Edgar Filing: L & L FINANCIAL HOLDINGS INC

Raw Materials (net)

10qsb1q2005

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the First Quarter Ended on July 31, 2005


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

		For the Transition Period From May 1, 2005 to July 31, 2005

		Commission File Number 000-32505

		L & L FINANCIAL HOLDINGS, INC
		(Exact name of registrant as specified in its charter)

		NEVADA
		(State or other jurisdiction of incorporation or organization)

		90-2103949
		(I.R.S. Employer Identification No.)

		720 Third Avenue #1611, Seattle, WA 98104
		(Address of principal executive office) (Zip Code)

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

		Check whether the issuer (1) filed all reports required to be filed by
		Section 13 or 15(d) of the Exchange Act 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 [ ]

		The number of shares outstanding of the issuer's common stock as of
		July 31, 2005 was 18,497,418

		Transitional Small Business Disclosure Format (check one):
		Yes [ ] No [X]

L & L FINANCIAL HOLDINGS, INC.

Report on Form 10-QSB For Third Quarter Ended July 31, 2005 Table of Contents


		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets................……………..……….……		3
Consolidated Statements of Operations) …………………………		5
Consolidated Statements of Cash Flow ..………………...…		7
Consolidated Statements of Shareholders' ..……………………..…		10
Notes to the Consolidated Financial Statements ..………...….…		11
Item 2. Management's Discussion and Analysis or Plan of Operations		33
Item 3. Control and Procedures .................…………………………………		36
PART II OTHER INFORMATION
Item 1. Legal Proceedings .........................……………………		36
Item 2. Changes in Securities ...................……………………		36
Item 3. Exhibits and Reports on Form 8-K ............………………		37
Signatures ............................……………………………............……		37
Certifications………………………………………………………………….		38

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


L & L FINANCIAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
As of July 31, 2005 and 2004


		July 31		April 30
		2005		2005


		Unaudited		Audited
ASSETS

CURRENT ASSETS:
Cash	$	1,085,897	$	1,978,671
Accounts receivable, net		5,060,748		4,861,364
Notes Receivable		12,346		67,014
Prepayment and other assets		1,978,090		1,803,107
Inventories		3,423,111		3,761,166

Total current assets		11,560,192		12,471,322

PROPERTY AND EQUIPMENT, net		3,139,866		3,283,463
GOODWILL		1,591,704		1,463,124
LOAN FROM A CORP SHAREHOLDER		4,784,770		4,351,582
INVESTMENTS		462,228		461,033

Total long term assets		9,978,568		9,559,202

TOTAL ASSETS	$	21,538,760		22,030,524


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable		3,768,961		4,252,912
Accrued and other liabilities		1,591,631		1,260,746
Taxes payable		2,304,570		2,066,927
Customer deposits		563,016		385,413
Bank loan and bank line of credit		648,148		849,439

Total current liabilities		8,876,326		8,815,437


CONSOLIDATED BALANCE SHEETS (Cont'd)

LONG TERM LIABILITIES:
Long Term Bank Loan		-		1,210,654

TOTAL LIABILITIES		8,876,326		10,026,091

MINORITY INTEREST		4,364,577		4,738,894

STOCKHOLDER'S 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 18,497,418 and 18,227,559 issued and
Outstanding		18,498		18,228
Paid -in Capital		7,690,510		6,883,603
Due to/(from) controlling shareholder		49,178		42,575
Deferred stock compensation		(75,500)		(80,000)
Foreign currency translation		83,624		(11,088)
Retained Earnings		531,547		412,221

Total stockholders' equity		8,297,857		7,265,539

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	21,538,760	$	22,030,524

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


L & L FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended July 31, 2005 and 2004

		July 31		July 31
		2005		2004

REVENUES
Sales (LEK)	$	3,273,524	$	0
Consulting Income		20,000		18,400

TOTAL REVENUES		3,293,524		18,400

Cost of Goods Sold		(2,361,155)		-
Consulting Expenses		(41,056)		-

Total Cost of sales		(2,402,211)		-
Gross Profit		891,313		18,400
OPERATING COSTS AND EXPENSES:
Personnel costs		(387,237)		(114,798)
Selling / General and administrative expenses		(503,534)		(66,124)

Total operating expenses		(890,771)		(180,922)

OTHER EXPENSES/(INCOME):
Interest income / (expense) (net)		54,976		(2,670)
Other income (net)		273,944		420

Total other expenses/(income)		328,920		(2,250)


INCOME/(LOSS) BEFORE INCOME TAXES AND MINORITY
INTEREST		329,462		(164,772)
LESS PROVISION FOR INCOME TAXES		-		-


INCOME BEFORE MINORITY INTEREST		329,462		(164,772)

LESS: MINORITY INTEREST		(210,136)		-


NET INCOME		119,326		(164,772)

OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments		94,712		(501)

Total other comprehensive loss		94,712		(501)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Cont'd)


COMPREHENSIVE INCOME	$	214,038	$	(165,273)

NET INCOME PER COMMON SHARE – basic		$0.007	$	(0.010)
NET INCOME PER COMMON SHARE – diluted		$0.006	$	(0.010)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING – basic		18,319,724		16,883,316

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING – diluted, under treasury stock method		18,858,091		16,883,316

The accompanying notes are an integral part of these consolidatedfinancialstatements


L&L FINANCIAL HOLDINGS, INC
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three months ended July 31, 2005 and 2004
		2005		2004


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	119,326	$	(164,772)
Add: Minority interest income		210,136
Adjustments to reconcile net income to net cash
provided by / (used in )operating activities:
Depreciation and amortization		62,973		3,658
Amortization for deferred compensation		4,500		(27,145)
Stock issued as compensation for director's fee				31,500
Provision for inventory		(489)		-
Changes in assets and liabilities (net of business acquisition):
Accounts receivable		(145,296)		58,570
Inventory		404,851		-
Prepaid and other assets		(312,771)		(59,688)
Accounts payable		(556,958)		(7,303)
Accrued liabilities and other liabilities		656,063		(10,463)
Net cash (used in)/provided by operating activities		442,335		(175,643)


CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable		54,907
Purchases of property and equipment		(5,630)		(2,448)

Net cash used/(provided) in investing activities		49,,277		(2,448)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock sales and subscriptions(net)		9,600		225,882
Net advances (to) from controlling shareholder		6,603		(44,738)
Net borrowings/ repayments on bank line of credit		(1,424,500)		(22,801)

Net cash provided by financing activities		(1,408,297)		158,343


FOREIGN CURRENCY TRANSLATION		23,911		(501)


CONSOLIDATED STATEMENT OFCASH FLOWS (UNAUDITED) (Cont'd)
INCREASE/(DECREASE) IN CASH		(892,774)		(20,249)
CASH, BEGINNING OF YEAR		1,978,671		461,050

CASH, END OF PERIOD	$	1,085,897	$	440,801

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


L&L FINANCIAL HOLDINGS, INC
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three months ended July 31, 2005 and 2004

		2005	2004

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized)	$	32,738		0
Income taxes	$	0		0

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Exchange of the company's common shares of 265,859
at a mutually agreed value of $3.00 per share for	$	797,577		0
exchange of LEK's 9.4% equity.


Exchange of equipment for note receivable		168,743

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

L&L Financial Holdings, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


For the years ended April30, 2003, 2004and 2005

				Due
			Additional	(from)/to			Foreign
	CommonStock		Paid-in	Controlling	Deferred	Retained	Currency

	Shares	Amount	Capital	Shareholder	Compensation	Earnings	Translation	Total

Balance
April 30, 2005	18,227,559	$18,228	$6,883,603	$42,575	$(80,000)	$412,221	$(11,088)	$7,265,539

Issuance of common
stock for cash	4,000	4	9,596					9,600

Issuance of common	265,859	266	797,311					797,577
stock for acquisition

Advance (from)/ to				6,603				6,603
shareholder

Amortization of					4,500			4,500
deferred compensation

Foreign currency
translation adjustment							94,712	94,712

Net Profit						119,326		119,326

July 31, 2005	$18,497,418	$18,498	$7,690,510	$49,178	$ (75,500)	$531,547	$83,624	$ 8,297,857

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

L & L FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JULY 31, 2005 AND 2004

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

L & L Financial Holdings, Inc. (the "Company"), was formally known as Royal Coronado Company Ltd. The Company changed its name to L & L Financial Holdings, Inc. in connection with its acquisition of L & L Investments Holdings, Inc. L & L Investments Holdings, Inc. was a holding company for two operating entities, L & L Financial Holdings Company Ltd., and Global Future Company Ltd. (formerly known as L & L Financial Investments Company Ltd.). These entities primarily conducted business consulting services in the United States and Asia. The Company's operations are conducted from the representative office in ShenZhen of China. The Company's revenues are generated from its recently acquired subsidiary, LEK (Liuzhou Liuerkong Machinery Company Ltd.) and from some consulting services provided to clients located primarily in Asia.

The Company focuses on acquisition of established manufacturing companies with high growth potential in China. The Company intends to acquire at least 51% equity control over its investments in private Chinese businesses. Management believes that the Company can utilize management practices and technologies common in the United States to restructure and better manage these businesses, improving efficiency and profitability. The Company intends to use its personal networks and personnel in Hong Kong, China and the United States to market its goods and services. Its business is conducted through two wholly-owned subsidiaries. The Company's United States subsidiary manages its own investment portfolios in the companies located in China. The Company, through its Hong Kong subsidiary, performs due diligence and financial consulting services.

The Hong Kong subsidiary, Global Future Company Ltd. incorporated in Hong Kong, performs due diligence services for its Hong Kong and Chinese corporate clients.

LEK is a manufacturer of industrial air compressors. Its manufacturing facility is located in China and sales of its products are primarily in China.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash –Cash includes all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: L & L Investments Holdings, Inc., L & L Financial Holdings Company Ltd., and Global Future Company Ltd. of Hong Kong as well as its 60.4% owned LEK subsidiary. All significant inter-company accounts and transactions are eliminated.

Revenue Recognition - Revenue is earned primarily from sales of goods of LEK air compressor products, and from small consulting services, such as, business strategy, and/or accounting related services. Revenue includes all amounts that are billed or billable to clients,

Revenue- Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which generally coincide with the time when the goods are delivered to customers and title has passed.

The Company generally enters into fixed-price contracts in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Revenue from such arrangements is recognized when: i) there is persuasive evidence of an arrangement, ii) the fee is fixed or determinable, iii) goods and services have been rendered and payment has been contractually earned, and iv) collectibility of the related receivable or unbilled revenue is reasonably assured. Sales and fees are generally billed and revenue recognized as good or services are provided and billed to clients based on consistent methods.

Costs of Service - Product cost consists of material cost, direct labor costs and related overhead costs associated with such product and or services. Other contract expenses include costs directly attributable to client engagements related to travel for client service professional staff.

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.

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, and 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. 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 two types of warrants (Class D, and Class E). As of July 31, 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 123 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. Under SFAS 123, stock compensation is based on the fair value of such instruments. The Company made additional disclosure on Note 22; Employee Stock Option Plan.

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 three months ended July 31, 2005, and 2004, as follows:


(Per $ thousand)	Three monthsperiod ended

	7/31/2005	7/31/2004

Net income - as reported	$ 119	$ (165)

Stock-Based employee compensation

Expense included in reported net income, net	0	3
of tax

Total stock-based employee compensation
expense

determined, under fair- value-based method
for

all rewards, net of tax	0	(3)

Pro forma net profit	$ 119	$ (165)

The fair value of the options granted in the period ended July 31, 2005 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 first quarter ended July 31, 2005.

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.

Impairment of long-lived assets is assessed by the Company whenever there is an indication that the carrying amount of the asset may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows generated by those assets to the assets' net carrying value. The amount of impairment loss, if any, is measured as the difference between the net book value of the assets and the estimated fair value of the related assets.

Earning Per Common Share - The Company has adopted SFAS No. 128, Earnings per Share, which supersedes APB No. 15. Net profit per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic earning per share is based upon the weighted average number of common shares outstanding . Diluted net profit per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic EPS differs from primary EPS calculation in that basic EPS does not include any potentially dilutive securities. Diluted EPS must be disclosed regardless of the dilutive impact to basic EPS (See Note 13).

Foreign currency translation - The foreign subsidiaries maintain their financial statements in the local currency which has been determined to be the functional currency. Substantially all operations are conducted in China and Hong Kong, the functional currencies are respectively Renminbi (RMB) and Hong Kong Dollar. Assets and liabilities denominated in the foreign currencies are translated into U.S. dollars at the rates in effect at the balance sheet date. Revenues and expenses are translated at average rates for the year. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains and losses resulting from foreign currency transactions are included in the results of operations. There were approx. 2% appreciations of RMB against the U.S. dollars, resulting foreign currency gains for the Company, for the three months ended July 31, 2005. The China government adopted a new exchange(fixed) rate between U.S.

dollars and RMB during the quarter, led to appreciation of RMB and depreciation of the U.S. dollars. No change of Hong Kong dollar exchange rate with the U.S. dollars during the period ended on July 31, 2005..

NOTE 3. BUSINESS COMBINATION

On December 4, 2004, the Company purchased 51% voting ownership interest of LiuZhou City No. 2 Air Compressor Co Ltd, or Liuzhou Liuerkong Machinery Company Ltd. ("LEK"). The acquisition of LEK is recorded under a purchase method of accounting. The LEK purchase price of $4,327,272, based on the negotiated value of LEK's net assets, was paid via an exchange of 1,442,424 of L&L common stock valued at $3.00 each stock. The value of the common stock issued was based on the price received for cash sales of the stock during fiscal 2005. The Company has accounted for the transaction as a purchase. In accordance with SFAS No. 141, the Company consolidates LEK financial position at July 31, 2005 and operational results from April 30, 2005 through July 31, 2005.

The following information relates to the LEK acquisition:

1. LEK, is a privately owned legal entity, incorporated in LuiZhou city, GuangXi, China. It is an established company with over 30 years of operations of manufacturing and sales of various piston-type, low-end, industrial air compressors. As of the date of acquisition, sale of air-compressors represent approx. 80% of LEK total sales, while the PVC plastic molding machines sales represents approx. 20%. As a result of the purchase, 51% of the LEK equity voting stock was acquired by the Company on December 4, 2004 via an execution of a sales and purchase agreement on that date.

The Company identified a US strategic partner to transfer US advanced technology to China. The partner is able to work with the Company to transport its high-end air compressors and its key components to LEK, to increase LEK products portfolio, quality, and sales. The Company is also improving the LEK disciplines, to improve sales efficiency. The Company management team is led by Chinese Americans, who understand the Chinese culture, languages, and business opportunities. The management team believes that if the Company could successfully bring in the US technology to manufacture cost competitive air compressors in China, it would lead LEK into a major player in China market. This growth strategy formulated by the Company is shared by its management team and understood by all LEK shareholders.

2. The consolidated statement of operations of the Company through the three months ended on

July 31, 2005 includes the results of operations of LEK from the acquisition date of December 4, 2004.

3. The purchase price indicated on the acquisition contract is $4,327,272. The purchase is a non-cash transaction, as the contract is executed by an exchange of the Company's common shares of 1,442,424 at a mutually agreed value of $3.00 per share for exchange of LEK's 51% of equity. The value of $3.00 per common share is a negotiated price, mutually agreed by both parties, based on the private placements of the Company's stock at $3.00 per share on and around the acquisition date.

4. Contingent payments, options, or commitments specified in the acquisition contract and their accounting treatments are as follows:

a) Per the acquisition contract, three (3) loans of approx $121,800 (RMB 1,000,000) each would be made by L&L to LEK. Two of the installments are made to LEK on 12/14/2004 and 5/1/2005, respectively. The third loan of $121,800 due after year-end and, is to be made on a conditional basis. Those conditions include, LEK management performance meets the budget. The loans bear a minimal interest rate to be paid by LEK to the Registrant. These loans are designed for the improvement of LEK working capital, as well as for a consolidation the existing three LEK manufacturing facilities to a new single plant, to enhance LEK inventory controls and operational efficiency. These inter-company balances are eliminated in consolidation.

b) On June 30, 2005 the Registrant acquired additional 9.4% of LEK equity shares using a stock exchange at $3.00 per share of the Company stock. Thus, the Company increased its equity holding of LEK to 60.4% . The consolidated statement of operations of the Company through the three months ended on July 31, 2005 includes the results of operations of LEK from the acquisition date of December 4, 2004.

c) L&L plans to form a new Sino-American join-venture company with selected assets of LEK, to focus on air compressor business, to gain further control over LEK, and to enjoy the tax benefits of China.

5. LEK Condensed balance sheet disclosures.

The LEK condensed balance sheet as of December 4, 2004 is summarized as follows:


	Historical	Fair Market		Historical	Fair Market
	Cost	Value		Cost	Value

Cash	$ 640,024	$ 640,024	Accounts Payable	$ 4,667,924	$ 4,667,924

Accounts Receivable	2,627,109	2,627,109	Other Payable	5,058,532	5,058,532

Other Receivable and
Prepayment	5,620,200	5,620,200	Long Term Liabilities	146,239	146,239

Inventories	4,837,738	4,967,666	Minority Interest	1,271,717	1,293,802

Fixed Assets	1,042,544	3,050,765	Equity	3,623,203	5,739,267

			Total Liabilities and
Total Assets	$ 14,767,615	$ 16,905,764		$ 14,767,615	$ 16,905,764
			Equity

The total appraised fair market value of LEK assets is $16,905,764 including inventories of $4,967,666 and fixed asset of $3,050,765 are determined on the acquisition date of December 4, 2004, supported by an independent, third party‘s appraisal report. The fair market value of LEK assets is higher than that of the book value at the acquisition date. Per SFAS 141, the cost allocation uses the fair market value of LEK assets and liabilities, resulting a net equity of $5,739,267 of LEK on December 4, 2004. LEK owns other subsidiaries that are consolidated for which there is minority ownership to account for.

6. The allocation of LEK purchase cost of $5,187,727.

Total LEK purchase cost of $5,187,727, which consists of $5,124,849 of stock exchange value, and $62,878 of capitalization of direct acquisition costs, is allocated to two components: 1) the fair market value of LEK's net equity and 2) goodwill. Details are summarized as follows:

As April 30, 2005, thd goodwill calculation as below:

Item

Amount


Fair value of assets	$ 16,905,764
Less: Fair value of liabilities	9,872,695
Minority interest	1,293,802


LEK equity	$ 5,739,267


Net equity acquired by L&L	$ 2,927,026	(51% of LEK equity)
Goodwill acquired by L&L	$ 1,463,124


Total LEK cost to L&L	$ 4,390,150

In 1Q movement

The LEK condensed balance sheet as of June 30, 2005 is summarized as follows:


	Historical	Fair Market			Fair Market
Item	Cost	Value	Item	Historical Cost	Value

Cash	$ 1,819,180	$ 1,819,180	Accounts Payable	$ 6,623,630	$ 6,623,630

Accounts Receivable	5,025,095	5,025,095	Other Payable	4,543,723	4,543,723

Other Receivable and
Prepayment	7,755,511	7,755,511	Long Term Liabilities	1,210,654	1,210,654

Inventories	3,585,683	3,585,683	Minority Interest	1,331,048	1,331,048

Fixed Assets	2,640,578	2,640,578	Equity	7,116,992	7,116,992

			Total Liabilities and
Total Assets	$ 20,826,047	$ 20,826,047	Equity	$ 20,826,047	$ 20,826,047

On June 30, 2005, an exchange of the Company's common shares of 265,859 at a mutually agreed value of $3.00 per share for exchange of LEK's 9.4% of equity. After the Registrant acquired additional 9.4% of LEK equity shares, the Company increased its equity holding of LEK to 60.4% .


In 1Q, The additional goodwill calculation as below:
Item	Amount

Fair value of assets	20,826,047
Less: Fair value of liabilities	12,378,007
Minority interest	1,331,048

LEK equity	7,116,992

Net equity acquired by L&L	668,997	(9.4% of LEK equity)
Goodwill acquired by L&L	128,580

Total LEK cost to L&L		( 797,577=$3×265,859 )
	797,577

Total Goodwill	1,591,704

7. Goodwill of LEK in the amount of $1,591,704 is shown on the Registrant's consolidated balance sheet as of July 31, 2005. Goodwill included in the consolidated statement is a result of combing LEK operations into the Company's operations. Goodwill is a residual cost after the cost allocation of the total purchase price of $5,187,727 exceeds the net equity acquired. The

goodwill of LEK is an intangible asset, expected to be indefinite until the disposal of the LEK operations. Goodwill of LEK relates to its established brand name, and the oil-free (non-lubricant) technology incorporated in LEK piston-type air compressors. The Company has not identified any finite lived intangible assets in connection with this transaction.

8. Per the SFAS No. 142, Management determined that there is no impairment of the LEK

Goodwill at the end of July 31, 2005. This is, evidenced by an independent appraisal evaluation report indicating that as of July 31, 2005 the fair market value of goodwill of $4,617,433 which is same as Dec 4, 2004 is higher than the carrying amount of $1,591,704 as of July 31, 2005. As there is only one sales reporting segment of the Company, there is no need to further disclose segments of goodwill. In addition, there is no gain or disposal of the goodwill during the Period ended July 31, 2005. On-going test of impairment of goodwill will be made at least on an annual basis in the future for the impairment purposes. Per the SFAS No. 142, there is no need for an amortization of goodwill.

NOTE 4. CASH

The cash balances as of July 31, 2005 and April 30, 2005 consist of:

Item

7/31/2005

4/30/2005


Cash on hand	$	15,247	$	12,804
Cash in banks		1,070,650		1,965,867


Total	$1,085,897		$1,978,671

NOTE 5. ACCOUNT RECEIVABLES

The account receivable balances as of July 31, 2005 and April 30, 2005 consist of:


			7/31/2005			4/30/2005

Item			Bad debt	Account		Bad debt	Account
		Amount			Amount
			provision	receivable, net		provision	receivable, net


Within credit term	(1)	$ 3,890,760	$ -	$ 3,890,760	$ 3,694,676	$ -	$ 3,694,676
Exceeding due
day 1 to 30 days		274,434	(13,722)	260,712	237,214	(11,861)	225,353
Exceeding due
day 31 to 180 days		1,182,196	(272,920)	909,276	1,255,133	(313,798)	941,335
Exceeding due	(2)
day 181 days		724,716	(724,716)	-	666,109	(666,109)	-


Total						$
		$ 6,072,106	$ (1,011,358)	$5,060,748	$ 5,853,132	(991,768)	$ 4,861,364

(1)	Based on Chinese business custom, the Company grants approx 30-60 days credit term for their customers.

(2)	The receivable would normally be collected within the180 days.

NOTE 6. NOTES RECEIVABLE

The notes receivable balances as of July 31, 2005 and April 30, 2005 consist of:


Item	7/31/2005	4/30/2005

Amount	$ 104,346	$ 159,014
Bad debt provision	(92,000)	(92,000)

Notes receivable, net	$ 12,346	$ 67,014

The notes receivable of $12,346 was due from LEK subsidiary. The notes receivable incurred in current year, is due on October 27, 2005. The entire amount was collected in October, 2005.

NOTE 7. INVENTORIES

Inventories located at LEK subsidiary consist of the following details as of July 31, 2005 and April 30, 2005:


		895		41
Work in process		346,535		919,932
Finished Goods		535,678		543,108

Subtotal		4,311,108		4,632,381
Less: Obsolescence Provision		(887,997)		(871,215)

Total Inventories	$	3,423,111	$	3,761,166

(1): Slow moving inventories - raw materials relates to LEK air compressor manufacturing operations. Prior to L&L's acquisition of LEK on 12/4/2004, LEK made bulky purchased of raw materials for price volume discounts. Due to larger volume on hand, some raw materials can not be used in 3 months, thus are considered slow moving. Management believes that these raw materials can be absorbed in the next 6 months, under the current production schedule. Therefore, no provision of slow moving inventories is needed as of 7/31/2005.

NOTE 8. PREPAYMENT AND OTHER ASSETS

Prepayment and other assets consist of the following details as of July 31, 2005 and April 30, 2005:


Item		7/31/2005	4/30/2005


Prepayments	(1)	$ 540,885	$ 345,046
Deposits	(1)	188,057	177,415
Other Receivables	(2)	719,353	737,650
Advances to employees	(3)	529,795	542,996


Total		$ 1,978,090	$ 1,803,107

(1): It is the business practice in China that Company maintains deposits or prepayments with its vendors and consultants, to ensure timely delivery of goods or services.

(2): Other receivables include account receivable from selling old fixed assets, and other non-air compressors. During the current year, LEK disposed old equipment, metal scraps, and un-usable assts to the general public to streamline its manufacturing facilities.

(3); LEK has some 20 sales and service centers, located through out China and away from LiuZhou factory. Each sale staff of these locations receives some cash advances, in order to conduct LEK business. The advances are recorded under employees' personal names, as advances to employees. The advances are on a replenish basis. In addition, it is the business practice that when employees having business trips, or due to unexpected difficulties, they may obtain an approval to borrow cash advance from the employer, on a temporarily basis. The advances can be collected, either upon demand, upon employees' claim their expenses, or deducted from their salaries. As the Company with LEK factory has. 700 workers and staff as of 7/31/2005, the balance is considered reasonable.

NOTE 9. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of July 31, 2005 and April 30, 2005:


Item		7/31/2005	4/30/2005


Building	(1)	$ 1,037,539	$ 1,020,422
RuiLi Project (property, at cost),	(2)	400,687	367,948
Machinery	(1)	1,669,131	1,811,778
Furniture, fixtures & Office equipment		130,151	132,349
Vehicles		134,740	129,846
Leasehold improvements		27,524	27,524

Sub-total		3,399,772	3,489,867

Less: accumulated depreciation		(259,906)	(206,404)


Property and equipment, net		$ 3,139,866	$ 3,283,463

(1): The LEK related building cost of $866,575 and machinery cost of $1,811,778 are based on an independent valuation on December 4, 2004.

(2): On April 20, 2005 a verbal agreement was reached that a debtor, Ms. Yong Peng, is to turn over the land usage rights of two parcels and a resort property valued at approx. $400,000 to the Company, to offset two outstanding loans of $367,948 due to the Company. As the formal contract was not signed until July 17 of 2005, the Company reclassified Account Receivables to the Property and Equipment account, under Ruili Property at April 30, 2005. The properties located at RuiLi city, China, may facilitate the Company expansion in China. The property rights include: a) a 30 year usage right on 80.5 Mu of land, with remaining right of 25 yeas, expiring on 4/26/2030, b) a 20 year land usage right on 28 Mu of an adjacent land with a reservoir, with a remaining right of 19 years, expiring on 12/14/2024, and c) an ecological resort properties with pepper trees, plants, and bungalows. The property was developed as a resort.

NOTE 10. INVESTMENTS

The Company made two separate investments in 2001, one in Tech-H Information Co. Ltd. ("Tech-H") located in Cheng-Du city, and the other in RuiLi Timber Co. Ltd. (" RuiLi") located in Rui-Li city, China. The Company, having investing interests of 19.8% of equity in these two investments, recorded these investments at costs. The Company has no significant influence on these entities.

On April 30, 2005, the Company negotiated to return its investment in RuiLi, and received its 750,000 common shares originally issued to RuiLi. The common shares, not being held as treasury stock, ware immediately retired, thus reduced the Company's issued and outstanding shares at the same amount on that date. There is no gain or loss of the RuiLi divesture. The carrying value of this investment on the books was $237,000. The rescission transaction was accounted for as a repurchase of shares.

As of July 31, 2005, the Company still owns a 19.8% investment interest in Tech-H, recorded under an investment are accounted for at cost, consistent with that of the prior year. The audited financial statements of Tech-H indicate the software company is growing and profitable. Therefore, management determined there is no impairment for the software company's investment.

The Company had acquired a Henan PVC manufacturing facility in 2003. After carefully weighted all evidence, the Company discussed with the seller and decided on a voluntary basis, to terminate the acquired project in 2004. During the prior year ended April 30 2005, the Company successfully reached a rescission agreement with the seller on a friendly basis, and withdrew all of its cash deposit of $560,963 from the Henan PVC project in China. The entire cash was repatriated back to a Company's bank account in Seattle.

In addition, the LEK air compressor subsidiary has an investment in another air compressor entity (5%) as of July 31, 2005. This small investment is recorded as an investment account on the balance sheet at July 31, 2005. The investment is recorded at cost and no impairment is suggested.

The summary of Investments Accounts as of July 31, 2005 and April 30, 2004 is as follows:


	Year	Historical	As of	Increase		As of	Equity
Item					Divesture
	Purchased	Costs	4/30/2005	(Exchange)		7/31/2005	Ownershi
							p

Owned by L&L:

Tech-H	2001	$ 400,500	$ 400,500	$ 0	$ 0	$ 400,500	19.8%

Owned by LEK:

Air Compressor Co.	2004	60,533	60,533	1,195		61,728	5.0%

$461,033 $ 1,195 $ 0 $ 462,228

NOTE 11. ACCRUALS AND OTHER LIABILITIES

Accruals and other liabilities consisted of the following as of July 31, 2005 and April 30, 2005:


Item		7/31/2005	4/30/2005


Accrual expenses :		$ 575,629	$ 538,995

a) Selling commissions		175,449	217,244
b) Office expenses		162,905	149,917
c) Staff salaries and benefits		103,521	63,532
d) other operation expenses including audit fees		133,754	108,302

Other liabilities	(1)	1,016,002	721,751


Total		$ 1,591,631	$ 1,260,746

(1): Other liabilities included employees' social insurance, prepaid rental deposit, and other loans with some other companies. All the liabilities have no repayment terms. They are miscellaneous short term accruals due to month early end cut-off dates. They are not notes payable. These accruals are to be paid off in the next month.

NOTE 12. LOANS DUE FROM A LEK CORPORATE SHAREHOLDER AND ITS AFFILIATES

These loans consisted of the following as of July 31, 2005 and April 30, 2005:


Item	Note	7/31/2005	4/30/2005

Liuzhou No. 2 air compressor Co, Ltd.	(1) (3)	3,493,618	3,085,440
FLUID-MEC International Holdings Co., Ltd	(2) (3)	1,291,152	1,266,142

Total		4,784,770	4,351,582

(1): When the Registrant acquired LEK, its assets included a loan of approximately $3,085,440 due from a corporation which owns a minority share of LEK. The loan amount is fully secured by assets of a land usage right ($5,413,402, which was determined by an evaluation report issued by an independent China evaluation firm, and a commercial properties ($2,780,387) of this corporate entity. The loan allows the Company to take the rental income of the commercial properties (approx. $284,000 per annum) as its interest payment (equivalent to approx 9.3% per annum). The term loan becomes due in the year of 2007. Management believes the loan is fully collectable in 2007.

(2): When the Registrant acquired LEK during the current year, an asset of LEK includes a loan of approx. $1,266,142 due from a corporation which owns a minority share of LEK's affiliate. The loan is charged with 2% interest guaranteed by its shareholders and is due in December, 2007. According the loan contract, the principal and interest will be due, and collected in December 2007. The loan had an income to LEK of $6,331, and to L&L $3,429 during the current period ended on July 31, 2005. .

(3): The notes are subject to paying interests only, until the full principal balances become due at maturity.

NOTE 13. BANK LOAN AND BANK LINE OF CREDIT

Bank loan and bank line of credit are summarized as follows:


Items	7/31/2005		4/30/2005


Bank loans
L&L	$	-	$ 213,846
LEK subsidiary		648,148	635,593


Total	$	648,148	$ 849,439

Bank loan collateralized the properties of the subsidiary approximately US$648,148 as of July 31, 2005. Interest is charged at 5.31 % per annum. The loan interest is payable monthly. The Company's loan balance includes interest accrual under this facility.

NOTE 14. LONG TERM BANK LOAN

The LEK subsidiary has a long-term credit arrangement of $1,210,654 with a bank in China. The loan bears interest at 5.76% per annum. Principal is due and repayable on December 2007. The loan is secured by a building owned by a third party. Due to bank's changes in policy in the current year, the bank suggested LEK to make an early settlement of this account. As of July 26, 2005 the long term loan was fully paid by the LEK subsidiary, therefore no further disclosure is needed at this time.

NOTE 15. SEGMENT INFORMATION

The Company operations consist of two distinct segments: a) the LEK air compressors operations, and b) L&L consulting operation.

1) Sales Segment:

For the current period ended July 31, 2005, the LEK air compressors income represented 99% of the total consolidated sales. L&L focus to acquire other factories and projects in the future, its consulting fee income through its professional services, is reduced, representing less than 1% of total consolidated sales. For the prior ended on July 31, 2004, the Company did not own LEK, thus its consulting income represented 100% of its income.


The sales segmentsare summarized as follows:

	Period ended on		Period ended on
Sale Segments		%		%
	7/31/2005		7/31/2004


Air compressors	$3,273,524	99%	$ 0	0%
Consulting	$20,000	1%	$18,400	100%


Total Sales	$3,293,524	100%	$18,400	100%

The Company plans to continue focusing on the air compressor sales and manufacturing activities in China. It plans to include sales of US air compressor products in China to increase the product portfolio, so the air compressor segment will continue to be the dominant segment in the future.

2) Geographic Segment:

During the current period ended on July 31, 2005, the Company's operations are in two geographic locations : 1) in China, and 2) in the US. In the current year, all income is generated in China, and in the three months, LEK contributes sales of $3,273,524 to the Company.

During the current year There is no concentration of LEK sales with any of its customers, suppliers, accounts receivable. As the prior year, the Company did not own the controlling interest in LEK, the concentration disclosure is not needed.


3) Segment byAssets:

The Company'sassets consistsof the following:
						( in $Per Thousand)

		7/31/2005				4/30/2005

		LEK				LEK
Assets	L&L				L&L
		air	Total	%		air	Total	%
	consulting				consulting
		compressors				compressors

Cash	153	932	1,086	5	399	1,580	1,979	9

Receivables	528	4,545	5,073	23	622	4,306	4,928	22

Prepayment	471	2,101	2,325	11	477	1,568	1,803	8

Inventories	-	3,423	3,423	16	0	3,761	3,761	17

PP&E	622	2,518	3,140	14	594	2,689	3,283	15

Goodwill	-	-	1,721	8	0	0	1,463	7

Loan from	-	4,438	4,438	21	0	4,352	4,352	20
shareholder

Investment	6,638	62	462	2	5,408	60	461	2

Total Assets	8,412	18,019	21,668	100	7,500	18,316	22,030	100

Asset %	17%	83%	100%		17%	83%	100%



NOTE 16.INCOME TAXES

The Company‘s main operations are located in China. The Company is subject to income taxes primarily in three taxing jurisdictions, including China, Hong Kong (under China sovereignty) and the United States. The income of the Company is mainly generated via its controlled LEK subsidiary, a controlled foreign entity located in China. As no cash or fund is repatriated from LEK to the US, the Company is not subject to the US federal taxation for both the current period and the period ended on July 31, 2005 and April 30, 2005, under subpart F, Income from controlled foreign company, of the US Internal Revenue Code.

The Company recognizes deferred income taxes for the differences between financial accounting and tax bases of assets and liabilities. The Company, due to the LEK acquisition, acquired a net operating loss carry forward of approximately $7,708,480 incurred in the past via LEK operations in China, resulting a tax credit of approximately $2,543,900. In the years ended on July 31, 2005 and April 30, 2005, there were no material temporary book/tax differences or differences between financial accounting and tax bases of assets and liabilities. The deferred income tax asset is offset by an equal valuation allowance. Income taxes for the period ended July 31, 2005 consisted of the following:


	2005	2004

Current (benefit) provision	$ 164,000	$ (1,570)

Deferred (benefit) provision	$ (164,000)	$ 1,570

Total income tax provision	$-0 -	$ -0 -

During the period ended on July 31, 2005, income is generated from its China LEK subsidiary, is to be used for its expansion in China. The Company has no plans to repatriate its overseas profit or funds back to the US. Therefore, the Company does not anticipate any U.S. income tax in the future. The registrant takes over LEK in the December 2004 with carry forward loss, thus it recorded no Chinese income tax liabilities to China local government as of July 31, 2005.

The differences between the statutory and effective tax rates are estimated as follows:


	As of 7/31/2005		As of 4/30/2005

U.S. federal statutory rates	$ 0	15%	$ 2,410	15%

China government rate	$ (163,000)	33%	$ (43,884)	33%

Hong Kong flat statutory rate	$ (1,000)	16%	$ (606)	16%

Valuation allowance	$ 164,000		$ 42,080

	$ - 0 -	-0-%	$ - 0 -	-0-%

As a result of the LEK operations, its local taxes payable in China at July 31, 2005 was $2,304,570. These payables related to local sales tax, local properties taxes, and miscellaneous tax liabilities of LEK payable to Chinese local governments, and can be postponed temporarily. L&L, a US company, is in contacts with local municipal government, and is in a process to formulate a formal Sino-American joint-venture to bring in US management skills, US technology, capital, to China, which benefit local communities. As according to the China law, a new joint venture may enjoy special Chinese tax rebates and treatments from the governments, thus there is a high probability that the LEK local tax liabilities in China can be mitigated

NOTE 17. RELATED PARTY TRANSACTIONS

There are two related entities controlled by the controlling shareholder of the Company as of July 31, 2005. Certain expenses such as rent, personnel costs and other overhead expenses are shared and allocated among these affiliated entities. The results of operations could vary depending on the method of allocating these expenses.

The Company provides office space, professional and technical personnel and marketing leads to one such affiliate, owned by the Company's controlling shareholder. There are number of contracts entered into by the affiliate for which the Company provides the professional staff for conducting the services to end-user clients and charge the affiliate for professional fees as the Company's income. Under the contracts, the affiliate agrees to pay 80% of its billings, as well as reimburse 75% of the professional staff salary and 40% of the administrative staff salary to the Company. During the period ended July 31, 2005, the Company received total fees from the affiliate for $0. The receivable balances related to these billings are included in the amount due from the controlling shareholder and his affiliate's balance. As of July 31, 2005, the amount due related to these billings was $457.

Another affiliate, a securities brokerage firm, provides assistance in raising capital and other contracted business presentations for the Company. This affiliate shares the office space with the Company in Seattle, Washington. During the period ended July 31, 2005, the Company incurred expenses, net of fees earned of $2,730. In August, 2005, the controlling shareholder has applied the disposition of his interest of the securities firm, pending regulators approval. During the period ended July 31, 2005, the Company made loans of $246,914 (RMB 2,000,000) to LEK, as LEK working capital to improve its operations. The L&L loan of $246,914 to LEK is eliminated during the consolidation process and is excluded in the Company consolidated balance sheet, as of July 31, 2005.

The Company operates business in China with its corporate office is located in Seattle Many executives of China operations need to travel to the Seattle Office to discuss business and cross train each other. Some overseas managers may not be familiar with US customs, food and the right-hand driving on the US roads, nor have a driver's license. For operational efficiency, overseas employees are required to stay at a house owned by the majority shareholder of the Company, so they can cook

food at nights at the facility. They also form a carpool to work in Seattle, using a Company car. A feasibility study reveals that staying in the facility is less expensive and more convenient than staying at a hotel or a leased apartment. Rent for the facility is paid to the Company's majority shareholder. Fees paid for rent for the current period ended on July 31, 2005 was $3,117, and for the prior ended on July 31, 2004 was $3,013.

The Company borrows and advances funds to its affiliates controlled by its controlling shareholder. The net amount due to the controlling shareholder and his affiliates was $49,178 as of July 31, 2005and $42,575 as of April 30, 2005.

NOTE 18. STOCKHOLDERS' EQUITY

The following events incurred during the current period ended July 31, 2005:

The Company offered its common shares with warrants in private placements under the Reg. D to the US accredited investors, to gain capital for acquisition activities in China starting in June of 2003. The initial PPM offered at $2.50 per share with a warrant convertible at the same price. The share price increased to $3.00 on February 14, 2004. As of July 31, 2005, the private placement offering is at $3.00 for one L&L common share and one unit of warrant. See Note 21, Fund Raising for additional disclosure.

On July 14, 2004, the Company began to issue warrants at $1.25 per unit to raise capital through a private placement. Each unit of the warrant gives the holder the right to purchase the Company's common stock at $2.00 per share. The Company has authorized the issuance of 800,000 warrants for this offering

Since June of 2005, the Company has stopped its private placement activities, to facilitate its application for the public trading of its common shares with the US authorities.

The Company declared a 3 (new)-for-1(old) common split in September 2004, to increase its issued and outstanding stock, and to improve its float and liquidity when stock is being traded. All stock presented to the Company on May 1, 2003, have been retroactively restated for the effect of this split.

The table below listed the Company's of warrants as of July 31, 2005 and April 30, 2005.

WARRANTS

SUMMARY

Beginning

Warrants

Ending

balance

Activityduring theperiod

Expired

balance

Type of

Warrants

Date

Authorized

4/30/2004

Issuance

Split

Conversion

Exercised

7/31/2005

(Units)

Warrants (class

Re: Warrants on

PPM exercise

Feb-03

2,000,000

1,400,202

price @US$2.50

Warrants (class

Re: Warrants on

PPM exercise

Feb-04

1,000,000

348,759

price @US$3.00


Warrants (class
C)
Re: Premium of
US$1.25 with
exercise price	Jul-04	1,000,000	825,000	-	-	-	-	- 825,000
@US$2.00

Warrants (class
D)
Re: Executive
exercise price	May -04	1,100,000	120,000	-	-	-	-	- 120,000
@US$2.25

Warrants (class
E)	May -04	4,000,000	956,249	-	-	-	-	- 956,249
Re: Director
exercise price
@US$3.00


Total		9,100,000	3,650,210	-	-	-	-	- 3,650,210


See Note 22,EmployeeStock OptionPlan, for warrants(classD and ClassE) issued to executiveand director
compensations.

NOTE 19. EARNINGS PER SHARE

The Company only has common shares and warrants issued and outstanding during the year. Under the treasury stock method of SFAS #128, the Company computed the diluted earning per share, as if all issued warrants were converted to common stock, and cash proceeds were used to buy back common stock. The following presents both basic and diluted earnings per share, for the two periods ended on July 31, 2005 and 2004.


Item	Three Months Ended	Three Months Ended
	July 31, 2005	July 31, 2004

Net Income	$ 119,326	$ (164,772)
Number of Shares	18,319,724	16,883,316
Per Share - Basic	$ 0.007	$ ( 0.010)
Effect of dilutive shares	538,367	-
Number of dilutive shares	18,858,091	16,883,316
Per Share - Diluted	$ 0.006	$ ( 0.010)

NOTE 20. CONCENTRATION OF CREDIT RISK

The Company maintains the majority of its cash balances at banks located in Hong Kong and China. Cash balances in these foreign locations are not insured as they do in the U.S. In addition, there are times, when the Registrant's cash deposits maintained at US banks located in the United States exceed federal government insured limits. As of July 31, 2005 and April 30, 2005, the Company had uninsured bank cash balances of $973,544 and $2,089,517 respectively.

Financial instruments that also potentially subject the Company to concentrations of credit risks are primarily trade accounts receivable and common stock of its investees. The trade accounts receivable are due primarily from clients in China. The Company has not historically experienced material losses due to uncollectible trade accounts receivable. As discussed in Note 9, the Company does not believe that the carrying value of its investments is impaired at July 31, 2005.

Note 21. FUND RAISING

During the current quarter ended July 31, 2005, the Company conducted fund raising excise, by selling its common shares and warrants to raise working capital from the accredited investors in the US.

When the cash is raised from the sales of the Company common stock and warrants via the private placements during the years, the Company recorded the cash amount received net of the finder fees and other overhead expenses, including finder commission, printing costs, FedEx charges. The Company has ceased to use a finder since December 2, 2004, the Company engaged a licensed securities firm, an affiliate, to continue its private placements activities, until June of 2005. When the finder was used, the Company paid a fee at 35% of the cash received. None of its director, nor

management receives any compensation for the assistance of the private sales of the Company shares. For the period ended on July 31, 2005, the Company records cash proceeds of $9,600 via sales of 4,000 common shares at $3.00 each, net of expenses. The amount is recorded as stock sold at par value of $4, and Paid in Capital of $9,596.

NOTE 22. EMPLOYEE STOCK OPTION PLAN

The Company issued two types of warrants for employees. One for executives (warrant class D), and the other for directors (warrant class E). Only directors and senior executives are entitled to receive warrants, as a compensations for their services, not all employees are entitled for these two type warrants. See Note 18, Stockholders' Equity for reference.

During the current period, no warrants D and warrants E are converted to common shares. As of July 31, 2005, total warrants authorized under Class D and Class E are 1,100,000 units and 4,000,000 units, respectively. During the period ended July 31, 2005, total units of warrants (class D) issued and warrants (class E) issued are 40,000 units and 850,000 units respectively. Company also issued Warrants A B C for investors, please see Note 18 for detail.

Information relating to warrants outstanding and exercisable at July 31, 2005 summarized by exercise price is as follows:

Weighted

Numberof

Weighted

Number

Weighted

Range of

Average

Outstandingat

Average

Exercisable at

Average

Exercise

Remaining

July31,2005

Exercise

July 31,2005

Exercise

Price

Contractual

(units)

Price

(units)

Price

Life

Class D

Class E

Class D Class E

$3.00

600,000

956,249

4 Years

$3.00

600,000 512,000

$3.00

During the current period ended July 31, 2005, the Company does not use its equity instruments to acquire goods or services, other than directors' services and reward senior executives. None of the warrants issued are converted as of July 31, 2005.

The following table summarizes two types of warrants and exercise prices, as of July 31, 2005:


	Number of	Number of
Name of Director, executive	Warrants (D)	Warrants (E)	Warrants
	issued and	issued and	convertible price
	outstanding	outstanding

Olmsted , Director		7,500	$3.00
Leung, Director		181,250	$ 3.00
Lee, Director		604,166	$ 3.00
Locke, Director, ex -executive	120,000		$ 2.25
Kiang, Director		61,666	$ 3.00
Sheppard, Director		51,667	$ 3.00
Borich, Director		50,000	$ 3.00

Total units issued	120,000	956,249

NOTE 23. COMMITMENTS AND CONTINGENCIES

a) Operating Leases

The Company leases its Seattle office and Silver Lake facility in China under two separate long-term, non-cancelable leases, expiring in March, and June of 2006 respectively. The non-cancelable operating lease agreements require that the Company pays certain operating expenses, including management fees to the leased premises. Rental expenses for the period ended July 31, 2005 and 2004 were $11,530 and $27,400, respectively.

The future minimum lease payments required under the operating leases is $17,318.

NOTE 24. SUBSEQUENT EVENTS

No subsequent events.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

1. Plan of Operation

The Company continues its growth through improvement of LEK sales, and products quality. The Company also plans to acquire additional strategic entities to build its business competitive advantages. In doing so, the Company is in discussions with investment institutions seeking their funding. A LEK restructure plan to establish a new Sino-American joint venture and to take tax incentives in China, is being formulated. The Company is in discussions with a US air compressor company to market US high-end products in China, and to improve LEK products using US technology transfers. As of July 31, 2005, L&L holds 60.4% equity of LEK. Accordingly, minority interest (i.e. a 39.6% of LEK profit) is to be excluded from the Company's bottom line, which effectively reduced the Company's net profit margin. The Company plans to increase its shareholding to as high as 80% in the future, when forming a joint venture with the LEK in China.

Any investment made in China has higher degree of risks than that in the US. To better mitigate such risks, the Company continues to strengthen its Board of Directors, and recruit senior managers, when its financial resources become feasible to do so.

L&L has retained a lawyer and a securities firm to implement its plan getting the Company common shares publicly traded on a US stock market

2. Results of Operations

1) As the Company completed its LEK acquisition in December 2004, its operational results including sales and profits have been significantly improved for the current period ended on July 31, 2005, as comparing to that of the prior year. 2) The Company's consolidated financial statements are prepared in accordance with the US generally accepted accounting principles (US GAAP). The US GAAP, while allowing a record of 100% of LEK revenue, requires subtraction of a portion of the profit belonging to the minority shareholders from the bottom line of the Company. As of July 31, 2005, the Company owning 60.4% equity of the LEK operation removed a 39.6% of net profit being minor interest. Consequently, the Company consolidated results of operations appear to have a much lower profit margin percentage (i.e. recording 100% of LEK income, while only recording 60.4% of LEK net profit).

Total Revenue:

The Company recorded revenue of $3,293,524 for the period ended July 31, 2005, comparing to $18,400 for the same period in 2004. The increase by $3,275,124 (or 17,800%) is due to the acquisition of LEK operations, which contributed $3,273,524 of revenue in three months.

Total operating expenses:

Due to the acquisition of LEK in the current year, total operating expenses increased as comparing to that of the prior ending on July 31, 2004. Detailed analysis is as follows:

Personnel costs, accounting for $387,237 in the first quarter period, represent an increase of $272,439 (or 237%) as compared to $114,798 over the same period in 2004. $300,851 of which is LEK personal cost after our acquisition.

Selling, General and Administrative Expenses (SG&A):

SG&A is $503,534 for the period ended July 31, 2005. When compared it to $66,124 for the same period in 2004, there is an increase of $437,410 (or 661%).The difference is due to mainly LEK SG&A expense of $413,752 which was included in the Company's financial statements in the current period ended July 31, 2005.

Interest expenses:

Interest expenses decrease in by $57,646 (or 2,159%) in the current period ended July 31, 2005, from $2,670 of the period ended July 31, 2004 to $(54,976) of the current period ended July 31, 2005. The decrease was a result of LEK gained approx. $ 35,000 interests return and L&L recognized approx. $33,000 interest income from Ruili project in financial statement for the first time in the current year.

Minority Interest:

The Company acquired majority of LEK subsidiary in December of 2004. As a result, a Minority Interest is shown on the income statement for the first time in the period ended on July 31, 2005, as comparing to that of prior year. The Company did not own LEK equity in 2004, thus did not consolidate the LEK controlling interest in the prior period ending July 31, 2004. The difference of Minority Interest is due to the above reason.

Net Income:

Net income increased by $284,098 (or 172% increase) during the current period ended July 31, 2005, as comparing $119,326 of net income for the current period ended July 31, 2005 to $(164,772) of net income for the prior period in 2004. The increase of net income is due to acquisition of LEK which increased revenue of $3,273,524 in the first quarter.

Other Income:

Other income increased by $273,524 (or 65,125% increase) during the current period ended July 31, 2005, as comparing $273,944 of net income for the current period ended July 31, 2005 to $420 of net income for the prior period in 2004. The increase of net other income is due to acquisition of LEK which increased other revenue of $273,944 in the first quarter.

Change in Liquidity and Capital Resources:

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

From the operating activities: Net Cash provided by operating activities was $497,242 during the current period ended July 31, 2005. When compared it to net cash generated of $ (175,643) in the same period of 2004, a sharp increase of $672,885 (or 383%) was mainly due to the combined effect of decrease of inventory by $404,851 and increase of accrued liabilities and other liabilities by $656,062. The Company's operating cash flow is highly dependent upon its ability to bill for the LEK sales and collect these LEK billings in a timely manner.

Investing activities: Net Cash used in investing activities was $5,630 during the current period ended on July 31, 2005, and $2,448 by the same period in 2004. The decrease of net cash provided of $3,182 (or 130%) was due to LEK purchase property in the current period ended in July 31, 2005,

Financing activities: Net cash used in financing activities was $1,408,297 for the current period ended July 31, 2005, while $(158,343) for the same period in 2004. The significant decrease of net cash $1,566,640 (or 989%) was primarily due to the LEK return $1,210,654 long term bank loan, and the L&L return $213,846 credit line.

The current assets of the Company were $11,560,192 and $12,471,322 for the first quarter ended on July 31, 2005, and for the prior year ended on April 30, 2005, respectively. There is no significant difference between the two periods. The difference of $911,130 represents only 7.3% variance.

The current liabilities were $8,876,326 and $8,815,437 for the first quarter ended on July 31, 2005, and the prior year ended on April 30, 2005 respectively. The increase of the current liabilities by $60,889 (or 1%) was immaterial

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 1.30 as of July 31, 2005, compared to 1.41 in the fiscal year ended on April 30, 2005. As a general rule, the higher the current ratio, the more likely the Company will be able to pay its short-term bills. This decrease in the current ratio is primarily due to the increase in accrued liabilities and bank loans as a result of the LEK acquisition.

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.

Item 3. CONTROL AND PROCEDURES

The Company, under the supervision of the principal executive officer and the principal accounting officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 15d-15e under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, the Company has concluded that the disclosure controls and procedures, as of the end of the period covered by this report, were designed and functioning effectively to provide reasonable assurances that the information required to be disclosed by the Company in reports filed under the Security Exchange Act of 1934, is recorded, recessed, summarized, and reported within the time periods specified in the SEC's rules and forms. The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

As required by Rule 15e-15(e) under the Securities Exchange Act of 1934, the Company has evaluated the internal controls over financial reporting to determine whether any changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on this evaluation, no such change in the internal controls over financial reporting occurred during the most recent fiscal quarter.

Part II

Item 1. LEGAL PROCEEDINGS

None.

Item 2. CHANGES IN SECURITIES

During the three months ended July 31, 2005, the Company issued 4,000 common shares from private placement at $3.00 per share, and the conversion of warrants to common stock for cash to acquire additional capital of $9,600, net of fund raising expenses, such as commissions, legal and professional fees, consulting fees, printing and postage. No common share is issued to the board of directors during the first quarter ended on July 31, 2005. As of July 31, 2005, the company issued 1,708,283 shares of ^c ommon stock for the 60.4% of LEK acquisition.. Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. SUBMISSION OF MATTERS TO THE VOTE OF SECURITIES HOLDERS

None.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits

	31.1	Certificate of Chairman as Required by Rule 13a-14(a)/15d-14.

	31.2	Certificate of Acting Comptroller as required by Rule 13a-14(a)/15d-14.

	32.1	Certificate of Chairman as Required by Rule 13a-14(b) and Rule 15d-14(b) (17 CFR

240.15d -14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

32.2 Certificate of Acting Comptroller as Required by Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d -14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

(b) Reports on Form 8-K - None

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report signed on its behalf by the undersigned, thereunto duly authorized.


		L & L Financial Holdings, Inc.


Date: December 20, 2005		By: /s/ Dickson V Lee
--------------------------------		--------------------------
		Dickson V. Lee, CPA, Chairman

In accordance with the requirements of the Exchange Act, the registrant has caused this report signed on its behalf by the undersigned, thereunto duly authorized.

L & L Financial Holdings, Inc.


Date: December 20, 2005		By: /s/ Dickson V Lee
--------------------------------		--------------------------
		Dickson V. Lee, CPA, Chairman

I, Dickson Lee, certify that:

Exhibit 31.1
CERTIFICATIONS

1.	I have reviewed this Quarterly Report on Form 10-QSB of L & L Financial Holdings, Inc:

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit

to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the small business issuer and have:

b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and c) disclosed in this report any changes in the small business issuer's internal controls over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.


Date: Dec 20, 2005		By: /S/ Dickson Lee
		------------------------
		Dickson Lee, CPA, CEO

Exhibit 31.2
CERTIFICATIONS

I, Dickson Lee, certify that:

1.	I have reviewed this Quarterly Report on Form 10-QSB of L & L Financial Holdings, Inc.:

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit

to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


4. The small business issuer's other certifying officer and I are responsible for establishing		and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)		and
15d-15(e)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated Subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and c) disclosed in this report any changes in the small business issuer's internal controls over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.


December 31, 2005		By: /s/ Dickson Lee
		------------------------
		Dickson Lee, CPA
		Chairman & CEO

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of L & L Financial Holdings, Inc. (the "Company") on Form 10-QSB for the first quarter ending July 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dickson Lee, Chairman of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dec 20, 2005 By: /s/ Dickson Lee
------------------------
Dickson Lee, CPA Chairman & CEO

Exhibit 32.2
CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of L & L Financial Holdings, Inc. (the "Company") on Form 10-QSB for the first quarter ending July 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dickson Lee, Acting Comptroller of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


December 20, 2005		By: /s/ Dickson Lee
		------------------------
		Dickson Lee, CPA
		Chairman & CEO