options issued and outstanding as of October 31, 2012.  Under the treasury stock method of earnings per share, the Company computed the diluted earnings per share as if all issued warrants or options were converted to common stock and cash proceeds were used to buy back common stock. The exercised prices of warrants and options are greater than fair market price. The securities are anti dilutive and can be ignored in the diluted Earnings Per Share calculation.

 

   

For the Three Months Ended Oct 31 

 

For the Six Months Ended Oct 31 

   

2012

2011

 

2012

2011

EPS numerator:

           

Net income from continuing operatings, net of income taxes

$

7,591,376

2,664,298

$

13,598,843

6,077,606

Less: Net (loss) income attributable to noncontrolling interests

 

1,949,832

945,361

 

3,327,195

1,706,870

Income from continuing operations attributable to common stockholders

 

5,641,544

1,718,937

 

10,271,648

4,370,736

(Loss) income from discontinued operations, net of income taxes

 

2,101,397

2,071,003

 

3,657,762

1,805,093

Net income attributable to common stockholders

$

7,742,941

3,789,940

$

13,929,410

6,175,829

EPS denominator:

           

Weighted average shares outstanding — basic

 

36,988,915

32,225,085

 

37,569,600

31,788,767

Effect of dilutive shares

 

-

1,160,692

 

-

1,160,692

Weighted average shares outstanding — diluted

 

36,988,915

33,385,777

 

37,569,600

32,949,459

Basic EPS attributable to common stockholders:

           

Income from continuing operations

 

0.15

0.05

 

0.27

0.14

(Loss) income from discontinued operations

 

0.06

0.07

 

0.10

0.05

Net income attributable to common stockholders

$

0.21

0.12

$

0.37

0.19

Diluted EPS attributable to common stockholders:

           

Income from continuing operations

 

0.15

0.05

 

0.27

0.13

(Loss) income from discontinued operations

 

0.06

0.06

 

0.10

0.06

Net income attributable to common stockholders

$

0.21

0.11

$

0.37

0.19

21


 
 

NOTE 23.   COMMITMENTS AND CONTINGENCIES

 

Operating Lease Commitments

 

The Company held an operating lease in the Seattle office and the lease will expire in July 2013. The non-cancelable operating lease agreement requires that the Company pays certain operating expenses, including management fees to the leased premises. The future minimum rental payments in less than a year and in greater than a year are $ 61,254 and $0 respectively. 

 

Legal Matters

 

On August 26, 2011, a federal securities law class action complaint was filed against the Company, certain officers and directors (i.e., Dickson V. Lee and Ian G. Robinson) and a former officer (i.e., Jung Mei (Rosemary) Wang) in the United States District Court, Western District of Washington at Seattle on behalf of a class consisting of all persons who purchased the common stock of the Company during the period August 13, 2009 through August 2, 2011, inclusive, and who were damaged thereby (the “Securities Class Action”). It alleges that the Company filed false and misleading reports with the SEC from August 13, 2009 to August 2, 2011, primarily based upon an amendment the Company filed to its 2010 Annual Report on Form 10-K on July 28, 2010 and a report published by the Glaucus Research Group on August 2, 2011. On December 15, 2011, the court appointed Gregg Irvin as lead plaintiff, and he filed an amended complaint and second amended complaint on February 8 and March 2, 2012, respectively, naming four other current and former directors as defendants (i.e., Shirley Kiang, Robert Lee, Dennis Bracy and Robert Okun).

 

On November 4, 2011, a complaint was filed by Larew P. Stouffer, an individual, in a derivative suit against the Company as nominal defendant, and against certain existing officers/employees and/or directors (i.e., Dickson V. Lee, Norman Mineta, Ian G. Robinson, Robert W. Lee, Shirley Kiang, Dennis Bracy, Syd S. Peng) and certain former officers and/or directors (i.e., Edward L. Dowd, Andrew M. Leitch, Robert Okun, Joseph J. Borich, Jung Mei Wang and David Lin) in the First Judicial District Court of the State of Nevada for Carson City (the “Stouffer Derivative Suit”). It mainly alleges that the defendants breached fiduciary duties to the Company and its shareholders, wasted corporate assets by paying certain officers and directors who breached their fiduciary duties, were unjustly enriched by accepting compensation while breaching fiduciary duties, and committed wrongful acts in concerted action.

 

On November 15, 2011, a complaint was filed by Russell L. Bush, an individual, in a derivative suit against the Company as nominal defendant, and against all existing directors (i.e., Dickson V. Lee, Norman Mineta, Ian G. Robinson, Robert W. Lee, Shirley Kiang, Dennis Bracy, Syd S. Peng) in the United States District Court, Western District of Washington at Seattle (the “Bush Derivative Suit”, with the Stouffer Derivative Suit, the “Derivative Suits”). It mainly alleges that the defendants breached fiduciary duties by failing to install proper internal control and overseeing system, and were unjustly enriched by accepting compensation while breaching fiduciary duties.

 

The Company has notified our insurance carrier of the Potential Class Action and the Derivative Suits. The Company  has retained outside legal counsels, and intends to defend these lawsuits vigorously as the Company believes that  these lawsuits are without merit.

 

The Company is unable to estimate the amount or range of any potential loss in the event of an unfavorable outcome. As such, as of October 31, 2012, the Company has not accrued any liability in connection with potential losses from legal proceedings.

 

On December 3, 2012, the United States District Court, Western District of Washington (“the Court”) at Seattle granted the Company’s motion to dismiss the Securities Class Action lawsuit filed against L&L and several of its officers and directors. It was granted on the grounds that the plaintiffs failed to adequately allege a violation of federal securities law. The plaintiffs have thirty days in which to seek the court permission to file an amended complaint.

22


 
 

Foreign Currency

 

The majority of the Company sales, purchases and expense transactions are denominated in RMB (Chinese currency) and most of the Company’s assets and liabilities are also denominated in RMB.  The RMB is not freely convertible into foreign currencies under the current law.  In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions.  Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.

 

Environmental Remediation

 

The PRC adopted extensive environmental laws and regulations that affect the operations of the coal mining industry.  The outcome of environmental liabilities under proposed or future environmental legislation cannot be reasonably estimated at present, and could be material.  Under existing legislation, however, Company management believes that there are no probable liabilities that will have a material adverse effect on the financial position of the Company.

 

Chinese Government

 

The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America.  These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange.  The Company’s results may be adversely affected by changes in the governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions and remittance abroad, and rates and methods of taxation, among other things.

 

Concentrations

 

For the six months ended October 31, 2012, we had two major customers who purchased 32% of the Company’s total sales, and represented $11,172,048 of AR balance in total as of October 31, 2012.  In addition, we had two major suppliers who provided 32% of our total purchases, and the relevant account payable had been paid off as at October 31, 2012

 

 

23


 
 

NOTE 24.  STOCK INCENTIVE PLAN

 

On September 9, 2010, our Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Plan”), which was approved by our shareholders at our annual meeting of the shareholders held on the same date. On February 17, 2011, the company filed S-8 Registration Statement. The Stock Incentive Plan authorizes the Board of Directors or one or more of its members to grant options to eligible individuals to purchase shares of common stock our Company to eligible individuals.  Eligible individuals may be employees, non-employee members of the Board or the board of directors of any Parent or Subsidiary, and consultants who provide valuable service to us or our Parent or Subsidiary. Options to purchase Common Stock may be incentive stock options, stock units, stock appreciation rights or non-statutory stock options as determined by the Board of Directors or its delegate. 4,200,000 shares of Common Stock were reserved for issuance.

 

Each option agreement specifies the term as to when the option is to become exercisable. Standard options vest at a rate of at least 20% of the underlying shares per year over five years and have a maximum term of 10 years. However, in no event shall an incentive stock option granted to a 10% or greater stockholder be granted at an exercise price less than 110% of the fair market value of the stock on the date of grant.

 

On March 5, 2011, the Company granted 40,000 stock options to its Independent Director Dennis Bracy at an exercise price of $7.65. The stock options were fully vested as of April 30, 2011 and expire five years after issuance.  The grant date fair value for this stock option was $7.06.

 

On August 31, 2012, the Company granted 80,000 stock options in lieu of cash to each of Directors of Dickson Lee, Syd Peng and Clayton Fong at an exercise price of $2.00. The stock options will be vested quarterly as board compensation of Fiscal year 2013, and expired five years after vested. The grant date fair value for the stock options was $1.06.

 

For the three months ended October 31, 2012, 39,999 stock options above mentioned of board compensation has been vested. No stock option has been exercised.

 

The following table displays the weighted average assumptions that have been applied to estimate the fair value of stock option awards on the date of grant for the three months ended October 31, 2012:

 

 

October 31, 2012

 

Expected life (years)

5.0

Risk-free interest rate

2.29%

Expected volatility

69.46%

Expected dividend yield

0%

                                       

  

(1)     Expected Life: The expected life was determined based on the option’s contractual term and employees’ expected early exercise and post-vesting employment termination behavior.

(2)     Risk Free Rate: The risk-free interest rate was based on U.S. Treasury yields with a remaining term that corresponds to the expected term of the option calculated on the granted date.

(3)     Expected Volatility: Expected volatility is computed base on the standard deviation of the continuously compounded rate of return of days when the stock price changed over the historical period of the expected life of the options.

(4)     Dividend Yield: The expected dividend yield is zero. The Company has not paid a dividend and does not anticipate paying dividends in there foreseeable future.

 

Stock compensation expense was recognized based on awards expected to vest. FASB ASC Topic 718 requires forfeiture to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

 

24


 
 

The following summarizes pricing and term information for options outstanding as of October 31, 2012:

 

   

Options Outstanding

       

Weighted

   

Range of

 

Total Options

 

Average Remaining Life

 

Weighted

Exercise Prices

 

Outstanding

 

(Years)

 

Average Exercise Price

$2.00 - $7.65

 

280,000

 

4.62

 

2.81

 

As of October 31, 2012, 79,999 of 280,000 stock options outstanding for compensation were exercisable. The weighted-average grant-date fair value of options granted during the year ended October 31, 2012 was $1.92.  

 

The following table is a summary of stock option activity under the Stock Incentive Plan as of October 31, 2012 and changes for the year then ended:

 

 

Incentive Stock

 

Weighted Average

 

Weighted Average

 

Options

 

Exercise Price Per Share

 

Remaining Life (Years)

Outstanding at May 1, 2012

40,000

 

$7.65

 

3.84

Granted

-

 

-

 

-

Exercised

-

 

-

 

-

Canceled

-

 

-

 

-

Outstanding at July 31, 2012

40,000

 

$7.65

 

3.59

Exercisable at July 31, 2012

40,000

 

$7.65

 

3.59

Granted

240,000

 

$2.00

 

4.84

Exercised

-

 

-

 

-

Canceled

-

 

-

 

-

Outstanding at October 31, 2012

280,000

 

$2.81

 

4.62

Exercisable at October 31, 2012

40,000

 

$2.81

 

4.62

 

 

 


 

25

 

NOTE 25.  SEGMENT INFORMATION

 

The Company reports its operations primarily through the following reportable operating segments: coal mining, coal wholesaling, coking coal washing revenue. The Company’s chief operating decision maker uses operating income as the primary measure of segment profit and loss.

 

 

For the three months ended October 31,

 

For the six months ended October 31,

Total Revenues (including intersegment sales)

 

2012

   

2011

   

2012

   

2011

Coal mining revenue

$

13,827,568

 

$

8,219,382

 

$

25,237,531

 

$

15,108,944

Coal wholesale revenue

 

10,057,073

   

4,851,900

   

22,352,054

   

9,314,630

Coal washing revenue

 

21,619,638

   

16,650,349

   

39,529,867

   

35,510,736

 

$

45,504,279

 

$

29,721,631

 

$

87,119,452

 

$

59,934,310

                       
                       

Discontinued operations:

                     

Coal mining revenue

$

5,114,603

 

$

4,650,380

 

$

9,251,493

 

$

5,016,638

Coal washing revenue

 

-

   

1,720,911

   

-

   

2,210,338

Coal coking revenue

 

4,326,804

   

7,389,668

   

6,047,752

   

14,033,787

 

$

9,441,407

 

$

13,760,959

 

$

15,299,245

 

$

21,260,763

                       

Total revenue

$

54,945,686

 

$

43,482,590

 

$

102,418,697

 

$

81,195,073

                       
                       

Intersegment revenues

 

2012

   

2011

   

2012

   

2011

Coal mining revenue

$

-

 

$

-

 

$

-

 

$

712,919

Coal washing revenue

 

-

   

269,330

   

2,167,076

   

269,330

 

$

-

 

$

269,330

 

$

2,167,076

 

$

982,249

                       

Discontinued operations:

                     

Coal washing revenue - PY

 

-

   

1,339,420

   

-

   

1,705,678

 

$

-

 

$

1,339,420

 

$

-

 

$

1,705,678

                       

Total intersegment revenue

$

-

 

$

1,608,750

 

$

2,167,076

 

$

2,687,927

                       
                       
                       

Net revenues

 

2012

   

2011

   

2012

   

2011

Coal mining revenue

$

13,827,568

 

$

8,219,382

 

$

25,237,531

 

$

15,108,944

Coal wholesale revenue

 

10,057,073

   

4,851,901

   

22,352,055

   

9,314,631

Coal coking revenue

 

-

   

-

   

-

   

-

Coal washing revenue

 

21,619,638

   

16,650,349

   

39,529,867

   

35,510,736

Less intersegment revenues

 

-

   

(269,330)

   

(2,167,076)

   

(982,249)

 

$

45,504,279

 

$

29,452,302

 

$

84,952,377

 

$

58,952,062

                       

Discontinued operations:

                     

Coal mining revenue

$

5,114,603

 

$

4,650,380

 

$

9,251,492

 

$

5,016,637

Coal washing revenue

 

-

   

381,490

   

-

   

504,660

Coal coking revenue

 

4,326,804

   

7,389,668

   

6,047,752

   

14,033,787

 

$

9,441,407

 

$

12,421,538

 

$

15,299,244

 

$

19,555,084

                       

Total net revenue including discontinued operations

$

54,945,686

 

$

41,873,840

 

$

100,251,621

 

$

78,507,146

                       
                       
                       

Net income attributable to L&L

 

2012

   

2011

   

2012

   

2011

Coal mining

$

4,586,381

 

$

3,622,831

 

$

8,809,396

 

$

6,469,657

Coal wholesale

 

521,868

   

451,695

   

925,517

   

751,037

Coal washing

 

2,383,154

   

1,998,654

   

4,084,731

   

4,026,222

Parent Company

 

(1,849,859)

   

(4,354,243)

   

(3,547,996)

   

(6,876,180)

 

$

5,641,544

 

$

1,718,937

 

$

10,271,648

 

$

4,370,736

                       

Discontinued operations:

                     

Coal mining revenue

$

1,623,158

 

$

1,160,521

 

$

3,072,112

 

$

500,324

Coal washing revenue

       

84,565

         

(188,679)

Coal coking revenue

 

478,239

   

825,917

   

585,650

   

1,493,448

 

$

2,101,397

 

$

2,071,003

 

$

3,657,762

 

$

1,805,093

                       

Total net income attributable to L&L

$

7,742,941

 

$

3,789,940

 

$

13,929,410

 

$

6,175,829

                       
                       
                       

Depreciation expense

 

2012

   

2011

   

2012

   

2011

Coal mining

$

1,333,506

 

$

1,012,885

 

$

2,393,406

 

$

1,607,824

Coal wholesale

 

11,774

   

15,055

   

23,522

   

30,374

Coal washing

 

142,705

   

140,851

   

285,828

   

279,136

Parent Company

 

72,404

   

68,624

   

144,270

   

135,630

 

$

1,560,389

 

$

1,237,415

 

$

2,847,026

 

$

2,052,964

                       

Discontinued operations:

                     

Coal mining revenue

$

261,079

 

$

524,457

 

$

435178

 

$

919131

Coal washing revenue

 

-

   

81,603

   

-

   

328073

Coal coking revenue

 

88,780

   

78,530

   

-

   

-

 

$

349,859

 

$

684,590

 

$

435178

 

$

1247204

                       

Total net revenue

$

1,910,248

 

$

1,922,005

 

$

3,282,204

 

$

3,300,168

26


 
 

 

   

As of October 31, 2012

   

As of April 30, 2012

Total assets

$

190,826,575

 

$

172,732,033

Coal mining

 

23,339,796

   

19,375,449

Coal wholesale

 

11,966,102

   

11,615,194

Coal coking

 

35,690,245

   

33,011,004

Coal washing

 

33,799,428

   

39,823,858

Parent Company (intercompany)

$

295,622,146

 

$

276,557,538

 

 

 

NOTE 26.   SUBSEQUENT EVENT

 

On October 26, 2012, the Company decided to proceed with the Sale and Purchase Agreement with Union Energy for the Luozhou and Lashu mines located in the Guizhou Province, China.  This transaction was then completed on November 18, 2012.  Under the agreement, the Company acquired 95%of both LuoZhou and LaShu Mines for $37.1 million. This payment was satisfied by a cash outlay of approximate $1.7 million and transfers of the Company's interests in Zonelin Coking Plant (98%) and the DaPing Mine (60%). The two mines contain some 34.2 million tons of low sulfur, high BTU, anthracite coal reserves. Already at trial coal production, The LuoZhou mine will move from an annual production rate of 200,000 tons to 450,000 tons by the end of 2013. LaShu will similarly move from 150,000 tons to 300,000 tons over time. With the production capacity of the Company’s nearby existing Weishe Mine of 150,000 tons moving to 500,000 tons over time, L&L anticipates a production rate of 500,000 tons within 2013 and to beyond 1 million tons over time.

 

 

 

27


 
 

 

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.  Forward-looking statements usually contain the words “estimate,” “anticipate,” “believe,” “expect,” or similar expressions, and are subject to numerous known and unknown risks and uncertainties.  In evaluating such statements, prospective investors should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions “Risk Factors” and in the Company’s other filings with the U.S. Securities and Exchange Commission (“SEC”).  These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements.  The Company undertakes no obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

 

Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us.  Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements.  Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risk Factors” in Item 1A, as well as those discussed elsewhere in this Quarterly Report.  Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report.  We file reports with the SEC.  You can read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F. Street, NE, Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m.  You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

 

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

When we use the terms "we," "us," "our," "L & L," and "the Company," we mean L & L ENERGY, INC. a Nevada corporation, and its subsidiaries.

 

Overview

   

We produce, process, and sell coal in the People’s Republic of China (“China” or “PRC”) and also have a financial interest (via a senior note)  in the Bowie Mine, a U.S. thermal coal mine located in Paonia, Colorado. As of October 31, 2012 our vertically integrated coal operations include four coal mines, two coal washing plants, one coking facility, and a coal wholesale and distribution network in the southwest region of China. Currently, substantially all of our coal mining operations are located in the Guizhou and Yunnan provinces. Our operations are located in inland and rural areas of China, which are being developed at a faster rate than the coastal areas that have historically received most of the PRC’s government focus. We sell the coal we produce, or acquire through wholesalers; both though direct sales to end users in China and through other wholesalers.

 

We were initially founded in 1995 by an American citizen and current Chairman and CEO Dickson Lee and originally focused on consulting services.  In 2001 we become a public reporting company and in 2004 acquired a majority interest in a coal related air compressor equipment company (“LEK”) located in China, which interest we disposed on in 2009 in order to focus on growing our coal businesses. In 2006 we commenced our coal operations which now constitute our principal operating business. We have funded our business to date primarily through investments from our founder and Chairman, from private placements, from cash flows from operations and from certain debt financings and arrangements.

 

We conduct our operations through both wholly- owned subsidiaries and majority interests in other entities. We derive our revenues from selling coal to customers, mainly State Owned Enterprises (SOE) in Yunnan, Guizhou and Guangxi Provinces.  Our thermal or steam coal is sold to SOEs utilities companies 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 factories.  

 

We are a United States company incorporated in Nevada and headquartered in Seattle, WA and have a China operations centers in Kunming City in Yunnan Province and in Guiyang in Guizhou Province. The majority of our management team and board of directors are American citizens, including three of four officers, and many are bilingual. As a public reporting company since 2001, we commenced trading on the NASDAQ Global Market in February 2010.

 

28


 
 

Macroeconomic Factors

 

There were several relevant macro-economic factors directly impacting our operating environment in China during FY 2012, including GDP growth and inflation. Last year, China’s economy expanded 9.2%, down from 10.4% the previous year.  This was largely attributable to a turbulent world economic climate and China’s efforts to tame inflation.   China’s GDP growth fell to 8.1 percent in the first quarter of 2012 after an 8.9 percent gain in the fourth quarter of 2011.  The consensus view among economists is that China will see growth of 8.0 percent for calendar 2012 while China’s Premier Wen Jiabao has lowered expectations to 7.5%. 

 

In middle of November 2012, China held its 18th National Congress for its once a decade leadership transition. It is generally expected that the new leaders will take necessary step to boost the economic growth in the orderly manner in China for the coming years.   

 

At the start of the Company’s prior fiscal year in May 2011, inflation in China was 5.5%, rising to a high of 6.5% in July 2011.  After the PRC tightened their fiscal policies, which included letting interest rates rise and capping prices of certain domestically-produced commodities like coal not to exceed last year’s prices, inflation fell to 3.6% at the end of the Company’s prior fiscal year in April 2012. As a result, China began our last fiscal year with higher demand for coal to fuel GDP growth but coal shortages due to the capping of coal prices and ended our fiscal year with slightly decreasing demand from a slowing national economy and an oversupply of coal from a flood of cheaper imported coal.

 

The coal shortages in 2011 were exacerbated by floods in Australia and inclement weather in Indonesia, both temporarily decreasing coal productions in countries that export coal to China.  This resulted in temporarily benefiting U.S. producers until Australian mines got back into production.  Indonesia normally experiences heavy rainfall during their rainy season but has seen relatively light rains this year, resulting in increasing the supply of export coal because of higher coal production.  Coal prices in the United States have declined because there is lower demand for coal due to increased competition from ample and low price natural gas, a record warm winter in 2012, and certain government policies.  Combined with a sluggish market for coal in Europe due to slow economic growth, coal exporters have taken advantage of the arbitrage opportunities between Chinese domestic coal prices and international coal prices.  This has created a temporary oversupply of coal, filling the storage capacity in Chinese ports and Chinese coal-fired electrical power plants have reported record inventories of coal.   

 

However, while the coastal metropolises have great demand for coal, growth is slowing in these large cities.  But growth, and therefore demand, is still high in the secondary cities in non-coastal China (like Kunming in Yunnan Province and Guiyang in Guizhou Province, both where we operate).  China has a relatively underdeveloped rail system of which the government has chosen to put a higher emphasis on developing passenger rail over freight rail.  Therefore, the coal-fired electrical power plants in coastal cities have huge stockpiles of coal and the excess coal that is crowding port storage facilities sits there because the rail system is inadequate to transport the coal to non-coastal cities that need it.  Also because of the lack of supply of freight rail, it is costly and mostly negates the price advantage of cheap imported coal. As a result, the demand and price for the coal generated from our mines have been less impacted as compared with other players in different provinces in China.

 

Coal will continue to be a key component of the PRC’s energy policy. According to the U.S. Energy Information Administration, coal makes up 70% of China’s total primary energy consumption.  China is both the largest consumer and producer of coal in the world.  In 2009, China accounted for over 46% of the world’s coal consumption. It is estimated that demand for coal in China will continue to increase for several decades, thus producing a favorable business environment for coal producers and wholesalers. Although China has substantial natural coal resources, the coal mining industry in China is fragmented and inefficient, and includes many small companies who lack the economies of scale and resources needed to maximize production capacity. Historically, mining companies in China have been unable to produce enough coal to meet China’s growing coal demands. As a result the PRC has allowed China to become a net importer of coal and has implemented a national policy of consolidation to increase production capacity, improve efficiency and safety in coal mines in China. Beginning with the 11th 5 year plan in 2006, the policy of government-mandated consolidation has continued with the current 12th 5 year plan from 20011-2015, which expands and accelerates the consolidation to new provinces including Guizhou.

29


 
 

The Twelfth Five-Year Plan Impact on the Chinese Coal Industry

 

The National People’s Congress ratified the 12th Five-Year Plan in March 2011 for the period 2011-2015.  Three sectors received a major boost: health care, technology, and energy.  With its emphasis on “inclusive growth,” the Chinese government is encouraging foreign business participation in these Strategic Emerging Industries.  In the energy sector, the PRC announced guidelines for a government-mandated consolidation of the fragmented and inefficient coal industry in Guizhou Province, similar to earlier consolidation efforts in northern China.

 

On April 15, 2011, the General Office of the Government of Guizhou Province issued Document (2011) Number 47 notifying the Guizhou Province Energy Department of guidelines related to accelerating the pace of consolidation through 2013. There are three main components to the guidelines: production, safety, and efficiency. 

 

·         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 from over 1,600 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 often 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. 

 

Soon after the distribution of Guizhou Province’s policy, Liupanshui City Government, which is the local government of Pan County where our DaPing Mines operate, issued their implementation policy. We also anticipate and are prepared for the consolidation policy to eventually be implemented and accelerated in Yunnan Province.  As a result of increasing individual mine production standards and the accelerating consolidation policy, our coal operations have grown significantly in the last five years, primarily through acquisitions, and more recently from expanding production capacity at existing mines.

 

Overall Strategy and Plan of Operations

 

The Company is a vertically integrated coal operator participating in the business of consolidation of a fragmented coal industry in Yunnan and Guizhou Provinces of southwest China. We plan to expand our coal business two ways: first, through expansion of existing operations in accordance with the consolidation policy, and second, through continued acquisitions of operations that lack the capital and management skills to expand to meet the minimum capacity required by the government. Additional plan of operations for expanding our coal business includes expanding our coal wholesale operations into Guizhou, pursuing strategic partnerships, exploring viable options for raising capital with an emphasis on debt and other non-dilutive instruments, and strengthening our team.

 

Organic Growth

 

We acquire producing mines that lack the capital and management expertise to expand to meet the minimum government-mandated production requirement, and then we provide the resources to expand production capacity and improve safety. Most coal mines in Southwest China, including our mines, use the conventional/traditional mining method, under which the coal seam is broken up by explosives and then the coal is gathered and loaded on to shuttle cars  winching to the surface loading area by a cable and rail system. In lieu of shuttle cars, the Company uses conveyer systems at both the Da Ping and Weishe mines, which are more efficient and safer than shuttle cars.  We also drill additional shafts in some of our mines to increase safety, operational efficiency, and improve the working environment. While our mines continue to use timber to reinforce mine shafts, we have improved safety by using steel and hydraulic braces to reinforce the support the roof of the mine. We have also invested in monitoring equipment for hazardous gases like methane, better electrical equipment and communication systems, GPS locators for each underground miner, and blowers and better ventilation systems to ensure safe air quality. The Company also seeks to acquire larger mines and mines designed to scale up to large production have come on the market recently because the consolidation policy requires that all mines come under a holding company that controls one to two million tons of production per year.

 

In addition to simple infrastructure improvements, we improve our production and safety by introducing basic management practices by expanding the operation from one shift to multiple shifts and work teams, and using production incentives and bonuses as part of our team’s compensation package. Our mine operations have instituted regular safety training for both mine management and workers, regular sharing of safety information, and individual shift safety briefings and debriefings at the start and end of each shift.  Because slogans are effective in impacting Chinese behavior, safety banners are posted for easy viewing. We comply with and try to exceed all the safety standards and cooperate fully with local, provincial, and national government safety regulators and safety supervision teams. There have been no fatal accidents in any of our mines.

 

This has resulted in the successful integration and safe expansion of the four mines we have acquired and expansion of production capacity to meet the current 300,000 tons a year government-mandated minimum annual production requirement. For example, DaPuAn and SuTsong Mines are the two mines which the Company has owned the longest and has had the most time to work on our expansion plans. DaPuAn mine’s production increased from 39,100 tons during the three months ended October 31, 2011 to 58,480 tons during the three months ended October 31, 2012, representing approximately a 49.6% increase. Also, SuTsong mine’s production increased from 23,404 tons in this quarter FY2011 to 36,419 tons in this quarter FY2012, representing approximately a 55.6% increase.

 

Coal washing increases the value and revenue of some of our mined coal. The Company constructed the DaPuAn coal washing plant to enhance the value of the coal mined at DaPuAn mine. In addition, the Company expanded the capacity of our coal washing facilities, in particular Hong Xing, which washed other mines’ coal. L&L has also partnered with Taggart (Beijing) Engineering Ltd. to jointly develop a coal preparation facility in South China.

 

During these periods, given the increasing of coal  demand as the fall and winter approach, the Company continues to expand the capacity and improve the safety of our mines. When approved for production, we have been producing to a capacity approved by the government. In the past, the government has allowed the Company to produce more than the existing permit allows but less than the amount applied for in the application.

30


 
 

Acquisitive Growth

 

We believe that the current government-mandated consolidation policy in China will continue and thus create more acquisition opportunities for us. Strategically, the Company will accelerate the rate of acquisitions and increase the size of acquiring mines. Our focus in the short term will be negotiating and signing memorandums of understanding and letters of intent with mines that meet our criteria to generate a pipeline of acquisition targets.

 

We seek two types of acquisitions. Our standard criteria include existing mines in production with good infrastructure and sufficient reserves but lacking the capital and management to expand to or beyond the current minimum of 300,000 tons per year or mines.  Normally, we send in a team to inspect the mine, evaluate the management, and perform extensive due diligence. Based on the due diligence and analysis, we then proceed with  negotiation to acquire the targets. Thus far, we have attained signed letters of intent with many  producing mines in Guizhou Province and will continue to evaluate others   for acquisition. We may not acquire all the mines that we have signed letters of intent for. Our acquisition and inspection team consists business, operational, financial, and  renowned coal experts. Two of the members are Dr. Syd Peng and Mr. Jingcai Yang who are both independent directors of the Company. Dr. Peng is a distinguished professor of mining engineering at the West Virginia University (WVU), specializing in underground mining technologies. After earning his PhD in Mining Engineering from Stanford University in 1970, Dr. Peng spent his entire career in mining including work for the U.S. Bureau of Mines, the faculty of WVU where he served as Chairman of the Department of Mining Engineering. He is a member of the National Academy of Engineering and is the recipient of numerous professional awards.  Mr. Yang is a well known leader in the China coal industry. He has over 30 years of experience, 16 of those spent with Shenhua, the largest coal company in the world. Mr. Yang was formerly the Chief Engineer of Shenhua before being promoted to Chairman & CEO of Shendong Coal Corporation, the largest and most profitable Shenhua subsidiary, where he held full P&L responsibility.  

 

Because the consolidation policy requires that all mines must also join a holding company that controls coal production between 800,000 to  2,000,000 tons, our additional criteria now include larger mines that were designed for a minimum of 300,000 ton capacity. As a result, in addition to our standard criteria, we have been inspecting larger mines with production near 300,000 tons or more, and have considerable proven coal reserves, better geology, and strong management teams already in place. When these well-designed mines are executed effectively, they require less capital expenditure to expand capacity. Strong management teams are integral to better safety and allow for scaling up operations more quickly. Mines with these characteristics are on the market more frequently than in the past because the government consolidation policy. The Company will put a higher priority on larger mines while continuing to explore existing mines that meet our acquisition criteria.

 

Other

 

In addition to acquiring mines, the Company established a new coal wholesale operation DaXing L&L Coal Company. With approval from the government, DaXing has begun developing additional coal storage space and growing its distribution network.  Our subsidiary is expected to generate revenue in 2012 and through its sourcing of coal, introduce potential mine acquisitions to the Company in a similar manner as KMC. DaXing is actively looking for and entering into a joint sales agreement with strategic partners to expand our distribution.  

 

The Company will continue to recruit talented professionals to strengthen our team at the board, officer, and management levels. Our board is composed mostly of independent directors who are predominately U.S. citizens.  We successfully recruited a world-renowned expert in coal mining who had chaired the Department of Mine Engineering at West Virginia University and a former senior executive with the largest coal company in the world. Officers include the founder of the Company, a Chief Financial Officer who was a partner with Ernst & Young, two former senior White House staffers. One of whom is also the former Director of the United States Mint. We have recruited key managers to augment our legal, accounting, and operations departments in both the United States and China, many who were trained in the United States and have advanced degrees in business. 

 

The Company’s immediate mission is to become a leading coal energy company in the coal-rich Yunnan and Guizhou Provinces. To meet the government-mandated production targets for each holding company in Guizhou, we believe that the Company’s production capacity will increase to between 1,000,000 and 2,000,000 tons per year by end of 2013.

31


 
 

General Discussion and Analysis of Second Quarter FY2013 Results

 

The Second quarter results continued the momentum created by the growing recovery of our mining segment in the first quarter of FY2013. The coal produced and sold by our mines increased 24% from Q1 FY2013 to Q2 FY2013. Due to the impact of seasonal increase of coal demand in China, Our revenue this quarter has been increased.

In addition, the Company made a management arrangement with the owner of GuangYeh coal sales company on September 5, 2012.   GuangYeh transferred its entire staff including its customer base, sales orders into L&L’s Tai Fung subsidiary in Kunming on August 2012. With L&L’s brand name and infrastructure, the  operation is expected to grow 250% to 180,000 tons in the first year. Approximately 6,000 tons of coal was sold for $ 0.65 million at $108 per ton. In August, 2012, Weishe Coal mine received its safety and regulatory approvals and has ramped up to its approved  rate of 150,000 tons per year, Weishe has begun to expand its  annual production to 450,000 tons. On October 15, 2012, L&L entered into a contract with Datang to increase its coal supplied to 360,000 tons through September 2013. The contract is timed for the higher demand over the winter season and firming of coal prices in the region. On October 22, 2012, L&L announced plan to finalize  the agreement for the two new mines, LuoZhou Coal Mine and LaShu Coal Mine, to expand our coal production. This transaction was completed on November 18, 2013. This transaction involved the transfer of the Company's interests in Zonelin Coking Plant (98%) and the DaPing Mine (60%)   The presentation of DaPing and Zonelin for balance sheet will be reclassified as “asset liabilities held for discontinued operation”, and “discontinued operation” in Profit and Loss and Cash Flow Statements. The combined revenue of $9,441,408 from DaPing and Zoneline was not included in the Net Revenue of $45,504,279 for Q2 2013. However, the Total Net Income of $3,193,262 from Discontinued Operation of DaPing and Zoneline was included in the Profit and Loss to Net Income and EPS calculating. Going forward, we do expect the revenue from the LouZhou and LaShu to exceed that of ZoneLin and DaPing.

 

Results of Operations

 

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

 

   

Three Months Ended October 31,

 

Six Months Ended October 31,

   

2012

 

2011

 

2012

 

2011

 

  

Amount

% of Revenue

  

Amount

% of Revenue

  

Amount

% of Revenue

  

Amount

% of Revenue

Revenues

$

45,504,279

100%

$

29,452,302

100%

$

84,952,377

100%

$

58,952,062

100%

Cost of revenue

  

33,625,414

73.90%

  

21,030,857

71.41%

  

63,173,428

74.36%

  

43,033,617

73.00%

Gross profit

 

11,878,865

26.10%

 

8,421,445

28.59%

 

21,778,949

25.64%

 

15,918,445

27.00%

Selling general & administrative

  

4,161,219

9.14%

  

4,914,526

16.69%

  

7,796,888

9.18%

  

8,009,285

13.59%

Interest expense (income)

 

(117,069)

(0.26)%

 

(179,740)

(0.61)%

 

(224,335)

(0.26)%

 

(376,373)

(0.64)%

Other expense (income)

  

(562,188)

(1.24)%

  

482,050

1.64%

  

(890,414)

(1.05)%

  

1,117,599

1.90%

Provision for income taxes

  

805,527

1.77%

  

540,310

1.83%

  

1,497,967

1.76%

  

1,090,327

1.85%

Net Income Attributable to Non-controlling interest

 

1,949,832

4.28%

 

945,361

3.21%

 

3,327,195

3.92%

 

1,706,870

2.90%

Income from Discontinued Operations, Net of Tax

 

2,101,397

4.62%

 

2,071,003

7.03%

 

3,657,762

4.31%

 

1,805,093

3.06%

Net income Attributable to L&L

$

7,742,941

17.02%

$

3,789,940

12.87%

$

13,929,410

16.40%

$

6,175,829

10.48%

 

 

32


 
 

Revenue

 

The following table presents revenues by operating segment:

 

For Continued Operations (Excluding Da Ping Mine and Zone Lin Coking Plant)

 

As discussed on Note 25, on October 22, 2012, the Company announced the plan to finalize the acquisition of two new mines, LuoZhou Coal Mine and LaShu Coal Mine,. This transaction involved the transfers of the Company's interests in Zonelin Coking Plant (98%) and the DaPing Mine (60%) to satisfy majority of the payment for the new acquisition. According to the FASB ASC 360 Rule,, since the intention to spin off Da Ping and Zonelin  were known during the Q2 FY2013,   The presentation of DaPing and Zonelin for balance sheet will be reclassified as “asset/liabilities of discontinued operation” , and “discontinued operation” in Profit and Loss and Cash Flow Statements. The combined revenue of $9,441,407 from DaPing and Zonelin was not included in the Net Revenue of $45,504,279 for Q2 2013. However, the Total Net Income of $3,193,262 from Discontinued Operation of DaPing and Zonelin was included in the Profit and Loss to Net Income and EPS calculating.

 

 

Three Months Ended

 

Increase (Decrease)

 

October 31,

 

to Revenues

 

2012*

2011*

 

$

%

 

                 

 

Coal Mining

$

13,827,568

$

8,219,382

 

$

5,608,186

68%

 

Coal Wholesale

 

10,057,073

 

4,851,901

   

5,205,172

107%

 

Coal Washing

 

21,619,638

 

16,381,019

   

5,238,619

32%

 

Total Revenues

$

45,504,279

$

29,452,302

 

$

16,051,977

55%

 

 

               

 

 

 

Six Months Ended

 

 

Increase (Decrease)

 

October 31,

 

to Revenues

 

2012*

2011*

 

$