FORWARD LOOKING STATEMENTS:

The company makes written and oral statements from time to time regarding the business and prospects, such as projections of future performance, statements of management's plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimates," "projects," "believes," "expects," "anticipates," "intends," "target," "goal," "plans," "objective," "should" or similar expressions, identify forward-looking statements, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers, or other representations made by the company to analysts, stockholders, investors, news organizations and others, and discussions with management and other representatives of the Company. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the private Securities Litigation Reform Act of 1995.

Any forward-looking statement made by or on behalf of the Company speaks only as of the date on which such statement is made. The forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, the Company does not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause the future results to differ materially from historical results or trends, results anticipated or planned by the company, or which are reflected from time to time in any forward-looking statement which may be made by or on behalf of the Company.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS DOCUMENT. IN ADDITION TO HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS DOCUMENT CONTAIN CERTAIN FORWARD-LOOKING INFORMATION. WHEN USED IN THIS DISCUSSION, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER

MATERIALLY FROM THOSE PROJECTED DUE TO A NUMBER OF FACTORS BEYOND OUR CONTROL. WE DO NOT UNDERTAKE TO PUBLICLY UPDATE OR REVISE ANY OF OUR FORWARD-LOOKING STATEMENTS EVEN IF EXPERIENCE OR FUTURE CHANGES SHOW THAT THE INDICATED RESULTS OR EVENTS WILL NOT BE REALIZED. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT ONLY OUR CURRENT VIEWS OF POSSIBLE FUTURE EVENTS.

Plan of Operations

As China does not substantial petroleum or natural gas reserves, different from that of the US, 71% of China energy is relying on coal. As China economy continues coal grow at high speed, supply of coal cannot meet the demand, thus drives coal prices upward in the recent years. This continuing demand of coal provides a leading, competitive edge for L&L energy operations, which is based on the coal rich region of Yunnan Province in the southwestern area of China. Yunnan's strong infrastructure demands large quantities of steel, coke, and coal supplies in the next 3 years. As a result, the Company plans to expand its energy business via M&A existing operation to following government's oligopoly policy that is to aim to eliminate many small inefficient coal mines, to increase operational efficiency and safety standards. The Company has entered 3 MOUs to acquire other energy related entities in Yunnan Province in July of 2008, following its policy to continuously acquire and expand other profitable energy entities in China and other parts of the world. Due to the unexpected Wall Street financial crisis, happened in the summer of 2008, the US liquidity is dried up which resulting a delay of the Company funding process. It is the Company's plan to focus on funding while upgrading its team by inviting additional qualified professionals to help growth. L&L is a US company, public listed in the US OTC-BB market since 8/4/2008. L&L is known to have organizational skills and visions to upgrade the coal mining standards, which most of the local small China miners do not have. To ensure its growth momentum, L&L is investing its time and resource to develop strategic relationship with large Japanese coal trading firms, not only to learn the high standards of Japan coal operations but also to take advantage of price differences between the higher international coal markets, and lower China domestic markets, following the Company international operational policy.

Results of Operations

1) During the current quarter ended on October 31, 2008, the Company sales increased of approx. 45% to $11,310,485 as compared to $7,805,082 for the same period in 2007. This sales increase was mainly due to L&L Coal sales, KMC sales increase of coal operations incurred during the current quarter. As of 10/31/2008, coal sales represent approx. 91% of L&L total sales, increased from approx. 14% from the same period ended on 10/31/2007.

2) As of October 31, 2008, the Company controls 100% of KMC operations, 80.4% of LEK operations and 60% of L&L Coal operations. The Company's consolidated financial statements prepared in accordance with the US generally accepted accounting principles (US GAAP)., had removed minority interests from the profit belonging to the minority shareholders of LEK and L&L Coal, which are 19.6% and 40% respectively, from the Company's net profit. Consequently, the Company consolidated results of operations appear to have a much lower profit margin than had the Company could reflect the entire operation profit as its bottom line. To reflect its true results of operation and improve its profit, the Company intents to acquire the entire equity of LEK and L&L Coal when it is feasible to do so.

Total Revenue:

The Company recorded revenue of $11,310,485 for the quarter ended October 31, 2008, comparing to $7,805,082 for the same period in 2007. The increase of $3,505,403 (or of 45%) for the quarter ended October 31, 2008 was a result of L&L Coal and KMC operation which contributed approx. $7 million and $3 of sales respectively in the current period. See Sales Segment Analysis details.

Total Operating expenses:

Total operating expense of $1,488,700 incurred in the period ended October 31, 2008, representing an increase of $792,363 (or 114%) as compared to $696,337 for the same period in 2007. The increase of total operating expenses is mainly due to the acquisition of L&L Coal operations.

Interest expenses:

Interest expenses of $95,878 for the period ended October 31, 2008, representing an increase of $42,624 (or 80%) from $53,254 for the same period in 2007. The increase reflected increasing bank loans of LEK and L&L Coal subsidiaries during the quarter, reflecting sales activities increase.

Minority Interest:

Minority interest for the period ended October 31, 2008 is $1,953,455, representing an increase of $1,884,611 (or 2738%) from $68,844 for the same period in 2007. The increase of minority interest is due to the acquisition of L&L Coal.

Net Income:

Income increased by $2,202,730 (or 681%) to $2,526,023 during the current quarter, comparing to net income of $323,293 for the same period of 2007, as a result of L&L Coal sales and KMC coal sales increase during the current period.

Change in Liquidity and Capital Resources:

The following factors affected the Company's liquidity status and capital resources:

Operating activities: Net cash provided by operating activities was $2,376,462 during the current period ended October 31, 2008. While in the same of period in 2007, the net cash used by operating activities was $3,092,513. By comparing these 2 periods, it shows an increment of cash provided by operating activities of $5,468,975 (or 177%). The increment was mainly

Investing activities: Net Cash used in investing activities was $6,585,245 during the current period ended October 31, 2008, while $155,418 was generated during the same period in 2007. The increase of net cash used of $6,740,663 (or -4,337%) was due to the purchase of property and equipment, and purchase of intangible assets.

Financing activities: Net cash provided by financing activities was $6,773,679 during the current period ended October 31, 2008, while $3,337,292 was generated during the same period in 2007. It shows an increase of 3,346,387 (or 103%), which was mainly due to increase in minority interest due to acquisition.

The current assets of the Company were $39,686,123and $23,283,385 for the current period ended on October 31, 2008, and for the same period in 2007, respectively. The increase in current assets of $16,402,738 (or 70%) was primarily due to the increase of prepayment and other receivable of $1,399,012 as coal business of L&L Coal and KMC is hot thus can ask for cash prepayment, increase of account receivable of $6,077,160, increase of cash of $3,525,694, and increase of inventory of $1,179,018.

The current liabilities were $14,508,367 and $13,122,178 for the current period ended on October 31, 2008, and for the same period in 2007, respectively. The increase of the current liabilities by $1,386,189 (or 11%) was primarily due to the acquisition of L&L Coal.

Off-Balance Sheet Arrangements:

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

The Company's current ratio (current assets divided by current liabilities, a ratio used to determine the Company's ability to pay its short-term liabilities) is 2.74 as of October 31, 2008 compared to 1.77 in the same period ended on October 31, 2007. As a general rule, the higher the current ratio, the more likely the Company will be able to pay its short-term bills.

Critical Accounting Policies and Estimates

The company prepares its Consolidated Financial Statements in accordance with accounting principles generally accepted in the U.S. In doing so, the company has to make estimates and assumptions based on the U. S. generally accepted accounting principles ("US GAAP"). Many of our estimates and assumptions involved in the application of GAAP may have a material impact on reported financial condition, and operation performance and on the comparability of such reported information over different reporting periods. The nature of the estimates or assumptions is material due to the levels of subjectivity and judgment, necessary to account for highly uncertain matters of the susceptibility of such matters to changes; and the impact of the estimates and assumptions on financial condition or operation performance may be material. The reason the uncertainties involved in may be that there is an uncertainty attached to the estimated or assumption, or it just may be difficult to measure or value.

As the assumptions for specific sensitivity may change as a result of other possible outcome, that these estimates/assumptions may changed in the future and may affect our reported amounts of assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities.

The Company's internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and

The following accounts my require estimates in computing the balances:

Revenue Recognition - The Company's revenue recognition policies are in compliance with Staff accounting bulletin when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

Accounts receivable - Majority of the Company's accounts receivable is due from its customers in China. The Company determines any required allowance, by considering a number of factors including length of time trade accounts receivable are past due and the Company's previous loss history. The Company writes off accounts receivable when they become uncollectible. When payments subsequently received on such receivables, they are credited to the allowance for doubtful accounts.

Inventories - Inventories comprise finished goods and work-in-progress and are stated at the lower of cost and net realizable value. Cost, calculated on the first-in, first-out basis, comprises materials, direct labor and an appropriate proportion of all production overhead expenditure. Net realizable value is determined on the basis of anticipated sales proceeds less estimated selling expenses

Property and Equipment - Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets ranging from 3 to 10 years.

Not recording value of coal reserves - On a conservative basis, the Company does not record value of 2 Mines' coal reserves which the Company has an exclusive right to excavate for commercial purposes and on a long term basis, evidenced by the exclusive government 2 mining licenses of the 2 Mines.

Income taxes - The Company provides for income taxes based on the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which, among other things, requires that recognition of deferred income taxes be measured by the provisions of enacted tax laws in effect at the date of financial statements. Its income from overseas controlled subsidiaries is not subject to the United States federal income taxes, as income not repatriated to the US is subject to the IRS code.

Financial Instruments - Financial instruments consist primarily of cash, accounts receivables, related party receivables, investments in equity securities and obligations under a bank credit facility. The carrying amounts of cash, accounts receivable and the credit facility approximate fair value due to the short maturity of those instruments. The carrying value of the related party receivables is estimated on the basis of arms' length transactions.

Use of Estimates - The preparation of financial statements, in conformity with generally accepted accounting principles, 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. Based on the past experience, these estimates are reasonably accurate, may have not been changed, and it is our best belief that these estimates are reasonably not likely to be changed in the future under the current circumstances. Actual results could differ from those estimates.

Stock-Based Compensation: The Company issued warrants to compensate directors and executive in accordance with Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and provides the pro forma net earnings and pro forma earnings per share disclosures for employee stock warrants granted, as if the fair-value-based method defined in Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, had been applied. In accordance with APB No. 25, compensation expense is recorded on the date a warrant is granted only if the current market price of the underlying stock exceeds the exercise price. The Company has issued 2 types of warrants (Class D, and Class E). As of April 30, 2005, no options have been granted.

The Company from time-to-time may grant restricted stock to employees and executives to award their services. Compensation cost if any, is to be charged as expenses on the grant date.

The Company follows SFAS 123R and Emerging Issues Task Force ("EITF") Issue No. 96-18 Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.

a) Pro Forma Net Income and Earning Per Share:

Under SFAS 123, the Company's net earnings, and earning per share are adjusted to the pro forma amounts for the 6 months ended October 31, 2008, and 2007, as follows:

                                                                                                    (Per $ Thousand)
                                                       6 months period ended              6 months period ended
                                                                 10/31/2008                         10/31/2007
Net income - as reported                                           $5,333                              $430
Stock-Based employee compensation
Expense included in reported net income, net of tax
Total stock-based employee compensation expense
determined, under fair- value-based method for
all rewards, net of tax
----------------------------------------------------   -------------------------------    -------------------------------
Pro forma net profit                                               $5,333                              $430

The fair value of the options granted in the year ended October 31, 2008 was determined based on the minimum value method. That calculation assumed no dividends, 5 year lives and risk free interest rate of 3.25% .

Impairment of Long-lived Assets: The Company assesses long-lived assets for impairment in accordance with the provisions of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 requires that the Company assess the value of a long-lived asset whenever there is an indication that its carrying amount may not be recoverable. The carrying amount of a long lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the net book value of the asset and its estimated fair value. For purposes of these tests, long-lived assets must be grouped with other assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. No long-lived assets were impaired during the quarters ended October 31, 2008 and 2007.

Recently Issued Accounting Standards - In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. In addition, SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. For public entities that file as a small business issuer, SFAS No. 123R is effective for the first interim or annual reporting period of the Company's first fiscal year beginning on or after December 15, 2005. The adoption of SFAS No. 123R is not expected to have a material effect on the Company's financial position or results of operations.

In December 2004, the FASB issued SFAS No. 153 "Exchange of Non-Monetary Assets
- an Amendment of APB Opinion No. 29" to amend APB No. 29 by eliminating the exception for non-monetary exchanges of similar productive assets and replaces it with general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange is defined to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a material effect on the Company's financial position or results of operations.

In March 2005, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 107 to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB No. 107 during implementation of SFAS No. 123R.

In August 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections. This statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement if the pronouncement does not include specific transition provisions, and it changes the requirements for accounting for and reporting them. Unless it is impractical, the statement requires retrospective application of the changes to prior periods'

SFAS 155 - 'Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140'

This Statement, issued in February 2006, amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets."

This Statement:

a. Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation

b. Clarifies which interest-only strips and principal-only strips are not subject to the requirements of FASB Statement No. 133

c. Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation

d. Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives

e. Amends FASB Statement No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a

derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This Statement is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006.

The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of our fiscal year, provided we have not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Provisions of this Statement may be applied to instruments that we hold at the date of adoption on an instrument-by-instrument basis.

The Company is currently reviewing the effects of adoption of this statement but it is not expected to have a material impact on our financial statements.

SFAS 156 - 'Accounting for Servicing of Financial Assets-an amendment of FASB Statement No. 140'

This Statement, issued in March 2006, amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations.

2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3. Permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets and servicing liabilities.

4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a service elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

Adoption of this Statement is required as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to have a material impact on our financial statements.

. . .