UNITED ~~STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549~~ STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: December 31, ~~2012~~ 2014

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

For the transition period from __________________ to __________________

Commission file number: 000-53490

~~SGB INTERNATIONAL HOLDINGS~~GRAND ~~INC.~~CHINA ~~(Exact~~ENERGY ~~name~~GROUP ~~of registrant as specified in its charter)~~ LIMITED

~~British~~(Exact name ~~Columbia N/A State or other jurisdiction~~ of ~~(I.R.S.~~registrant ~~Employer~~as ~~incorporation~~specified orin ~~organization~~its ~~Identification No.~~charter)

~~No.~~British 25Columbia ~~Jia~~N/A HeState ~~Road,~~or ~~Xinjing~~other ~~Centre,~~jurisdiction ~~Unit C2606Siming~~of ~~District,~~incorporation ~~Xiamen~~or ~~City,~~organization ~~Fujian ProvincePRC China 362300~~ (~~Address~~I.R.S. ofEmployer ~~principal~~Identification ~~executive offices and Zip Code~~No.)

~~Registrant's~~Room 1601, ~~telephone number~~16/F, ~~including~~China ~~area~~Taiping ~~code:~~Tower ~~86-13611930299~~Phase II,

~~N/A~~8 Sunning ~~(Former name or former address~~Road, ~~if changed~~Causeway ~~since last report) Securities registered pursuant to Section 12(b) of the Act~~ Bay

~~Title of Each Class Name of each Exchange on which registered Nil N/A~~Hong Kong

(Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code: 852.3691.8831

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class		Name of each Exchange on which registered
N/A		N/A

Securities registered pursuant to Section 12(g) of the Act

Common Stock, no par value~~(Title of Class)~~

~~Indicate by check mark if the registrant is a well-known~~(Title ~~seasoned issuer, as defined in Rule 405~~ of ~~the Securities Act. Yes [ ] No [X]~~ Class)

Indicate by check mark if the registrant is ~~not~~a ~~required~~well-known ~~to file~~seasoned ~~reports~~issuer, ~~pursuant~~as todefined ~~Section~~in 13Rule ~~or Section~~405 ~~15(d)~~ of the Securities Act. Yes ~~[ ] No~~ ~~[X]~~☐ No ☒

Indicate by check mark ~~whether~~if the registrant ~~(1)~~is ~~has~~not ~~filed all reports~~ required to befile ~~filed~~reports bypursuant to Section 13 or Section 15(d) of the ~~Securities Exchange~~ Act ~~of 1934 during the preceding 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 ~~[ ] No~~☐ ~~[X]~~ No ☒

Indicate by check mark whether the registrant (1) has ~~submitted electronically~~filed ~~and~~all ~~posted~~reports ~~on its corporate Web site, if any, every Interactive Data File~~ required to be ~~submitted~~filed ~~and~~by ~~posted~~Section ~~pursuant~~13 toor ~~Rule~~15(d) ~~405~~ of ~~Regulation~~the Securities ~~S-T~~Exchange ~~(§232.405~~Act of ~~this~~1934 ~~chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to ~~submit~~file such reports), and ~~post~~(2) has been subject to such ~~files)~~filing requirements for the past 90 days. Yes ~~[X]~~ ☐ No ~~[ ]~~ ☒

Indicate by check mark ifwhether ~~disclosure~~the ofregistrant ~~delinquent~~has ~~filers~~submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to ~~Item~~Rule 405 of Regulation S-KT (§ ~~229~~232.405 of this chapter) isduring ~~not contained herein, and will not be contained, to~~ the ~~best of registrant’s~~ ~~knowledge,~~preceding in12 ~~definitive~~months ~~proxy~~ (or ~~information~~for ~~statements~~such ~~incorporated~~shorter ~~by reference~~period inthat ~~Part~~the ~~III~~registrant ofwas ~~this~~required ~~Form~~to ~~10-K~~submit orand ~~any~~post ~~amendment~~such tofiles). ~~this~~Yes ~~Form~~☒ No ~~10-K. [ ]~~ ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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

Large accelerated filer [☐ ] Accelerated filer [☐ ] Non-accelerated filer [☐ ]Smaller reporting company ☒ (Do not check if a smaller reporting company) ~~Smaller reporting company [X]~~

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

173,118,558 shares of common stock at a price of $0.01 per share for an aggregate market value of ~~about~~approximately $1,731,~~196~~186.1

1 The aggregate market value of the voting stock held by non-affiliates is computed by reference to the ~~price~~$0.01 ofclosing ~~shares~~price of ~~common~~registrant’s common stock ~~sold~~ on ~~April~~June 830, ~~2013~~2014.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 373,793,578 shares of common stock are issued and outstanding as of ~~April~~June 830, ~~2013~~2015.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable

TABLE OF CONTENTS

PART I	3		4
	ITEM 1.	BUSINESS	4
ITEM 1. BUSINESS	3
	ITEM 1A.	RISK FACTORS	23
ITEM 1A. RISK FACTORS	15
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	33
ITEM 1B. UNRESOLVED STAFF COMMENTS	19
	ITEM 2.	PROPERTIES	33
ITEM 2. PROPERTIES	20
	ITEM 3.	LEGAL PROCEEDINGS	41
ITEM 3. LEGAL PROCEEDINGS	20
	ITEM 4.	Mine Safety Disclosures	42
ITEM 4. MINE SAFETY DISCLOSURES	20
PART II	20		42
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	42
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	20
	ITEM 6	SELECTED FINANCIAL DATA	43
ITEM 6. SELECTED FINANCIAL DATA	22
	ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	43
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	22
	ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	F-1
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS	47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS	25
	ITEM 9A.	CONTROLS AND PROCEDURES	47
ITEM 9A. CONTROLS AND PROCEDURES	25
	ITEM 9B	OTHER INFORMATION	48
ITEM 9B. OTHER INFORMATION	26
PART III	26		48
	ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	48
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	26
	ITEM 11.	EXECUTIVE COMPENSATION	51
ITEM 11. EXECUTIVE COMPENSATION	31
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.	53
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.	32
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	34
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES.	54
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.	35
PART IV	36		55
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES.	55
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.	36
SIGNATURES			56

iii

PART I

ITEM 1. BUSINESS

Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements are statements that relate to future events or future ~~financial~~ financial performance. In some cases, you can identify forward-looking statements by the use of terminology such as “may”, “should”, “intend”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “project”, “predict”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements speak only as of the date of this report. Examples of forward-looking statements made in this annual report include statements pertaining to, among other things:

● our future development programs and results; ● our future capital expenditures; ● our financial and operating performance; ● operating expenditures; and ● governmental regulation of mining operations.

~~our~~The material ~~future~~assumptions ~~capital~~supporting ~~expenditures;~~ these forward-looking statements include, among other things:

● our ~~future~~ability ~~investments~~to inobtain any necessary financing on acceptable terms, if and ~~acquisitions~~when needed; ● retention of ~~mineral~~skilled ~~properties~~personnel; ● current exchange rate and interest rates; and ● general economic and financial market conditions.

~~our~~Although management ~~financial~~considers ~~and~~these ~~operating~~assumptions ~~performance;~~ to be reasonable based on information currently available to it, they may prove to be incorrect.

~~the~~These forward-looking ~~estimation~~statements ofare ~~mineral~~only ~~reserves~~predictions and ~~the~~involve ~~realization~~known ofand ~~mineral~~unknown ~~reserve estimates;~~ risks, uncertainties and other factors, including:

~~operating~~● ~~expenditures~~statements respecting anticipated business activities; ● corporate strategies; ● political and regulatory risks associated with mining development and exploration; and ● the risks in the section entitled “Risk Factors”.

~~governmental~~These risks, ~~regulation~~as well as risks that we cannot currently anticipate, could cause our company’s or our industry’s actual results, levels of ~~mining~~activity ~~operations;~~or ~~and~~performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

~~our~~Although we ~~need~~believe ~~for~~that the expectations reflected in the forward-looking statements are reasonable, ~~and~~we ~~our~~cannot ~~ability~~guarantee tofuture ~~raise~~results, levels ~~capital~~of activity or performance. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

~~The material assumptions supporting these forward-looking statements include, among other things:~~3

~~our~~In this ~~ability~~report, tounless ~~obtain~~otherwise ~~any~~specified, ~~necessary~~all ~~financing~~dollar onamounts ~~acceptable~~are ~~terms,~~expressed ifin United States dollars and all references to “common ~~when~~shares” ~~needed;~~refer to the common shares in our capital stock. “RMB” or “Renminbi” refers to the legal currency of China and “$” or “US$” refers to the legal currency of the United States. “China” or “PRC” refers to the People’s Republic of China.

~~timing~~As used in this report, the terms “we”, “us”, and ~~amount~~“ ofour” ~~capital~~refer ~~expenditures;~~ to Grand China Energy Group Limited.

~~our ability to obtain necessary drilling and related equipments in a~~Foreign ~~timely~~Private ~~and~~Issuer ~~cost-effective manner to carry out operating activities;~~ Status

~~retention~~We are a foreign private issuer as defined under Rule 3b-4 promulgated under the Securities Exchange Act of ~~skilled~~1934, ~~personnel;~~but voluntarily file our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

We have elected to voluntarily file our annual, quarterly, and current reports on U.S. domestic forms because we have used such forms ever since we began filing the ~~timely~~reports ~~receipt~~under the Securities Exchange Act of ~~required~~1934. ~~regulatory~~Going ~~approvals;~~forward, we intend to continue to comply with our reporting requirements under Section 13 of the Securities Exchange Act of 1934 using the Forms 10-K, 10-Q, and 8-K.

~~continuation~~As a foreign private issuer, we are not required to use the U.S. domestic forms to comply with our reporting requirements under Section 13 of ~~current~~the ~~tax~~Securities Exchange Act of 1934. Instead, we can file an annual report on Form 20-F each year with the Securities and ~~regulatory~~Exchange ~~regime;~~Commission and file our interim financial statements and management’s discussion and analysis and reports about material changes to our company, in the forms required by Canadian securities legislation, with the Securities and Exchange Commission on Form 6-K.

~~current exchange rate and interest rates; and~~Corporate History

~~general~~We were ~~economic~~incorporated ~~and~~on ~~financial~~November ~~market~~6, ~~conditions~~1997 in the province of British Columbia, Canada under the name “Slocan Valley Minerals Ltd.” with an authorized share capital of 10,000,000 common shares without par value. Following our incorporation we were not actively engaged in any business activities. On June 1, 2004 we increased our authorized share capital from 10,000,000 common shares without par value to an unlimited number of common shares without par value. On June 11, 2004 we changed our name to “Orca International Language Schools Inc.”

~~Although~~Effective March ~~management~~3, ~~considers~~2009, ~~these~~we ~~assumptions~~changed our name from “Orca International Language Schools Inc.” to be“SGB International Holdings ~~reasonable~~Inc.” ~~based~~and onwe ~~information~~created ~~currently~~a ~~available~~new toclass itof preferred shares. As a result, ~~they~~our ~~may~~authorized ~~prove~~capital toconsists beof an unlimited number ~~incorrect~~of common shares without par value and an unlimited number of preferred shares without par value. We have not issued any preferred shares. Effective March 4, 2009, we effected a 4.5 for one forward split of our issued and outstanding common shares.

~~These~~Our goal ~~forward-looking~~originally ~~statements~~was ~~are~~to ~~only~~provide ~~predictions~~management ~~and~~services to schools in the international education industry based on the principles ~~involve~~of ~~known~~improving ~~and~~their ~~unknown~~administrative, ~~risks~~operational, ~~uncertainties~~marketing, sales and human resources functions; building links with other ~~factors~~schools worldwide to foster student exchange; and repositioning the schools to concentrate their curriculum to prepare students for one of the three major English proficiency tests. We searched for a school as the initial client but were not successful in finding any such school. Since we had incurred losses since November 6, ~~including:~~1997, in March 2009, our board of directors decided to explore the possibility of adopting a different business plan to protect our shareholders’ value.

~~risks and uncertainties relating to the interpretation of sampling results, the geology, grade and continuity of mineral deposits;~~ 4

~~statements~~On April ~~respecting~~12, ~~anticipated~~2011, we entered into a share exchange agreement (the “Share Exchange Agreement”) with Dragon International Resources Group Co., Limited, its shareholders and Fujian Huilong Coal Mine Co., Ltd. (formerly known as YongdingShangzhai Coal Mine Co., Ltd.) and as a result of the closing of this agreement on May 11, 2011, we adopted the business ~~activities;~~of Fujian Huilong Coal Mine Co., Ltd. and abandoned our prior business. Pursuant to the Share Exchange Agreement, we acquired 100% of the issued and outstanding capital stock of Dragon International Resources Group Co. in exchange for an aggregate of 220,522,000 shares of our common stock, which constituted 90% of our issued and outstanding common stock on a fully-diluted basis as of and immediately after the consummation of the Share Exchange Agreement. On December 19, 2013, we sold our 100% equity interest in Dragon International Resources Group Co and its wholly owned subsidiary Fujian Huilong Coal Mine Co., Ltd to an independent third party for cash consideration of HKD 1,000,000 (approximately USD $129,000) because we believed that the existing mine plant, property, and equipment had deteriorated and the mine was not providing coal of required quantity or quality.

~~planned~~On ~~expenditures;~~October 3, 2013, we incorporated, SGB Investment Limited, which is a wholly owned subsidiary. The principal business of SGB Investment Limited is providing mining related consulting work for coal mines in Fujian Province, People’s Republic of China. The areas of business SGB Investment Limited also include assisting other mining operations to set up sales chain management systems as well as providing advisory services for mining exploration management.

~~corporate~~During ~~strategies;~~2014, we conducted no consulting activities related to the mines in Fujian Province, choosing instead to devote our resources to engaging in extensive due diligence on coal mining properties elsewhere in China and in Uzbekistan and Kyrgyzstan. Such diligence included numerous site visits and meetings with mine owners. We continue to search for potential coal mining entities, properties and assets for acquisition.

~~proposed~~Effective August ~~acquisitions~~6, ~~and~~2014, ~~dispositions~~we ofchanged ~~assets;~~ our name from “SGB International Holdings Inc.” to “Grand China Energy Group Limited.”

~~anticipated capital expenditures;~~Our Business

~~future~~Since December ~~production;~~19, 2013, our principal business has been to provide mining related consulting work for coal mines in Fujian Province, assist other mining operations to set up sales chain management systems to provide mining exploration advisory services and to search for potential acquisition candidates involving mining entities and properties.

~~expected~~We are targeting acquisition candidates both in China and internationally. The Chinese government has set a firm target to develop western China’s economy as a large number of roads and railways have been built to increase the infrastructure for the region. We see this as a huge potential for us. All infrastructure works require large amounts of electricity and steel, and steam coal and coking coal demand for the region will be significantly increased. Due to the low coal price since 2014, several quality coal mine ~~life;~~opportunities from the west side of China and central Asia Region have become available.

~~future~~Due ~~exploration~~to the low coal market price, the Fujian coal markets have suffered. A large number of local mining sites have laid off mining contractors and ~~expenditures~~reduced their daily hours of operation. SGB Investment Limited reduced its consulting activates due to that fact, and has principally devoted its resources to spending more time on ~~our~~studying, ~~company’s~~developing ~~properties;~~and planning for other mining deposits which are near Shanxi Province, Xinjiang Province and in central Asian countries such as Kyrgyzstan and Uzbekistan.

~~estimates~~Together with external advisors, we have engaged in geological data and mining site visits and have performed feasibility studies on four potential acquisition targets, two of ~~future~~which ~~Chinese~~are ~~demand~~located ~~for~~in ~~coal;~~China, one from Shanxi Province, and the other in the Xinjiang Province. Two potential foreign projects are located in Kyrgyzstan and Uzbekistan. No assurance can be given that we will successfully complete an acquisition or that we will be able to do so on beneficial terms.

~~risks and uncertainties that results of initial sampling and mapping will not be consistent with our expectations;~~ 5

Our mining team ~~and~~has ~~development~~finished ~~risks,~~its ~~including~~Xinjiang ~~risks~~coal ~~related~~market tostudy ~~accidents,~~with the assistance of independent mining consultants. The study analyzed in ~~equipment~~excess ~~breakdowns,~~of ~~labor~~20 ~~disputes~~coal orcustomers ~~other~~in ~~unanticipated~~the ~~difficulties~~Xinjiang ~~with~~province. The study confirms our belief that a significant supply gap for premium orcoal ~~interruptions~~exists in ~~production;~~the Xinjiang region, leading to the potential for a far more positive market dynamic in Xinjiang than the current outlook for seaborne coking coals.

~~the~~We did ~~potential~~not ~~for~~engage ~~delays~~ in ~~exploration,~~any ~~development,~~direct mining or ~~production~~ coal trading activities; during 2014.

~~risks related to the inherent uncertainty of cost estimates and the~~Research ~~potential for unexpected costs~~ and ~~expenses;~~ Development

~~risks~~We had ~~related~~no toresearch ~~commodity~~and ~~price~~development ~~fluctuations;~~expenses in 2013 and in 2014. We currently have no plans for any research and development activities and do not anticipate any material research and development costs.

~~risks related to failure to obtain adequate financing on a timely basis~~Intellectual Properties and ~~on acceptable terms for our operations;~~ Licenses

~~risks~~We have ~~related~~no tomaterial ~~environmental~~patents, ~~regulation~~licenses ~~and~~or ~~liability;~~ other intellectual property.

~~risks that the amounts reserved or allocated for environmental compliance,~~Regulatory ~~reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;~~ Overview

~~risks related to tax assessments;~~Coal Law

~~political~~On August 29, 1996, the PRC Government promulgated the People’s Republic of China Coal Law (the “Coal Law”), which became effective on December 1, 1996. The Coal Law sets forth requirements for all coal mines, including state-owned mines and ~~regulatory~~privately ~~risks~~owned ~~associated~~mines, ~~with~~mainly ~~mining~~providing ~~development~~for resource exploitation planning, approval of new mines, the issuance of mining and safety production permits, implementation of safety standards, processing of coal, business management, protection of mine ~~exploration;~~areas from destructive exploitation, and safety protection for miners and administrative supervision.

According to the ~~risks~~Coal Law, entities seeking to establish mining enterprises must apply to the relevant government office and obtain all necessary approvals. Upon obtaining such approvals, the entities concerned will be granted a mining permit from the Ministry of Land and Resources. Thereafter, an entity must obtain a coal production permit and a coal operation permit and other related quality permits in order to commence coal production and sell coal products in the ~~section~~PRC. ~~entitled~~We ~~“Risk~~have ~~Factors”~~applied for and received a mining permit valid until 2016 and a coal production permit valid until 2031. The PRC Government is in the process of amending the Coal Law, in response to concerns over the lack of a well-coordinated development plan for mining, which contributed to a significant amount of waste of valuable coal resources. The lack of effective penalty provisions or the lenient enforcement of existing provisions in the Coal Law has been cited as another important reason for the current rulemaking effort.

~~These~~Mining activities ~~risks,~~in asthe ~~well~~PRC asare ~~risks~~also ~~that~~subject weto ~~cannot~~the ~~currently~~People’s Republic of China Mineral Resources Law (“Mineral Resources ~~anticipate~~Law”), ~~could~~promulgated ~~cause~~by ~~our~~the ~~company’s~~PRC orGovernment ~~our~~on ~~industry’s~~March ~~actual~~19, ~~results~~1986 and amended on August 29, ~~levels~~1996. The Mineral Resources Law ofregulates ~~activity~~matters relating to the planning or ~~performance~~engaging in the exploration, exploitation and mining of mineral resources. According to bethe ~~materially~~Mineral ~~different~~Resources ~~from~~Law ~~any~~all ~~future~~mineral ~~results~~resources, including coal, are owned by the state. Except under limited circumstances, ~~levels~~any enterprise planning to engage in the exploration, exploitation and mining of ~~activity~~mineral orresources ~~performance~~must ~~expressed~~first orapply ~~implied~~for byand ~~these~~obtain exploration ~~forward-looking~~rights and mining rights before commencing the relevant activities. The Mineral Resources Law prohibits the transfer ~~statements~~of exploration and exploitation rights in general unless the transfer falls within certain specified circumstances. Our management believes that we are in compliance with the Mineral Resources Law in this respect because we have applied for and obtained the requisite mining and coal production permits.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results. 6

~~In this report, unless otherwise specified, all dollar amounts~~We are ~~expressed~~principally insubject ~~United States dollars and all references~~ to ~~“common~~governmental ~~shares” refer~~supervision ~~to the common shares in our capital stock. “RMB” or “Renminbi” refers to the legal currency of China~~ and ~~“$”~~regulation orby ~~“US$” refers to~~ the ~~legal~~following ~~currency~~agencies of the ~~United~~ ~~States. “China” or “~~PRC” ~~refers to the People’s Republic of China.~~ Government:

As● ~~used~~the State Council, which is the highest level of the executive branch, is responsible for the examination and approval of major investment projects specified in ~~this~~the ~~report~~2004 Catalogue of Investment Projects released by the PRC Government; ● the National Development and Reform Commission, which formulates and implements major policies concerning China’s economic and social development, examines and approves investment projects exceeding certain capital expenditure amounts or in specified industry sectors, including examination and approval of foreign investment projects, oversees reform of state-owned enterprises and formulates industrial policies and investment guidelines for the ~~terms~~natural ~~“we”~~resource industries, ~~“us”~~such as coal production. In addition, the NDRC administers coal export activities and “export ~~our”~~quotas ~~refer to~~jointly ~~SGB~~with ~~International~~the ~~Holdings~~Ministry ~~Inc~~of Commerce. The NDRC is also responsible for the evaluation and implementation of the price-linking mechanism between the prices of coal and power; ● the Ministry of Commerce of China (“MOFCOM”) and/or its ~~newly~~local ~~acquired~~counterpart, ~~subsidiaries~~which regulates foreign investment in China, ~~Dragon International~~such as review and approval of foreign invested companies in China and mergers and acquisitions of Chinese domestic enterprises by foreign investors; ● the Ministry of Land and Resources ~~Group~~of ~~Co.,~~China ~~Limited~~(“MLR”) and/or its local counterpart, awhich ~~Hong~~has ~~Kong~~the ~~corporation~~authority to grant land use licenses and mining right permits, approves transfer and ~~Fujian Huilong~~lease ~~Coal~~of ~~Mine~~mining ~~Co.~~rights, ~~Ltd.~~and ~~(formerly~~reviews ~~Yongding~~mining ~~County~~rights ~~Shangzhai~~premium and reserve valuation; ● the State Administration of Coal Mine ~~Co.~~Safety (“SACMS”) and/or its local counterpart, ~~Ltd.~~ which is responsible for the implementation and supervision of the relevant safety laws and regulations applicable to coal mines and coal mining operations; ● the Ministry of Environmental Protection of China (“MEP”) and/or its local counterpart, awhich ~~People~~supervises and controls environmental protection and monitors China’s ~~Republic~~environmental system; ● the Ministry of Construction of China ~~corporation~~(“MOC”) and/or its local counterpart, ~~unless~~which is responsible for the ~~context~~management ~~clear indicates~~of ~~otherwise.~~survey Asand ~~used~~design inof ~~this~~construction ~~report~~projects, including but not limited to the ~~terms~~survey ~~“Dragon~~and ~~International”~~ design of coal mines; ● the National and ~~“Fujian~~State ~~Huilong~~Tax Bureaus and/or their local counterparts, which are responsible for the federal and local income, VAT and other taxes; ● the State Administration of Foreign Exchange of China (“SAFE”) ~~refer~~and/or toits ~~Dragon~~local ~~International~~counterpart, ~~Resources~~which ~~Group~~is ~~Co.~~responsible for the convertibility of RMB into foreign currencies, ~~Limited~~ registration of foreign debt or loans of Chinese companies and, ~~Fujian~~in ~~Huilong~~certain ~~Coal~~cases, ~~Mine~~the ~~Co.~~remittance of currency out of the PRC, ~~Ltd.~~such as repayment of bank loans or dividends denominated in foreign currencies; and ● the State Administration for Industry and Commerce of China (“SAIC”) and/or its local counterpart, ~~respectively~~which is responsible for review and approval of establishment of domestic and foreign invested companies in China and issuance of their business licenses.

~~Foreign~~The following ~~Private~~is ~~Issuer~~a ~~Status~~brief summary of the principal laws, regulations, policies and administrative directives to which we are subject with respect to our existing and proposed operations in China.

We are a foreign private issuer as defined under Rule 3b-4 promulgated under the Securities Exchange Act of 1934, but voluntarily file our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.Pricing

WeUntil 2002, ~~have~~the ~~elected~~production and pricing of coal was largely subject to ~~voluntarily~~close ~~file~~control ~~our~~and ~~annual,~~supervision ~~quarterly~~by the PRC Government, ~~and~~which centrally ~~current~~manages ~~reports~~the onproduction Uand pricing of coal.S. ~~domestic~~Previously, ~~forms~~the ~~because~~price weof ~~have~~coal ~~used~~was ~~such~~determined ~~forms~~based ~~ever~~on a government-devised pricing ~~since~~guideline wewhich ~~began~~set ~~filing~~out the ~~reports~~suggested ~~under~~prices for coal. However, to effectuate the ~~Securities~~transformation ~~Exchange~~from ~~Act~~planned ofeconomy to market ~~1934.~~economy ~~Going~~practices, ~~forward~~from January 1, we2002 ~~intend~~China toeliminated ~~continue~~the state guidance price for coal and allowed prices for all types of coal to ~~comply~~be determined in accordance with ~~our~~market ~~reporting~~demand. However, as the PRC Government continues to maintain control over the ~~requirements~~national ~~under~~railway ~~Section~~system, 13which ofis the ~~Securities~~primary ~~Exchange~~means ~~Act~~for ofcoal ~~1934~~transportation in China, the PRC Government still may exert influence ~~using~~over the ~~Forms~~pricing ~~10-K,~~of ~~10-Q,~~coal ~~and~~through ~~8-K.~~its allocation of railway transportation capacity for coal.

As a foreign private issuer, we are not required to use the U.S. domestic forms to comply with our reporting requirements under Section 13 of the Securities Exchange Act of 1934. Instead, we can file an annual report on Form 20-F each year with the Securities and Exchange Commission and file our interim financial statements and management’s discussion and analysis and reports about material changes to our company, in the forms required by Canadian securities legislation, with the Securities and Exchange Commission on Form 6-K. 7

5In addition, under the Price Law of the PRC, promulgated December 29, 1997, effective May 1, 1998, in the event of an actual increase or potential increase in the prices of important products such as coal, the State Council and the provincial governments, autonomous regions and municipalities directly under the PRC Government may adopt intervention measures, such as restricting the ratio of price differentials or of profits, and imposing price limits, etc. In August 2004, the NDRC issued a notice setting forth temporary measures to be imposed on thermal coal prices for certain regions. In December 2004, the NDRC issued a notice setting forth guidelines for pricing of thermal coal sales in 2005. Under these guidelines, the coal suppliers and their customers may not negotiate for the sale of coal at prices exceeding the government suggested price range.

~~Corporate~~Similar to ~~History~~coal pricing, the production and supply of coal, which is dictated by the PRC Government’s annual state coal allocation plan, has been gradually liberalized and largely subject to market forces. Major domestic coal suppliers and coal purchasers attend the Annual National Coal Trading Convention to negotiate and discuss the price and quantity of coal to be supplied and purchased for the coming year through the signing of letters of intent and short and long-term supply contracts.

WeOn December ~~were~~18, ~~incorporated~~2006, onthe ~~November~~National 6,Development ~~1997~~and inReform Committee issued the ~~province~~Notice ofRelating to the Good Preparation for Inter ~~British~~Provincial ~~Columbia,~~Coal ~~Canada~~Production ~~under~~Transportation ~~the~~Works ~~name~~(Fa ~~“Slocan~~Gai ~~Valley~~Yun ~~Minerals~~Xing ~~Ltd~~[2006] No.” ~~with~~2867). anAccording to the notice, in 2007, policies ~~authorized~~were ~~share~~to ~~capital~~be implemented to encourage the reform of ~~10,000,000~~the ~~common~~market ~~shares~~system ~~without~~for ~~par~~determining ~~value. Following~~coal ~~our~~prices ~~incorporation~~by weallowing ~~were~~parties ~~not~~to ~~actively~~determine prices ~~engaged~~through discussions in ~~any~~accordance ~~business activities~~with market demand, and to encourage price determination based on quality. On ~~June~~December 27, 12006, ~~2004~~the werelevant ~~increased~~government ~~our~~departments ~~authorized~~and ~~share~~units, ~~capital~~such ~~from~~as the National Development and Reform Committee for railway operations, 10and the Transportation Department,~~000,000~~ ~~common~~convened ~~shares~~a ~~without~~2007 ~~par~~coal ~~value~~industry tovideo anand ~~unlimited~~telephone ~~number~~conference. This symbolized the end of ~~common~~the ~~shares~~Annual ~~without~~National ~~par~~Coal ~~value~~Trading Convention that has been in place for over 50 years. OnUnder ~~June~~the ~~11,~~State’s ~~2004~~macroeconomic wecontrols, the ~~changed~~new ~~our~~mechanism ~~name~~for enterprises to ~~“Orca International~~freely ~~Language~~determine ~~Schools~~prices ~~Inc.”~~through negotiations was put in place.

~~Effective March 3, 2009, we changed our name from “Orca~~Domestic ~~International~~Trading ~~Language Schools Inc.” to “SGB International Holdings Inc.” and we created a new class~~ of ~~preferred~~ shares. As a result, our authorized capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. We have not issued any preferred shares. Effective March 4, 2009, we effected a 4.5 for one forward split of our issued and outstanding common shares.Coal

~~Our~~Pursuant to ~~goal~~the ~~originally~~Measures ~~was~~for tothe ~~provide~~Regulation ~~management~~of ~~services~~Coal ~~to schools~~Operations inpromulgated by the ~~international~~NDRC ~~education~~on ~~industry~~December ~~based~~27, on2004, the ~~principles~~state ~~of:~~implemented a system ~~improving~~to ~~their~~examine ~~administrative,~~coal ~~operational,~~operation ~~marketing~~qualifications in respect of coal operations, ~~sales~~including the wholesale and ~~human~~retail of raw coal and processed ~~resources~~coal ~~functions;~~products, ~~building~~and ~~links~~the ~~with~~processing ~~other~~and ~~schools~~distribution ~~worldwide~~of tocoal ~~foster student~~for ~~exchange;~~civilian ~~and~~use. ~~repositioning~~Before ~~the~~an ~~schools~~enterprise tocan ~~concentrate~~engage ~~their~~in ~~curriculum~~coal operations, onit ~~preparing~~must ~~students~~obtain ~~for~~a ~~one~~coal ofoperation ~~the~~qualification ~~three~~certificate. ~~major~~A ~~English~~coal ~~proficiency~~production ~~tests.~~enterprise Wethat deals in coal products which it did ~~have~~not ~~been~~itself ~~searching~~produce ~~for~~and aprocess ~~school~~is asrequired ~~the~~to ~~initial~~obtain ~~client~~coal ~~but~~operation wequalifications. ~~have~~The ~~not~~enterprise ~~been successful~~is also prohibited from dealing in ~~finding~~coal ~~any~~products ~~such~~produced ~~school.~~and/or ~~Since~~processed weby a coal mine enterprise that does not have ~~incurred~~a ~~losses~~coal ~~since~~production permit. An enterprise ~~November~~is 6,also ~~1997,~~prohibited infrom ~~March~~selling ~~2009,~~coal ~~our~~products ~~board~~to ofa ~~directors~~coal ~~has~~operation ~~decided~~enterprise tothat ~~explore~~does not have coal operation qualifications. ~~the~~Our ~~possibility~~company ofhas ~~adopting~~applied for and obtained a ~~different~~coal ~~business~~production ~~plan~~permit toand ~~protect~~this ~~our shareholders’~~permit ~~value.~~is valid until December of 2031.

~~Prior~~Although the toPRC ~~the~~Government ~~date~~indirectly ofinfluences ~~our~~coal ~~reverse~~prices ~~acquisition,~~through ~~discussed~~its ~~below, we~~broad ~~were~~regulation ~~considered~~of aselectricity aprices ~~“shell~~and ~~company”~~control ~~under~~over the ~~Rule~~allocation of ~~405~~national ~~promulgated~~railway ~~under~~capacity, ~~the Securities~~domestic ~~Act~~coal ofprices ~~1933~~have ~~and~~mainly ~~Rule~~been ~~12b~~market-2driven ~~promulgated~~since ~~under~~2002, when the ~~Securities~~PRC ~~Exchange~~Government eliminated ~~Act~~the ofprice ~~1934~~control ~~because~~measures wefor ~~had~~coal ~~nominal~~used ~~operations~~in ~~and~~electric ~~nominal~~power ~~assets~~generation.

AsPrior to ~~described~~2006, ~~above~~however, onthe ~~April~~PRC ~~12,~~Government ~~2011,~~continued weto ~~entered~~implement ~~into~~temporary ~~the share~~measures ~~exchange~~to ~~agreement~~prevent ~~with~~and ~~Dragon~~control ~~International~~any ~~Resources~~unusual ~~Group~~fluctuations in Cothermal coal prices. This, ~~Limited~~among other reasons, ~~its~~ ~~shareholders~~has ~~and~~caused ~~Fujian~~thermal ~~Huilong~~coal ~~Coal~~contract ~~Mine~~prices ~~Co.,~~for ~~Ltd.~~major ~~(formerly~~users ~~known~~to asbe generally lower ~~Yongding~~than ~~Shangzhai~~spot ~~Coal~~market ~~Mine~~prices ~~Co.,~~during ~~Ltd~~this period.) ~~and~~On asJanuary a1, ~~result~~2006, ofthe NDRC announced the ~~closing~~elimination of ~~this~~such temporary intervention ~~agreement~~practices on ~~May~~thermal ~~11,~~coal ~~2011~~price, wethus ~~adopted~~completely ~~the~~removing ~~business~~control ofover ~~Fujian~~thermal ~~Huilong~~coal ~~Coal Mine Co.~~prices, ~~Ltd.~~including ~~and~~contract ~~abandoned~~prices ~~our~~for ~~prior business~~major users.

~~Reverse Acquisition of Dragon International Resources Group Co., Limited~~ 8

~~On May 11, 2011, we completed a reverse acquisition transaction~~Environmental ~~with~~Protection ~~the~~Laws ~~shareholders of Dragon International Resources Group Co., Limited pursuant to which we acquired 100% of the issued~~ and outstanding capital stock of Dragon International Resources Group Co. in exchange for an aggregate of 220,522,000 common shares of our company, which constituted 90% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the reverse acquisition. Regulations

~~Dragon~~Pursuant to ~~International~~the ~~was~~Environmental ~~incorporated~~Protection inLaw, ~~the~~MEP ~~Hong~~is ~~Kong~~empowered ~~on October~~to 5,formulate ~~2010,~~national environmental quality and isdischarge astandards ~~holding~~and to ~~company~~monitor China’s environmental system at the national level for ~~Fujian~~the ~~Huilong.~~purpose ~~Fujian~~of ~~Huilong~~preventing ~~was~~and eliminating environmental ~~incorporated~~pollution inand damage to ecosystems. Environmental protection bureaus at the ~~People’s~~county ~~Republic~~level ofand ~~China~~above onare ~~August~~responsible 4,for ~~2005.~~environmental protection within their areas of jurisdiction.

~~There~~Environmental regulations ~~was~~require nocompanies ~~material~~to ~~relationship~~file ~~that~~an ~~existed~~environmental ~~between~~impact ~~our company,~~report ~~our~~with ~~former~~the ~~principal~~relevant ~~shareholders,~~environmental ~~and~~authority ~~the~~for ~~shareholders~~approval ~~of Dragon~~before ~~International~~undertaking ~~prior to~~ the ~~time~~construction of ~~the~~a ~~reverse~~new ~~acquisition~~production ~~other~~facility ~~than~~or inany ~~respect~~ major expansion or renovation of ~~the~~an ~~reverse~~existing ~~acquisition~~production facility. New Nofacilities ~~third~~built ~~parties~~pursuant ~~played~~to athis ~~material~~approval ~~role~~are innot ~~arranging or~~permitted ~~facilitating~~to operate until the ~~transactions~~relevant ~~and~~environmental noauthority ~~third~~has ~~parties~~performed an ~~received~~inspection ~~benefits~~and ~~from arranging~~has orfound ~~facilitating~~that the ~~transaction~~facilities ~~between~~are ~~our~~in ~~company~~compliance ~~and~~with ~~the~~environmental ~~former~~standards. Our current facilities are in ~~shareholders~~compliance ofwith ~~Dragon~~environmental ~~International~~standards.

6Mining operations, including both open pit mines and underground mines, may result in disturbances of surface and underground land and cause water pollution, landslides and other types of environmental damage. To manage the adverse effects that the coal industry has on the environment, China promulgated a series of laws and regulations. Through these laws and regulations, China established national and local environmental protection legal frameworks and issued standards applicable to emission controls, discharges of wastes and pollutants to the environment, generation, handling, storage, transportation, treatment and disposal of waste materials by production facilities, land rehabilitation and reforestation.

~~Because~~The Environmental weProtection ~~did~~Law, ~~not~~promulgated ~~have~~by ~~any active business operations prior to~~ the ~~reverse~~National ~~take~~People’s ~~over~~Congress ofDecember ~~Dragon International and were considered a “shell company”~~26, ~~our previous management~~1989, ~~including~~is ~~Mr.~~the ~~Xin~~cardinal ~~Li,~~law ~~actively~~for ~~pursued~~environmental ~~opportunities~~protection ~~for~~in usChina. toThe ~~acquire~~law anestablishes ~~operating~~the ~~business~~basic toprinciple ~~enhance~~for ~~shareholders value.~~coordinated ~~Mr.~~advancement ~~Li met representatives~~ of ~~Fujian~~economic ~~Huilong Coal Mine Co.~~growth, ~~Ltd.~~social inprogress aand ~~business~~environmental ~~meeting~~protection, and ~~learned~~defines ~~that~~the ~~Fujian~~rights ~~Huilong~~and isduties ~~contemplating~~of ~~going~~governments ~~public in~~at ~~North~~all ~~America~~levels. ~~through~~Local ~~its~~environmental ~~holding~~protection ~~company~~bureaus may inset ~~Hong~~stricter ~~Kong,~~local ~~Dragon~~standards ~~International. The~~than ~~parties~~the ~~started~~national ~~negotiating~~standards ~~the~~and ~~terms~~enterprises ofare ~~the~~required ~~transaction~~to ~~and~~comply ~~subsequently agreed~~with tothe ~~terms~~stricter of the ~~share~~two sets ~~exchange~~of ~~agreement~~standards. ~~entered~~The ~~into~~Environmental ~~between~~Protection ~~our~~Law ~~company and~~requires ~~shareholders~~any ofentity ~~Dragon~~operating ~~International.~~a ~~Other~~facility ~~than~~that ~~Mr.~~produces Lipollutants ~~and~~or ~~principals of~~other ~~Dragon~~hazards ~~International,~~to noincorporate ~~third~~environmental ~~parties~~protection ~~played~~measures ainto ~~material~~its ~~role~~operations inand ~~arranging~~to ~~or facilitating~~establish ~~the~~an ~~transactions.~~environmental ~~Mr.~~protection Liresponsibility system, iswhich ~~considered~~must aadopt ~~promoter~~effective ofmeasures ~~our~~to ~~company~~ control and heproperly ~~did~~dispose ~~not~~of ~~receive~~waste ~~anything~~gases, ofwaste ~~value~~water, ~~from~~waste ~~our~~residue, ~~company~~dust ~~for these~~or ~~transactions.~~other waste materials.

~~As a result of the reverse acquisition~~New construction, weexpansion ~~have~~or ~~assumed~~reconstruction ~~the business~~projects and ~~operations~~other ofinstallations ~~Fujian~~that ~~Huilong~~directly ~~Coal~~or ~~Mine~~indirectly ~~Co.,~~discharge ~~Ltd.,~~pollutants ~~a wholly-owned~~to ~~subsidiary~~the ofenvironment ~~Dragon~~shall ~~International~~be ~~Resources~~subject ~~Group~~to ~~Co.,~~relevant ~~Limited.~~state ~~Fujian~~regulations ~~Huilong Coal~~governing ~~Mine~~environmental ~~Co.,~~protection ~~Ltd.~~for issuch ~~a company engaged in coal production and sales by exploring, developing and mining coal properties~~projects. ~~Fujian Huilong Coal Mine Co.,~~Entities ~~Ltd.~~undertaking ~~owns~~such ~~and~~projects ~~operates~~must submit a ~~coal~~pollutant ~~mine,~~discharge ~~located~~declaration atstatement ~~Shangzhai~~detailing ~~Village,~~the ~~Yongding County~~amount, ~~Longyan City of Fujian Province~~type, ~~People’s~~location ~~Republic~~and ~~of China, which has~~method ~~coal reserves~~ of antreatment ~~estimated~~to ~~1,354,000~~the tcompetent asauthorities offor ~~December 31, 2009, including 416,000 t proven coal reserve, and 938,000 t probable coal reserve~~examination. The ~~current coal~~authorities ~~production~~will ~~was~~allow ~~conducted within~~ the ~~parameter~~construction ~~stated~~project inoperator ~~the~~to ~~mining permit.~~release ~~The~~a ~~remaining~~certain ~~coal~~amount ~~reserve as~~ of ~~December~~pollutants ~~31,~~into ~~2012 is still pending for~~ the ~~geological~~ ~~report~~environment ~~to be issued from an independent~~ and ~~qualified~~will ~~Canada~~issue ~~based geologist~~a ~~company,~~pollutant ~~Wardrop~~discharge ~~Engineering~~license ~~Inc.~~for ~~(the~~that ~~“Wardrop”).~~amount ~~Because the scope~~ of ~~Wardrop’s work on its May 2011 NI-43-101 technical report covered 5.7~~discharge ~~km2~~subject ~~area~~to of the ~~mining~~payment ~~permit numbered 3500000620055, which provides for an annual production rate~~ of ~~90,000~~discharge t/a and is in good standing until April 2016, but Wardrop noted that Fujian Huilong production was over 200,000 t in year 2009 , over 150,000 t in year 2010, over 130,000 in 2011 and about 114,000 t in year 2012fees. ~~Because~~The ofrelease ~~the unique geological structure and coal deposits in the Fujian Province, coal productions require a higher level~~ of ~~human~~pollutants ~~input together~~is ~~with~~subject ~~machinery~~ to ~~achieve~~monitoring aby ~~desirable~~the ~~rate~~competent ofenvironmental ~~return, which is unlike~~protection ~~coal~~authorities. ~~deposits~~If inan ~~Northwestern~~entity ~~China~~discharges ~~that are~~ more ~~suitable~~than ~~for~~the ~~larger~~amount ~~production using~~permitted ~~mostly~~by ~~large machinery. Accordingly, when a new coal mining operation applies for a permit in~~ the ~~Fujian~~pollutant ~~Province~~discharge license, the ~~typical~~local ~~annual production rate~~environmental ~~granted~~protection ~~would~~bureau becan infine the ~~range~~entity ofup ~~60,000 t/a~~ to ~~90,000~~several ~~t/a.~~times ~~This~~the ~~initial~~discharge ~~annual production~~fees ~~rate,~~payable ~~which~~by ~~may be considered as a trial period production rate, may be adjusted and increases can be applied for subsequently, depending on~~ the ~~development~~ ofoffending aentity ~~particular mine. We initially applied~~ for anits ~~annual production~~allowable ~~rate of 90~~discharge,~~000~~ ~~t/a~~require ~~for our mining permit number 3500000620055 because of this practice in~~ the ~~Fujian~~offending ~~Province.~~entity ~~We are in the process of applying~~ to ~~increase our~~close annual production rate to up to 300,000 t/a. As of May 13, 2011, Shangzhai has obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by its ~~existing mining permit~~operations, ~~which~~or ~~also~~take ~~allows it~~other tomeasures ~~mine at different mining levels. With respect~~ to ~~the~~remedy ~~estimated 1,354,000 t reserves in~~ the ~~valid 5~~problem.7 ~~km2~~We ~~mining~~have ~~area,~~not ~~Shangzhai has confirmed~~received ~~that~~any ~~about~~notices ~~70%~~from ~~coal reserves have been assigned to~~ the ~~current~~relevant ~~mine~~government ~~shaft~~authorities ~~and mining~~demanding ~~equipment,~~us ~~while~~to ~~the~~pay ~~rest~~any ~~30%~~fines ~~coal~~or ~~reserves~~threatening ~~will~~to ~~require~~close ~~sustaining capital~~our ~~for coal production~~operations.

~~The~~In the ~~run~~environmental ofimpact ~~mine~~statement ~~coal~~of ~~from~~a ~~underground~~construction ~~are~~project, ~~sold~~the ~~without~~project ~~further processing.~~operator ~~The~~shall ~~major~~make ~~application~~an ofassessment regarding the ~~coal~~pollution and isenvironmental ~~used~~hazards asthe ~~solid~~project ~~fuel~~is likely to produce ~~heat~~ and ~~electricity~~its impact on the ecosystem, and measures for their prevention and control. The ~~coal~~operator ~~product~~shall ~~has~~submit athe ~~typical~~statement ~~calorific~~according ~~value~~to ofthe ~~around~~specified procedure to the competent environmental protection ~~7,000~~authority ~~kcal/kg,~~for asexamination ~~received~~and approval. The ~~total~~building ~~sulfur~~of ~~contained~~sewage inoutlets ~~the~~within ~~product~~any iswater conservancy projects, such as canals, ~~typically~~irrigation ~~about~~channels ~~0.6%~~and reservoirs, ~~dry~~shall ~~basis.~~be ~~The~~subject ~~total~~to ~~moisture~~the inconsent of the ~~coal~~competent ~~product~~authority isin ~~about~~charge of water conservancy 4projects.~~4%.~~

~~Corporate Structure~~ 9

AsThe rehabilitation aof ~~result~~mining sites is another important issue the PRC Government has sought to address. Under the Law of Land Administration of the ~~consummation~~People’s Republic of China, promulgated June 15, 1986, and amended on August 28, 2004, and the ~~transactions~~Land Rehabilitation ~~contemplated~~Regulations, ~~under~~issued by the ~~share~~State ~~exchange~~Council ~~agreement:~~in 1988 and effective January 1, 1989, coal producers must undertake measures to restore the mining site to its original state within a prescribed time frame if mining activities result in damage to arable land, grassland or forest. The rehabilitated land must meet rehabilitation standards, as required by law from time to time, and may only be subsequently used upon examination and approval by the land authorities. A coal producers’ failure to comply with this requirement or its failure to return the mining site to its original state will result in the imposition of fines, rehabilitation fees and/or rejection of applications for land use rights by the local bureau of land and resources.

~~Dragon~~Emissions of ~~International~~waste ~~Resources~~water ~~Group~~by ~~Co.~~coal mines and coking plants are regulated by the Law on Prevention and Control of Water Pollution of the PRC, promulgated ~~Limited~~by ~~became~~the ~~our~~Standing ~~wholly-owned~~Committee of National People’s Congress in May 1984 and as amended in May 1996 and February ~~subsidiary~~2008, which became effective in June 2008, and ~~Fujian~~the ~~Huilong~~Administrative ~~Coal~~Regulations ~~Mine~~on ~~Co.~~the Levy and Use of Discharge Fees, ~~Ltd~~issued by the State Council in January 2003 and effective in July 2003. Any new construction projects, ~~the~~such ~~wholly-owned~~as ~~subsidiary~~coal mines and coking plants, must submit an environmental impact statement, which shall include an assessment of ~~Dragon~~the ~~International~~water ~~Resources~~pollution ~~Group~~hazards Cothe project is likely to produce and its impact on the ecosystem., ~~Limited~~The ~~became~~environmental ~~our~~impact ~~wholly-owned~~statement must also contain measures to prevent and ~~subsidiary;~~control the water pollution hazards. Every new production facility must be equipped with waste water processing facilities which must be put in use together with the production facilities. Construction projects that discharge pollutants into water shall pay a pollutant discharge fee in accordance with state regulations.

WeViolators of ~~issued~~the anEnvironmental ~~aggregate~~Protection ofLaw ~~220,522,000~~and ~~common~~various ~~shares~~environmental ofregulations ~~our~~may ~~company~~be subject to warnings, payment of damages and fines. ~~representing~~Any ~~approximately~~entity ~~90%~~undertaking construction work or manufacturing activities before the pollution and waste control and processing facilities are inspected and approved by the environmental protection department may be ordered to suspend production or operations and may be fined. The violators of ~~our~~relevant ~~issued~~environmental protection laws and ~~outstanding~~regulations ~~common~~may ~~shares~~be onexposed to criminal liability if violations aresult ~~fully~~in ~~diluted~~severe ~~basis~~loss of property, inpersonal ~~exchange~~injuries ~~for~~or ~~all~~death. Our management is of ~~outstanding~~the ~~capital~~view ~~stock~~that ofwe are in compliance with the ~~Dragon~~Environmental ~~International~~Protection Law and various environmental regulations. We have not received any notice from the relevant government authorities advising us that we are in violation of the Environmental Protection Law or various environmental regulations.

7In addition to the PRC environmental laws and regulations, China is a signatory to the 1992 United Nations Framework Convention on Climate Change and the 1998 Kyoto Protocol, which propose emission targets to reduce greenhouse gas emissions. The Kyoto Protocol came into force on February 16, 2005. At present, the Kyoto Protocol has not set any specific emission targets for certain countries, including China.

~~The~~Mineral Resources ~~organization~~Laws and ~~ownership structure of our company subsequent to the consummation of the reverse acquisition as summarized in the paragraphs above is as follows:~~ Regulations

~~Fujian Huilong Coal Mine Co.~~Exploration, exploitation ~~Ltd.~~and ~~(formerly~~mining ~~known~~operations asmust ~~Yongding Shanzahi~~comply ~~Coal~~with ~~Ming~~the ~~Co.,~~relevant ~~Ltd.)~~provisions isof athe ~~wholly~~Mineral ~~foreign-owned~~Resources ~~limited~~Law ~~liability company~~and ~~operating~~other inrelevant ~~China~~ regulations, and isare ~~wholly~~under ~~owned~~the bysupervision of the ~~foreign~~Ministry ~~investor~~of ~~(Dragon International~~Land inand ~~our case)~~Resources. ~~Dragon~~Exploration ~~International~~and ~~was~~exploitation ~~incorporated~~of onmineral ~~October~~resources 5,are also ~~2010~~subject into ~~Hong~~examination ~~Kong~~and toapproval ~~acquire~~by ~~all~~the Ministry of ~~the~~Land ~~equity~~and ~~interest~~Resources inand ~~Fujian~~relevant ~~Huilong~~local ~~Coal~~authorities. We have applied for ~~Mine~~and ~~Co.,~~received ~~Ltd.~~our ~~from~~mining ~~its~~permit ~~previous~~(*3500000620055) ~~owners,~~valid ~~Mr.~~until ~~Chuanzhen~~April ~~Lin,~~of Mr2016. ~~Wensi~~Upon ~~Lin~~approval, ~~and Mr.~~a ~~Qingdong~~mining ~~Shi,~~permit ~~and~~is toissued ~~change~~by the ~~status~~relevant administrative ofauthorities, ~~Fujian~~which ~~Huilong~~are ~~into~~responsible afor ~~wholly foreign-owned~~supervision ~~subsidiary.~~and ~~Dragon~~inspection ~~International~~of ~~was~~mining ~~also~~exploitation ~~created~~in totheir ~~facilitate~~jurisdictions. ~~the~~The ~~share~~holders ~~exchange~~of ~~between~~mining ~~SGB~~rights ~~International~~are ~~Holdings,~~required ~~Inc.~~to ~~and~~file ~~the~~annual ~~shareholders of~~reports ~~Dragon~~with ~~International~~the asrelevant ~~Chinese~~administrative ~~laws~~authorities. doWe ~~not~~have ~~allow~~filed ~~SGB~~our annual ~~International~~reports ~~Holdings, Inc.~~with tothe ~~effect~~relevant ~~share~~administrative ~~exchanges~~authorities ~~directly~~to ~~with~~maintain ~~any~~the ~~owners~~validity of ~~Fujian~~our ~~Huilong.~~mining permit.

On November 1, 2010, Dragon International entered into a share transfer agreement with Mr. Chuanzhen Lin, Mr. Wensi Lin, and Mr. Qingdong Shi, under which Dragon International acquired all of the outstanding equity shares of Fujian Huilong. On February 21, 2011, Fujian Huilong received its new business license and became a WFOE under the People’s Republic of China (“PRC”) laws. Mr. Longwen Lin, a key management member of Fujian Huilong, subsequently acquired 90% of the Dragon International. At that time, Mr. Longwen Lin did not have other relationship with Dragon International, Fujian Huilong or these entities’ shareholders in connection with the reverse merger. Mr. Peifeng Huang was also a key management member of Fujian Huilong before its acquisition by Dragon International, but he did not have other relationship with Dragon International, Fujian Huilong or these entities’ shareholders in connection with the reverse merger. Mr. Thomas Tze Khern Yeo did not have other relationship with Dragon International, Fujian Huilong or these entities’ shareholders in connection with the reverse merger. 10

WeThe Mineral ~~anticipate~~Resources ~~that~~Law wegoverns, ~~will~~among ~~rely~~other ~~principally~~things, onthe ~~dividends~~assignment ~~from our~~of ~~PRC~~mining ~~subsidiary,~~rights. ~~Fujian~~If ~~Huilong,~~the ~~for~~entity ~~our~~holding ~~cash~~the ~~requirements~~mining ~~outside~~rights is to be changed due to a sale of ~~PRC, including~~enterprise ~~servicing~~assets ~~any~~or ~~debt~~other wecircumstances that may ~~incur~~cause ~~outside~~a ofchange ~~PRC~~in ~~and~~the ~~obtaining~~property ~~the~~rights ~~funds~~to the ~~necessary~~assets toof ~~pay~~the ~~dividends~~enterprise, ~~and~~the ~~other~~enterprise ~~cash~~may ~~distributions~~assign its mining rights, subject to ~~our~~approval ~~shareholders~~according ~~and~~to the Coal Law, the Mineral ~~pay~~Resources ~~our~~Law ~~operating~~and ~~expenses~~other ~~outside~~laws ofand ~~PRC~~regulations.

~~Under the~~ The PRC ~~law,~~Government aspermits amine ~~WFOE,~~operators ~~the~~of ~~PRC~~collectively ~~subsidiary,~~owned ~~Fujian Huilong,~~mines ~~may~~to ~~pay~~exploit ~~dividends~~mineral ~~only~~resources ~~out of its accumulated retained earnings determined~~ in ~~accordance~~designated ~~with~~areas ~~the PRC accounting standards~~ and ~~regulations and~~individuals ~~tax laws, which will subject~~ to amine ~~withholding~~scattered ~~tax~~mineral ~~of 10%~~resources. ~~Pursuant~~Such tomine aoperators ~~special arrangement between Hong Kong~~ and ~~the~~individuals ~~PRC~~are ~~government,~~subject known as the Arrangement between the Mainland and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, effective August 21, 2006 (the “Arrangement”), Dragon International may qualify for a lower rate of 5% for any dividends remitted from Fujian Huilong in Mainland China to ~~Dragon~~government ~~International in Hong Kong~~regulation. InMining ~~October 2009, the State~~activities ~~Administration~~by of Taxation of China, or the SAT, further issued the Circular on How to Interpret and Recognize the “Beneficial Owner” in Tax Agreements, or Circular 601. According to Circular 601, non-resident enterprises that cannot provide valid supporting documents as “beneficial owners” may not be approved to enjoy the preferential tax rate under the Arrangement. “Beneficial owners” are individuals, ~~enterprises or other organizations that~~ are ~~normally engaged in substantive operations~~restricted. ~~These~~ ~~rules~~Individuals ~~also~~are ~~set~~not ~~forth~~permitted ~~certain adverse factors~~ to ~~the~~exploit ~~recognition~~mineral ofreserves ~~a “beneficial~~allocated ~~owner.”~~for ~~Specifically,~~exploitation ~~they~~by ~~expressly exclude~~ a ~~“conduit~~mining enterprise ~~company,”~~ or ~~any~~ company ~~established for the purposes of avoiding~~ or ~~reducing~~protected ~~tax obligations or transferring or accumulating profits and not engaged in actual operations such as manufacturing, sales or management, from being a “beneficial owner~~reserves.” ~~As a~~Indiscriminate ~~result,~~mining ~~although~~that ~~Fujian~~damages ~~Huilong~~mineral resources is a wholly owned subsidiary of Dragon International, Dragon International may not be able to enjoy the preferential withholding tax rate under the Arrangement and therefore be subject to withholding tax at a rate of 10% with respect to dividends to be paid by Fujian Huilongprohibited.

8It is unlawful for an entity or individual to conduct mining operations in areas designated for other legal mining operators. A mining operator whose exploitation causes harm to others in terms of production or in terms of living standards is liable for compensation and is required to take necessary remedial measures. When a mine is closed, a mine closure report and information concerning the mining facilities, hidden dangers, remediation and environmental protection must be submitted for examination and approval in accordance with the relevant law.

InMineral products ~~accordance~~illegally toextracted ~~the~~and ~~Article~~incomes ~~167~~derived offrom ~~the~~such ~~PRC~~activities ~~Company~~may ~~Law,~~be ~~the PRC~~confiscated ~~subsidiary,~~and ~~Fujian~~may ~~Huilong,~~result isin ~~required~~fines, torevocation ~~set aside at least 10%~~ of ~~its~~ ~~after-tax profit based on PRC accounting standards to its statutory surplus reserve fund until~~ the ~~accumulative~~mining ~~amount~~permit ofand, ~~such~~in ~~reserve~~serious ~~reaches~~circumstances, ~~50%~~criminal ~~of its respective registered capital~~liability. ~~These~~Because ~~reserves~~we ~~are~~have ~~not~~mined ~~distributable~~and asproduced ~~cash dividends.~~coal ~~The~~from ~~board~~an ofarea ~~directors~~beyond the ofarea acovered ~~WFOE~~by ~~has~~our ~~the~~valid ~~discretion~~mining topermit, ~~allocate~~we ~~a portion~~may ofbe ~~its~~subject ~~after-tax profits~~ to ~~its~~fine ~~staff~~or ~~welfare~~revocation ~~and bonus funds. After the allocation~~ of ~~relevant~~our ~~welfare~~mining ~~and~~permit. ~~funds~~However, ~~the~~our ~~equity~~management believes ~~owners~~that ~~can distribute~~ the ~~remaining~~ ~~net~~likelihood ~~after-tax~~of ~~profits~~any ~~after~~enforcement ~~deducting~~action ~~the~~is ~~accumulated~~low ~~losses~~as inwe ~~the previous~~have ~~fiscal~~applied ~~year.~~for ~~According~~and toobtained ~~the~~in ~~PRC~~May ~~Company~~of ~~Law,~~2011 ~~companies~~another ~~may subject to~~mining apermit ~~fine~~covering upan toadditional ~~RMB5,000~~6.8 ~~for~~km2 ~~non-compliance~~of ~~with~~mining ~~the above rules~~area.

~~The registered capital of Fujian Huilong was RMB1 million as at~~Mining December 31, 2010 and has been increased to and remains as RMB13.28 million as at December 31, 2011 and December 31, 2012 respectively. Fujian Huilong will set aside at least 10% of its after-tax profit until it reached the minimum 50% of its respective registered capital requirement.safety

~~After~~On June ~~paying~~7, 2005, the ~~withholding~~State ~~taxes~~Council ~~applicable~~promulgated toSeveral ~~Fujian Huilong,~~Opinions ~~making~~on ~~appropriations~~Promoting ~~for~~the ~~its~~Healthy ~~statutory~~Development ~~reserve~~of ~~funds~~the ~~and~~Coal ~~retaining~~Industry ~~any profits~~(the ~~from accumulated profits~~“Opinions”), announcing the ~~remaining~~PRC ~~net~~Government’s ~~profits~~policies ofwith ~~Fujian~~respect ~~Huilong would~~to bethe ~~available~~development ~~for~~and ~~distribution~~restructuring toof ~~its~~the ~~sole~~coal ~~shareholder,~~industry. ~~Dragon~~The Opinions ~~International,~~are ~~our~~consistent ~~wholly~~with ~~owned~~the ~~subsidiary~~NDRC’s inannouncement ~~Hong~~on ~~Kong,~~the ~~and~~revision ~~from~~of ~~Dragon International~~the toCoal ~~us.~~Law ~~Dragon~~and ~~International~~reiterated isthe ~~subject~~PRC Government’s policies with respect to the ~~uniform~~administration ~~tax~~of ~~rate~~coal reserves, enhancement of ~~16.5%~~ incoal ~~Hong~~mine ~~Kong.~~safety, ~~Under~~encouragement ~~the~~of ~~Hong~~industry ~~Kong~~consolidation among ~~tax~~coal ~~laws~~producers, ~~Dragon~~acceleration ~~International~~of ~~is exempted~~the ~~from~~construction ~~the~~of ~~Hong~~large ~~Kong~~coal ~~income~~production ~~tax~~bases, onimprovement ~~its~~of ~~foreign-derived~~mining ~~income~~techniques and ~~there~~equipment ~~are~~for nocoal ~~withholding~~production ~~taxes~~and inthe ~~Hong~~organization ~~Kong~~and onregulation ~~remittance~~ of ~~dividends~~small coal mines.

~~Our~~Special Regulations ~~Business~~by the State Council on Preventing Work Safety Related Accidents in Coal Mines and Five Sets of Supplemental Rules and Regulations

AsThe Special aRegulations ~~result~~by of the ~~reverse~~State ~~acquisition~~Council on Preventing Work Safety Related Accidents in Coal Mines were promulgated and entered into effect on September 3, we2005. This regulation specifies that coal mine enterprises are ~~mainly~~responsible ~~engaged~~for preventing coal mine work safety-related accidents. If a coal mine has not obtained, in accordance with the law, a mining right permit, work safety permit, coal production inpermit or business license and if the ~~province~~mine ofmanager ~~Fujian~~has not obtained, in accordance with the ~~People’s~~law, ~~Republic~~a ofmine manager ~~China~~qualification certificate and a mine manager safety qualification certificate, the coal mine may not engage in production. ~~Through~~A ~~our~~coal ~~wholly~~mine ~~owned~~should ~~subsidiary~~have adequate safety equipment, ~~Fujian~~facilities ~~Huilong~~and ~~Coal~~resources ~~Minde~~and ~~Co.~~should have in place measures to guard against the occurrence of work safety related accidents, ~~Ltd~~as well as a sound contingency plan to deal with emergencies., weCoal mining enterprises ~~manage~~should ~~and~~establish ~~operate~~a sound system for the ~~Shangzhai~~detection, elimination, treatment and reporting of latent work safety-related dangers. If a major latent work safety-related danger as specified exists in a coal mine, ~~which~~the isenterprise ~~located~~should atimmediately ~~Yongding~~suspend ~~County,~~production ~~Fujian~~and ~~Province,~~eliminate ~~People’s~~the ~~Republic~~latent ofdanger. ~~China~~Coal mining enterprises should provide their personnel working underground and their special operation personnel with safety education and training in accordance with relevant state regulations. The ~~Shangzhai~~person in charge of a coal mine ~~currently~~and the production and operation management personnel should go into mines and act as foremen on a rotating basis ~~sells~~in ~~unprocessed~~accordance ~~coal~~with state regulations, while a file recording their entry into the mine should be maintained. In addition, the State Administration of Work Safety issued five sets of supplemental measures:

~~Our~~1. ~~Products~~The Measures for Determining Major Latent Work Safety Related Dangers in Coal Mines (for Trial Implementation) stipulates the specific criteria for determining major latent work safety-related dangers. It further defines each of the latent safety related dangers specified in the Special Regulations of the State Council on Preventing Work Safety Related Accidents in Coal Mines, and lists more than 60 major latent safety related dangers.

All of our coal is classified as anthracite. The coloring of this coal is dark gray to slightly silver-gray. The coal is of sufficient quality to be used for power generation, production of cement, as raw material for ammonia production, and for domestic uses. 11

~~Because~~2. The Implementing Measures for the ~~capacity~~Detection and Elimination of Latent Dangers in Coal Mines and the ~~screen~~Rectification ~~system~~and Closure of Such Mines (for Trial Implementation) specifies that coal ~~processing is~~mining ~~too~~enterprises ~~small~~are toresponsible befor ~~used,~~the wedetection ~~sell~~and elimination of latent work safety-related dangers and that the main persons in charge of coal ~~unprocessed~~mining enterprises are fully responsible for the detection, elimination and treatment of latent work safety-related dangers in their enterprises. In3. ~~addition~~The Measures for the Supervision and Inspection of Coal Mine Safety Training (for Trial Implementation) specifies that coal mining enterprises must arrange and provide safety education and training to all of their mining personnel in accordance with relevant regulations; select and send their principal persons in charge, ~~sale contractors~~work ~~are~~safety ~~responsible~~management personnel and special operations personnel to qualified coal mine safety training institutions for ~~hauling~~training in a timely manner; and obtain the corresponding qualification certificates. 4. The Guiding Opinions on Persons in Charge of Coal Mines and Production and Operation Management Personnel Going into Mines as Foremen requires the various types of coal ~~from~~mines to arrange for their persons in charge and production and operation management personnel to go into the ~~mine~~mines to act as foremen and to ensure that each shift has at least one such person on site directing the operations. Coal mining enterprises are required to ~~customers~~establish such procedures, clarify foremen’s duties and responsibilities and strictly implement internal management and performance appraisal. ~~Therefore~~ 5. The Measures for Rewarding the Reporting of Major Latent Work Safety Related Dangers in, ~~there~~and ~~are~~Violations noof ~~processing~~the Law by, Coal Mines (for Trial Implementation) specifies that all units or ~~hauling~~individuals ~~costs.~~have the right to report major latent work safety-related dangers in, and violations of law by, coal mines.

~~Our~~Special Regulation ~~Customers~~by the State Council on Shutting Down Small Coal Mines

WeThe Special ~~sell~~Regulation ~~our~~by ~~coal~~the ~~directly~~State toCouncil ~~local~~on ~~sale~~Shutting ~~contractors~~Down Small Coal Mines went into effect on September 28, ~~and~~2006. ~~are~~The passage ~~responsible~~of ~~only~~regulation ~~for~~is ~~loading~~the ~~contractors’~~launch ~~trucks~~of ata ~~the~~national ~~mine~~campaign ~~site.~~to ~~Subsequently,~~close down small coal mines defined as having annual coal production capacity ~~sale~~of ~~contractors~~30,000 ~~haul~~tons or less, as well as coal ~~from~~mines ~~the~~without ~~mine~~proper ~~site~~licenses toor ~~consumers~~permits. ~~For~~The intent of the ~~years~~regulation ~~ended~~is to reduce both ~~December~~the ~~31,~~high ~~2012~~rate of accidents and ~~December~~pollution 31in the PRC coal mining industry. Under this regulation, ~~2011~~9,887 small and/or illegal coal mines were to have been shut down by the ~~Company~~end ~~had~~of ~~three~~2009. ~~(2012)~~The ~~and~~regulation ~~four~~specifies that the Central Government will support the development ~~(2011)~~of ~~customers~~big ~~accounted~~coal ~~for~~mining ~~more~~operations, ~~than~~defined ~~10%~~as having annual coal production capacity of ~~total~~300,000 ~~sales~~tons ~~representing~~or ~~73%~~more. However, the regulation ~~(2012)~~is ~~and~~silent ~~80%~~as ~~(2011)~~to the PRC government’s position on coal mine operations having annual production capacity of ~~total~~more ~~sales~~than 30,000 tons ~~respectively:~~but less than 300,000 tons.

9Laws and Regulations Applicable to Foreign Invested Enterprises (FIEs)

Name	% of the sales in FY2012	% of the sales in FY2011
Mr. Wei Mingji	29%	0%
Mr. Huang Jingyang	24%	17%
Mr. Lin Jinxiu	20%	0%
Mr. Ling Tianyun	0%	30%
Mr. Yan Dechang	0%	21%
Mr. Dai Jinsheng	0%	12%

As coal is currently a scarce commodity in Fujian province and demand is significantly higher than supply, we sell our coal on a per ton basis directly to our customers on cash basis or wire transfer payment. Our coal is generally sold to a few major individual customers and also on-site sales to other smaller customers on cash basis only. As a result, we carry a small balance of accounts receivable as at December 31, 2012. There was a significant increase of sales in 2007 through 2011 mainly driven by market demands and also due to the improvement on our productivity. Our sales personnel conduct routine customer visits and customer satisfaction surveys. We typically enter into contracts with our customers on a yearly basis, which contracts are renewable annually. These contracts do not provide for minimum purchase amount requirements. Once our coal is mined, it is typically picked up immediately by, or loaded immediately for delivery to, customers so we do not currently maintain an inventory of the mined coal.12

~~Product~~The following ~~Pricing~~is a brief summary of the principal law and regulations that apply to FIEs.

~~Coal prices are generally determined by market price or are~~Corporate ~~based~~Laws ~~on contractual terms. The price for certain thermal coal used for power generation is determined among coal suppliers~~ and ~~power~~Industry ~~plant~~Catalogue ~~buyers~~Relating ~~in accordance with the pricing guideline published by the PRC Government. However, we are not required~~ to ~~abide~~Foreign by the government pricing guideline as our customer do not comprise of power plant buyers. In addition, we do not believe we will be required to abide by the government pricing guidelines because we are not obligated to determine to whom our customers will sell the coal they purchased from us and as such the government pricing guidelines do not apply to the purchase and sale of coal between our company and our customers. Investment

WeThe establishment, ~~set~~operation ~~pricing~~and bymanagement ~~taking~~of ~~into~~corporate ~~account:~~entities ~~(i) prices~~ in ~~the relevant~~China ~~local~~generally ~~coal~~are ~~markets;~~governed ~~(ii)~~by ~~grade~~the ~~and~~Company ~~quality~~Law of the ~~coal;~~PRC, ~~and (iii)~~or ~~relationships~~the ~~with~~Company ~~customers~~Law, effective in 1994, as amended in 1999, 2004, 2005, respectively. ~~Transportation~~The ~~costs~~investment activities in the PRC by foreign investors are ~~normally~~principally ~~borne~~governed by the ~~customers.~~ ~~The~~Guidance ~~average~~Catalogue ~~price~~of Industries for ~~raw~~Foreign ~~coal~~Investment, or the Catalogue, which was promulgated and is amended from time to time by MOFOM and the ~~Shangzhai~~National ~~coal~~Development ~~mine~~and inReform ~~2012~~Commission, or the NDRC. The Catalogue ~~was~~divides ~~about~~industries ~~US$112~~into ~~per~~three ~~ton~~categories: encouraged, ~~which~~restricted isand $5prohibited. orIndustries 5%not ~~higher~~listed ~~than~~in the ~~average~~Catalogue ~~price~~are ofgenerally ~~about~~open ~~US$107~~to ~~per~~foreign ~~ton~~investment inunless ~~2011~~specifically restricted by other PRC regulations.

~~Sources and Availability~~ Regulations of ~~Raw Materials and the Principal Suppliers~~ Taxation

WeOn March ~~purchase~~16, ~~certain~~2007, ~~materials~~the inChinese ~~connection~~government ~~with~~enacted ~~our~~the ~~coal mining~~new ~~operations~~Enterprise Income Tax Law, ~~including:~~or ~~(i)~~the ~~mining~~New ~~equipment~~EIT Law, and ~~vehicles;~~promulgated ~~(ii)~~the ~~lift~~New ~~cylinders;~~EIT Law Implementation Regulations. Both the New EIT Law and ~~(iii)~~the ~~iron~~New ~~boards,~~EIT ~~etc.~~Law ~~Because~~Implementation ~~these~~Regulations ~~materials~~became ~~are~~effective ~~readily~~on January ~~available~~1, we2008. doUnder ~~not~~the ~~purchase~~New ~~them~~EIT ~~exclusively~~Law ~~from~~and ~~any~~the ~~one~~New ~~supplier~~EIT ~~for~~Law ~~our~~Implementation Regulations, foreign invested enterprises incorporated in the ~~operation.~~PRC, a uniform income tax rate of 25%.

~~The~~Pursuant to ~~price~~the Provisional Regulations on Value-Added Tax of ~~these~~the ~~materials~~PRC, ispromulgated ~~set~~by atthe ~~market~~State ~~rates~~Council oron December 13, 1993, as amended ~~determined~~on ~~through~~November ~~negotiations.~~5, We2008 ~~believe~~(effective weon ~~have~~January ~~established~~1, ~~stable cooperative~~2009), ~~relationships~~and ~~with~~the Rules for Implementation of Provisional Regulations on Value-Added Tax of the ~~suppliers~~PRC, ~~that~~promulgated weon ~~deal~~December ~~with~~25, 1993 and amended on December 15, 2008 (effective on January 1, 2009), all entities and individuals engaged in selling goods, providing repair and placement services or importing goods into the PRC are generally subject to ~~ensure~~a value-added tax, or VAT, at a rate of 17% of the gross sales proceeds received (with the exception of certain goods ~~reliable~~which ~~supply~~are subject to a rate of 13% or lower), less any VAT already paid or borne by the ~~materials~~taxpayer ~~required~~on ~~for~~goods ~~our~~or ~~mining~~services ~~operations.~~purchased and utilized in the production of goods or provision of services that have generated the gross sales proceeds.

~~Research~~Regulations on ~~and~~Dividend ~~Development~~ Distribution

~~We had no research and development expenses in 2012 and in~~The ~~2011.~~principal Weregulations ~~currently~~governing ~~have~~dividend nodistributions ~~plans~~of ~~for~~WFOEs ~~any research and development activities and do not anticipate any material research and development costs.~~ include:

~~Intellectual~~1. ~~Properties~~Company Law (2005) 2. Wholly Foreign-Owned Enterprise Law (2000); and ~~Licenses~~3. Wholly Foreign-Owned Enterprise Law Implementing Rules (2001).

WeUnder these ~~have~~regulations, noWFOEs ~~material~~in ~~patents~~the PRC may pay dividends only out of their accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, ~~licenses~~WFOEs orare ~~other~~required ~~intellectual~~to set aside at least 10% of their respective accumulated ~~property~~profits each year, if any, to fund certain reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital. At the discretion of the WFOEs, they may allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.

10 13

~~Competition~~Labor Laws and Social Insurance

InPursuant to the ~~area~~PRC ~~where~~Labor weLaw ~~operate~~and the ~~Shangzhai~~PRC ~~coal~~Labor ~~mine~~Contract Law, ~~there~~employers ~~are no~~must ~~other~~execute ~~coal~~written ~~mine~~labor ~~operating~~contracts inwith ~~the~~full-time ~~Shangzhai~~employees. All ~~district~~employers ~~but~~must ~~there~~compensate ~~are~~their ~~about~~employees ~~4 other~~with ~~licensed~~wages ~~coal~~equal ~~mines~~to ~~within~~at least the ~~Yongding~~local ~~County~~minimum ~~which~~wage ~~directly~~standards. ~~compete~~All ~~with~~employers are ~~us:~~required ~~Yongding~~to ~~County~~establish ~~Dakedu~~a ~~coal~~system ~~mine,~~for ~~Yongding~~labor ~~County~~safety ~~Dawanke~~and ~~coal mine~~sanitation, ~~Yongding~~ ~~County~~strictly ~~Huangyoukeng~~abide ~~coal~~by ~~mine~~state rules and ~~Yongding~~standards ~~County~~and ~~Jiaozhi~~provide ~~coal mine.~~employees ~~Yongding~~with ~~County~~workplace ~~Dakedu~~safety ~~coal~~training. ~~mine~~Violations ~~has~~of anthe ~~annual~~PRC ~~production~~Labor ~~capacity~~Contract ofLaw ~~about 90,000 tons/a~~ and the ~~remaining~~PRC ~~competitors~~Labor ~~have~~Law anmay ~~annual~~result ~~production~~in ~~capacity of~~the ~~about~~imposition ~~60,000 tons/a. However, because demand for coal currently outpaces~~of ~~supply,~~fines weand doother ~~not~~administrative ~~face~~liabilities. ~~any~~Criminal ~~meaningful~~liability ~~competition~~may arise for ~~the~~serious ~~sale of our coal from the Shangzhai coal mine~~violations.

~~The Coal Industry Policy, issued by the National~~Notice ~~Development~~Concerning ~~and~~Foreign ~~Reform~~Exchange ~~Commission~~Controls (NDRC) in November 2007, stipulates that new coal mines and expansions of existing coal mines in Fujian Province must have a minimum output of 90,000 t/a. The approved production capacity of the Shangzhai coal mine is 90,000 t/a, which is in accordance with this policy. According to the Circular on ~~Assigning~~Domestic ~~the Plan for Closing Small Scale Coal Mines in the Last Three Years of the ‘Eleventh Five Year~~Residents’ ~~Period~~Financing ~~issued by the NDRC, National Energy Bureau, State Administration of Work Safety,~~ and ~~the~~Roundtrip ~~State Administration~~Investment ofThrough ~~Coal~~Offshore ~~Mine Safety in October 2008, Chinese coal mines with an~~Special ~~annual~~Purpose production capacity of less than 300,000 t/a are considered to be small-scale coal mines and will be closed, merged, or limited; there was plans to reduce the number of small-scale coal mines in Fujian Province and our mine is not expected to be one of the affected one.Vehicles

~~Yongding County Coal Industry Management Bureau is the direct~~SAFE ~~government~~issued ~~agency responsible for implementing the “Circular~~ on ~~Assigning~~October ~~the Plan~~21, ~~for~~2005 ~~Closing Small Scale Coal Mines in~~ the ~~Last~~Notice ~~Three~~Concerning ~~Years~~Foreign ofExchange ~~the~~Controls ~~‘Eleventh Five~~on ~~Year’~~Domestic ~~Period~~Residents’” inFinancing ~~Yongding County~~ and ~~the officer with whom we had a~~Roundtrip ~~conversion~~Investment ~~regarding~~Through ~~effect~~Offshore ofSpecial ~~the~~Purpose ~~Circular~~Vehicles, onor ~~our~~Circular75, ~~company~~which ~~was~~became ~~the~~effective deputy chief and he has the overall decision making power of this bureau. He indicated to us that because Fujian Province does not have sufficient coal production for use by local industries and relies heavily on ~~import~~November ~~from other provinces~~1, ~~and~~2005. ~~because our mine has consistently demonstrated excellent safety records, we will not be one of the small-scale mines affected by the~~ Circular. ~~However,~~75 ~~we have not~~requires ~~received~~PRC ~~any~~resident ~~written~~legal ~~assurance~~persons ~~regarding~~or ~~the~~individual ~~applicability~~residents ~~of the “Circular on Assigning the Plan for Closing Small Scale Coal Mines in the Last Three Years of the ‘Eleventh Five Year’ Period’”~~ to ~~our~~register ~~mine~~with ~~operations and it is possible that decisions regarding~~ the ~~Circular~~competent ~~on the~~ local ~~level~~SAFE ~~could~~branches bebefore ~~overruled~~establishing ator ~~the~~controlling ~~national~~any ~~level.~~company ~~Our past coal production~~ outside of the ~~areas~~PRC ~~covered~~(offshore byspecial ~~our mining~~purpose ~~permit~~vehicles ~~may~~or ~~not~~offshore beSPV) ~~considered~~for inthe ~~determining~~purpose ~~whether we have a coal production capacity~~ of atoffshore ~~least~~capital ~~300,000 t/a. However, after receiving the new~~financing ~~mining~~by ~~permit~~using ~~covering~~assets ~~additional~~or ~~6.8~~equities ~~km2,~~held ~~we intend to conduct our mining operations only within the areas covered~~ by ~~our~~such ~~valid~~PRC ~~mining~~resident ~~permits~~legal ~~and our~~persons ~~coal~~or ~~production~~individual residents in ~~the future will be considered whether we have~~ a ~~coal production~~PRC ~~capacity~~domestic ~~of at least 300,000 t/a~~enterprise.

~~According~~Article 3 toof ~~the~~Mineral ~~Opinions~~Resources Law of the ~~NDRC~~People’s onRepublic ~~Expediting~~of China provides that mineral resources belong to the State. ~~Merger~~The ~~and~~right ~~Reorganization~~ of ~~Coal~~State ~~Mines,~~ownership ~~issued~~in bymineral ~~the~~resources ~~General~~is ~~Office~~exercised ofby the State Council. inState ~~October~~ownership ~~2010~~of mineral resources, ~~large-scale~~either near ~~coal~~the ~~mining~~earth's ~~companies~~surface ~~are~~or ~~encouraged to~~underground, ~~merge~~shall ~~with~~not orchange ~~acquire~~with ~~small-scale~~the ~~coal~~alteration ~~mines~~of inownership ~~order~~or right to ~~reduce~~the use of the ~~overall~~land which ~~number~~the ofmineral ~~coal~~resources ~~mining~~are ~~enterprises.~~attached to.

~~Regulatory~~The State ~~Overview~~safeguards the reasonable development and utilization of mineral resources. Seizing or damaging of mineral resources by any means and by any organization or individual shall be prohibited. People's governments at various levels must make serious efforts to protect mineral resources.

~~Coal~~Anyone who ~~Law~~wishes to explore or mine mineral resources shall separately make an application according to law and shall register after obtaining the right of exploration or mining upon approval, with the exception of the mining enterprises that have, in accordance with law, applied for and obtained the right of mining and are conducting exploration within the designated mining area for the purpose of their own production. The State protects the right of exploration and of mining from encroachment and protects the order of production and other work in the mining and exploration areas from interference and disruption. Anyone engaged in exploring and mining of mineral resources shall meet the prescribed qualifications.

OnArticle 5 ~~August~~of ~~29,~~Mineral ~~1996,~~Resources ~~the~~Law ~~PRC~~of ~~Government promulgated~~ the People’s Republic of China ~~Coal~~provides ~~Law~~that (the ~~“Coal~~State ~~Law”),~~practices ~~which~~a ~~became~~system ~~effective~~wherein onthe ~~December~~exploration 1,right ~~1996.~~and ~~The~~mining ~~Coal~~right ~~Law~~shall ~~sets~~be ~~forth~~obtained ~~requirements~~with ~~for~~compensation; ~~all coal mines~~however, ~~including~~ ~~state-owned~~the ~~mines~~State ~~and privately owned mines~~may, ~~mainly~~in ~~providing~~light ~~for resource exploitation planning, approval~~ of ~~new~~specific ~~mines~~conditions, prescribe ~~the~~reduction ~~issuance~~ of ~~mining and~~or ~~safety~~exemption ~~production~~from ~~permits,~~the ~~implementation~~compensation offor ~~safety~~acquiring ~~standards,~~the ~~processing~~exploration ~~of coal,~~right ~~business~~and ~~management,~~mining ~~protection~~right. ofSpecific ~~mine areas from destructive~~measures ~~exploitation,~~ and ~~safety~~implementation ~~protection~~procedures ~~for~~shall ~~miners~~be ~~and~~formulated ~~administrative~~by ~~supervision~~the State Council.

~~According to the Coal Law, entities seeking to establish mining~~Anyone ~~enterprises~~who ~~must~~mines ~~apply~~mineral toresources the relevant government office and obtain all necessary approvals. Upon obtaining such approvals, the entities concerned will be granted a mining permit from the Ministry of Land and Resources. Thereafter, an entity must ~~obtain~~pay aresource ~~coal~~tax ~~production permit~~ and aresource ~~coal~~compensation ~~operation permit and other related quality permits~~ in ~~order~~accordance to commence coal production and sell coal products in the PRC. We have applied for and received a mining permit valid until 2016 and a coal production permit valid until 2031. Our management believes that we have complied with ~~the~~ relevant ~~provisions~~regulations of the ~~Coal Law~~State. We will be forced to terminate our business if we do not have the necessary approvals from the relevant government offices. The PRC Government is in the process of amending the Coal Law, in response to concerns over the lack of a well-coordinated development plan for mining, which contributed to a significant amount of waste of valuable coal resources. The lack of effective penalty provisions or the lenient enforcement of existing provisions in the Coal Law has been cited as another important reason for the current rulemaking effort.

11Article 15 of Mineral Resources Law of the People’s Republic of China provides that anyone who wishes to establish a mining enterprise must meet the qualifications prescribed by the State, and the department in charge of examination and approval shall, in accordance with law and relevant State regulations examine the enterprise's mining area, its mining design or mining plan, production and technological conditions and safety and environmental protection measures. Only those that pass the examination shall be granted approval.

Mining activities in the PRC are also subject to the People’s Republic of China Mineral Resources Law (“Mineral Resources Law”), promulgated by the PRC Government on March 19, 1986 and amended on August 29, 1996. The Mineral Resources Law regulates matters relating to the planning or engaging in the exploration, exploitation and mining of mineral resources. According to the Mineral Resources Law all mineral resources, including coal, are owned by the state. Except under limited circumstances, any enterprise planning to engage in the exploration, exploitation and mining of mineral resources must first apply for and obtain exploration rights and mining rights before commencing the relevant activities. The Mineral Resources Law prohibits the transfer of exploration and exploitation rights in general unless the transfer falls within certain specified circumstances. Our management believes that we are in compliance with the Mineral Resources Law in this respect because we have applied for and obtained the mining permit and coal production permit.14

WeArticle 4 ~~are~~of ~~principally~~Regulations ~~subject~~for toImplementation ~~governmental~~of ~~supervision~~the Mineral Resources Law of the People’s Republic of China provides that the exploration and exploitation of the mineral resources within the territory of the People's Republic of China and other sea ~~regulation~~areas under its jurisdiction must abide by the ~~following~~Mineral ~~agencies~~Resources Law of the ~~PRC~~People's ~~Government:~~Republic of China (hereinafter referred to as the Mineral Resources Law) and these Regulations.

Article 7 of Regulations for Implementation of the ~~State~~Mineral ~~Council,~~Resources ~~which~~Law isof the ~~highest~~People’s ~~level~~Republic of China provides that the ~~executive~~state ~~branch~~allows foreign companies, ~~is responsible~~enterprises ~~for~~and ~~the~~other ~~examination~~economic organizations as well as individuals to invest in exploration and ~~approval~~exploitation of ~~major~~the ~~investment~~mineral ~~projects specified~~resources inwithin the ~~2004~~territory ~~Catalogue~~of the People's Republic of ~~Investment~~China ~~Projects~~and ~~released~~other bysea ~~the~~areas ~~PRC~~under its ~~Government;~~jurisdiction pursuant to the relevant laws and regulations of the People's Republic of China.

~~the~~In accordance ~~National~~with ~~Development~~the ~~and~~Provisions ~~Reform~~on ~~Commission,~~M&A ~~which~~of ~~formulates~~a ~~and implements~~Domestic ~~major~~Enterprise ~~policies~~by ~~concerning~~Foreign ~~China’s economic and social development~~Investors, ~~examines~~ ~~and~~which ~~approves~~was ~~investment~~initially ~~projects exceeding certain capital~~promulgated ~~expenditure~~by ~~amounts~~MOFCOM orand inSAIC, ~~specified~~on ~~industry~~August ~~sectors~~8, ~~including~~2006 ~~examination~~ and ~~approval~~became ofeffective ~~foreign~~on ~~investment~~September ~~projects~~8, ~~oversees~~2006, ~~reform~~as ofamended ~~state-owned enterprises~~on ~~and~~June ~~formulates~~22, ~~industrial~~2009, ~~policies~~which ~~and~~is ~~investment guidelines for~~commonly ~~the~~known ~~natural resource industries, such~~ as ~~coal~~Decree ~~production~~No. ~~In addition~~10, ~~the NDRC~~acquisition ~~administers~~by ~~coal~~foreign ~~export~~investors ~~activities~~of ~~and~~share ~~export~~capital ~~quotas jointly with the Ministry~~ of ~~Commerce.~~a ~~The~~domestic ~~NDRC~~enterprise isshall ~~also~~be ~~responsible~~approved ~~for~~by ~~the evaluation and~~MOFCOM ~~implementation~~and ofregistered ~~the~~with ~~price-linking mechanism between the prices of coal and power;~~ SAIC.

the Ministry of Commerce of China (“MOFCOM”) and/or its local counterpart, which regulates foreign investment in China, such as review and approval of foreign invested companies in China and mergers and acquisitions of Chinese domestic enterprises by foreign investors; Employees

~~the~~As of ~~Ministry~~December of31, ~~Land~~2014, ~~and~~we ~~Resources~~had ofapproximately ~~China~~20 ~~(“MLR”)~~employees ~~and/or~~including ~~its~~our ~~local counterpart~~President, ~~which~~Chief ~~has~~Executive ~~the~~Officer ~~authority~~and toChief ~~grant~~Financial ~~land~~Officer and ~~use~~mining ~~licenses~~support ~~and~~team. ~~mining right~~We ~~permits,~~have ~~approves~~not ~~transfer~~experienced ~~and~~a ~~lease~~work ofstoppage. ~~mining~~Management ~~rights,~~believes ~~and~~that ~~reviews~~our relations with our employees are ~~mining~~good. ~~rights~~We ~~premium~~do ~~and~~not ~~reserve~~have ~~valuation;~~insurance for industry-related accidents.

~~the State Administration of Coal Mine Safety (“SACMS”) and/or its~~ITEM ~~local~~1A. ~~counterpart,~~RISK ~~which is responsible for the implementation and supervision of the relevant safety laws and regulations applicable to coal mines and coal mining operations;~~ FACTORS

~~the Ministry of Environmental Protection of China (“MEP”) and/or its~~Risks ~~local~~Related ~~counterpart,~~to ~~which~~Doing ~~supervises~~Business ~~and~~in ~~controls environmental protection and monitors~~ China~~’s environmental system;~~

~~the~~Our ~~Ministry~~operations are ofprimarily ~~Construction~~located ofin China ~~(“MOC”)~~ and~~/or~~ ~~its~~may ~~local counterpart,~~be ~~which~~adversely isaffected ~~responsible~~by ~~for~~changes in the ~~management~~policies of ~~survey and design of construction projects, including but not limited to~~ the ~~survey~~Chinese ~~and design of coal mines;~~ government.

The political environment in the ~~National~~PRC may adversely affect our business operations. The PRC has operated as a socialist state since 1949 and is ~~State~~controlled ~~Tax~~by ~~Bureaus~~the Communist Party of China. In recent years, however, the government has introduced reforms aimed at creating a “socialist market economy” and~~/or~~ policies have been implemented to allow business enterprises greater autonomy in their ~~local~~operations. ~~counterparts~~Changes in the political leadership of the PRC may have a significant effect on laws and policies related to the current economic reforms program, ~~which~~other policies affecting business and the general political, economic and social environment ~~are~~in ~~responsible~~the ~~for~~PRC, including the ~~federal~~introduction of measures to control inflation, changes in the rate or method of taxation, the imposition of additional restrictions on currency conversion and ~~local~~remittances ~~income~~abroad, ~~VAT~~and foreign investment. These effects could substantially impair our business, profits or prospects in China. Moreover, economic reforms and ~~other~~growth ~~taxes;~~in the PRC have been more successful in certain provinces than in others, and the continuation or increases of such disparities could affect the political or social stability of the PRC.

12The Chinese government exerts substantial influence over the manner in which companies in China must conduct their business activities.

~~the~~The ~~State~~PRC only ~~Administration~~recently ofhas ~~Foreign~~permitted ~~Exchange~~greater ofprovincial ~~China (“SAFE”)~~ and~~/or~~ ~~its~~ local ~~counterpart,~~economic ~~which~~autonomy isand ~~responsible~~private ~~for~~economic ~~the~~activities. ~~convertibility~~The government of ~~RMB~~the ~~into~~PRC ~~foreign~~has ~~currencies,~~exercised ~~registration~~and ofcontinues ~~foreign~~to ~~debt~~exercise orsubstantial ~~loans~~control over virtually every sector of the Chinese economy through ~~companies~~regulation and state ownership. Accordingly, government actions in ~~certain~~the ~~cases~~future, ~~the~~including ~~remittance~~any ofdecision ~~currency~~not ~~out~~to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in the PRC or particular regions thereof, and could ~~such~~require asus ~~repayment~~to ofdivest ~~bank~~the ~~loans~~interests orwe ~~dividends~~then ~~denominated~~hold in ~~foreign~~Chinese properties or joint ventures. Any such developments could have a material ~~currencies;~~adverse effect on the business, operations, financial condition and prospects of our company.

the State Administration for Industry and Commerce of China (“SAIC”) and/or its local counterpart, which is responsible for review and approval of establishment of domestic and foreign invested companies in China and issuance of their business licenses. 15

~~The~~Future inflation ~~following~~in isChina amay ~~brief~~inhibit ~~summary~~economic ofactivity ~~the principal laws, regulations, policies~~ and ~~administrative~~adversely ~~directives~~affect toour ~~which we are subject~~operations.

~~Pricing~~In recent years, the Chinese economy has experienced periods of rapid expansion within which there have been some years with high rates of inflation and deflation, which have led to the adoption by the PRC government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. While inflation has moderated since 1995, high inflation may in the future cause the PRC government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby adversely affect our business operations and prospects in the PRC.

~~Until~~We ~~2002, the production and pricing of coal was largely~~may ~~subject~~be torestricted close control and supervision by the PRC Government, which centrally manages the production and pricing of coal. Previously, the price of coal was determined based on a government-devised pricing guideline which set out the suggested prices for coal. However, to effectuate the transformation from ~~planned~~ ~~economy~~freely toconverting ~~market economy practices, from January 1, 2002 China eliminated~~ the ~~state~~Renminbi ~~guidance price for coal and allowed prices for all types of coal~~ to beother ~~determined~~currencies in ~~accordance~~a ~~with~~timely ~~market demand~~manner. However, as the PRC Government continues to maintain control over the national railway system, which is the primary means for coal transportation in China, the PRC Government still may exert influence over the pricing of coal through its allocation of railway transportation capacity for coal.

InThe ~~addition,~~Renminbi is ~~under~~not ~~the~~a ~~Price~~freely ~~Law~~convertible currency at present. We receive all of ~~the~~our ~~PRC~~revenue in Renminbi, ~~promulgated~~which may need to be converted to ~~December~~other 29currencies, ~~1997~~primarily U.S. dollars, ~~effective~~and ~~May~~remitted outside of the PRC. Effective July 1, ~~1998~~1996, inforeign ~~the~~currency ~~event~~“current account” oftransactions anby ~~actual~~foreign ~~increase~~investment ~~or potential~~enterprises, ~~increase~~including insino-foreign joint ventures, are no longer subject to the ~~prices~~approval of ~~important~~SAFE, ~~products~~but ~~such~~need asonly ~~coal~~a ministerial review, according to the ~~State Council~~Administration ~~and~~of the ~~provincial governments~~Settlement, ~~autonomous~~Sale ~~regions~~ and ~~municipalities~~Payment ~~directly~~of ~~under~~Foreign Exchange Provisions promulgated in 1996 (the ~~PRC~~“FX ~~Government~~regulations”). ~~may~~“Current ~~adopt~~account” ~~intervention~~items ~~measures~~include international commercial transactions, which occur on a regular basis, such as ~~restricting~~ ~~the~~those ~~ratio~~relating ofto ~~price~~trade ~~differentials~~and orprovision of ~~profits,~~services. Distributions ~~and~~to ~~imposing~~joint ~~price~~venture parties also are considered a “current account transaction.” Other non-current account ~~limits~~items, ~~etc.~~known Inas ~~August~~“capital ~~2004~~account” items, ~~the~~remain ~~NDRC~~subject ~~issued~~to aSAFE ~~notice~~approval. ~~setting~~Under ~~forth~~current ~~temporary~~regulations, we can obtain ~~measures~~foreign tocurrency bein ~~imposed~~exchange onfor ~~thermal~~Renminbi ~~coal~~from ~~prices~~swap ~~for~~centers ~~certain~~authorized ~~regions~~by the government. InWe ~~December~~do not anticipate problems in obtaining ~~2004~~foreign currency to satisfy our requirements; however, ~~the~~there ~~NDRC~~is ~~issued~~no aassurance ~~notice~~that ~~setting~~foreign ~~forth~~currency ~~guidelines~~shortages ~~for~~or ~~pricing~~changes ofin ~~thermal~~currency ~~coal~~exchange ~~sales~~laws and regulations by the Chinese government will not restrict us from freely converting Renminbi in ~~2005~~a timely manner. If ~~Under~~such ~~these~~shortages ~~guidelines,~~or ~~the~~change ~~coal~~in ~~suppliers~~laws and ~~their customers~~regulations ~~may~~occur, ~~not~~we ~~negotiate~~may ~~for~~accept ~~the~~Renminbi, ~~sale~~which ofcan ~~coal~~be atheld ~~prices~~or ~~exceeding~~re-invested ~~the government~~in ~~suggested~~other ~~price range~~projects.

~~Similar~~Future fluctuation toin ~~coal pricing,~~ the ~~production~~value ~~and supply~~ of ~~coal, which is dictated by~~ the ~~PRC~~Renminbi ~~Government’s~~may ~~annual~~negatively ~~state~~affect ~~coal~~our ~~allocation~~sales ~~plan,~~globally ~~has been gradually liberalized~~ and ~~largely~~our ~~subject~~ability to ~~market~~convert ~~forces.~~our ~~Major~~return ~~domestic coal~~on ~~suppliers and coal purchasers attend the Annual National Coal Trading~~operations ~~Convention~~ to ~~negotiate~~U.S. ~~and~~dollars ~~discuss~~in ~~the~~a ~~price~~profitable ~~and quantity of coal to be supplied and purchased for the coming year through the signing of letters of intent and short and long-term supply contracts~~manner.

OnUntil ~~December 18~~1994, ~~2006, the National Development and Reform~~ ~~Committee issued~~ the ~~Notice~~Renminbi ~~Relating~~experienced toa ~~the~~gradual ~~Good~~but ~~Preparation~~significant ~~for~~devaluation ~~Inter Provincial~~against ~~Coal~~most ~~Production~~major ~~Transportation~~currencies, ~~Works~~including ~~(Fa~~U.S. ~~Gai~~dollars, ~~Yun~~and ~~Xing~~there was ~~[2006]~~a ~~No. 2867).~~significant ~~According~~devaluation toof the ~~notice,~~Renminbi inon ~~2007~~January 1, ~~policies~~1994 ~~were~~in toconnection bewith ~~implemented to encourage~~ the ~~reform~~replacement of the ~~market~~dual ~~system~~exchange ~~for determining coal prices by~~rate ~~allowing~~system ~~parties to determine prices through discussions in accordance~~ with ~~market~~ ~~demand,~~a ~~and~~unified tomanaged ~~encourage~~floating ~~price~~rate ~~determination~~foreign ~~based~~exchange ~~on quality~~system. ~~On December~~Since 271994, ~~2006,~~ the ~~relevant~~value ~~government~~of ~~departments~~the ~~and~~Renminbi ~~units,~~relative ~~such~~to as the U.S. ~~National~~Dollar ~~Development~~has ~~and~~appreciated ~~Reform~~approximately ~~Committee~~15%. ~~for railway operations~~Countries, ~~and~~including the ~~Transportation~~ ~~Department~~U.S., ~~convened~~have aargued ~~2007~~that ~~coal industry video and telephone conference. This symbolized~~ the ~~end~~Renminbi ofis ~~the~~artificially ~~Annual National Coal Trading~~undervalued ~~Convention~~due ~~that~~to ~~has~~China’s ~~been~~current inmonetary ~~place~~policies ~~for~~and ~~over~~have 50pressured ~~years.~~China ~~Under~~to ~~the~~allow ~~State’s macroeconomic controls,~~ the ~~new~~Renminbi ~~mechanism for enterprises~~ to float freely ~~determine prices through negotiations was put~~ in ~~place.~~world markets.

~~Fees~~The ~~and~~PRC legal ~~Taxes~~system embodies uncertainties that could limit the legal protection available to our shareholders.

~~There~~The ~~are~~PRC’s legal ~~various~~system ~~taxes~~is ~~and~~a ~~fees~~civil ~~that~~law ~~are~~system ~~imposed~~based ~~upon~~on ~~coal producers~~written statutes in ~~Fujian~~which ~~Province,~~decided aslegal ~~well~~cases ashave ~~statutory~~little ~~reserves~~value ~~which~~as ~~coal~~precedents, ~~producers~~unlike ~~are~~the ~~required~~common tolaw ~~set~~system ~~aside~~prevalent in the United States. ~~Such~~The ~~taxes~~PRC does not have a well-developed, ~~fees~~consolidated body of laws governing foreign investment enterprises. As a result, the administration of laws and ~~statutory~~regulations ~~reserves~~by asgovernment ~~applicable~~agencies may be subject to ~~our~~considerable ~~company~~discretion atand ~~December 31~~variation, ~~2012~~and ~~which~~may ~~coal~~be ~~company~~subject ~~has~~to influence by external forces unrelated to ~~purchase~~the legal merits of a particular matter. China’s regulations and ~~pay~~policies with respect to foreign investments are evolving. Definitive regulations ~~RMB~~and ~~165~~policies ~~per~~with ~~tons~~respect to such matters as the ~~local~~permissible ~~Coal~~percentage ~~Management~~of ~~Authority~~foreign ~~that~~investment ~~set~~and ~~out~~permissible ~~the~~rates of equity ~~relevant~~returns ~~tax~~have ~~rate~~not yet been published. Statements regarding these evolving policies have been conflicting and any such policies, as ~~follows:~~administered, are likely to be subject to broad interpretation and discretion and to be modified, perhaps on a case-by-case basis. The uncertainties regarding such regulations and policies present risks that we will not be able to achieve our business objectives.

13 16

Item	Base	Rate
Corporate income tax	Taxable income	about US$0.85 per ton (equivalent to RMB 5.5 per ton)
VAT	Revenue from domestic sales	about US$3.62 per ton (equivalent to RMB 23.4 per ton)
City construction tax	Amount of VAT and business tax	About US$0.18 per ton (equivalent to RMB 1.17 per ton)
Education surcharge	Amount of VAT and business tax	About US$0.15 per ton (equivalent to RMB 0.94 per ton)
Stamp duty fee	Proceeds from the sale of coal	About US$0.01 per ton (equivalent to RMB 0.05 per ton)
Resource tax	Volume of raw coal produced	About US$0.39 per ton (equivalent to RMB 2.5 per ton)
General fund (comprise of safety fund, maintenance fund, environmental fund and forestry fund)	Volume of raw coal produced	About US$19.93 per ton (equivalent to RMB 128.94 per ton)
Individual income tax	Volume of raw coal produced	About US$0.39 per ton (equivalent to RMB 2.5 per ton)

Risks Related to Our Company

~~Under~~Our ~~the Mineral Resources Law, if mining results in damage to~~management ~~arable~~team ~~land,~~does ~~grasslands~~not orhave ~~forest areas, the mining enterprise must take effective measures to return the land to an arable state, plant trees or grass or take other measures~~U.S. ~~The~~public ~~Mineral~~company ~~Resources~~experience ~~Law~~ and ~~other~~it ~~applicable~~could ~~laws~~adversely ~~and regulations~~impact ~~also~~our ~~state~~ability ~~that anyone who causes others~~ to ~~suffer~~comply ~~loss~~with inthe ~~terms~~reporting ofrequirements ~~production or in terms~~ of ~~living standards is held liable for~~ the ~~loss~~securities ~~under the law and is required to compensate the persons affected and to remedy the situation~~laws. ~~In addition, the Mineral Resources Law also provides for (i) regulations concerning labor safety and hygiene and (ii) environmental protection.~~

~~All~~Our ~~coal~~management team ~~producers~~has ~~are~~no ~~subject~~U.S. public company experience, which could impair our ability to ~~PRC~~comply ~~environmental~~with ~~protection laws~~legal and ~~regulations~~regulatory ~~which~~requirements ~~currently~~such as ~~impose~~those ~~fees~~imposed ~~for~~by the ~~discharge~~Sarbanes-Oxley Act of ~~waste~~2002. Currently, all of our directors do not have experience with public companies. ~~substances~~Accordingly, ~~require~~our senior management collectively has limited experience with the ~~payment~~responsibilities ofrelated ~~fines~~to ~~for~~managing ~~serious~~a ~~pollution~~publicly traded company. Such responsibilities include complying with federal securities laws and ~~provide~~making ~~for~~required disclosures on a timely ~~the~~basis. ~~discretion~~Our ofsenior ~~the~~management ~~PRC~~may ~~Government~~not be able to ~~close~~implement ~~any~~programs ~~facility~~and ~~which~~policies ~~fails~~in toan ~~comply with~~effective ~~orders~~and ~~requiring~~timely itmanner that adequately respond to ~~cease~~such orlegal, ~~cure~~regulatory ~~operations~~compliance ~~causing~~and ~~environmental~~reporting requirements, including establishing and maintaining internal controls ~~damage~~over financial reporting. WeAny such deficiencies, weaknesses or lack of compliance could have ~~not~~a ~~been~~materially ~~notified~~adverse byeffect on our ability to comply with the ~~PRC~~reporting ~~Government~~requirements ~~authorities~~of the Securities Exchange Act of ~~any~~1934, which is necessary to maintain our public ~~environmental~~company ~~damages~~status. If we were to fail to fulfill those obligations, our ability to continue as a public company would be in jeopardy in which event you could lose your entire investment in our company.

~~Domestic~~If ~~Trading~~we fail to maintain an effective system of ~~Coal~~internal controls, we may not be able to accurately report our financial results or prevent fraud.

~~Pursuant~~We are subject to ~~the~~reporting ~~Measures~~obligations ~~for~~under the ~~Regulation~~U.S. ofsecurities ~~Coal~~laws. ~~Operations promulgated~~The Securities and Exchange Commission, as required by Section 404 of the ~~NDRC~~Sarbanes-Oxley onAct ~~December~~of 272002, ~~2004,~~adopted ~~the~~rules ~~state~~requiring ~~implemented~~every apublic ~~system~~company to include a management report on such company’s ~~examine~~internal ~~coal~~controls ~~operation~~over ~~qualifications~~financial reporting in ~~respect~~its ofannual ~~coal operations~~report, ~~including the~~which ~~wholesale~~contains ~~and~~management’s ~~retail~~assessment of ~~raw~~the ~~coal~~effectiveness of ~~and~~our ~~processed~~internal ~~coal~~controls ~~products,~~over ~~and~~financial ~~the processing~~reporting. ~~and~~Our ~~distribution~~management ofmay ~~coal~~conclude ~~for~~that ~~civilian~~our ~~use.~~internal ~~Before~~control anover ~~enterprise~~our ~~can~~financial reporting ~~engage~~is innot ~~coal~~effective. ~~operations,~~Our itreporting ~~must~~obligations ~~obtain~~as a ~~coal~~public ~~operation~~company ~~qualification~~will place a significant strain on our management, operational ~~certificate.~~and Afinancial ~~coal~~resources ~~production~~and ~~enterprise~~systems ~~that~~for ~~deals~~the inforeseeable ~~coal~~future. ~~products~~Effective ~~which~~internal ~~it did~~controls, ~~not~~particularly ~~itself~~those ~~produce~~related ~~and~~to ~~process~~revenue recognition, isare ~~required~~necessary for us to ~~obtain~~produce ~~coal~~reliable ~~operation qualifications.~~financial ~~The~~reports ~~enterprise~~and isare ~~also~~important ~~prohibited~~to ~~from~~help ~~dealing~~prevent infraud. ~~coal~~As ~~products~~a result, ~~produced~~our failure to achieve and~~/or~~ ~~processed~~maintain byeffective ainternal ~~coal~~control ~~mine~~over ~~enterprise~~financial ~~that~~reporting ~~does~~could ~~not~~result ~~have~~in athe ~~coal~~loss of investor confidence ~~production~~in ~~permit.~~the Anreliability ~~enterprise~~of isour ~~also~~financial ~~prohibited~~statements, ~~from~~which ~~selling~~in ~~coal~~turn ~~products to~~could aharm ~~coal~~our ~~operation~~business ~~enterprise~~and ~~that~~negatively ~~does~~impact ~~not~~the ~~have~~trading ~~coal~~price of ~~operation~~our ~~qualifications~~stock. ~~Our~~ ~~company~~Furthermore, ~~has~~we ~~applied~~anticipate ~~for~~that ~~and~~we ~~obtained~~will aincur ~~coal~~considerable ~~production~~costs ~~permit~~and use significant management time and ~~this~~other resources ~~permit~~in isan ~~valid~~effort ~~until~~to ~~December~~comply with Section 404 and other requirements of ~~2031.~~the Sarbanes-Oxley Act.

~~Although~~Our ~~the PRC Government indirectly influences coal prices~~accounting ~~through~~staff ~~its~~lacks ~~broad~~experience ~~regulation~~with ofU.S. ~~electricity~~GAAP ~~prices~~ and ~~control~~we ~~over~~may ~~the allocation~~not ofbe ~~national~~able ~~railway~~to ~~capacity,~~accurately ~~domestic~~report ~~coal~~our ~~prices~~financial ~~have~~results ~~mainly~~or ~~been market-driven~~report ~~since~~them ~~2002,~~on ~~when the PRC Government eliminated the price control measures for coal used in electric power generation~~time.

~~Prior~~We have limited ability to ~~2006,~~prepare ~~however,~~financial ~~the~~statements ~~PRC~~and ~~Government~~maintain ~~continued~~our ~~to implement~~books ~~temporary~~and ~~measures~~records toin ~~prevent~~U.S. GAAP. Our books and ~~control~~records ~~any~~are ~~unusual~~maintained and ~~fluctuations~~prepared in PRC GAAP and our employees who have primary responsibilities of preparing and supervising the preparation of the ~~thermal~~financial ~~coal~~statements ~~prices~~under U.S. ~~This,~~GAAP ~~among~~do ~~other~~not ~~reasons,~~have ~~has~~extensive ~~caused~~knowledge ~~thermal~~of ~~coal~~and ~~contract~~professional experience with U.S. GAAP and SEC rules ~~prices~~and ~~for~~regulations. ~~major~~Accordingly, ~~users~~we tomay not be ~~generally~~able ~~lower~~to ~~than~~report ~~spot~~our ~~market~~financial ~~prices~~results ~~during~~accurately ~~this~~as required by SEC rules and regulations ~~period.~~and Onwe ~~January~~may 1,report ~~2006~~our financial results late. Furthermore, we confirm that we will evaluate these factors in the ~~NDRC~~future ~~announced~~in concluding on the ~~elimination~~effectiveness of ~~such~~disclosure ~~temporary intervention~~controls ~~practices~~and onprocedures ~~thermal~~under ~~coal~~Item ~~price,~~307 ~~thus~~of ~~completely~~Regulation ~~removing~~S-K ~~control over~~and ~~thermal~~internal ~~coal~~control ~~prices,~~over ~~including~~financial reporting ~~contract~~under ~~prices~~Item ~~for~~308 ~~major~~of ~~users.~~Regulation S-K.

14 17

~~Environmental~~All ~~Protection~~of our ~~Laws~~assets and ~~Regulations~~our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or our directors and officers.

~~Pursuant~~All toof our assets are located outside the ~~Environmental~~United ~~Protection~~States. ~~Law~~In addition, ~~MEP~~our isdirectors ~~empowered to~~and ~~formulate~~officers ~~national~~are ~~environmental~~a ~~quality~~national and/or ~~discharge~~resident ~~standards~~of ~~and~~a tocountry ~~monitor~~other ~~China’s~~than ~~environmental~~the ~~system~~United atStates, ~~the~~and ~~national~~all ~~level~~or ~~for~~a ~~the~~substantial ~~purpose~~portion of ~~preventing~~ ~~and~~their ~~eliminating~~respective ~~environmental~~assets ~~pollution~~are ~~and~~located ~~damage~~outside tothe ~~ecosystems~~United States. ~~Environmental~~As ~~protection~~a ~~bureaus~~result, atit may be difficult for investors to enforce within the ~~county~~United ~~level~~States ~~and~~any ~~above~~judgments ~~are~~obtained ~~responsible~~against us or our directors ~~for~~and ~~environmental~~officers, ~~protection~~including ~~within~~judgments ~~their~~predicated ~~areas~~upon the civil liability provisions of ~~jurisdiction~~the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under United States federal and state securities laws against us or our directors and officers.

~~Environmental regulations require companies to file an~~Because ~~environmental~~Wei ~~impact~~Gu, ~~report~~Quan ~~with~~Gu ~~the~~and ~~relevant~~Chang ~~environmental~~Gu, ~~authority~~control ~~for approval before undertaking the construction of~~ a ~~new~~large ~~production~~percentage ~~facility or any major expansion or renovation~~ of anour ~~existing~~common ~~production~~shares, ~~facility.~~they ~~New~~have ~~facilities built~~the ~~pursuant~~ability to ~~this~~influence ~~approval~~matters ~~are not permitted to operate until the relevant~~affecting ~~environmental~~our ~~authority has performed an inspection and has found that the facilities are in compliance with environmental standards~~shareholders. ~~Our current facilities are in compliance with environmental standards.~~

~~Mining~~Mr. Wei ~~operations~~Gu, ~~including~~Quan ~~both~~Gu ~~open~~and ~~pit~~Chang ~~mines~~Gu ~~and underground~~each ~~mines,~~beneficially ~~may~~own ~~result~~approximately in21.22% ~~disturbances~~ of ~~surface~~our ~~and~~issued ~~underground land~~ and ~~cause~~outstanding ~~water~~common ~~pollution,~~shares. ~~landslides~~As ~~and~~a ~~other~~result, ~~types of environmental damage.~~they Tohave ~~manage~~ the ~~adverse~~ability ~~effects~~to ~~that~~influence ~~the~~matters ~~coal~~affecting ~~industry~~our ~~has~~shareholders, onincluding the ~~environment, China~~election ~~promulgated a series~~ of ~~laws~~our directors and ~~regulations.~~the ~~Through these laws and~~acquisition ~~regulations,~~or ~~China~~disposition ~~established~~of ~~national~~our ~~and~~assets. ~~local~~Because ~~environmental~~they ~~protection~~control ~~legal frameworks~~such ~~and~~shares, ~~issued~~our ~~standards~~shareholders ~~applicable~~will tofind ~~emission~~it ~~controls,~~difficult ~~discharges of wastes and pollutants~~ to ~~the environment, generation, handling, storage,~~replace ~~transportation,~~our ~~treatment~~management ~~and~~if ~~disposal~~they ofdisagree ~~waste~~with ~~materials~~the byway ~~production facilities,~~our ~~land~~business ~~rehabilitation~~is ~~and~~being ~~reforestation~~operated.

~~The Environmental Protection Law, promulgated by the National~~Risks ~~People’s~~Related Congress December 26, 1989, is the cardinal law for environmental protection in China. The law establishes the basic principle for coordinated advancement of economic growth, social progress and environmental protection, and defines the rights and duties of governments at all levels. Local environmental protection bureaus may set stricter local standards than the national standards and enterprises are required to ~~comply~~Our ~~with~~Common the stricter of the two sets of standards. The Environmental Protection Law requires any entity operating a facility that produces pollutants or other hazards to incorporate environmental protection measures into its operations and to establish an environmental protection responsibility system, which must adopt effective measures to control and properly dispose of waste gases, waste water, waste residue, dust or other waste materials. Shares

~~New~~If ~~construction, expansion or reconstruction projects and~~we ~~other~~issue ~~installations~~additional ~~that~~shares ~~directly~~in ~~or indirectly discharge pollutants to~~ the ~~environment~~ shall be subject to relevant state regulations governing environmental protection for such projects. Entities undertaking such projects must submit a pollutant discharge declaration statement detailing the amountfuture, ~~type,~~ ~~location~~it ~~and method of treatment to the competent authorities for examination. The authorities~~ will ~~allow~~result ~~the~~in ~~construction project operator to release a certain amount of pollutants into~~ the ~~environment~~dilution ~~and will issue a pollutant discharge license for that amount~~ of ~~discharge~~our ~~subject~~existing ~~to the payment of discharge fees~~shareholders. The release of pollutants is subject to monitoring by the competent environmental protection authorities. If an entity discharges more than the amount permitted by the pollutant discharge license, the local environmental protection bureau can fine the entity up to several times the discharge fees payable by the offending entity for its allowable discharge, require the offending entity to close its operations, or take other measures to remedy the problem. We have not received any notices from the relevant government authorities demanding us to pay any fines or threatening to close our operations.

InOur ~~the~~authorized capital ~~environmental~~consists ~~impact~~of ~~statement~~an ofunlimited anumber ~~construction project,~~of ~~the~~common ~~project~~shares ~~operator~~without ~~shall~~par ~~make~~value and an ~~assessment~~unlimited ~~regarding~~number ~~the~~of ~~pollution~~preferred shares without ~~and~~par ~~environmental~~value. ~~hazards~~We ~~the~~have ~~project~~not isissued ~~likely~~any preferred shares. Our board of directors may choose to ~~produce~~issue ~~and~~some ~~its~~or ~~impact~~all onof ~~the~~such shares to acquire ~~ecosystem,~~one or more companies or properties and ~~measures~~to ~~for~~fund ~~their~~our ~~prevention~~overhead and ~~control~~general operating requirements. The ~~operator~~issuance ~~shall~~of any such shares ~~submit~~will reduce the ~~statement~~book ~~according~~value toper ~~the~~share ~~specified~~and ~~procedure~~may contribute to ~~the~~a ~~competent environmental~~reduction ~~protection~~in ~~authority~~the ~~for~~market ~~examination~~price ~~and~~of ~~approval.~~the ~~The~~outstanding ~~building~~common shares of ~~sewage~~our ~~outlets~~company. ~~within~~If we issue any ~~water~~such ~~conservancy~~additional ~~projects~~shares, such asissuance ~~canals,~~will ~~irrigation channels~~reduce the proportionate ownership and ~~reservoirs,~~voting ~~shall~~power beof all ~~subject~~current toshareholders. ~~the~~Further, ~~consent~~such ofissuance ~~the~~may ~~competent authority~~result in ~~charge~~a change of ~~water~~control ~~conservancy~~of ~~projects.~~our corporation.

~~The~~Our ~~rehabilitation of mining sites is another important issue~~common ~~the~~shares ~~PRC~~are ~~Government~~illiquid ~~has~~and ~~sought to address. Under~~ the ~~Law~~price of ~~Land~~our ~~Administration of~~common ~~the~~shares People’s Republic of China, promulgated June 15, 1986, and amended on August 28, 2004, and the Land Rehabilitation Regulations, issued by the State Council in 1988 and effective January 1, 1989, coal producers must undertake measures to restore the mining site to its original state within a prescribed time frame if mining activities result in damage to arable land, grassland or forest. The rehabilitated land must meet rehabilitation standards, as required by law from time to time, and may ~~only~~ be ~~subsequently~~negatively ~~used~~impacted ~~upon examination and approval~~ by ~~the~~ ~~land~~factors ~~authorities.~~which Aare ~~coal~~unrelated ~~producers’ failure~~ to ~~comply~~our with this requirement or its failure to return the mining site to its original state will result in the imposition of fines, rehabilitation fees and/or rejection of applications for land use rights by the local bureau of land and resourcesoperations.

15Although our common shares are currently available for quotation on the OTCQB Market, relatively few of our shares have been purchased or sold on that market. Even when a more active market is established, trading through the OTCQB Market is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common shares could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common shares, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common shares.

Emissions of waste water by coal mines and coking plants are regulated by the Law on Prevention and Control of Water Pollution of the PRC, promulgated by the Standing Committee of National People’s Congress in May 1984 and as amended in May 1996 and February 2008, which became effective in June 2008, and the Administrative Regulations on the Levy and Use of Discharge Fees, issued by the State Council in January 2003 and effective in July 2003. Any new construction projects, such as coal mines and coking plants, must submit an environmental impact statement, which shall include an assessment of the water pollution hazards the project is likely to produce and its impact on the ecosystem. The environmental impact statement must also contain measures to prevent and control the water pollution hazards. Every new production facility must be equipped with waste water processing facilities which must be put in use together with the production facilities. Construction projects that discharge pollutants into water shall pay a pollutant discharge fee in accordance with state regulations. 18

~~Violators~~We ~~of the Environmental Protection Law and various~~do ~~environmental~~not ~~regulations~~intend ~~may be subject~~ to ~~warnings,~~pay ~~payment~~cash ofdividends ~~damages~~on ~~and fines.~~any ~~Any~~investment ~~entity~~in ~~undertaking construction work or manufacturing activities before~~ the ~~pollution~~shares ~~and waste control and processing facilities are inspected and approved by the environmental protection department may be ordered to suspend production or operations and may be fined. The violators~~ of ~~relevant environmental~~stock ~~protection laws and regulations may be exposed to criminal liability if violations result in severe loss~~ of ~~property,~~our ~~personal injuries or death~~company. Our management is of the view that we are in compliance with the Environmental Protection Law and various environmental regulations. We have not received any notice from the relevant government authorities advising us that we are in violation of the Environmental Protection Law or various environmental regulations.

InWe ~~addition~~have never topaid ~~the~~any ~~PRC~~cash ~~environmental~~dividends ~~laws~~ and ~~regulations, China~~currently isdo anot ~~signatory~~intend to ~~the~~pay ~~1992~~any ~~United~~cash ~~Nations~~dividends ~~Framework~~for ~~Convention~~the onforeseeable ~~Climate~~future. Because we do ~~Change~~not ~~and~~intend ~~the~~to ~~1998~~declare ~~Kyoto~~cash ~~Protocol~~dividends, ~~which~~any ~~propose~~gain ~~emission~~on ~~targets~~an toinvestment ~~reduce greenhouse~~in ~~gas~~our ~~emissions.~~company ~~The~~will ~~Kyoto~~need ~~Protocol~~to ~~came~~come ~~into~~through ~~force~~an onincrease ~~February~~in ~~16,~~the stock’s ~~2005~~price. AtThis ~~present,~~may ~~the~~never ~~Kyoto~~happen ~~Protocol~~and ~~has~~investors ~~not~~may ~~set~~lose ~~any~~all ~~specific~~of ~~emission~~their ~~targets for~~investment ~~certain~~in ~~countries,~~our ~~including China~~company.

~~Mineral~~Trading of ~~Resources~~our ~~Laws~~stock is restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and ~~Regulations~~sell our common shares.

~~Exploration,~~The ~~exploitation~~ Securities and ~~mining~~Exchange ~~operations~~Commission ~~must~~has ~~comply with~~adopted ~~the~~regulations ~~relevant~~which ~~provisions~~generally ofdefine ~~the~~“penny ~~Mineral~~stock” ~~Resources~~to ~~Law~~be ~~and~~any ~~other~~equity ~~relevant~~security that ~~regulations,~~has ~~and~~a ~~are~~market ~~under~~price ~~the~~(as ~~supervision~~defined) ofless ~~the~~than ~~Ministry~~$5.00 ofper ~~Land~~share ~~and Resources.~~or ~~Exploration~~an ~~and~~exercise ~~exploitation~~price of ~~mineral~~less ~~resources~~than ~~are~~$5.00 ~~also~~per share, subject to certain ~~examination~~exceptions. ~~and~~Our ~~approval~~securities are covered by the ~~Ministry~~penny ofstock ~~Land~~rules, ~~and~~which ~~Resources~~impose ~~and~~additional ~~relevant~~sales practice requirements on broker-dealers ~~local~~who ~~authorities.~~sell Weto ~~have~~persons ~~applied~~other ~~for~~than established customers and ~~received~~“accredited ~~our~~investors”. ~~mining~~The ~~permit~~term “accredited investor” ~~(*3500000620055)~~refers ~~valid~~generally ~~until~~to ~~April~~institutions with assets in excess of ~~2016~~$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. ~~Upon~~The ~~approval~~penny stock rules require a broker-dealer, prior to a ~~mining~~transaction ~~permit~~in isa penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form ~~issued~~prepared by the ~~relevant~~Securities ~~administrative~~and ~~authorities~~Exchange Commission, which ~~are~~provides ~~responsible~~information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the ~~supervision~~penny stock, the compensation of the broker-dealer and ~~inspection~~its salesperson in the transaction and monthly account statements showing the market value of ~~mining~~each ~~exploitation~~penny stock held in ~~their~~the ~~jurisdictions~~customer’s account. The bid and offer quotations, and the broker-dealer ~~holders~~and ofsalesperson ~~mining~~compensation ~~rights~~information, ~~are~~must ~~required~~be given to ~~file~~the ~~annual~~customer ~~reports~~orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the ~~relevant~~customer’s confirmation. In addition, the penny stock rules ~~administrative~~require ~~authorities~~that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. WeThese disclosure requirements may have ~~filed~~the ~~our~~effect ~~annual~~of ~~reports~~reducing ~~with~~the level of trading activity in the secondary ~~relevant~~market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ~~administrative~~ability ~~authorities~~of broker-dealers to ~~maintain~~trade our securities. We believe that the ~~validity~~penny stock rules discourage investor interest in and limit the marketability of our ~~mining~~common ~~permit~~shares.

~~The Mineral Resources Law governs, among other things, the~~FINRA ~~assignment~~sales ofpractice ~~mining~~requirements ~~rights.~~may Ifalso ~~the~~limit ~~entity holding the mining rights is to be changed due to~~ a ~~sale~~stockholder’s ofability ~~enterprise assets or other circumstances that may cause a change in the property rights~~ to ~~the~~buy ~~assets of the enterprise, the enterprise may assign its mining rights, subject to approval according to the Coal Law, the Mineral Resources Law~~ and ~~other~~sell ~~laws~~our ~~and regulations~~stock.

~~The~~In ~~PRC~~addition to ~~Government~~the ~~permits~~“penny ~~mine~~stock” ~~operators~~rules ofdescribed ~~collectively~~above, ~~owned~~the Financial Industry Regulatory Authority (known as “FINRA”) ~~mines~~has toadopted ~~exploit~~rules ~~mineral~~that ~~resources~~require that in ~~designated~~recommending ~~areas~~an ~~and~~investment ~~individuals~~ to ~~mine~~a customer, a broker-dealer must have reasonable grounds ~~scattered~~for ~~mineral~~believing ~~resources.~~that ~~Such~~the ~~mine~~investment ~~operators~~is ~~and~~suitable ~~individuals~~for ~~are~~that ~~subject~~customer. Prior to ~~government~~ ~~regulation.~~recommending ~~Mining~~speculative ~~activities~~low bypriced ~~individuals~~securities ~~are~~to ~~restricted.~~their ~~Individuals~~non-institutional ~~are~~customers, ~~not~~broker-dealers ~~permitted~~must make reasonable efforts to ~~exploit~~obtain ~~mineral~~information ~~reserves~~about ~~allocated~~the ~~for~~customer’s financial ~~exploitation~~status, bytax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a ~~mining~~high ~~enterprise~~probability orthat ~~company~~speculative orlow ~~protected~~priced ~~reserves~~securities will not be suitable for at least some customers. FINRA requirements ~~Indiscriminate~~make ~~mining~~it more difficult for broker-dealers to recommend that ~~damages~~their ~~mineral~~customers ~~resources~~buy isour ~~prohibited.~~common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

~~It is unlawful for an entity or individual to conduct mining~~ITEM ~~operations in areas designated for other legal mining operators~~1B. AUNRESOLVED ~~mining operator~~STAFF whose exploitation causes harm to others in terms of production or in terms of living standards is liable for compensation and is required to take necessary remedial measures. When a mine is closed, a mine closure report and information concerning the mining facilities, hidden dangers, remediation and environmental protection must be submitted for examination and approval in accordance with the relevant law. COMMENTS

16Not applicable.

Mineral products illegally extracted and incomes derived from such activities may be confiscated and may result in fines, revocation of the mining permit and, in serious circumstances, criminal liability. Because we have mined and produced coal from an area beyond the area covered by our valid mining permit, we may be subject to fine or revocation of our mining permit. However, our management believes that the likelihood of any enforcement action is low as we have applied for and obtained in May of 2011 another mining permit covering an additional 6.8 km2 of mining area. 19

~~Mining~~ITEM 2. ~~safety~~ PROPERTIES

~~On June 7, 2005, the State Council promulgated Several Opinions~~Executive on Promoting the Healthy Development of the Coal Industry (the “Opinions”), announcing the PRC Government’s policies with respect to the development and restructuring of the coal industry. The Opinions are consistent with the NDRC’s announcement on the revision of the Coal Law and reiterated the PRC Government’s policies with respect to the administration of coal reserves, enhancement of coal mine safety, encouragement of industry consolidation among coal producers, acceleration of the construction of large coal production bases, improvement of mining techniques and equipment for coal production and the organization and regulation of small coal mines. Offices

~~The~~Our ~~Measures~~principal place ~~for~~of ~~Implementing~~business ~~Work~~is ~~Safety~~located ~~Permits~~at inRoom ~~Coal~~1601, 16/F, China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong. We pay ~~Mine~~a ~~Enterprises~~monthly rent of RMB20,000 for office space of approximately 400 square feet. The lease which lasts for one year, expires on July 2015.

~~The State Administration of Work Safety and the SACMS issued~~ITEM ~~“The Measures for Implementing Work Safety Permits in Coal Mine Enterprises”, which came into effect on May 17, 2004~~3. ~~Pursuant~~LEGAL to this document, a coal mine enterprise without a work safety permit may not engage in coal production activities. We have received a safety production permit ((2005)F107(G1)) that is valid until December of 2011. Coal mining enterprises and their mines that do not satisfy the safety conditions set forth in this document, or those that violate the provisions of this document, will be punished accordingly. PROCEEDINGS

~~Special~~We ~~Regulations~~know of byno ~~the~~material ~~State~~pending ~~Council~~legal onproceedings ~~Preventing~~to ~~Work Safety~~which ~~Related~~our ~~Accidents~~company inis ~~Coal~~a ~~Mines~~party ~~and~~or ~~Five~~of ~~Sets~~which any of ~~Supplemental~~our property is the subject. In addition, ~~Rules~~we ~~and~~do ~~Regulations~~not know of any such proceedings contemplated by any governmental authorities.

~~The~~We ~~Special Regulations by the State Council on Preventing Work~~know ~~Safety~~of ~~Related~~no ~~Accidents~~material inproceedings Coal Mines were promulgated and entered into effect on September 3, 2005. This regulation specifies that coal mine enterprises are responsible for preventing coal mine work safety-related accidents. If a coal mine has not obtained, in ~~accordance~~which ~~with~~any ~~the law~~director, aofficer ~~mining~~or ~~right~~affiliate ~~permit,~~of ~~work safety~~our ~~permit~~company, ~~coal~~or ~~production~~any ~~permit~~registered or ~~business~~beneficial ~~license and if the mine~~stockholder ~~manager~~of ~~has~~our ~~not obtained~~company, inor ~~accordance~~any ~~with~~associate ~~the~~of ~~law,~~any asuch ~~mine manager qualification certificate and a mine manager safety qualification certificate~~director, ~~the~~ ~~coal mine may not engage in production. As disclosed earlier~~officer, ~~we have applied for and received a mining right permit~~affiliate, ~~work~~or ~~safety~~stockholder ~~permit,~~is ~~coal production permit. We also have~~ a ~~valid~~party ~~business~~adverse ~~license~~to ~~(350000100007198) and~~ our ~~mine~~company ~~manager~~ or has ~~received~~ a ~~mine~~material ~~manager~~interest ~~qualification~~adverse certificate (MK350120043) and a mine manager safety qualification certificate (10035050100182). A coal mine should have adequate safety equipment, facilities and resources and should have in place measures to ~~guard~~our ~~against the occurrence of work safety related accidents, as well as a sound contingency plan to deal with emergencies~~company. Coal mining enterprises should establish a sound system for the detection, elimination, treatment and reporting of latent work safety-related dangers. If a major latent work safety-related danger as specified exists in a coal mine, the enterprise should immediately suspend production and eliminate the latent danger. Coal mining enterprises should provide their personnel working underground and their special operation personnel with safety education and training in accordance with relevant state regulations. The person in charge of a coal mine and the production and operation management personnel should go into mines and act as foremen on a rotating basis in accordance with state regulations, while a file recording their entry into the mine should be maintained. In addition, the State Administration of Work Safety issued five sets of supplemental measures:

17ITEM 4. MINE SAFETY DISCLOSURES

1.Not ~~The Measures for Determining Major Latent Work Safety Related Dangers in Coal Mines (for Trial Implementation) stipulates the specific criteria for determining major latent work safety-related dangers~~applicable. It further defines each of the latent safety related dangers specified in the Special Regulations of the State Council on Preventing Work Safety Related Accidents in Coal Mines, and lists more than 60 major latent safety related dangers. 2. The Implementing Measures for the Detection and Elimination of Latent Dangers in Coal Mines and the Rectification and Closure of Such Mines (for Trial Implementation) specifies that coal mining enterprises are responsible for the detection and elimination of latent work safety-related dangers and that the main persons in charge of coal mining enterprises are fully responsible for the detection, elimination and treatment of latent work safety-related dangers in their enterprises. 3. The Measures for the Supervision and Inspection of Coal Mine Safety Training (for Trial Implementation) specifies that coal mining enterprises must arrange and provide safety education and training to all of their mining personnel in accordance with relevant regulations; select and send their principal persons in charge, work safety management personnel and special operations personnel to qualified coal mine safety training institutions for training in a timely manner; and obtain the corresponding qualification certificates. 4. The Guiding Opinions on Persons in Charge of Coal Mines and Production and Operation Management Personnel Going into Mines as Foremen requires the various types of coal mines to arrange for their persons in charge and production and operation management personnel to go into the mines to act as foremen and to ensure that each shift has at least one such person on site directing the operations. Coal mining enterprises are required to establish such procedures, clarify foremen’s duties and responsibilities and strictly implement internal management and performance appraisal. 5. The Measures for Rewarding the Reporting of Major Latent Work Safety Related Dangers in, and Violations of the Law by, Coal Mines (for Trial Implementation) specifies that all units or individuals have the right to report major latent work safety-related dangers in, and violations of law by, coal mines.

~~Special Regulation by the State Council on Shutting Down~~PART ~~Small Coal Mines~~ II

~~The Special Regulation by the State Council on Shutting Down~~ITEM ~~Small Coal Mines went into effect on September 28, 2006~~5. ~~The~~MARKET ~~passage~~FOR of regulation is the launch of a national campaign to close down small coal mines defined as having annual coal production capacity of 30,000 tons or less, as well as coal mines without proper licenses or permits. The intent of the regulation is to reduce both the high rate of accidents and pollution in the PRC coal mining industry. Under this regulation, 9,887 small and/or illegal coal mines were to have been shut down by the end of 2009. The regulation specifies that the Central Government will support the development of big coal mining operations, defined as having annual coal production capacity of 300,000 tons or more. However, the regulation is silent as to the PRC governmentREGISTRANT’sS ~~position~~COMMON ~~on coal mine operations having annual production capacity of more than 30~~EQUITY,~~000~~ ~~tons but~~RELATED ~~less~~STOCKHOLDER ~~than~~MATTERS ~~300,000~~AND ~~tons.~~ISSUER WePURCHASES ~~believe~~OF ~~that~~EQUITY the likelihood of our mining operation being shut down pursuant to The Special Regulation by the State Council on Shutting Down Small Coal Mines is relatively small because Fujian Province, where our mining operation is currently located, does not have sufficient coal production for use by local industries and relies heavily on import from other provinces. We have been advised by the County Coal Industry Management Bureau that we are not likely to be forced to shut down. Furthermore, our management also believes that, despite the fact that we have mined and produced coal beyond the area then covered by our valid mining permit, we will not likely be shut down because we have applied for and obtained in May 2011 another mining permit for an additional 6.8 km2 of mining area and that we have consistently demonstrated excellent safety records. SECURITIES

~~Our mining activities in the past had gone beyond the area~~Market ~~covered by our mining permit and to a certain extent these activities have not met applicable regulatory requirements for permitting, inspections, conduct of operations, submission of~~ information. However, we have not received any notice of penalty or fines for our past non-compliance. We believe the likelihood of our company being penalized or fined for past non-compliance is small as the Natural Resource Department of Fujian Province was made aware of our past non-compliance when we submitted our application for a new mining permit in May 2010 for an additional 7.5 km2 of mining area. As the coal deposit had been depleted by our past mining activities in some of the 7.5 km2 of mining area applied for, we were granted a mining permit for an area of 6.8 km2. As we have obtained in May 2011 the new mining permit for an additional 6.8 km2 of mining area, we intend to conduct our mining operation only within the areas covered by our valid mining permits.

18Our common shares are quoted on the OTCQB Venture Marketplace of the OTC Markets Group Inc. Our symbol is “SGBHF” and our CUSIP number is 78417V 104.

WeSet ~~did~~forth below ~~not~~are ~~need~~the torange ~~obtain~~of ~~additional~~high ~~environmental, health~~ and ~~safety~~ ~~permitting~~low ~~requirements~~bid ~~when~~quotations ~~we applied~~ for the ~~new~~period ~~mining~~indicated ~~permit C3500002011051120112047~~ as ~~our~~reported ~~new~~by ~~mining~~the ~~permit~~OTCQB ~~was~~Market. ~~issued~~The onmarket ~~the~~quotations reflect ~~basis~~inter-dealer ofprices, ~~our existing~~without ~~environmental~~retail mark-up, ~~health~~mark-down or commissions and ~~safety~~may ~~permitting~~not ~~approvals.~~necessarily represent actual transactions.

Laws and Regulations Applicable to Foreign Invested Enterprises (FIEs)

Quarter End	Bid High		Bid Low
03/31/2015	$	0.01	$	0.00
12/31/2014	$	0.01	$	0.00
09/30/2014	$	0.01	$	0.00
06/30/2014	$	0.01	$	0.00
03/31/2014	$	0.00	$	0.00
12/31/2013	$	0.00	$	0.00
09/30/2013	$	0.00	$	0.00
06/30/2013	$	0.00	$	0.00
03/31/2013	$	0.00	$	0.00
12/31/2012	$	0.00	$	0.00
09/30/2012	$	0.00	$	0.00
06/30/2012	$	0.00	$	0.00
03/31/2012	$	0.00	$	0.00

Under Chinese law, foreign invested enterprises refer to the enterprises jointly invested by Chinese investors and foreign investors or solely invested by foreign investors in China. Sino-foreign equity joint venture, Sino-foreign contractual joint venture and wholly foreign owned enterprise are the three types of foreign invested enterprises. Fujian Huilong, our operating subsidiary in China, is a wholly foreign owned enterprise invested by Dragon International and is a FIE under Chinese law.20

~~The following is a brief summary of the principal law and~~Transfer ~~regulations that apply to Fujian Huilong as a FIE.~~Agent

~~Corporate~~The ~~Laws~~transfer agent and ~~Industry~~registrar ~~Catalogue~~for ~~Relating~~our tocommon ~~Foreign~~stock is Pacific Stock Transfer Company 500 E. Warm Springs Road, Suite 240, Las Vegas NV 89119 ~~Investment~~(702) 361-3033.

~~The establishment, operation and management of corporate~~Holders ~~entities in China generally are governed by the Company Law~~ of ~~the~~Common PRC, or the Company Law, effective in 1994, as amended in 1999, 2004, 2005, respectively. The Company Law is applicable to, Fujian Huilong, our PRC Subsidiary, unless the PRC laws on foreign investment have stipulated otherwise.Stock

~~The~~As ~~establishment, approval, registered capital requirement and day-to-day operational matters~~ of ~~WFOEs, such as our PRC Subsidiary, Fujian~~June ~~Huilong~~30, ~~is regulated by the Wholly Foreign Owned Enterprise Law of the PRC effective in 1986~~2015, asthere ~~amended~~were in102 ~~2000,~~holders ~~and the Implementation Rules~~ of ~~the Wholly~~record ~~Foreign-owned Enterprise Law~~ of ~~the~~our ~~PRC~~common ~~effective in 1990, as amended in 2001~~stock. ~~According~~As ~~to relevant provisions~~ of ~~the~~such ~~Wholly Foreign Owned Enterprise Law of the PRC and its Implementation Rules~~date, ~~MOFCOM Fujian branch issued the certificate of approval no. [2010] 0056 for the establishment of Fujian Huilong as a WFOE on December 21~~373, ~~2010~~793,578 ~~and~~shares ~~the~~were ~~SAIC Fujian branch~~ issued ~~the~~and ~~business license no~~outstanding. ~~350000100007198 for Fujian Huilong as a WFOE.~~

Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, which was promulgated and is amended from time to time by MOFOM and the National Development and Reform Commission, or the NDRC. The Catalogue divides industries into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC regulations. The industry that Fujian Huilong is involved in is not listed in the Catalogue and is open to foreign investment. Dividends

~~Regulations~~We have not declared any dividends on our common stock since the inception of ~~Taxation~~our company. There is no restriction in our articles of incorporation and bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

~~On March 16, 2007, the Chinese government enacted the new~~Recent ~~Enterprise~~Sales ~~Income~~of ~~Tax~~Unregistered ~~Law,~~Securities; orUse ~~the~~of ~~New~~Proceeds ~~EIT~~from ~~Law,~~Registered and promulgated the New EIT Law Implementation Regulations. Both the New EIT Law and the New EIT Law Implementation Regulations became effective on January 1, 2008. Under the New EIT Law and the New EIT Law Implementation Regulations, foreign invested enterprises incorporated in the PRC, such as Fujian Huilong is subject to a uniform income tax rate of 25%. Securities

~~Pursuant~~During ~~to the Provisional Regulations on Value-Added Tax of~~our ~~the~~fiscal ~~PRC,~~year ~~promulgated~~ended ~~by the State Council on~~ December 1331, ~~1993~~2014, aswe ~~amended~~did ~~on November~~not 5,sell 2008 (effective on January 1, 2009), and the Rules for Implementation of Provisional Regulations on Value-Added Tax of the PRC, promulgated on December 25, 1993 and amended on December 15, 2008 (effective on January 1, 2009), all entities and individuals engaged in selling goods, providing repair and placement services or importing goods into the PRC are generally subject to a value-added tax, or VAT, at a rate of 17% of the gross sales proceeds received (with the exception of certain goods which are subject to a rate of 13% or lower), less any ~~VAT~~equity ~~already paid or borne by the taxpayer on goods or services purchased and utilized in the production of goods or provision of services that have generated the gross sales proceeds~~securities. Fujian Huilong is subject to such value-added tax but according to local regulations, the local Coal Management Authority is the government authority responsible for collecting VAT as part of the approximately US$18.56 or RMB 120 per ton for all taxes, fees and statutory reserves payable by Fujian Huilong. The amount of VAT imposed by the local Coal Management Authority is about US$3.62 or RMB 23.4 per ton. The understanding of Fujian Huilong that the local Coal Management Authority is responsible for collecting VAT payment is for an indefinite period and rate is subject to adjustment by the local Coal Management Authority from time to time. For the last three years, the local Coal Management Authority has not adjusted the rate of VAT that they have imposed on our company. As compared to the rate of VAT applicable to other businesses subject to VAT rate of 17% on their gross proceeds received, our company’s effective VAT rates for the last years were 5.95% for 2008, 5.28% for 2009, 3.98% for 2010 and 3.41% for 2011. However, because the local Coal Management Authority is able to adjust the VAT rate unilaterally and arbitrarily, there is no assurance that the local Coal Management Authority will not impose materially higher VAT rate on our company in the future.

19Securities authorized for issuance under equity compensation plans.

~~Regulations~~The following ontable ~~Foreign~~summarizes ~~Exchange~~certain information regarding our equity compensation plans as at December 31, 2014.

~~Foreign~~Plan ~~exchange~~category ~~activities~~Number of ~~FIEs,~~securities ~~such~~to asbe ~~Fujian~~issued ~~Huilong~~upon exercise of outstanding options, ~~our~~ ~~PRC~~warrants ~~subsidiary~~and rights Weighted-average exercise price of outstanding options, ~~are~~warrants ~~primarily~~and ~~governed~~rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by ~~the~~security ~~following~~holders ~~regulations:~~Nil N/A Nil Equity compensation plans not approved by security holders Nil N/A Nil Total Nil N/A Nil

1.	Foreign Currency Administration Rules (2008), or the Exchange Rules; and
2.	Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

2010 Equity Compensation Plan

~~Under~~On ~~the~~October 27, ~~Exchange Rules~~2010, ifour ~~documents~~board ~~certifying~~of ~~the~~directors ~~purposes of~~approved ~~the~~and ~~conversion~~adopted ofour ~~RMB~~2010 ~~into~~equity ~~foreign~~compensation ~~currency~~plan ~~are~~and ~~submitted~~on toNovember ~~the~~30, ~~relevant~~2010, our shareholders ~~foreign~~approve ~~exchange~~the ~~conversion~~plan. ~~bank,~~Pursuant to the ~~RMB~~plan, ~~will~~our beboard ~~convertible~~of ~~for~~directors ~~current account~~may ~~items,~~grant ~~including~~stock ~~the~~options ~~distribution~~or ofstock ~~dividends,~~awards ~~interest~~to ~~and~~employees, ~~royalties payments~~directors, officers ~~and~~or ~~trade~~consultants ~~and~~of ~~service-related~~our ~~foreign~~company ~~exchange~~or ~~transactions~~subsidiary. ~~Conversion~~ A maximum of ~~RMB~~10% ~~for~~of ~~capital~~the ~~account~~total ~~items,~~issued ~~such~~and asoutstanding ~~direct~~common ~~investment,~~shares ~~loan,~~of our ~~securities~~company ~~investment~~at ~~and~~the ~~repatriation~~time of ~~investment,~~grant ~~however,~~may isbe ~~subject~~issued toupon ~~the approval~~exercise of stock options granted under the ~~SAFE~~plan or ~~its~~as ~~local~~stock ~~counterpart~~awards granted under the plan.

Under the Administration Rules, FIEs may only buy, sell and/or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE or its local counterpart.21

~~On August 29, 2008, the Circular on the Relevant Operating~~Purchases ~~Issues Concerning the Improvement~~ of ~~the~~Equity ~~Administration~~Securities of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or Circular No. 142, was issued. Pursuant to Circular No. 142, the Renminbi capital from the settlement of foreign currency capital of a foreign-invested enterprise must be used within the business scope as approved by the ~~applicable~~Issuer ~~government authority~~ and ~~cannot~~Affiliated be used for domestic equity investment, unless it is otherwise provided for. Fujian Huilong, as a FIE, is subject to the regulation of Circular 142. The business scope of Fujian Huilong currently includes coal mining and coal production.Purchasers

~~Regulations~~We ondid ~~Dividend~~not purchase ~~Distribution~~any of our shares of common stock or other securities during our fiscal year ended December 31, 2014.

~~The principal regulations governing dividend distributions of~~ITEM ~~WFOEs~~6. ~~include:~~SELECTED FINANCIAL DATA

1Not applicable. ~~Company Law (2005) 2. Wholly Foreign-Owned Enterprise Law (2000); and 3. Wholly Foreign-Owned Enterprise Law Implementing Rules (2001).~~

~~Under these regulations, WFOEs in the PRC may pay dividends~~ITEM ~~only out of their accumulated profits as determined in accordance with PRC accounting standards and regulations~~7. InMANAGEMENT’S ~~addition,~~DISCUSSION ~~WFOEs~~AND ~~are~~ANALYSIS ~~required~~OF toFINANCIAL ~~set aside~~CONDITION atAND ~~least~~RESULTS ~~10%~~OF of their respective accumulated profits each year, if any, to fund certain reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital. At the discretion of the WFOEs, they may allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Fujian Huilong, as a WFOE, is in compliance with these regulations. OPERATION

20Results of Operations

~~Labor~~For ~~Laws~~the years ~~and~~ended ~~Social~~December ~~Insurance~~31, 2014 and 2013

~~Pursuant to the PRC Labor Law and the PRC Labor Contract Law,~~The ~~employers~~following ~~must~~table ~~execute~~sets ~~written~~forth ~~labor contracts with full-time employees. All employers must compensate their employees with wages equal to at least~~ the ~~local minimum~~consolidated ~~wage~~financial ~~standards.~~statements ~~All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with workplace safety training. Violations~~ of the ~~PRC~~Company ~~Labor Contract~~for ~~Law and~~ the ~~PRC~~years ~~Labor~~ended ~~Law~~December ~~may~~31, ~~result~~2014 ~~in the imposition of fines~~ and ~~other~~ ~~administrative liabilities~~2013. ~~Criminal liability may arise for serious violations.~~

In addition, employers in China are obliged to provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and housing funds. To comply with these laws and regulations, which Fujian Huilong is subject to, Fujian Huilong have caused its full-time employees, other than miners working underground who belong to third party sub-contractors, to enter into labor contracts with Fujian Huilong and provides its employees with the proper welfare and employment benefits.

	Year Ended			Year Ended
	December 31, 2014			December 31, 2013
	$			$
Net sales		---			189,000
Cost of sales		---			100.000
Gross profit		---			89,000
Operating expenses		220,436			189,157
Net (loss) from continuing operations		(216,817	)		(121,901	)
Net (loss) from discontinued operations		(16,753,104	)		---
Net (loss)		(16,875,005	)		(216,817	)

~~Notice Concerning Foreign Exchange Controls on Domestic~~Net ~~Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles~~Sales

~~SAFE~~We ~~issued~~had ~~on October 21, 2005 the Notice Concerning Foreign~~no ~~Exchange~~revenues ~~Controls~~in on2014 ~~Domestic~~compared ~~Residents’~~to ~~Financing~~revenues ~~and~~from ~~Roundtrip~~continuing ~~Investment Through~~operations ~~Offshore~~of ~~Special~~$189,000 ~~Purpose~~in ~~Vehicles~~2013, orall ~~Circular75,~~of which ~~became~~were ~~effective on~~derived ~~November~~from ~~1, 2005. Circular 75 requires PRC resident legal persons or~~consulting ~~individual~~services ~~residents to register with the competent local SAFE branches before establishing or controlling any company outside of the PRC (offshore special purpose vehicles or offshore SPV)~~ for the ~~purpose~~coal ofmine ~~offshore~~operations ~~capital financing by using assets or equities held by such PRC resident legal persons or individual residents~~ in aFujian ~~PRC~~Province, ~~domestic enterprise~~China. Our ~~Chinese~~services ~~legal~~include ~~counsel~~sales ~~has advised~~chain usmanagement ~~that~~system ~~based~~advisory ~~on its understanding of Circular 75, our PRC resident~~as ~~beneficial~~well ~~owners~~as ~~are~~advisory ~~not~~works ~~subject~~for tomining ~~the~~exploration ~~registration~~management ~~requirement~~on ~~under~~other ~~Circular 75~~coal ~~because~~mines ~~our~~in ~~PRC resident beneficial holders have never held and are not holding any assets or equities of~~ Fujian ~~Huilong and therefore are not the PRC individual residents as defined under Circular 75 who are required to register with SAFE, for establishing or controlling companies outside of the PRC~~Province.

WeSGB Investment Limited have ~~also~~reduced ~~been~~its ~~advised~~trading byand ~~our~~consulting ~~Chinese~~activates ~~legal~~due ~~counsel~~to that ~~the reverse~~fact, ~~acquisition~~and ofspending ~~SGB~~more ~~International~~time ~~Holdings~~on ~~Inc. by Dragon International Resources Group Co.~~studying, ~~Limited~~developing ~~complied with the PRC Mineral Resources Laws~~ and ~~was~~planning ~~not~~for ~~subject~~other tomining ~~any~~deposits ~~restrictions~~which byare ~~the~~near ~~Ministry~~Shanxi ~~of Commerce of China~~Province, ~~or MOFCOM,~~Xinjiang Province and ~~the~~in ~~State~~central ~~Administration~~Asian ~~for~~countries ~~Industry~~such ~~and~~as ~~Commerce of China, or~~Kyrgyzstan ~~SAIC.~~and Uzbekistan.

~~We believe that the provisions of “Mineral Resources Law of the~~Cost ~~People’s Republic~~ of China” and “Regulations for Implementation of the Mineral Resources Law of the People’s Republic of China” applicable to the reverse acquisition of SGB International Holdings Inc. by Dragon International Resources Group Co., Limited include:Sales

~~Article~~The cost 3 of ~~Mineral~~sales ~~Resources~~decreased ~~Law~~from ~~of the People’s Republic of China~~$100,000 ~~which~~in ~~provides~~2013 ~~that mineral resources belong~~ to ~~the~~$0 ~~State. The right of State ownership~~ in ~~mineral resources is exercised by the State Council. State ownership of mineral resources~~2014, ~~either~~principally ~~near~~due ~~the~~to ~~earth's surface or underground, shall not change with~~ the ~~alteration~~discontinued ofoperations ~~ownership or right to the use~~ of ~~the~~Dragon ~~land which the mineral resources are attached to~~international.

~~The State safeguards the reasonable development and utilization~~Gross of mineral resources. Seizing or damaging of mineral resources by any means and by any organization or individual shall be prohibited. People's governments at various levels must make serious efforts to protect mineral resources.Profit

~~Anyone who wishes to explore or mine mineral resources shall~~In ~~separately~~line ~~make~~with ~~an application according to law and shall register after obtaining~~ the ~~right~~discontinued ~~of exploration or mining upon approval~~operation, ~~with~~our ~~the~~gross ~~exception of~~profit ~~the~~decreased ~~mining~~by ~~enterprises that have~~$89,000 inor ~~accordance~~100% ~~with~~from ~~law~~$89,000 applied for and obtained the right of mining and are conducting exploration within the designated mining area for the purpose of their own production. The State protects the right of exploration and of mining from encroachment and protects the order of production and other work in ~~the~~2013 ~~mining~~to ~~and~~$0 ~~exploration areas from interference and disruption. Anyone engaged~~ in ~~exploring and mining of mineral resources shall meet the prescribed qualifications~~2014.

21 22

~~Article 5 of Mineral Resources Law of the People’s Republic~~Operating of China, which provides that the State practices a system wherein the exploration right and mining right shall be obtained with compensation; however, the State may, in light of specific conditions, prescribe reduction of or exemption from the compensation for acquiring the exploration right and mining right. Specific measures and implementation procedures shall be formulated by the State Council.Expenses

~~Anyone~~Operating expenses ~~who~~increased ~~mines~~by ~~mineral~~$31,279 ~~resources~~or ~~must~~16.5% ~~pay~~from ~~resource~~$189,157 ~~tax~~in ~~and~~2013 to $220,436 in 2014, due principally to the business trips on studying, ~~resource~~developing ~~compensation~~and planning for other mining deposits which are near Shanxi Province, Xinjiang Province and in ~~accordance~~central ~~with~~Asian ~~relevant~~countries such ~~regulations~~as ofKyrgyzstan, ~~the~~and ~~State~~Uzbekistan.

~~Article~~Net 15 of Mineral Resources Law of the People’s Republic of China, which provides that anyone who wishes to establish a mining enterprise must meet the qualifications prescribed by the State, and the department in charge of examination and approval shall, in accordance with law and relevant State regulations examine the enterprise's mining area, its mining design or mining plan, production and technological conditions and safety and environmental protection measures. Only those that pass the examination shall be granted approval.Income/Loss

~~Article~~We recorded 4a ofnet ~~Regulations~~loss from continuing operations for ~~Implementation~~the year ended December 31, 2014, of ~~the~~$216,817 ~~Mineral~~as compared ~~Resources~~to ~~Law~~a ofnet loss from continuing operations for the ~~People’s~~year ~~Republic~~ended December 31, 2013, of ~~China~~$121,901. ~~which~~The ~~provides~~increase ~~that~~was ~~the~~attributable to ~~exploration~~the geological research and ~~exploitation~~due ofdiligence ~~the~~conducted ~~mineral~~by ~~resources~~us ~~within~~in ~~the~~2014. ~~territory~~We ofrecorded a net loss from discontinued operations ~~the~~involving ~~People's~~Dragon ~~Republic~~International ofResources ~~China~~Group ~~and~~Co., ~~other~~Limited ~~sea~~and ~~areas~~Fujian ~~under~~Huilong ~~its~~Coal ~~jurisdiction~~Mine ~~must abide~~Co. byLtd. for the ~~Mineral~~year ~~Resources~~ended ~~Law~~December 31, 2013 of ~~the~~$16,753,104. ~~People's~~As ~~Republic~~those ofoperations ~~China (hereinafter~~were ~~referred~~discontinued toin asDecember ~~the~~2013, ~~Mineral~~we ~~Resources~~recorded ~~Law)~~no ~~and~~losses ~~these~~from discontinued ~~Regulations~~operations for the year ended December 31, 2014.

~~Article 7 of Regulations for Implementation of the Mineral~~Impact ~~Resources Law~~ of the People’s Republic of China, which provides that the state allows foreign companies, enterprises and other economic organizations as well as individuals to invest in exploration and exploitation of the mineral resources within the territory of the People's Republic of China and other sea areas under its jurisdiction pursuant to the relevant laws and regulations of the People's Republic of China.Inflation

~~Because~~Inflation had ~~Fujian~~a ~~Huilong~~minimal ~~has~~impact ~~the~~on ~~right~~our ofresults ~~exploration, right~~ of ~~mining~~ ~~and~~operations ~~pays resource tax and resource compensation~~ in ~~accordance with relevant regulations~~2014. ~~Through~~The ~~the~~average ~~acquisition~~inflation ofrate ~~Fujian~~in ~~Huilong~~China bywas ~~Dragon International,~~at ~~Fujian~~2.06% ~~Huilong~~in ~~became~~2014 acompared ~~wholly foreign owned enterprise, for~~to ~~exploitation~~an ofaverage ~~the~~inflation ~~mineral~~rate ~~resources~~in ~~within the territory of the People's Republic of~~ China ~~under~~during ~~its jurisdiction pursuant to the relevant laws and regulations~~ of ~~the~~2.51% ~~People's~~in ~~Republic of China~~2013. AsThe aChinese ~~result,~~government ~~the~~has ~~reverse acquisition~~carried ofout ~~Dragon~~a ~~International~~series ~~by SGB International Holdings Inc. complied with the provisions~~ of ~~“Mineral~~financial ~~Resources~~and ~~Law of the People’s Republic of China”~~monetary ~~and~~policies ~~“Regulations~~to ~~for~~control ~~Implementation of~~ the ~~Mineral~~increasing ~~Resources Law of the People’s Republic of China”~~inflation.

~~Under the Guidance Catalogue of Industries for Foreign~~Liquidity ~~Investment promulgated by the National Development~~ and ~~Reform~~Capital Commission and MOFCOM, which became effective as of December 1, 2007, mining of special coals falls within restricted industry for foreign investment, while mining of other types of coal is permitted for foreign investment and a foreign invested enterprise engaged in mining of non-special coal may be 100% owned by foreign investors. The business of Fujian Huilong involves only mining of non-special coal. Thus, the acquisition by Dragon International of the 100% share capital of Fujian Huilong in November 2010 complies with PRC laws on foreign investment in the mineral resources sector of the PRC. Resources

~~In accordance with the Provisions on M&A of a Domestic~~Working ~~Enterprise~~Capital byat ~~Foreign~~December ~~Investors~~31, ~~which~~2014 ~~was initially promulgated by MOFCOM~~ and SAIC, on August 8, 2006 and became effective on September 8, 2006, as amended on June 22, 2009, which is commonly known as Decree No. 10, acquisition by foreign investors of share capital of a domestic enterprise shall be approved by MOFCOM and registered with SAIC. According to our Chinese legal counsel, the acquisition by Dragon International of the 100% share capital of Fujian Huilong in November 2010 has been properly approved by MOFCOM and registered with SAIC pursuant to Decree No. 10.2013

	2014			2013
Current Assets	$	330,560		$	332,592
Non-Current Assets		230,746			---
Total Assets	$	561,306		$	332,592

Current Liabilities	$	802,261		$	374,924
Non-Current Liabilities		---			---
Total Liabilities	$	802,261		$	374,924

Working Capital (Deficit)	$	(471,701	)	$	(42,332	)

~~Because we believe that there was no material relationship that~~Current ~~existed~~assets ~~between~~decreased ~~SGB~~by ~~International~~$2,032 ~~the~~or ~~former~~0.61% ~~principal~~from ~~shareholders~~$332,592 ofas ~~SGB International~~at ~~prior~~December ~~to the reverse acquisition~~31, ~~and~~2013 ~~the shareholders of Dragon International prior~~ to ~~the~~$330,560 ~~time~~as ofat ~~the~~December ~~reverse~~31, ~~acquisition other than in respect of the reverse acquisition~~2014, ~~our~~principally ~~Chinese legal counsel advised us that Dragon~~due ~~International~~to ~~was not~~ a ~~special~~decrease purpose vehicle company and that the reverse acquisition of Dragon International by SGB International is not subject to approval of MOFCOM and registration with SAIC. Our Chinese counsel never mentioned in ~~its~~cash ~~legal opinion the PRC Mineral Resources Law, although it did specifically mention the “Regulations for Merger with~~ and ~~Acquisition~~cash ~~of Domestic Enterprises by Foreign Investors,” Circular 75, MOFCOM and SAIC~~equivalents.

~~Employees~~Current liabilities increased by $427,337 or 114,00% from $374,924 as at December 31, 2013 to $802,261 as at December 31, 2014, principally due to increases in accounts payable and accrued liabilities of $109,295 and amounts due to related parties of $316,199.

AsTaken as ofa ~~December 31~~whole, ~~2012 and 2011,~~ we ~~had~~experienced ~~approximately~~an ~~112~~increase ~~and 120~~in ~~respectively of management staff including~~ our ~~President, Chief Executive Officer and Chief Financial Officer, for our mine and administrative office located in Fujian Province. We also had about 900 and 600 miners respectively~~ working ~~underground~~capital ~~who~~deficit ~~belong to third party sub-contractors. The working schedule for these contract miners is three shifts per day for 260 days per year. None~~ of these employees are represented by any collective bargaining agreements. We have not experienced a work stoppage. Management believes that our relations with our employees are good. We do not have insurance for industry-related accident. For any accident-related costs below RMB50$429,~~000 is to be borne by the third party subcontractors~~369. ~~For any accident-related costs above RMB50,000, 95% of such costs is to be borne by our company and the remaining 5% is to be borne by the third party sub-contractors.~~

~~ITEM 1A. RISK FACTORS~~Cash Flows

InFor ~~addition to other information in this report,~~ the ~~following~~ ~~risk~~years ~~factors~~ended ~~should~~December ~~be carefully considered in evaluating our business because such factors may have a significant impact on our business~~31, ~~operating~~2014 ~~results, liquidity~~ and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment. 2013

Risks Related to Our Business

	2013			2013
Net cash provided by operating activities	$	(55,573	)	$	796,399
Net cash used in investing activities	$	(260,626	)	$	(792,608	)
Net cash provided by financing activities	$	316,199		$	(430,756	)
Cash and cash equivalents at end of year	$	1,646		$	1,793

~~Our business and results of operations are dependent on coal markets, which may be cyclical.~~ 23

~~As all of our revenue is derived from sales of coal in the PRC,~~The ~~our~~net ~~business~~cash ~~and~~provided by operating ~~results~~activities ~~are~~decreased ~~substantially~~by ~~dependent on the domestic Chinese demand for coal~~$824,972 ~~especially~~or ~~the demand for coal in the province of Fujian~~103.59% ~~The Chinese coal market is cyclical and exhibits fluctuation in supply and demand~~ from ~~year to year. It is subject to numerous factors beyond our control~~$796,399 ~~including,~~in ~~but~~2013 ~~not limited~~ to, ~~the economic conditions in the PRC and fluctuations in industries with high demand for coal~~$(55,573) ~~such as the power and steel industries. Fluctuations~~ in ~~supply and demand for coal affect coal prices~~2014, ~~which~~ ~~in turn affects our operating and financial performance. We have~~due ~~experienced~~principally ~~substantial~~to ~~price~~a ~~fluctuations~~reduction in ~~the~~consulting ~~past and believe such fluctuations will continue~~activities. ~~The average selling price from the Shangzhai coal mine was about US $107 per ton in 2011 and about US $112 per ton in 2012.~~

~~The demand for coal is primarily affected by the overall~~Net ~~economic~~cash ~~development~~used ~~and~~in ~~the~~investing ~~demand~~activities ~~for~~increased ~~coal from the electricity generation, steel and construction industries. The supply of coal, on the other hand, is primarily affected~~ by ~~the geographical location of the coal supplies~~$531,982 ~~the~~or ~~volume of coal produced by the domestic and international coal suppliers, and the quality and price of competing sources of coal~~67.12% ~~Alternative~~from ~~fuels~~$(792,608) such as natural gas, oil and nuclear power, and alternative energy sources, such as hydroelectric power also have influences on the market demand for coal. Excess supply of coal or significant reduction in ~~the~~2013 ~~demand~~to ~~for our coal by domestic electricity generation or steel industries may have an adverse effect on coal prices~~$(260,626) ~~which would~~ in ~~turn~~2014 ~~cause~~due ato ~~decline in our profitability. In addition,~~the ~~any~~December ~~significant~~2013 ~~decline~~sale ~~in domestic coal prices could materially and adversely affect our business and results~~ of ~~operations~~Dragon International.

23Net cash generated by financing activities was $316,199 in 2014 as compared to net cash used in financing activities of $430,756 in 2013.

Our ~~mining~~cash and ~~operations~~cash ~~may~~equivalents beas ~~shut~~at ~~down~~December ~~pursuant~~31, to2014 ~~Special Regulation~~decreased slightly by ~~State~~$147 ~~Council~~from onDecember ~~Shutting~~31, ~~Down~~2013 ~~Small~~to ~~Coal~~December ~~Mines~~31, 2014.

~~The Special Regulation by the State Council on Shutting Down~~Off ~~Small~~Balance ~~Coal~~Sheet Mines went into effect on September 28, 2006. The passage of regulation is the launch of a national campaign to close down small coal mines defined as having annual coal production capacity of 30,000 tons or less, as well as coal mines without proper licenses or permits. The regulation specifies that the Central Government will support the development of big coal mining operations, defined as having annual coal production capacity of 300,000 tons or more. However, the regulation is silent as to the PRC government’s position on coal mine operations having annual production capacity of more than 30,000 tons but less than 300,000 tons. We believe that the likelihood of our mining operation being shut down pursuant to The Special Regulation by the State Council on Shutting Down Small Coal Mines is relatively small because Fujian Province, where our mining operation is currently located, does not have sufficient coal production for use by local industries and relies heavily on import from other provinces. We have been advised by the County Coal Industry Management Bureau that we are not likely to be forced to shut down. Furthermore, our management also believes that, despite the fact that we have mined and produced coal beyond the area then covered by our valid mining permit, we will not likely be shut down because we have applied for and obtained in May 2011 another mining permit for an additional 6.8 km2 of mining area and that we have consistently demonstrated excellent safety records. Arrangements

~~Our~~We ~~mining~~have no ~~operations~~off-balance sheet arrangements that have or are ~~inherently~~reasonably ~~subject~~likely to ~~changing~~have a current or future effect on our financial condition, ~~conditions~~changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that ~~can~~is ~~affect~~material ~~our~~to ~~profitability~~stockholders.

~~Our mining operations are inherently subject to changing~~ITEM ~~conditions that affect levels of production and production costs for varying lengths of time and can result in decreases in our profitability~~7A. WeQUANTITATIVE ~~are~~AND ~~exposed to~~QUALITATIVE ~~commodity~~DISCLOSURES ~~price~~ABOUT ~~risk~~MARKET related to our purchase of diesel fuel, explosives and steel. In addition, weather conditions, equipment replacement or repair, fires, variations in thickness of the layer, or seam, of coal, amounts of overburden, rock and other natural materials and other geological conditions can be expected in the future to have, a significant impact on our operating results. Prolonged disruption of production at our mine would result in a decrease in our revenues and profitability, which could be material. Other factors affecting the production and sale of our coal that could result in decreases in our profitability include: RISK

~~sustained~~Not ~~high pricing environment for our raw materials, including, among other things, diesel fuel, explosives and steel;~~ Applicable.

~~changes in the laws and/or regulations that we are subject to, including permitting requirements; labor shortages; and~~ 24

~~changes~~ITEM 8. inFINANCIAL ~~coal~~STATEMENTS ~~market~~AND ~~and~~SUPPLEMENTARY ~~general economic conditions.~~ DATA

Our ~~coal~~audited consolidated ~~operations~~financial statements are ~~extensively~~stated ~~regulated~~in byUnited ~~the~~States ~~PRC Government~~dollars and ~~government~~are ~~regulations~~prepared ~~may~~in ~~limit~~accordance ~~our~~with ~~activities~~United ~~and~~States ~~adversely~~Generally ~~affect~~Accepted ~~our~~Accounting ~~business operations~~Principles.

Our coal operations, like those of other Chinese energy companies, are subject to extensive regulations established by the PRC Government. Central governmental authorities, such as the National Development and Reform Commission, the State Environmental Protection Administration, the Ministry of Land and Resources, the State Administration of Coal Mine Safety, the State Bureau of Taxation, and provincial and local authorities and agencies exercise extensive control over various aspects of China’s coal mining and transportation (including rail and sea transport). These controls affect the following material aspects of our operations:

	PAGE

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2014 and 2013	F-3

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2014 and 2013	F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013	F-6

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2014 and 2013	F-5

Notes to Consolidated Financial Statements	F-7

~~exploration, exploitation and mining rights and licensing;~~ F-1

~~rehabilitation~~REPORT ofOF ~~mining~~INDEPENDENT ~~sites~~REGISTERED ~~after mining is completed;~~PUBLIC ACCOUNTING FIRM

~~recovery~~To ~~rate~~the ~~requirements;~~Stockholders and the Board of Directors of GRAND CHINA ENERGY GROUP LTD.

~~industry-specific~~We ~~taxes~~have audited the accompanying consolidated balance sheets of Grand China Energy Group Ltd. (formerly known as “SGB International Holdings Inc.”) and ~~fees;~~subsidiaries (the “Company”) as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficiency) and cash flows for the years ended December 31, 2014 and 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~target~~We ofconducted our ~~capital~~audits ~~investments;~~in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~environmental~~In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2014 and ~~safety~~2013 ~~standards.~~and the results of its operations and its cash flows for the year ended December 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

24The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2014, the Company had negative working capital and stockholders’ deficit of US$471,701 and US$240,955, respectively, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~There~~/s/ ~~can~~Parker beRandall noCF ~~assurance that the central or local governments in the PRC will not impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures~~(H. ~~We may face significant constraints on our ability to implement our business strategies or to carry out or expand our business operations~~K.) ~~Our business may also be~~CPA materially and adversely affected by future changes in certain regulations and policies of the Chinese Government in respect of the coal industry. New legislation or regulations may be adopted that may materially and adversely affect our coal operations, our cost structure or the demand for our products. In addition, new legislation or regulations or different or more stringent interpretation of existing laws and regulations may also require us to substantially change our existing operations or incur significant costs. Limited

~~The~~PARKER ~~Chinese~~RANDALL ~~government~~CF ~~has~~(H.K.) ~~become~~CPA ~~increasingly concerned with~~LIMITED ~~workplace~~Certified ~~safety~~Public ~~and environmental issues, particularly in light of several~~Accountants ~~recent~~Hong ~~accidental explosions in coal mines due to poor internal safety measures,~~Kong ~~and~~March ~~as reflected by the implementation of the State Council’s Regulation on Shutting Down Small Coal Mines. Moreover~~30, additional new legislation or regulations may be adopted, or the enforcement of existing laws could become more stringent, either of which may have a significant impact on our mining operations or our customers’ ability to use coal and may require us or our customers to significantly change operations or to incur substantial costs. 2015

~~Our operations are subject to Value Added Tax imposed by local Coal Management Authority, which can adjust the rate of Value Added Tax to which we are subject unilaterally and arbitrarily.~~F-2

~~Pursuant~~GRAND toCHINA ~~the~~ENERGY ~~Provisional~~GROUP Regulations on Value-Added Tax of the PRC, promulgated by the State Council on December 13, 1993, as amended on November 5, 2008 (effective on January 1, 2009), and the Rules for Implementation of Provisional Regulations on Value-Added Tax of the PRC, promulgated on December 25, 1993 and amended on December 15, 2008 (effective on January 1, 2009), all entities and individuals engaged in selling goods, providing repair and placement services or importing goods into the PRC are generally subject to a value-added tax, or VAT, at a rate of 17% of the gross sales proceeds received (with the exception of certain goods which are subject to a rate of 13% or lower), less any VAT already paid or borne by the taxpayer on goods or services purchased and utilized in the production of goods or provision of services that have generated the gross sales proceedsLTD. ~~Fujian~~AND Huilong is subject to such value-added tax but according to local regulations, the local Coal Management Authority is the government authority responsible for collecting VAT as part of the approximately US$18.56 or RMB 120 per ton for all taxes, fees and statutory reserves payable by Fujian Huilong. The amount of VAT imposed by the local Coal Management Authority is about US$3.62 or RMB 23.4 per ton. The understanding of Fujian Huilong that the local Coal Management Authority is responsible for collecting VAT payment is for an indefinite period and rate is subject to adjustment by the local Coal Management Authority from time to time. For the last three years, the local Coal Management Authority has not adjusted the rate of VAT that they have imposed on our company. As compared to the rate of VAT applicable to other businesses subject to VAT rate of 17% on their gross proceeds received, our company’s effective VAT rates was 3.41% in FY2011 and 3.33% in FY2012. However, because the local Coal Management Authority is able to adjust the VAT rate unilaterally and arbitrarily, there is no assurance that the local Coal Management Authority will not impose materially higher VAT rate on our company in the future.SUBSIDIARIES

~~Our~~CONSOLIDATED ~~business~~BALANCE ~~operations may be adversely affected by present or future environmental regulations.~~ SHEETS

AsAS aAT ~~producer~~DECEMBER ~~of coal products~~31, we2014 ~~are~~AND ~~subject to significant, extensive, and increasingly stringent environmental protection laws and regulations in China. These laws and regulations:~~ 2013

~~impose~~(STATED ~~fees~~IN ~~for~~US ~~the discharge of waste substances;~~ DOLLARS)

require the establishment of reserves for reclamation and rehabilitation;

			December 31			December 31
			2014			2013
	Note		$			$
ASSETS
Current Assets
Cash and cash equivalents		4		1,646			1,793
Receivables		5		328,914			330,799
Total Current Assets				330,560			332,592

Non-current Assets
Property, plant and equipment		6		230,746			-
Total Non-current Assets				230,746			-

Total Assets				561,306			332,592

LIABILITIES AND STOCKHOLDERS DEFICIENCY
Current Liabilities
Account payable and accrued liabilities		7		395,667			286,372
Amounts due to related parties		8		328,411			12,212
Income tax payable		12		20,000			20,000
Loan payable – current		9		58,183			56,340
Total Current Liabilities and Total Liabilities				802,261			374,924

Stockholders Deficiency
Common stocks		10		9,138,544			9,138,544
Contributed surplus				100,000			100,000

Additional paid-in capital				100,000			100,000
Accumulated deficit				(9,563,913	)		(9,347,096	)
Accumulated other comprehensive loss				(15,586	)		(33,780	)
Total Stockholders Deficiency				(240,955	)		(42,332	)

Total Liabilities and Stockholders Deficiency				561,306			332,592

~~require~~The ~~the~~accompanying ~~payment~~notes ofare ~~fines~~an ~~for~~integral part ~~serious~~of ~~environmental~~these ~~offences;~~consolidated ~~and~~ financial statements.

~~allow the Chinese Government, at its discretion, to close any facility that fails to comply with orders requiring it to correct or stop operations causing environmental damage.~~ F-3

~~Our~~GRAND ~~coal~~CHINA ~~mining~~ENERGY ~~operations~~GROUP ~~may produce waste water, gas and solid waste materials~~LTD. ~~Currently, the PRC Government is moving toward more~~AND rigorous enforcement of applicable laws and regulations as well as the adoption and enforcement of more stringent environmental standards. Our current amounts of capital expenditure for environmental regulatory compliance may not be sufficient if additional regulations are imposed and we may need to allocate additional funds for such purpose. If we fail to comply with current or future environmental laws and regulations, we may be required to pay penalties or fines or take corrective actions, any of which may have a material adverse effect on our business operations and financial condition. SUBSIDIARIES

25CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

In(STATED ~~addition,~~IN ~~China~~US is a signatory to the 1992 United Nations Framework Convention on Climate Change and the 1997 Kyoto Protocol, which are intended to limit emissions of greenhouse gases. Efforts to control greenhouse gas emission in China could result in reduced use of coal if power generators switch to sources of fuel with lower carbon dioxide emissions, which in turn could reduce the revenues of our coal business and have a material adverse effect on our results of operations. DOLLARS)

Demand for coal and coal prices are closely linked to consumption patterns of the electric industry in China. Any changes in consumption patterns could affect our operations and profitability.

	Year ended 31 December
	2014			2013
	$			$
Revenue, net of sales tax		-			189,000
Cost of revenue		-			(100,000	)
Gross profit		-			89,000
Depreciation & amortization		(29,880	)		-
General and administrative		(190,556	)		(189,157	)

Total operating expenses		(220,436	)		(189,157	)
Net loss from operations		(220,436	)		(100,157	)
Other items:
Exchange gain		10,374			-
Interest expense		(6,755	)		(1,744	)
Loss before tax		(216,817	)		(101,901	)

Income tax expense		-			(20,000	)

Net loss from continuing operations;		(216,817	)		(121,901	)
Net (loss)/income from discontinued operations		-			(16,753,104	)
Net loss for the period		(216,817	)		(16,875,005	)
Foreign currency translation adjustment		18,194			(599,762	)
Comprehensive (loss)/income		(198,623	)		(17,474,767	)
(Loss)/earnings Per Share (cents) – Basic and diluted		(0.00	)		(0.05	)

Weighted Average Shares Outstanding – Basic and diluted		373,793,578			373,793,578

~~Demand~~The ~~for~~accompanying ~~coal~~notes ~~and the prices we can obtain for our coal~~ are ~~closely~~ ~~linked~~an ~~to coal consumption patterns of the electric generation industry~~integral inpart ~~China, which has accounted for approximately 58%~~ of ~~overall~~these ~~coal~~consolidated ~~consumption in~~financial China in recent years. These coal consumption patterns are influenced by factors beyond our control, including the demand for electricity (which is dependent to a significant extent on summer and winter temperatures and the strength of the economy); government regulation; technological developments and the location, availability, quality and price of competing sources of coal; other fuels such as natural gas, oil and nuclear; and alternative energy sources such as hydroelectric power. Any reduction in the demand for our coal by the domestic electric generation industry may cause a decline in profitability. statements

~~If transportation for our coal becomes unavailable or uneconomic for our customers, our ability to sell coal could suffer.~~ F-4

~~Transportation~~GRAND ~~costs~~CHINA ~~represent~~ENERGY aGROUP ~~significant portion of the total cost of coal and, as a result, the cost of transportation is a critical factor in a customer’s purchasing decision~~LTD. ~~Increases in transportation costs~~AND ~~could make coal a less competitive source of energy or could make some of our operations less competitive than other sources of coal.~~ SUBSIDIARIES

~~Disruption~~CONSOLIDATED ofSTATEMENTS ~~any~~OF ofCASH the transportation services that our customers use due to weather-related problems, flooding, drought, accidents, mechanical difficulties, strikers, lockouts, bottlenecks, and other events could temporarily impair our customers’ ability to purchase coal from us, resulting in decreased revenues. FLOWS

~~Our~~(STATED ~~future success depends upon our ability to continue~~IN ~~acquiring~~US ~~and developing coal mining rights that are economically feasible.~~ DOLLARS)

The amount of coal underlying our mining rights declines as we produce coal. We may not be able to mine all of the coal underlying our mining rights as profitably as we do at our current operations. Our profitability depends substantially on our ability to mine coal that has the geological characteristics that enable it to be mined at competitive costs. As we can only increase our existing production capacity by a limited amount, the future increase in our coal production will depend on expanding our existing mining rights or acquisitions of new mining rights.

	Year Ended 31 December
	2014			2013
Cash flows from operating activities	$			$
Net loss for the period – continuing and discontinued operations:		(216,817	)		(16,875,005	)
Items not involving cash:
Depreciation & amortization		29,880			1,084,022
Impairment loss on fixed assets		-			12,496,003
Loss on retirement of fixed assets		-			1,821,097
Imputed cost		-			100,000
Interest accretion		-			16,297
Interest expense		6,755			63,977
Other non-cash item from discontinued operations		-			(223,635	)
Gain on disposal of subsidiaries		-			(321,695	)
Changes in non-cash working capital:
Receivables		(10,478	)		(8,053	)
Prepaid expenses, deposit and other receivables		-			84,877
Accounts payable , accrued liabilities and income tax payables		135,087			2,558,514
Deferred revenue		-			-
Net cash (used in) provided by operating activities		(55,573	)		796,399
Cash flows from investing activities

Net cash outflow from disposal of subsidiaries		-			(63,756	)
Purchase of property, equipment and mine development costs		(260,626	)		(728,852	)
Net cash used in investing activities		(260,626	)		(792,608	)
Cash flows from financing activities
Increase (decrease) of term loan		-			(430,756	)

Amounts due to a related party		316,199			-
Net cash (used in) provided by financing activities		316,199			(430,756	)
Increase/(decrease) in cash and cash equivalents		-			(426,965	)
Effect of exchange rate changes on cash		(147	)		(11,550	)
Cash and cash equivalents – beginning of year		1,793			440,308
Cash and cash equivalents – end of year		1,646			1,793
Supplemental disclosure of cash flow information:
Income taxes paid		-			60,169
Interest expense paid		-			1,744

~~New~~The ~~mining~~accompanying ~~rights~~notes ~~may~~are ~~not~~an beintegral ~~available~~part ~~when required or, if available, the underlying coal may not be capable~~ of ~~being mined at costs~~these ~~comparable~~consolidated to those characteristics of our existing mining rights. We may in the future acquire mining rights from third parties. We may not be able to accurately assess the geological characteristics to any mining rights that we acquire, which may adversely affect our profitability and financial ~~condition.~~ statements

~~If we are not able to obtain a permit to expand the mining area and increase production capacity for the Shangzhai coal mine, our operations and financial condition could be adversely affected.~~ F-5

~~The~~GRAND ~~Shangzhai~~CHINA ~~coal~~ENERGY ~~mine~~GROUP ~~produced 134,668 t and 114,000 t of coal in 2011 and 2012, respectively~~LTD. ~~According to Wardrop Engineering Inc., the~~AND Shangzhai coal mine should have a production capacity of only 90,000 t/a under the current valid mining permit. Government authorities may order the Shangzhai coal mine to be closed or limited at any time, since the area of active mining currently exceeds the limits of the mining permit. As of May 13, 2011, Shangzhai has obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by its existing mining permit, which also allows it to mine at different mining levels. At this time, our company is not contemplating apply for any new mining permit. Rather, we will focus on obtaining permission to increase our annual production rate. The coal production in 2011and 2012 was conducted within the parameter stated in the mining permit. The remaining coal reserve as of December 31, 2012 still pending for the geological report to be issued from an independent and qualified Canada based geologist company, Wardrop Engineering Inc. (“Wardrop”). Because we have obtained another mining permit, which allows to produce 90,000 t/a from a new mining area, we are confident that we will be able to secure future increase to our permitted rate of production from the authorities. Currently our application to increase the rate of production has received county approval and is being reviewed by the city level government. After receive the city level approval, we will need to apply and receive the provincial level approval before the increase of our rate of production is finally approved.SUBSIDIARIES

26CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIENCY)

AAS ~~notice~~AT ~~issued~~DECEMBER in 2006 by the State Environmental Protection Administration (SEPA) deemed that the Environmental Impact Assessment of a coal mine construction project within an area covered by a coal mine master plan cannot be approved until a planning Environmental Impact Assessment of the coal mine master plan is approved. Since the master plan for the Longyang Longtan – Shizhong coal mine area (which covers the Shangzhai coal mine) was under preparation as of November 201031, there is a risk that an Environmental Impact Assessment for the Shangzhai coal mine expansion will not be approved before the corresponding planning Environmental Impact Assessment is approved. Delay or failure in securing the relevant governmental approvals or permits as well as any adverse change in government policies may cause a significant adjustment to our operations and financial condition. 2014

~~Risks~~(STATED ~~inherent~~IN toUS ~~mining could increase the cost of operating our business.~~ DOLLARS)

Our mining operations are subject to conditions beyond our control that can delay coal deliveries or increase the cost of mining at particular mines for varying lengths of time. These conditions include weather and natural disasters, unexpected maintenance problems, key equipment failures, variations in coal seam thickness, variations in the amount of rock and soil overlying the coal deposit, variations in rock and other natural materials and variations in geologic conditions.

	Common shares				Stocks to be		Contributed		Additional Paid-in					Retained earnings (Accumulated			Accumulated other comprehensive			Total Stockholders’ equity
	Shares		Amount		issued		surplus		capital		Reserve			Deficit)			income			(deficiency)
			$		$		$		$		$			$			$			$
Balance at December 31, 2012		373,793,578		9,138,544		-		100,000		-		650,182			7,527,909			565,982			17,982,617
Net loss for the period		-		-		-		-		-		-			(16,875,005	)		-			(16,875,005	)
Disposal of subsidiaries		-		-		-		-		-		(650,182	)		-			-			(650,182	)
Imputed cost		-		-		-		-		100,000		-			-			-			100,000
Currency translation		-		-		-		-		-		-			-			(599,762	)		(599,762	)
Balance at December 31, 2013		373,793,578		9,138,544		-		100,000		100,000		-			(9,347,096	)		(33,780	)		(42,332	)

Loss for the year		-		-		-		-				-			(216,817	)		-			(216,817	)
Other comprehensive income for the year		-		-		-		-				-			-			18,194			18,194
Balance at December 31, 2014		373,793,578		9,138,544		-		100,000		100,000		-			(9,563,913	)		(15,586	)		(240,955	)

AsThe ~~with all underground coal mining companies, our operations~~accompanying notes are affected by mining conditions such as a deterioration in the quality or thickness of faults and/or coal seams, pressure in mine openings, presence of gas and/or water inflow and propensity to spontaneous combustion, as well as operational risks associated with industrial or engineering activity, such as mechanical breakdowns. Although we have conducted geological investigations to evaluate such mining conditions and adapt our mining plans to address them, there can be no assurance that the occurrence of any adverse mining conditions would not result in an ~~increase~~integral inpart ~~our costs~~ of ~~production,~~these aconsolidated ~~reduction~~financial ~~of our coal output or the temporary suspension of our operations.~~ statements

~~Underground mining is also subject to certain risks such as methane outbursts and accidents caused by roof weakness and ground~~F-~~falls. There can be no assurance that the occurrence of such events or conditions would not have a material adverse impact on our business and results of operations.~~ 6

~~We may suffer losses resulting from industry-related~~1 ORGANIZATION ~~accidents~~AND ~~and~~PRINCIPAL ~~lack of insurance.~~ ACTIVITIES

~~We operate coal mines and related facilities that may be affected by water, gas, fire or structural problems~~Grand China Energy Group Ltd. ~~As a result, we, like other~~ ~~coal~~(formerly ~~mining~~known ~~companies,~~as ~~have~~“SGB ~~experienced~~International ~~accidents~~Holdings ~~that have caused property damage and personal injuries~~Inc.”) ~~There~~(“Grand ~~can be no assurance that industry-related accidents will not occur in the future. We do not currently maintain fire~~China”,“SGB” or ~~other~~ ~~property~~the ~~insurance covering our properties, equipment or inventories,~~“Company”) ~~other~~was ~~than~~incorporated ~~with respect to vehicles. In addition, we do not maintain any business interruption insurance or any third party liability insurance to cover claims~~ in ~~respect~~British ~~of personal injury~~Columbia, ~~property~~Canada ~~or environmental damage arising from accidents~~ on ~~our~~November ~~properties~~6, ~~other than third party liability insurance with respect to vehicles~~1997. ~~For~~Through ~~any~~its ~~accident-related costs below RMB50~~subsidiary,~~000~~ ~~is to be borne by~~ the ~~third~~Company ~~party sub-contractors. For any accident-related costs above RMB50,000, 95% of such costs~~ is toengaged bein ~~borne~~coal ~~by our company and the remaining 5% is to be borne by the third party sub-contractors~~business. ~~Any uninsured losses and liabilities incurred by us could have a material adverse effect on our financial condition and results of operations.~~

27On May 11, 2011, the Company completed the acquisition of Dragon International Resources Group Co., Limited (“Dragon International”), a Hong Kong corporation incorporated on October 5, 2010, and its wholly-owned subsidiary through a share exchange which resulted in the former shareholders of Dragon International acquiring the control of SGB. This transaction was accounted for as a reverse takeover transaction (“RTO”) for accounting purpose, as Dragon International was deemed to be the acquirer, and these consolidated financial statements are a continuation of the consolidated financial statements of Dragon International. The carrying amounts of SGB’s assets and liabilities are included in these consolidated financial statements.

WePrior ~~may~~to bethe ~~required~~above noted RTO, and on February 21, 2011, pursuant to ~~allocate~~a ~~additional~~share ~~funds~~transfer ~~for~~agreement, ~~land~~Dragon International completed the acquisition of Fujian Huilong Coal ~~subsidence~~Mine Co., Ltd. (“Fujian Huilong”) (formerly known as Yongding Shangzhai Coal Mine Co., Ltd.), a People’s Republic of China corporation and was incorporated on August 4, 2005. Upon the completion of the acquisition, Fujian Huilong became the wholly-owned subsidiary of Dragon International and the control in substance was not changed. For accounting purposes, the acquisition has been accounted for using the continuity of interest method, which recognizes Fujian Huilong as the successor. The net assets of Dragon International prior to the acquisition has been accounted as recapitalization as at the date of acquisition.

AOn ~~consequence~~October of3, ~~the underground mining methods used at our mines is land subsidence above underground mining sites. Depending on the circumstances~~2013, we ~~may~~incorporated, beSGB ~~required~~Investment ~~to relocate inhabitants from the land above~~Limited, ~~the~~which ~~underground~~is ~~mining~~a ~~sites~~wholly ~~prior~~owned ~~to mining those sites or we may be required to compensate the inhabitants for losses or damages from land subsidence after the underground sites have been mined~~subsidiary. WeThe ~~may~~principal ~~also~~business ~~be required to make payments for land subsidence, restoration, rehabilitation or environmental protection~~ of ~~the~~ ~~land~~SGB ~~after~~Investment ~~the~~Limited ~~underground sites have been mined. Where such payment~~ is ~~required~~ ~~under~~providing ~~applicable~~mining ~~law~~related orconsulting ~~regulations, an estimate of such costs is~~work ~~recognized~~for in the ~~period~~coalmine in ~~which~~Fujian ~~the~~Province ~~obligation~~as iswell ~~identified and is charged~~ as an ~~expense~~engaging in ~~our~~coal ~~income~~trading ~~statement~~activities in ~~proportion~~Fujian ~~to the coal extracted. The estimate of costs for land subsidence~~Province, ~~restoration,~~People’s ~~rehabilitation or~~Republic ~~environmental protection~~ of ~~the land may be subject to change in the future as actual costs become apparent and standards established by the PRC Government change from time to time~~China. ~~Therefore,~~The ~~there~~areas ~~can~~of bebusiness noincluding ~~assurance~~assist ~~such~~other ~~estimates are~~mining ~~accurate~~operation orsetting ~~that~~up ~~our~~sales ~~land~~chain ~~subsidence,~~management ~~restoration,~~system ~~rehabilitation~~as ~~and environmental~~well ~~protection~~as ~~costs will not substantially increase in the future or~~advisory ~~that~~works ~~the~~for ~~PRC~~mining ~~Government~~exploration ~~will not impose new fees in respect of land subsidence~~management. ~~Any such substantial increases or new fees could have a material adverse effect on our results of operations.~~

~~The~~On ~~total~~December ~~ecological environment rehabilitation deposit for operating the Shangzhai coal mine is about US$596~~19,~~782~~ ~~(equivalent to RMB 3.86 million). We paid about US$179~~2013,~~035~~ ~~(equivalent~~the toCompany ~~RMB 1.16 million (or 30% of~~disposed ~~the~~Dragon ~~total~~International ~~deposit))~~and ~~to the~~ Fujian ~~Provincial Land and Resources Bureau on November 18, 2009~~Huilong. ~~The balance of about US$417,747~~ (~~equivalent~~See tonote ~~RMB 2.70 million (or 70% of the total deposit~~3)~~) must be paid to the Fujian Provincial Land and Resources Bureau before April 2015 (one year ahead of the expiration of the mining license).~~

IfOn weAugust ~~are~~12, ~~unable~~2014, tothe ~~expand~~Company ~~our operations through~~changed ~~acquisitions~~its ofname ~~other~~from ~~coal~~SGB ~~mining~~International ~~businesses~~Holdings orInc. ~~assets,~~to ~~our~~Grand ~~profitability~~China ~~may~~Energy ~~be negatively~~Group ~~affected~~Ltd.

WeThe ~~may~~Company ~~seek~~and toits ~~expand~~subsidiaries ~~our operations both in the regions in~~are ~~which~~considered weto ~~operate~~be asoperating ~~well as~~ in ~~other~~one ~~parts~~segment ofbased ~~China~~on ~~through~~its ~~acquisitions~~organizational ~~of businesses~~structure and ~~assets.~~strategic ~~Acquisition~~decision ~~transactions~~making ~~involve inherent risks, such as:~~ method.

~~uncertainties~~These financial statements have been prepared in ~~assessing~~accordance with U.S. generally accepted accounting principles applicable to a going concern, which contemplates the realization ~~value~~of assets and the satisfaction of liabilities and commitments in the normal course of business. As at December 31, 2014 ~~strengths~~and December 31, ~~weaknesses~~2013, ~~contingent~~the Company had working capital deficiency of $471,701 and ~~other~~ ~~liabilities~~$42,332, respectively, and ~~potential~~requires ~~profitability~~additional funds to maintain its operations. In view of ~~acquisition~~the orworking ~~other~~capital deficiency, the management has reviewed the cash position as at ~~transaction~~the ~~candidates~~balance sheet date and the cash flow forecast for the next twelve months and taken into factors that (i) to raise equity financing as required; and (ii) to obtain the principle shareholder’s support in funding the required working capital.

~~the potential loss of key personnel of an acquired business;~~ F-7

~~the ability to achieve identified operating and financial synergies~~1 ORGANIZATION ~~anticipated~~AND toPRINCIPAL ~~result~~ACTIVITIES ~~from an acquisition or other transaction;~~ (Continued)

~~problems~~After ~~that~~taking ~~could~~the ~~arise~~above ~~from~~circumstances and facts into consideration, the ~~integration~~management of the ~~acquired~~Company ~~business;~~is satisfied that the Company will have sufficient funds to complete the current development and to meet in full its financial obligation and operations or capital expenditure as they fall due for the foreseeable future.

~~unanticipated changes in business, industry or general economic conditions~~2 SIGNIFICANT ~~that~~ACCOUNTING ~~affect the assumptions underlying the acquisition or other transaction rationale; and~~ POLICIES

~~unexpected~~Use ~~development~~of ~~costs~~estimates ~~that adversely affect our profitability.~~

InThe ~~addition,~~Company's weconsolidated ~~may~~financial statements ~~not~~have bebeen ~~able~~prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of the Company's consolidated financial statements requires management to ~~successfully~~make ~~negotiate~~estimates ~~new~~and assumptions ~~mining~~that ~~rights~~affect orthe ~~maintain~~reported ~~our~~amounts ~~leasehold~~of ~~interests~~assets inand ~~properties~~liabilities onand ~~which~~disclosure ~~mining~~of contingent assets and liabilities at the date of the ~~operations~~consolidated ~~are~~financial ~~not~~statements ~~commenced~~and the reported amounts of revenues and expenses during the ~~term~~reporting period. Significant items subject to such estimates and assumptions include inventories; asset impairments; environmental and reclamation obligations; acquisition accounting; other employee benefit obligations; useful lives for depreciation, depletion, and amortization; current and deferred income taxes; and fair value of ~~the~~financial ~~lease~~instruments. Estimates are based on facts and circumstances believed to be reasonable at the time; however, actual results could differ from those estimates.

~~Our~~Principles ~~ability~~of ~~to operate our company effectively could be impaired if we lose key personnel or fail to attract qualified personnel.~~ consolidation

WeThese ~~manage~~consolidated ~~our~~financial ~~business~~statements ~~with~~included athe ~~number~~ accounts of ~~key~~the ~~personnel,~~Company ~~namely, Longwen Lin, Peifeng Huang~~ and ~~Thomas~~its ~~Yeo,~~wholly-owned ~~the~~subsidiaries ~~loss of a number of whom could have a material adverse effect on us. In addition,~~ as our business develops and expands, we believe that our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified personnel. We cannot assure you that key personnel will continue to be employed by us or that we will be able to attract and retain qualified personnel in the future. We do not have “key person” life insurance to cover our executive officers. Failure to retain or attract key personnel could have a material adverse effect on us. follows:

28SGB Investment Limited, a British Virgin Islands Corporation incorporated on October 3, 2013.

~~Our~~Dragon ~~reserve~~International, ~~estimates~~a ~~may~~Hong ~~prove~~Kong tocorporation incorporated beon ~~incorrect~~October 5, 2010 which was disposed on December 19, 2013.(See note3).

~~The~~Fujian ~~mineral reserve figures in this report are estimates based on the interpretation of limited sampling and subjective judgments regarding the grade~~Huilong, continuity and existence of mineralization, as well as the application of economic assumptions, including assumptions as to operating costs, foreign exchange rates and future commodity prices. The sampling, interpretations or assumptions underlying any reserve estimate may be incorrect, and the impact on reserves may be material. Should the mineralization and/or configuration of a ~~deposit~~ ~~ultimately~~People’s ~~turn out to be significantly different from that currently~~Republic ~~envisaged, then the proposed mining plan may have to be altered in a way that could affect the tonnage and grade~~ of ~~the~~China ~~reserves~~corporation ~~mined~~incorporated ~~and~~on ~~rates~~August ~~of production and~~4, ~~consequently,~~2005 ~~could~~which ~~adversely~~was ~~affect~~disposed ~~the~~on ~~profitability~~December ~~of the mining operations. In addition~~19, ~~short~~2013(See term operating factors relating to the reserves, such as the need for orderly development of ore bodies or the processing of new or different ores, may cause reserve estimates to be modified or operations to be unprofitable in any particular fiscal periodnote3). There can be no assurance that our projects or operations will be, or will continue to be, economically viable, that the indicated amount of minerals will be recovered or that they will be recovered at the prices assumed for purposes of estimating reserves.

~~Risks~~All ~~Related~~significant tointercompany ~~Doing~~accounts ~~Business~~and intransactions ~~China~~have been eliminated upon consolidation.

~~Our~~Foreign ~~operations~~currency ~~are primarily located in China and may be adversely affected by changes in the policies of the Chinese government.~~ translation

The ~~political~~Company’s ~~environment~~functional incurrency ~~the~~and ~~PRC may adversely affect our~~presentation ~~business~~currency ~~operations. The PRC has operated as a socialist state since 1949 and~~ is ~~controlled~~ byCanadian ~~the~~dollars ~~Communist Party of China. In recent years, however, the government has introduced reforms aimed at creating a~~ (“~~socialist market economy~~CAD” ~~and~~) ~~policies have been implemented to allow business enterprises greater autonomy in their operations. Changes in the political leadership of the PRC may have a significant effect on laws~~ and policies related to the current economic reforms program, other policies affecting business and the general political, economic and social environment in the PRC, including the introduction of measures to control inflation, changes in the rate or method of taxation, the imposition of additional restrictions on currency conversion and remittances abroad, and foreign investmentU.S. ~~These effects could substantially impair our business~~dollars, ~~profits or prospects in China~~respectively. ~~Moreover,~~The ~~economic~~Company’s ~~reforms~~subsidiaries’ ~~and growth~~functional incurrencies ~~the~~are ~~PRC~~Hong ~~have~~Kong ~~been~~dollars ~~more~~(“HKD”) ~~successful in certain provinces than in others,~~ and ~~the~~ ~~continuation~~Chinese orRMB ~~increases~~(“RMB”) offor ~~such~~SGB ~~disparities~~Investment ~~could affect the political or social stability of the PRC~~Limited.

~~The Chinese government exerts substantial influence over the manner in which companies in China must conduct their business activities.~~ F-8

~~The PRC only recently has permitted greater provincial and~~2 SIGNIFICANT ~~local~~ACCOUNTING economic autonomy and private economic activities. The government of the PRC has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in the PRC or particular regions thereof, and could require us to divest the interests we then hold in Chinese properties or joint ventures. Any such developments could have a material adverse effect on the business, operations, financial condition and prospects of our company. POLICIES (Continued)

~~Future~~Foreign ~~inflation~~currency intranslation( ~~China may inhibit economic activity and adversely affect our operations.~~ Continued)

InTransactions ~~recent~~in ~~years,~~a ~~the~~currency ~~Chinese~~other ~~economy has experienced periods of~~than ~~rapid~~the ~~expansion~~functional ~~within~~currency ~~which~~(“foreign ~~there~~currency”) ~~have~~are ~~been~~measured ~~some~~in ~~years~~the ~~with~~respective ~~high~~functional ~~rates~~currencies of ~~inflation~~ ~~and deflation, which have led to~~ the ~~adoption~~Company ~~by the PRC government,~~and ~~from~~its ~~time~~subsidiaries toand ~~time,~~are ofrecorded ~~various~~on ~~corrective~~initial ~~measures~~recognition ~~designed~~in ~~to restrict~~ the ~~availability~~ offunctional ~~credit~~currencies orat ~~regulate~~exchange ~~growth~~rates ~~and~~approximating ~~contain~~those ~~inflation. While inflation~~ruling ~~has~~at ~~moderated since 1995, high inflation may in~~ the ~~future~~transaction ~~cause~~dates. ~~the~~Exchange ~~PRC government~~gains ~~to impose controls on credit~~ and~~/or~~ ~~prices,~~losses orare torecorded ~~take other action, which could inhibit economic activity~~ in ~~China,~~the ~~and~~statements ~~thereby~~of ~~adversely affect our business~~ operations and ~~prospects~~comprehensive ~~in the PRC~~loss.

29Assets and liabilities of the Company and its subsidiaries are translated into the U.S. dollars at exchange rates at the balance sheet date, equity accounts are translated at historical exchange rate and revenues and expenses are translated by using the average exchange rates. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income loss in the statements of stockholders deficiency.

~~PRC~~Cash ~~regulation of loans~~ and ~~direct~~cash ~~investment by offshore holding companies to PRC entities may delay or prevent our company from providing needed capital to Fujian Huilong~~ equivalents

InCash ~~August~~and ofcash ~~2008,~~equivalents ~~China’s~~include ~~State~~those ~~Administration~~short-term ~~of Foreign~~money ~~Exchange~~market ~~(“SAFE”)~~instruments ~~issued Circular 142,~~ which ~~regulates~~are ~~the~~highly-liquid process of foreign currency capital verification by foreign invested enterprises in China. Circular 142 introduced new statutory requirements that impact the use of Renminbi converted capital invested by FIEs. In particular, Circular 142 imposes additional capital verification procedures, restricts investments ~~by FIEs in domestic enterprises, prohibits purchase of domestic real estate by FIEs;~~ and ~~imposes~~ ~~additional~~readily ~~approval~~convertible ~~process~~into oncash ~~payment~~with ofa ~~consideration~~term to ~~domestic individuals~~maturity ~~and institutions in M&A transactions. Like many~~ of ~~SAFE’s~~90 ~~other regulations,~~days Circular 142 is broadly drafted, making it difficult to predict how local SAFE branches will interpret and enforce certain provisions of Circular 142. We do not expect Circular 142 having a significant effect on our company because even though Fujian Huilong is a FIE, for the foreseeable future, we have no plan to make any equity investment in other domestic enterprises or ~~real~~ ~~estate~~less inwhen ~~PRC through Fujian Huilong~~acquired.

~~We may be restricted from freely converting the Renminbi to other currencies in a timely manner.~~ Inventories

~~The~~Coal ~~Renminbi~~inventories isare ~~not~~stated ~~a freely convertible currency~~ at ~~present. We~~the ~~receive all~~ lower of ~~our~~average ~~revenue~~cost inor ~~Renminbi, which may need to be converted to other currencies, primarily U~~market.S. ~~dollars,~~The ~~and~~cost ~~remitted outside~~ of ~~the~~coal ~~PRC. Effective~~inventories ~~July~~is 1,determined ~~1996,~~based ~~foreign~~on ~~currency~~average ~~“current~~cost ~~account” transactions by foreign investment enterprises, including sino-foreign joint ventures, are no longer subject to the approval~~ of ~~SAFE~~production, ~~but~~which ~~need~~includes ~~only~~all ~~a ministerial review,~~costs ~~according~~incurred to ~~the Administration of the Settlement~~extract, ~~Sale~~transport and ~~Payment~~process ~~of Foreign Exchange Provisions promulgated in 1996 (~~the ~~“FX regulations”)~~coal. ~~“Current account”~~Market ~~items~~represents ~~include~~the ~~international~~estimated ~~commercial~~replacement ~~transactions~~cost, ~~which~~subject ~~occur~~to on a ~~regular~~ ~~basis,~~floor ~~such as those relating to trade~~ and ~~provision of services.~~ceiling, ~~Distributions~~which toconsiders ~~joint~~the ~~venture~~future ~~parties~~sales ~~also~~price ~~are~~of ~~considered~~the aproduct ~~“current~~as ~~account transaction.”~~well ~~Other non-current account items, known~~ as ~~“capital~~remaining ~~account”~~estimated ~~items, remain~~preparation ~~subject~~and toselling ~~SAFE approval~~costs. ~~Under~~Coal ~~current~~is ~~regulations, we can obtain~~reported ~~foreign~~as ~~currency~~inventory inat ~~exchange for Renminbi from swap centers authorized by~~ the ~~government.~~ Wepoint ~~do not anticipate problems~~ in ~~obtaining~~time ~~foreign~~the ~~currency~~coal ~~to satisfy our requirements; however, there~~ is noextracted ~~assurance~~from ~~that~~the ~~foreign~~mine ~~currency shortages or changes in currency exchange laws~~ and ~~regulations~~weighed byat ~~the Chinese government will not restrict us from freely converting Renminbi in~~ a ~~timely manner.~~loading ~~If such shortages or change in laws and regulations occur, we may accept Renminbi, which can be held or re-invested in other projects~~facility.

~~Future~~As ~~fluctuation~~at inDecember ~~the~~31, ~~value~~2014 ~~of the Renminbi may negatively affect our sales globally~~ and ~~our~~2013, ~~ability to convert our return on~~the ~~operations~~Company tocarried ~~U.S.~~no ~~dollars in a profitable manner~~inventories.

~~Until 1994~~Property, ~~the~~equipment ~~Renminbi experienced a gradual but significant devaluation against most major currencies, including U.S. dollars,~~ and ~~there~~mine ~~was a~~development ~~significant~~costs devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. Dollar has appreciated approximately 15%. Countries, including the U.S., have argued that the Renminbi is artificially undervalued due to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets.

~~The~~Property, ~~PRC~~plant ~~legal~~and ~~system~~equipment, ~~embodies~~are ~~uncertainties~~stated at ~~that~~cost ~~could~~less ~~limit~~depreciation and amortization and accumulated impairment loss. Cost represents the purchase price of the asset and other costs incurred to bring the ~~legal~~asset ~~protection~~into ~~available~~its existing use. Depreciation of property, plant and equipment is calculated to ~~our~~write off ~~shareholders~~the cost, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. The estimated useful lives are as follows:

The PRC’s legal system is a civil law system based on written statutes in which decided legal cases have little value as precedents, unlike the common law system prevalent in the United States. The PRC does not have a well-developed, consolidated body of laws governing foreign investment enterprises. As a result, the administration of laws and regulations by government agencies may be subject to considerable discretion and variation, and may be subject to influence by external forces unrelated to the legal merits of a particular matter. China’s regulations and policies with respect to foreign investments are evolving. Definitive regulations and policies with respect to such matters as the permissible percentage of foreign investment and permissible rates of equity returns have not yet been published. Statements regarding these evolving policies have been conflicting and any such policies, as administered, are likely to be subject to broad interpretation and discretion and to be modified, perhaps on a case-by-case basis. The uncertainties regarding such regulations and policies present risks that we will not be able to achieve our business objectives.

Machinery / Mobile mining equipment	10 years
Motor vehicles	5 years
Office equipment	5 years
Leasehold improvement	Lease term

30 F-9

~~Risks~~2 SIGNIFICANT ACCOUNTING ~~Related to Our Company~~ POLICIES (Continued)

~~Our~~Property, ~~management~~equipment ~~team does not have North American public company experience~~ and itmine ~~could~~development ~~adversely~~costs ~~impact our ability to comply with the reporting requirements of the securities laws.~~ (Continued)

~~Our~~Costs ~~management~~for ~~team~~mineral ~~has~~properties noand ~~North American public company~~mine ~~experience,~~development ~~which~~incurred ~~could impair our ability~~ to ~~comply~~expand ~~with~~capacity ~~legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act~~ of ~~2002.~~operating ~~Other~~mines ~~than Thomas~~or ~~Tze~~to ~~Khern~~develop ~~Yeo,~~new ~~who~~mines ~~serves~~are ascapitalized ~~Chief~~and ~~Financial~~charged ~~Officer~~to ~~and~~operations ~~Company~~using ~~Secretary~~the units-of-production ~~Sunshine~~method ~~Holdings~~over ~~Limited, a company listed on~~ the ~~Singapore~~estimated ~~Main Board,~~proven ~~our other officers~~ and ~~directors~~probable doreserve ~~not~~tons ~~have~~directly ~~experience~~benefiting ~~with~~from ~~public companies.~~the ~~Accordingly,~~capital ~~our senior management collectively has limited~~expenditures ~~experience~~but ~~with~~up ~~the responsibilities related~~ to ~~managing~~the aCompany’s ~~publicly~~allowable ~~traded company.~~quotas ~~Such~~set ~~responsibilities~~by ~~include~~the ~~complying~~local ~~with federal securities laws and making required disclosures on a timely basis~~government. ~~Our~~Mine ~~senior~~development ~~management~~costs ~~may~~include ~~not be~~costs ~~able~~incurred tofor ~~implement programs and policies in an effective and timely manner~~site ~~that~~preparation ~~adequately respond to such legal, regulatory compliance~~ and ~~reporting requirements,~~development ~~including establishing and maintaining internal controls over financial reporting. Any such deficiencies, weaknesses or lack~~ of ~~compliance could have a materially adverse effect on our ability to comply with~~ the ~~reporting~~ ~~requirements~~mines ofduring the ~~Securities~~development ~~Exchange Act of 1934, which is necessary to maintain our public company status~~stage. ~~If we were to fail to fulfill those obligations, our ability to continue as a public company would be in jeopardy in which event you could lose your entire investment in our company.~~

IfMajor werepairs ~~fail~~and tobetterments ~~maintain~~that ansignificantly extend ~~effective~~original ~~system~~useful oflives ~~internal~~or improve productivity are capitalized and depreciated over the period benefitted. Maintenance and ~~controls~~repairs are expensed as incurred. When equipment is retired or disposed, wethe ~~may~~related ~~not~~cost beand ~~able~~accumulated todepreciation ~~accurately~~are ~~report~~removed from ~~our~~the ~~financial~~respective ~~results~~accounts and any profit or ~~prevent~~ ~~fraud.~~loss on disposal is recognized in cost of coal sales.

WeIntangible are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of our internal controls over financial reporting. Our management may conclude that our internal control over our financial reporting is not effective. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs (approximately $200,000 per year) and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. asset

~~Our~~Intangible ~~Accounting~~asset ~~staff~~represents ~~lacks~~the ~~experience~~coal mining ~~with~~right Uand is recorded at cost less accumulated amortization.S. ~~GAAP~~Amortization ~~and~~is weprovided using the units-of-production method ~~may~~over ~~not~~the beestimated ~~able~~proven toand ~~accurately~~probable ~~report~~reserve ~~our~~tons ~~financial~~directly ~~results~~benefiting orfrom ~~report~~the ~~them~~capital onexpenditures but up to the Company’s ~~time~~allowable quotas set by the local government.

WeAsset ~~have~~impairment ~~limited ability to prepare financial statements~~ and ~~maintain~~ ~~our~~disposal ~~books and records in U.S. GAAP. Our books and records are maintained and prepared in PRC GAAP and our employees who have primary responsibilities~~ of ~~preparing and supervising the preparation of the financial~~ statements under U.S. GAAP do not have extensive knowledge of and professional experience with U.S. GAAP and SEC rules and regulations. Accordingly, we may not be able to report our financial results accurately as required by SEC rules and regulations and we may report our financial results late. Furthermore, we confirm that we will evaluate these factors in the future in concluding on the effectiveness of disclosure controls and procedures under Item 307 of Regulation Slong-Klived ~~and~~assets ~~internal control over financial reporting under Item 308 of Regulation S-K.~~

~~All~~Long-lived ofassets, ~~our~~such ~~assets~~as property, equipment and ~~our~~mine ~~directors~~development costs, owned and ~~officers~~leased mineral rights and purchased intangibles subject to amortization, are ~~outside~~reviewed ~~the~~for ~~United~~impairment ~~States,~~whenever ~~with~~events ~~the~~or ~~result~~changes in circumstances indicate that itthe carrying amount of an asset may not be ~~difficult~~recoverable. Recoverability ~~for~~of ~~investors~~assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted ~~enforce~~future ~~within~~cash flows expected to be generated by the ~~United~~asset. ~~States~~If ~~any~~the ~~judgments~~carrying ~~obtained~~amount ~~against~~of usan orasset ~~our~~exceeds its estimated future cash flows, ~~directors~~an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would separately be presented in the consolidated balance sheets and ~~officers~~reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the consolidated balance sheets.

~~All~~Asset ofRetirement ~~our~~Obligation assets are located outside the United States. In addition, our directors and officers are a national and/or resident of a country other than the United States, and all or a substantial portion of their respective assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our directors and officers, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under United States federal and state securities laws against us or our directors and officers.

31Minimum standards for mine reclamation have been established by various regulatory agencies and dictate the reclamation requirements at the Company's operations. The Company's asset retirement obligations consist principally of costs to reclaim acreage disturbed at surface operations and estimated costs to reclaim support acreage and perform other related functions at underground mines. The Company records these reclamation obligations at fair value in the period in which the legal obligation

~~Because Longwen Lin, Zifu Lin and Chuanzhen Lin, control a large percentage of our common shares, they have the ability to influence matters affecting our shareholders.~~ F-10

~~Zifu Lin and Chuanzhen Lin, each beneficially directly own 17.~~2~~% and Longwen Lin directly owned 53.1% of the issued and outstanding common~~ SIGNIFICANT ~~shares~~ACCOUNTING of our company as at December 31, 2012. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors and the acquisition or disposition of our assets. Because they control such shares, our shareholders will find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by Messrs. Lin could result in management making decisions that are in their best interest and not in the best interest of our shareholders, our shareholders may lose some or all of the value of their investments in our common shares.POLICIES (Continued)

~~Our~~Asset ~~lack~~Retirement ofObligation ~~independent directors could adversely affect our company.~~ (Continued)

Weassociated ~~have~~with nothe ~~independent~~retirement ~~members~~ of ~~our~~the long-lived ~~board~~asset ofis ~~directors~~incurred. ~~Our board~~When ofthe ~~directors~~liability is ~~comprised~~initially ofrecorded, ~~three~~the ~~people,~~offset ~~all~~is ofcapitalized ~~whom~~by ~~are~~increasing ~~employed~~the bycarrying ~~us.~~amount ~~Accordingly,~~of ~~none~~the ofrelated ~~our~~long-lived ~~directors~~asset. Over time, the liability is ~~"independent"~~accreted ~~using~~to ~~the~~its ~~definition~~present ~~set forth~~value ineach ~~the~~period, ~~NASDAQ~~and ~~Marketplace~~the ~~Rules.~~capitalized ~~Although~~cost is ~~our~~depreciated ~~directors~~over ~~are~~the ~~subject~~useful tolife of the ~~fiduciary~~ ~~duties~~related ~~imposed~~asset onusing ~~board~~the ~~members~~units-of-production ~~pursuant~~method toover ~~British~~the ~~Columbia~~estimated ~~law,~~proven ~~our~~and probable ~~shareholders~~reserve dotons ~~not~~directly ~~have~~benefiting from the ~~protections~~capital ~~afforded~~expenditures bybut ~~independent~~up ~~directors~~to ~~which are~~the ~~some~~Company’s ofallowable quotas set by the ~~traditional~~local government. ~~procedural~~To ~~safeguards~~settle ~~that~~the ~~protect~~liability, the ~~interests~~obligation ~~of minority~~is ~~shareholders.~~paid, ~~Our~~and ~~lack~~to ofthe ~~independent~~extent ~~directors~~there onis ~~our~~a ~~board~~difference ~~of directors~~between ~~may~~the ~~also~~liability ~~make~~and the ~~decisions~~amount of ~~our~~cash ~~board~~paid, ofa ~~directors~~gain ~~more~~or ~~prone~~loss toupon ~~legal claims~~settlement oris ~~shareholder~~recorded. ~~criticism~~The ~~than~~Company ifannually ~~made~~reviews byits aestimated ~~board~~future ofcash ~~directors with~~flows ~~independent~~for ~~board~~its ~~members.~~asset retirement obligations.

~~Risks~~Borrowing ~~Related to Our Common Shares~~ costs

IfBorrowing wecosts ~~issue~~are ~~additional~~capitalized ~~shares~~as inpart of the ~~future~~cost of a qualifying asset if they are directly attributable to the acquisition, itconstruction ~~will~~or ~~result~~production of that asset. Capitalization of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the ~~dilution~~expenditures ofand ~~our~~borrowing ~~existing~~costs ~~shareholders~~are incurred. Borrowing costs are capitalized until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

~~Our~~Income authorized capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. We have not issued any preferred shares. Our board of directors may choose to issue some or all of such shares to acquire one or more companies or properties and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding common shares of our company. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation. tax

~~Our~~The ~~common~~Company ~~shares~~accounts ~~are~~for ~~illiquid~~income taxes under the provisions of ASC Topic 740-10, Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the ~~price~~expected future tax consequences of ~~our~~events ~~common~~that have been recognized in the Company’s financial statements or tax ~~shares~~returns ~~may~~using bethe ~~negatively~~liability ~~impacted~~method. byUnder ~~factors~~this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are ~~unrelated~~expected to ~~our~~reverse. The effect on deferred income tax assets and liabilities of a change in income ~~operations~~tax rates is included in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

~~Although~~Other ~~our~~comprehensive common shares are currently quoted on the OTCQB Market, relatively few of our shares have been purchased or sold on that market. Even when a more active market is established, trading through the OTCQB Market is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common shares could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common shares, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common shares. income

WeThe doCompany ~~not~~accounts ~~intend~~for tocomprehensive income ~~pay~~under ~~cash~~the ~~dividends~~provisions onof ~~any~~ASC ~~investment~~Topic ~~in the~~220-10, ~~shares~~Comprehensive Income - Overall, which establishes standards for reporting and display of ~~stock~~comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statements of ~~our~~operations and ~~company~~comprehensive income(loss). The Company’s comprehensive income(loss) consists of net earnings(loss) for the period and currency translation adjustments.

We have never paid any cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. Because we do not intend to declare cash dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company. F-11

322 SIGNIFICANT ACCOUNTING POLICIES (Continued)

~~Trading~~Earnings ofper ~~our stock is restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our common shares.~~ share

~~The~~Basic ~~Securities~~earnings ~~and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00~~ per share oris ~~an exercise price of less than~~calculated ~~$5.00~~using ~~per~~the ~~share,~~weighted ~~subject~~average tonumber ~~certain~~of ~~exceptions.~~shares ~~Our~~outstanding ~~securities~~during ~~are covered by~~ the ~~penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”~~year. The ~~term~~Company ~~“accredited~~has ~~investor”~~adopted ~~refers~~ASC ~~generally~~Topic ~~to institutions with assets in excess of $5~~260-10,~~000,000~~ orEarnings ~~individuals with a net worth~~per inShare ~~excess~~- ~~of $1~~Overall,~~000,000~~ orand ~~annual~~uses ~~income~~the ~~exceeding~~treasury ~~$200,000 or $300,000 jointly with their spouse. The penny~~ stock ~~rules~~method ~~require a broker-dealer, prior~~ to ~~a transaction~~compute ~~in a penny stock not otherwise exempt from~~ the ~~rules,~~dilutive toeffect ~~deliver~~of ~~a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission~~options, ~~which~~warrants ~~provides information about penny stocks~~ and ~~the nature~~similar ~~and level of risks in the penny stock market~~instruments. Under ~~The~~this ~~broker-dealer~~method, ~~also must provide~~ the ~~customer~~dilutive ~~with~~effect ~~current~~on ~~bid~~earnings ~~and~~per ~~offer~~share ~~quotations~~is ~~for~~recognized ~~the~~on ~~penny stock,~~ the ~~compensation~~use of the ~~broker-dealer~~proceeds ~~and~~that ~~its~~could ~~salesperson~~be inobtained ~~the transaction and~~upon ~~monthly~~exercise ~~account statements showing the market value~~ of ~~each~~options, ~~penny~~warrants ~~stock~~and ~~held~~similar ~~in the customer’s account~~instruments. ~~The~~It ~~bid~~assumes ~~and~~that ~~offer quotations, and~~ the ~~broker-dealer~~proceeds ~~and salesperson~~would ~~compensation information, must~~ be ~~given~~used to ~~the~~purchase ~~customer~~common ~~orally~~shares ~~or in~~at ~~writing prior to effecting~~ the ~~transaction~~average ~~and~~market ~~must~~price beduring ~~given to~~ the ~~customer~~period. ~~in writing~~As ~~before~~at orDecember ~~with~~31, ~~the~~2014 ~~customer’s~~and ~~confirmation. In addition~~2013, the ~~penny~~basic ~~stock rules~~earnings ~~require~~per ~~that~~share ~~prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock~~ is aequal ~~suitable investment for the purchaser and receive the purchaser’s written agreement~~ to ~~the transaction. These disclosure requirements~~diluted ~~may~~earnings ~~have~~per ~~the~~share ~~effect~~as ofthere ~~reducing~~were ~~the~~no ~~level~~dilutive ofinstruments ~~trading~~outstanding ~~activity~~as inat ~~the~~December ~~secondary market for the stock that is subject to these penny stock rules. Consequently~~31, ~~these~~ ~~penny~~2014 ~~stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in~~ and ~~limit the marketability of our common shares~~2013.

~~FINRA~~Revenue ~~sales~~recognition ~~practice requirements may also limit a stockholder’s ability to buy and sell our stock.~~

InThe ~~addition~~Company’s torevenue ~~the~~recognition policies ~~“penny~~are ~~stock”~~in ~~rules~~compliance ~~described~~with ~~above,~~SEC ~~the Financial~~Staff ~~Industry~~Accounting ~~Regulatory~~Bulletin ~~Authority~~ (~~known as~~ “~~FINRA~~SAB”) ~~has~~104 ~~adopted rules~~(codified ~~that require that~~ in ~~recommending~~FASB anASC ~~investment~~Topic to480). aCoal ~~customer, a~~sales ~~broker-dealer~~revenues ~~must~~represent ~~have~~sales ~~reasonable grounds for believing that the investment is suitable for that customer. Prior~~ to ~~recommending~~individual ~~speculative low priced securities to their non-institutional~~ customers, ~~broker-dealers~~who ~~must~~sold ~~make reasonable~~the ~~efforts~~coal to ~~obtain~~coal ~~information~~processing ~~about the customer’s financial status~~companies, ~~tax~~ ~~status,~~power ~~investment~~stations ~~objectives~~ and ~~other~~steel ~~information~~factories. ~~Under interpretations~~ ofSales ~~these~~revenue ~~rules,~~is ~~FINRA~~recognized ~~believes~~when ~~that there is~~ a ~~high~~formal ~~probability~~arrangement ~~that~~exists, ~~speculative low~~which ~~priced~~is ~~securities~~generally ~~will~~represented ~~not~~by bea ~~suitable~~contract ~~for~~between atthe ~~least some customers. FINRA~~Company ~~requirements~~and ~~make~~the itbuyer; ~~more~~the ~~difficult~~price ~~for~~is ~~broker-dealers~~fixed toor ~~recommend~~determinable; ~~that~~title ~~their customers~~has ~~buy~~passed ~~our~~to ~~common~~the ~~shares~~buyer, which ~~may~~generally ~~limit~~is ~~your~~at ~~ability~~the totime ~~buy~~of ~~and~~delivery; ~~sell~~no ~~our~~other ~~stock~~significant ~~and~~obligations ~~have~~of anthe ~~adverse~~Company ~~effect~~exist onand ~~the~~collectability ~~market~~is ~~for~~reasonably ~~our shares~~assured.

~~ITEM~~Cost ~~1B.~~of ~~UNRESOLVED~~revenue ~~STAFF COMMENTS~~

~~Not~~Cost ~~Applicable~~of revenue for the year ended December 31, 2013 consists primarily of the market price for the service rendered. There is no Cost of revenue for the year ended December 31, 2014.

~~ITEM~~Fair 2.value ~~PROPERTIES~~of financial instruments

~~Executive~~The ~~Offices~~estimated ~~and~~fair ~~Address~~values for ~~Service~~financial instruments under ASC Topic 825-10, Financial Instruments, are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of the Company’s financial instruments includes cash and cash equivalents, receivables, accounts payable and accrued liabilities, asset retirement obligation, due to a related party and term loan. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.

Our current address for the principal place of business is located at Xiamen City, Si Ming District, Jia He Road No.25, Xinjing Centre, Unit C2606, PRC China 361009. We paid a monthly rent of RMB11,042 to an unrelated party. F-12

332 SIGNIFICANT ACCOUNTING POLICIES (Continued)

~~Properties~~Fair value of financial instruments (Continued)

The ~~Shangzhai~~Company ~~Coal~~adopted ~~Mine~~ASC Topic 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in US GAAP, and expands disclosures about fair value measurements.

WeASC ~~own~~Topic ~~100%~~820-10 ~~equity~~does ~~interest~~not inrequire ~~the Fujian Huilong coal~~any ~~property,~~new ~~located~~fair atvalue ~~Yongding County~~measurements, ~~Fujian~~but ~~Province,~~provides ~~People’s~~guidance ~~Republic~~on ~~of China,~~how ~~about~~to 30measure kmfair ~~south~~value ofby ~~the~~providing ~~nearest~~a ~~major~~fair ~~town,~~value ~~Longyan~~hierarchy ~~City,~~used ~~and~~to ~~about 130~~classify kmthe ~~northwest~~source of ~~Xiamen,~~the ~~a major coastal port for Fujian Province~~information. The ~~nearest village,~~fair ~~Shangzhai,~~value ishierarchy ~~about~~distinguishes ~~1.5 km away. The road~~ between ~~this~~assumptions ~~property~~based ~~and Shangzhai~~on ~~village~~market isdata ~~paved.~~(observable ~~Provincial Highway 203 passes through the village~~inputs) and isan inentity’s ~~turn~~own ~~connected~~assumptions to(unobservable ~~a recently constructed freeway~~inputs). The ~~nearest~~hierarchy ~~rail access~~consists isof ~~about~~three ~~15 km away at Canton City.~~levels:

~~The~~Level ~~Shangzhai~~one ~~coal~~– ~~property~~Quoted ismarket ~~comprised of a mining license~~prices ~~about 5.7 km2~~ in ~~area.~~active ~~Currently,~~markets ~~we are producing about 150,000 t of coal annually from eight coal seams in two underground operating areas. We applied~~ for aidentical ~~new~~assets ~~mining~~or permit to expand our mining area to 7.5 km2 in order to increase the amount of coal mined. As of May 13, 2011, we obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by our existing mining permit, which also allows us to mine at different mining levels. liabilities;

~~The~~Level ~~climate~~two in– ~~this~~Inputs ~~part~~other ~~of China is semi-tropical. The climate~~than ~~along~~level ~~the~~one ~~coastal~~inputs ~~area~~that ~~of the province is semi-tropical (hot in the summer, and cool in winter). Mean temperatures range from about 84°F (29°C) in July to about 52°F (11°C) in January. There~~ are ~~three~~either ~~seasons:~~directly ~~November~~or ~~through~~indirectly ~~February is the cool season, March through May, the warm season~~observable; and ~~June through October, the hot season. The growing period lasts throughout the year; likewise, mining operations are possible on a year-round basis.~~

~~The~~Level ~~Shangzhai~~three ~~coal~~– ~~property~~Unobservable ~~has sufficient surface rights for~~inputs ~~current~~developed ~~and~~using ~~anticipated~~estimates ~~mining operations, as well as sufficient power, water,~~ and ~~personnel. The surface rights relate to the rights relating to the mining facilities on the surface. These surface rights are distinct from the rights conveyed in our existing mining license~~assumptions, which ~~allow~~are usdeveloped toby ~~mine for coals underground. The mine is connected to~~ the ~~state~~reporting ~~power~~entity ~~grid~~ and areflect ~~river~~those ~~flows through~~assumptions ~~the~~that ~~Shangzhai~~a ~~coal property. This region of Fujian has numerous coal~~market ~~mining~~participant ~~operations~~would ~~and a large skilled workforce~~use.

~~History~~For the years ended December 31, 2014 and 2013, the fair value of ~~Exploration~~cash and ~~Development~~cash equivalents was measured using Level one inputs.

The ~~earliest~~book ~~documented~~values ~~exploration~~of incash ~~the~~and ~~area~~cash ~~dates from 1950~~equivalents, toaccounts ~~1960~~receivable, ~~when~~accounts ~~Fujian~~payable ~~Province~~and ~~Coal~~accrued ~~Exploration~~liabilities ~~Team~~and ~~121~~amounts ~~carried~~due ~~out~~to ~~regional exploration~~a ~~for~~related ~~coal.~~party ~~Exploration~~approximate ontheir ~~the~~respective ~~Shangzhai coal property itself began in~~fair ~~1989~~values bydue to the ~~same~~short-term ~~exploration~~nature ~~team as part~~ of athese ~~regional evaluation that was carried out until 1994~~instruments. ~~Part~~Items ofidentified ~~this~~are ~~exploration~~measured ~~consisted of driving adits so that production began~~ at ~~almost~~fair ~~the~~value ~~same~~on ~~time~~a ~~that~~recurring ~~exploration was initiated~~basis.

~~Over~~There ~~the~~were ~~period~~no ofassets ~~1989~~or toliabilities ~~2003,~~measured ~~this~~at ~~team~~fair ~~excavated an unknown~~value ~~number~~on ofa ~~trenches~~non-recurring ~~and~~basis ~~underground~~during ~~development, as well as drilled 26 core holes. In 2000, with increasing concern about mine safety,~~ the ~~government rescinded~~years ~~the~~ended ~~mining~~December ~~licence that was issued to the initial operator whose operational procedures were sub-standard. Details pertaining to the amount of exploration~~31, ~~development,~~2014 and ~~extraction by the previous owner are not known~~2013.

34Segment information

~~Fujian~~Operating ~~Huilong~~segments ~~incorporated~~are ~~and~~reported ~~obtained the business licence on August 4, 2005 and first mining license was obtained~~ in ~~April of 2006,~~a ~~approximately~~manner ~~2.7~~consistent ~~km2 in area and~~ with ~~an annual permitted production rate of 60,000 t, and have been in operation ever since. In 2005,~~ the ~~license area~~internal ~~was~~reporting ~~expanded~~provided to ~~its present size of approximately 5.7 km2 with an annual permitted mining rate of 90,000 t. Having rights to legally extract stated amount of coal does not guarantee reserves or~~ the ~~amount~~chief ~~that~~operating ~~may~~decision ~~be economically~~maker ~~extracted.~~whose Wemembers ~~have~~are ~~not~~responsible ~~conducted any drilling or conducted any~~for ~~other~~allocating ~~exploration~~resources onand ~~the~~assessing ~~property~~performance ~~that~~of ~~is subject to~~ the ~~existing~~operating ~~mining permit~~segments.

~~Geology~~Recent accounting pronouncements

~~The~~In ~~Shangzhai~~February ~~coal~~2013, ~~property~~the ~~contains~~FASB ~~eight~~issued ~~coal~~ASU 2013-02, ~~seams~~"Comprehensive ~~of Permian~~Income ~~age~~(Topic ~~that~~220), ~~are~~Reporting ~~mined~~of ~~commercially~~Amounts ~~within~~Reclassified aOut ~~mining~~of ~~licence~~Accumulated ~~that~~Other ~~measures about~~Comprehensive 5Income".7 The ~~km2~~amendments indo ~~area.~~not ~~The~~change ~~eight~~the ~~commercial~~current ~~seams~~requirements ~~(numbered~~for 3,reporting 5,net ~~7, 9,~~income ~~23,~~or ~~24,~~other 28comprehensive ~~Upper~~income ~~and~~in ~~28)~~financial statements. However, ~~are~~the ~~among~~amendments ~~about~~require 24an ~~seams~~entity ~~that~~to ~~occur~~provide ~~within~~information about the ~~Permian~~ ~~age~~amounts ~~Tongziyan~~reclassified ~~Formation.~~out ~~The~~of ~~strata~~accumulated ~~have~~other ~~been~~comprehensive income ~~deformed~~ by ~~low-angle thrusting~~component. ~~and~~In ~~folding.~~addition, ~~This~~an ~~deformation~~entity ~~has~~is ~~resulted~~required into present, either on the ~~division~~face of the ~~mining~~ ~~areas~~statement ~~into~~where ~~northern~~net ~~and~~income ~~southern~~is ~~sectors~~presented or ~~separated~~in bythe anotes, ~~zone~~significant inamounts ~~which structural~~reclassified ~~deformation~~out ~~has~~of ~~removed~~accumulated orother ~~truncated~~comprehensive ~~the~~income ~~coal-bearing~~by ~~strata.~~the respective line

~~Annual Production~~ F-13

~~The~~2 SIGNIFICANT ~~following~~ACCOUNTING ~~table~~POLICIES ~~shows~~(Continued) ~~the annual sale and production volume from our Shangzhai coal mine and the average sale price before tax per ton for our coal for the last two years.~~

Year	Annual Sale and Production Volume (t)	Average Sale Price (US$)
2010	156,303	87
2011	134,668	107
2012	114,000	112

Recent accounting pronouncements (Continued)

~~Coal~~items ~~Reserve~~of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S.GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The pronouncement is effective for fiscal years and interim periods ending after December 15, 2012.The adoption of this pronouncement doesn’t have a material effect on the Company's consolidated financial position or results of operations.

WeOther ~~retained~~accounting ~~Wardrop~~pronouncements ~~Engineering Inc., an independent firm, to prepare a technical report in compliance with National Instrument 43-101 on the Shangzhai coal property. The information~~ that ~~follows relating to the Shangzhai~~ ~~coal~~have ~~mine~~been isissued ~~derived,~~or ~~for~~proposed ~~the~~by ~~most part, from, and in some instances is an extract from,~~ the ~~technical~~FASB ~~report~~or ~~dated~~other ~~May~~standards-setting ~~10,~~bodies ~~2011,~~that ~~authored~~do bynot ~~Greg~~require ~~Mosher, P.Geo,~~adoption ~~Wenchang~~until ~~Ni,~~a ~~P.Eng.,~~future ~~and~~date ~~Doug Ramsey, P.Eng. of Wardrop Engineering Inc.~~are innot ~~respect~~expected ofto ~~the~~have ~~Shangzhai~~a ~~coal~~material ~~property.~~impact Aton the ~~time~~Company’s offinancial ~~the~~statements ~~preparation~~upon ~~of the technical report, these authors were independent of our company and were a “qualified persons”, as that term is defined in National Instrument 43-101~~adoption.

~~Portions of the following information are based on assumptions,~~3 DISCONTINUED qualifications and procedures which are not fully described herein. Reference should be made to the full text of the technical report on the Shangzhai coal property which has been filed with certain Canadian securities regulatory authorities pursuant to National Instrument 43-101 and is available for review at www.sedar.com.OPERATIONS

~~The~~On ~~Shangzhai~~December ~~coal~~19, ~~mine’s~~2013, ~~coal~~the ~~reserves~~Company ~~as reported by Wardrop~~sold ~~Engineering~~its ~~Inc.~~100% ~~presented~~equity ~~here~~interest ~~comply with National Instrument 43-101 Standards of Disclosure for Mineral Projects. The information we have provided~~ in ~~this~~Dragon ~~Form~~International ~~8-K~~and isits ~~presented~~wholly inowned ~~accordance~~subsidiary ~~with~~Fujian ~~the~~Huilong ~~requirements~~to ~~of Industry~~an ~~Guide~~independent 7.third ~~However,~~party ~~information concerning the resources estimates~~at ~~contained~~a incash ~~this~~consideration ~~report may not be comparable to information made public by United States companies subject to the reporting and disclosure requirements~~ of ~~the~~ ~~SEC~~US$129,509 ~~specifically~~equal ~~the~~to ~~SEC’s~~HKD ~~Industry Guide 7~~1,000,000. ~~National~~The ~~Instrument~~Company ~~43-101~~recognized is a ~~rule~~gain ~~developed~~on by the ~~Canadian~~disposal ~~Securities~~of ~~Administrators~~Dragon ~~that establishes~~International ~~standards~~and ~~for~~Fujian ~~all~~Huilong ~~public disclosure an issuer makes~~ of ~~scientific and technical information concerning mineral projects. Unless otherwise indicated~~US$321,695 ~~all~~which ~~reserve estimates~~has ~~contained in this report have~~ been ~~prepared~~included in ~~accordance~~consolidated ~~with National~~statement ~~Instrument~~of ~~43-101.~~operations ~~These~~as ~~standards~~net ~~differ~~loss ~~significantly~~ from ~~the~~discontinued ~~requirements~~operations offor the ~~SEC,~~year ~~and~~ended ~~reserve~~December ~~information~~31, ~~contained herein may not be comparable to similar information disclosed by U~~2013.~~S. companies.~~

35Results of the discontinued operations are summarized as follows:

Based on the report of Wardrop Engineering Inc. dated May 10, 2011, the total remaining coal reserve at the end of 2009 was 1,354,000 t, including 416,000 t of proven coal reserve, and 938,000 t of probable coal reserve. Modified factors mainly include a 25% coal pillar loss rate, 85% panel recovery rate, and 5% dilution rate. Because most of the annual production of 150,000t in year 2010 was produced outside of the 5.7 km2 area covered by our valid mining permit (permit number: 3500000620055), the coal reserve estimate as of December 31, 2010 remained at approximately 1,354,000 t. The coal production of 134,668 t in 2011 was conducted within the parameter stated in the mining permit. The remaining coal reserve as of December 31, 2012 still pending for the geological report to be issued from an independent and qualified Canada based geologist company, Wardrop Engineering Inc. (the “Wardrop”). Because the scope of Wardrop’s work on the NI-43-101 technical report covered 5.7 km2 area of the mining permit numbered 3500000620055, which provides for an annual production rate of 90,000 t/a and is in good standing until April 2016, but Wardrop noted that Fujian Huilong’s production was over 200,000 t in year 2009 and about 150,000 t in year 2010, and that portions of Fujian Huilong’s mine development were situated outside the boundaries of the 5.7 km2 mining permit, accordingly, it was Wardrop’s opinion that Shangzhai should renew the mining permit as soon as possible to verify the legality and safety of the mine. As of May 13, 2011, Shangzhai has obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by its existing mining permit, which also allows it to mine at different mining levels. As of May 13, 2011, Shangzhai has obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by its existing mining permit, which also allows it to mine at different mining levels.

	2013
	$
Revenue		7,038,626
Loss before tax		(17,014,630	)
Gain on disposal		321,695
Income tax		(60,169	)
Net loss from discontinued operations		(16,753,104	)

~~Summary~~Assets and liabilities of ~~Underground~~the ~~Coal~~discontinued ~~Reserves~~operation as of the ~~December~~disposal ~~31, 2010(1)~~date were summarized as follows:

Classified Coal Reserves (t)		Total Coal Reserves (t)
		$
Proven	Probable
Cash and cash equivalents			63,757
416,000	938,000	1,354,000
Receivables			1,424,383
Property, Plant, equipment and mining rights			1,201,195
Assets of discontinued operations			2,689,335
Payables			863,510
Asset retirement obligation			414,293
Liabilities of discontinued operations			1,277,803
Net assets of discontinued operations			1,411,532

~~Note~~ F-14

~~(1) The remaining coal reserve as of December 31,~~3 DISCONTINUED ~~2012~~OPERATIONS ~~still pending for the geological report to be issued from an independent and qualified Canada based geologist company, Wardrop Engineering Inc.~~ (~~the “Wardrop”~~Continued)

~~Our~~Reconciliation ~~Mining~~of ~~Operations~~gain on disposal is as follows:

The Shangzhai coal property is comprised of Mining Licence No. 3500000620055, is 5.7 km2 in area and is held in the name of Fujian Huilong. This licence includes an earlier, smaller licence that is approximately 2.7 km2 in area. The licence was issued in April 2006 and remains in good standing until April 2016. As of May 13, 2011, we have obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by our existing mining permit, which also allows us to mine at different mining levels.

	$
Fair value of consideration		129,509
Less: carry amount of net asset at date of disposal		1,411,532
Add: reclassification from reserve and other comprehensive income to profit and loss		1,603,718
Gain on disposal		321,695

The Shangzhai coal mine located in the Shangzhai coal property is a typical multi-seam coal mine with decline shaft access that employs longwall mining with a low degree of mechanization. The Shangzhai coal mine operates on the eight thin coal seams. The thicknesses of coal seams seldom exceeds 1 m. 4 RECEIVABLES

The mine exploits eight coal seams that do not outcrop on the Shangzhai coal property but are of regional extent; therefore the coal resource is more extensive than the Shangzhai coal property. The Shangzhai coal property does, however, contain all mine development and storage as well as all related infrastructure, including explosives storage and an electrical substation.

	December 31,		December 31,
	2014		2013
	$		$

Receivable from disposal of subsidiaries		128,914		129,509
Others ⁽ⁱⁱ⁾		200,000		201,290

		328,914		330,799

The main facilities at the Shangzhai coal mine include the north main shaft, the south main shaft, the north auxiliary shaft with two axial fans, the south auxiliary shaft, and the south vent shaft with two axial fans. Other ancillary facilities include an air compressor room, four ground surface winch rooms, two coal storage sheds, one old coal gangue storage area, one new coal gangue storage area, two mining water sedimentation tanks, office buildings, dormitories, kitchens, and canteens, etc. Notes:

(i) The ~~Shangzhai~~Company ~~coal~~does ~~mine~~not ~~has~~hold ~~two~~any ~~operation~~collateral ~~areas~~over –these ~~North and South – divided by the F12 fault~~balances. ~~Both~~The ~~the~~average ~~North~~age ~~and~~of ~~South~~these ~~areas~~receivable ~~have independent ventilation and hoisting systems. The main decline shafts~~ are ~~equipped~~ ~~with~~more ~~winches~~than toone ~~pull~~year ~~and~~but ~~lower~~less ~~mine~~than ~~cars~~two ~~on tracks between each production level to surface~~years. ~~Production~~(ii) ~~levels~~Unsecured, ~~which~~interest ~~generally~~free ~~have~~and 40repayable ~~m vertical~~on ~~interval, are grouped in a system with respect to the decline~~demand.

365 PROPERTY, EQUIPMENT AND MINE DEVELOPMENT COSTS

We utilize a central methane monitoring and controlling system. The mine dispatcher can continuously monitor the methane level of major underground working places and, in the event of unsafe methane levels, appropriate action can be taken immediately.

			Accumulated		Net book
	Cost		amortization		value
	$		$		$
December 31, 2014
Motor vehicles		260,626		29,880		230,746

Total		260,626		29,880		230,746

December 31, 2013
Motor vehicles		-		-		-

Total		-		-		-

~~Since~~During ~~2007,~~ the ~~Shangzhai~~year ~~coal~~ended ~~mine~~December ~~production capacity has been progressively increased from approximately 50~~31,~~000~~ ~~t/a to 240,000 t/a, with~~2014 ~~the exception of a decrease in 2010 to 156,000 t/a~~ and ~~further decrease in 2012 to 114~~2013,~~000t/a~~ ~~due to~~ the ~~continuous~~Company ~~construction~~charged ofamortization ~~mining shafts~~ and ~~other facilities.~~depreciation ~~Most~~expenses of ~~the coal was produced from the Southern area~~$29,880 ~~since~~and ~~mine development~~$nil ~~was not finished in the Northern area. However, we performed a lot of mine development in the Northern area, which is not subject~~ to the ~~existing mining~~general ~~permit~~Administrative, ~~and prepared more than enough working places for extending the permitted production capacity~~respectively.

~~Although~~The ~~the mine produced more than 100~~property,~~000~~ tequipment ofand ~~coal from 2009 to 2012, this production capacity may not be sustainable because portions of the~~ mine development costs ~~are~~were ~~situated outside~~ the ~~boundaries~~assets of ~~the~~Dragon ~~valid~~International ~~mining permit.~~and ~~According~~Fujian ~~to Wardrop Engineering Inc~~Huilong., ~~the~~On ~~Shangzhai~~December ~~coal mine should have a production capacity of only 90~~19,~~000~~ ~~t/a under the current valid mining permit. Government authorities may order the Shangzhai coal mine to be closed or limited at any time~~2013, ~~since~~ the ~~area~~Company ofdisposed ~~active~~its ~~mining~~subsidiaries ~~currently exceeds the scope~~Dragon ofInternational ~~the~~and ~~mining~~Fujian ~~permit.~~Huilong ~~However,~~and ~~our~~no ~~management believes that this risk has been minimized since as of May 13~~property, ~~2011,~~equipment ~~we have obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (~~and ~~with~~mine adevelopments ~~small~~were ~~overlapping~~included ~~area~~in ~~with)~~ the ~~5.7~~consolidated ~~km2~~balance ~~area covered by~~sheets ~~our~~as ~~existing mining permit, which also allows us to mine~~ at ~~different~~December ~~mining levels.~~31 ~~We initially applied for a mining permit covering an area of 7~~2013.5 km2, including area covered by our past active mining operations. The new mining permit issued to us covers an area of 6.8 km2, which is the 7.5 km2 area we applied for less the area exhausted by our past mining activities. After receiving this new mining permit, we intend to conduct our mining operations only within the areas covered by our valid mining permits.

Our annual permitted mine production rate increased gradually since 2006 from 60,000 t/a to the current 90,000 t/a with full support of the local mining authorities. At the annual permitted mine production rate of 90,000 t/a, our mine operation is consider larger than the local artisan mining operations, which are target of government enforcement. As we expanded of our actual mine production beyond the 90,000 t/a, our mine production infrastructure has also been steadily developed to support the excess production. It is our management’s view that our current mine development can support an annual production of 300,000 t/a. Our management’s view of our production capability being 300,000 t/a is based on the facts that when we expanded our mining operation through the years, we have developed our mine production infrastructure with a goal of exceeding 300,000 t/a and also that we were able to produce 134,668t and 114,000 of coal for years 2011 and 2012 respectively. Our management is also of the view that this annual production capability of 300,000 t/a is based on mining operations only in the areas covered by current valid mining permits. We intend to and are in the process of applying for an increase to our annual permitted mine production rate to 300,000 t/a in stages over the next few years. The application process includes submitting an application and plan for the production increase, followed by the review of records and inspection by officials onsite. The factors in determining whether an application to increase annual production rate would be approved include past production records, actual production capacity, adequacy of equipment and infrastructure and past safety records. The government authorities may approve increase annual production rate in stages and with requirements of trial period. Because of the condition of our mining operation, we are confident that we will be able to secure future increase to our permitted rate of annual production from the authorities, if not directly to 300,000 t/a, to a rate of 180,000 t/a as the first stage increase. The likelihood of the authorities shutting down our mine for nonF-compliance is relatively small. In May of 2011, we also obtained a new mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by its existing mining permit, which also allows it to mine at different mining levels. This new mining permit also allows us to produce at an annual production rate of 90,000 t/a from the area covered by this ming permit. Accordingly, we are currently able to produce 90,000 t/a from each of the areas covered by our two mining permits. Should the authorities indicate to us that strict compliance with permitted mine production rate is required, we intend to limit our mine production to 90,000 t/a from each of the areas covered by our two mining permits until such time when our annual permitted mine production rate is increased.15

Wardrop Engineering Inc. estimated that the Shangzhai coal mine had a remaining coal reserve of 1,354,000 t as of Dec 31, 2009. Because most of the mining activity in 2010 was performed outside the area covered by our valid mining permit, the remaining coal reserve in the 5.7 km2 area is essentially the same as that at the end of 2009. The coal production of 134,668 t in 2011 was conducted within the parameter stated in the mining permit. The remaining coal reserve as of December 31, 2011 still pending for the geological report to be issued from an independent and qualified Canada based geologist company, Wardrop Engineering Inc. (the “Wardrop”).Wardrop recommends that Shangzhai should renew the mining permit as soon as possible to verify the legality and safety of the mine. As of May 13, 2011, we obtained another mining permit (C3500002011051120112047) for an area of 6.8 ACCOUNTS ~~km2 that is~~PAYABLE ~~adjacent~~AND toACCRUED ~~(and~~LIABILITIES with a small overlapping area with) the 5.7 km2 area covered by our existing mining permit, which also allows us to mine at different mining levels. Under the current valid mining permit, the life of mine will be approximately 15 years at a production rate of 90,000 t/a. The life of mine will be re-evaluated when Shangzhai renewed its mining permit with updated mining area and production rate. The remaining coal reserve as of December 31, 2012 still pending for the geological report to be issued from an independent and qualified Canada based geologist company, Wardrop Engineering Inc. (the “Wardrop”)

37The following is a summary of accounts payable and accrued liabilities:

Growth Strategy

	December 31,		December 31,
	2014		2013
	$		$
Accounts payable		8,893		39,874
Staff costs / wage payable		27,196		29,626
Accrued liabilities		168,674		22,019
Advances		177,678		193,558
Other payable		13,226		1,295
		395,667		286,372

We plan to increase our coal reserves by: (i) performing further exploration programs in the current valid mining permit to upgrade our coal resources into the coal reserves; and (ii) expanding the mining boundary, and conducting corresponding feasibility studies with a new mining permit to increase the coal reserves. As of May 13, 2011, Shangzhai has obtained a mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 AMOUNTS ~~km2~~DUE ~~area covered~~TO byRELATED its existing mining permit but also allows it to mine at different mining levels. We expended approximately US$78,125 (RMB500,000) to retain Fujian Province Coal Exploration Team 8 to investigate preliminarily the geological characteristics, coal seam distribution, structure, thickness, lithology and formation. A preliminary coal resource estimate has been completed on this 6.83 km2 mining area. In addition, we also expended approximately US$70,313 (RMB450,000) to commission Fujian Huaxia Architecture Design Institute to complete a 300,000 t/year feasibility study. Shangzhai is planning to update the current NI 43-101 report prepared by Wardrop beginning in November of 2011 to incorporate the coal resource and reserves in the 6.83 km2 area, which is expected to be in compliance with the CIM standards (the standards set forth by Canadian Institute of Mining, Metallurgy and Petroleum). We anticipate that we will need to spend approximately US$60,000 to update the NI 43-101 report. We anticipate that the updated NI 43-101 report will be finalized by June 2012. The National Instrument 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects, designed to improve the accuracy and integrity of the information provided by mining issuers. PARTIES

Permits and Other Regulatory Requirements

	December 31,		December 31,
	2014		2013
	$		$
Amounts due to SGB C&C Investment		11,210		12,212
Amounts due to a director - Gu Chang		317,201		-
		328,411		12,212

~~Permits~~8 LOAN PAYABLE

WeThe ~~operate~~following ~~the~~is ~~Shangzhai~~a ~~coal~~summary ~~mine~~of ~~pursuant~~term ~~to the following 7 permits~~loan:

Name of Permit	Permit No.	Expiry Date	Limits (Area)	Issued by
		December 31, 2014			December 31, 2013
Business Licence	350000100007198	August 2035	N.A.	Administration for Industry and Commerce of Fujian Province
		$			$
Certificate of Organization Code	77753680-8	August 2012	N.A.	Fujian Bureau of Quality and Technical Supervision
Interest bearing loan at 15% per annum, unsecured and due on demand			58,183			56,340
Tax Licence	350822777536808	Permanent	N.A.	Tax Department of Fujian Province
Total			58,183			56,340
Mining Permit	*3500000620055	April 2016	5.7 km2 & above +328 masl	Natural Resource Department of Fujian Province
Mining Permit	C3500002011051120112047	May 2021	6.8 km2 from 700 m to -300 m	Natural Resource Department of Fujian Province
Coal Production Permit	203508220136	December 2031	N.A.	Economic and Trade Commission of Fujian Province

38During the years ended December 31, 2014 and 2013, the Company accrued or paid interest expense of $6,755and $1,744 in connection with the term loan, respectively.

~~Safety~~As ~~Production~~of ~~Permit~~December ~~(2005)F107(G1)~~31, ~~February~~2014, ~~2016~~the ~~N.A.~~weighted average ~~Coal~~interest ~~Mine~~rate ~~Safety~~on ~~and~~short-term ~~Supervision~~obligations ~~Department~~outstanding ofis ~~Fujian~~15% ~~Province~~(2013: 15%)

*Note: the scope of Wardrop9 STOCKHOLDERS’s ~~work is limited to the area~~EQUITY ~~covered by mining permit 3500000620055 only.~~

~~Wardrop~~Authorized: Engineering Inc. recommended that we should renew and expand the mining permit as soon as possible to guarantee that mine production is legal and to ensure safe operation. We submitted applications to the authorities to expand our mining area for an additional 7.5 km2 and increase production capacity in May of 2010. As of May 13, 2011, we have obtained another mining permit (C3500002011051120112047) for an area of 6.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by our existing mining permit, which also allows us to mine at different mining levels.

AUnlimited ~~notice~~number ~~issued in 2006 by the State Environmental Protection Administration (SEPA) deemed that the Environmental Impact Assessment~~ of acommon ~~coal mine~~shares ~~construction project within an area covered by a coal mine master plan~~without ~~cannot~~par be approved until a planning Environmental Impact Assessment of the coal mine master plan is approved, which management expects to be approved. Since the master plan for the Longyang Longtan – Shizhong coal mine area (which covers the Shangzhai coal mine) was under preparation as of November 2010, there is a risk that an Environmental Impact Assessment for the Shangzhai coal mine expansion will not be approved before the corresponding planning Environmental Impact Assessment is approved. However, we are not sure when the master plan for the Longyang Longtan – Shizhong coal mine area will be finalized so we have no way to assess the likely impact on our Shangzhai coal mine. We intend use commercial reasonable efforts to comply with any additional requirements imposed by the master plan for the Longyang Longtan – Shizhong coal mine area on our Shangzhai coal mine. value

~~Safety~~Unlimited ~~Risk~~number ~~Deposit~~of preferred shares without par value

OnIssued ~~August~~and ~~26,~~outstanding 2005, we paid about US$154,560 (equivalent to RMB 1 million) to the Yongding County Coal Development Company as a representative of the Yongding County Coal Industry Management Bureau. In 2005, the approved capacity of the Shangzhai Mine was 60,000 t/a. Since April 2006, the approved capacity of the Shangzhai coal mine was increased to 90,000 t/a. According to consultation with the Yongding County Coal Industry Management Bureau in November 2010, there is no regulation that specifically requires a coal mine that has paid the safety risk deposit at an originally approved capacity to increase the safety risk deposit once its capacity is increased. In addition, we have received from Yongding County Coal Industry Management Bureau a confirmation that our safety risk deposit will not increase as the safety risk deposit was an one-time fee. As we have already received this confirmation from Yongding County Coal Management Bureau, we believe the risk of any fines or other penalties being assessed against our company as a result of any failure to properly pay safety risk deposit is minimal.

~~Ecological~~As ~~Environment~~at ~~Rehabilitation~~December ~~Deposit~~31, 2014 and 2013, 373,793,578 common stocks issued and outstanding which were derived from the following transactions:

~~The~~Prior ~~Fujian~~to ~~Provincial~~the ~~Mine~~RTO ~~Ecological~~with ~~Environment~~Dragon International ~~Rehabilitation~~and ~~Deposit Management Measures (effective~~ as ofat ~~January~~May 111, ~~2007) requires~~2011, ~~every~~SGB ~~mining~~had ~~license~~24,502,446 ~~holder~~common ~~within~~shares ~~Fujian~~issued ~~Province~~and ~~to:~~ outstanding.

~~prepare a Mine Ecological Environment Rehabilitation Plan;~~ F-16

~~sign~~On May 11, 2011, SGB completed a ~~Mine~~reverse acquisition ~~Ecological~~transaction ~~Environment~~with ~~Rehabilitation~~the ~~Agreement~~shareholders of Dragon International pursuant to which SGB acquired 100% of the issued and outstanding capital stock of Dragon International in exchange for an aggregate of 220,522,000 common shares of SGB, which constituted 90% of SGB’s issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the reverse acquisition. Prior to the acquisition, SGB has no business with a minimal assets and liabilities which did not meet the ~~Fujian~~definition ~~Land~~of a business, therefore, the reverse take-over of SGB by Dragon International has been accounted for as a capital transaction which is deemed Dragon International acquired SGB by issuance of 24,502,446 common shares (issued and ~~Resources~~outstanding ~~Bureau;~~prior to the RTO) for its net assets of $10,789.

~~pay~~Prior ato ~~Mine~~the ~~Ecological~~RTO ~~Environment~~and ~~Rehabilitation~~on ~~Deposit~~February 21, 2011, Dragon International completed the acquisition of Fujian Huilong and for accounting purpose, the acquisition has been accounted for using the continuity of interest method, which recognizes Fujian Huilong as the successor. The net assets of Dragon International totaling $1,277,694 as at the date of acquisition have been accounted as recapitalization into Fujian Huilong.

~~The~~Fujian ~~Mine~~Huilong ~~Ecological~~has ~~Environment~~a ~~Rehabilitation~~registered ~~Deposit should~~and be paid-in tocapital ~~the~~of ~~Fujian~~$123,913 ~~Province~~(RMB ~~Land~~1,000,000) ~~and~~prior ~~Resources~~to ~~Bureau~~being ~~who~~acquired ~~issued~~by ~~the~~Dragon ~~Mining License~~International. ~~The deposit can be paid in one lump sum, or in partial installments annually.~~

~~The~~As ~~total~~the ~~Ecological~~consolidated ~~Environment~~financial ~~Rehabilitation Deposit for~~statements ~~operating~~is the ~~Shangzhai~~continuation ~~coal~~of ~~mine~~Fujian ~~is about US$596~~Huilong,~~782~~ ~~(equivalent to RMB 3.86 million). We paid about US$179~~therefore,~~035~~ ~~(equivalent~~the toshare ~~RMB~~capital ~~1.16 million (or 30%~~ of ~~the~~ ~~total deposit)) to the~~ Fujian ~~Provincial~~Huilong ~~Land~~has ~~and~~been ~~Resources~~restated ~~Bureau~~to ~~on November~~reflect ~~18,~~the ~~2009. The balance of about US$417~~220,~~747~~522,000 common ~~(equivalent~~shares tothat ~~RMB~~effected ~~2.702826~~the ~~million~~RTO ~~(or~~for ~~70% of~~ the ~~total~~purpose ~~deposit))~~of ~~must~~financial bestatements ~~paid~~presentation ~~to the Fujian Provincial Land~~ and ~~Resources Bureau~~earnings ~~before~~per ~~April~~share ~~2015 (one year ahead of the expiration of the mining license)~~calculation.

39On September 21, 2011, Fujian Huilong’s registered and paid-in capital was increased by $1,925,447 (RMB 12,278,945) to a total of $2,049,360 (RMB 13,278,945) as at December 31, 2012.

~~Environmental~~On December 29, ~~Health~~2011, the Company settled $7,726,148 by agreeing to issue 128,769,132 shares of the common stock of the Company at a deemed price of $0.06 per share. The Company has allotted and ~~Safety~~issued ~~Approvals~~the shares in 2012.

~~Environmental~~10 RELATED ~~Resources~~PARTY Management Shanghai Limited (“ERM”) was commissioned by Wardrop Engineering Inc. to undertake an environmental, health, safety review of the Shangzhai coal mine, which was used by Wardrop Engineering Inc. to complete a technical report on the Shangzhai coal property. ERM identified 13 environmental risks, 4 occupational health and safety risks, and no community (social) risks. According to the technical report of Wardrop Engineering Inc., most of the risks identified by ERM’s review may result in fines below the material threshold (US$250,000), but should not result in immediate shut-down of the operations.TRANSACTIONS

~~ERM~~During ~~recommended~~the ~~that~~year weended ~~apply~~December ~~for the following environmental~~31, ~~health,~~ 2014 and ~~safety approvals~~2013, ~~which were not in place at~~ the ~~time~~Company ofengaged ~~the~~following ~~site visit~~related byparty ~~ERM from October 31, 2010 to November 1, 2010~~transactions:

~~Occupational~~● ~~Disease~~Accrued ~~Hazard~~or ~~Pre-Assessment~~paid $ nil (~~ODHA~~December 31, 2013: $nil); in salaries and bonus to senior officers and directors of the Company;

~~Occupational~~As ~~Disease~~at ~~Hazard~~December ~~Control~~31, ~~Effectiveness~~2014 ~~Assessment~~and ~~(ODHCEA);~~December 31, 2013, following receivable and payable were outstanding:

~~Firefighting~~● ~~Design~~Included ~~approval~~in accounts payable and ~~Firefighting~~accrued ~~Completion~~liabilities, ~~Inspection approval;~~$317,201 (December 31, 2013: $nil) were payable to the senior officers and directors of the Company

~~Water~~● ~~Abstraction~~Included ~~Permit.~~in receivable, $nil was receivable (December 31, 2013: $nil) from a senior officer and director of the Company.

~~Currently~~Also ~~ODHA~~see ~~and~~note ODHCEA systems have not been set up in Fujian province, accordingly, we are unable to complete these assessments as there are no regulatory bodies in Fujian province current responsible for implementation of these systems8. Because the ODHA and ODHCEA systems have not been implemented in Fujian Province, our management does not believe that we are currently in violation of existing rules or laws in this regard. Our management intends to comply with the requirements of ODHA and ODHCEA systems when they are implemented in Fujian Province. However, because these systems are not yet in place, our management is not able to assess the likely length of time and costs that are required for our company to comply with these requirements. We do not know and have not basis to predict when ODHA and ODHCEA systems will be available in Fujian province. We will continue to monitor the status of potential implementation of ODHA and ODHCEA systems in Fujian province closely and be ready for future compliance requirements. However, Shangzhai has incorporated voluntarily the yearly occupational disease examination for coal miners. In addition, Shangzhai pays the work injury insurance at a 30% ration of all the employees without naming beneficiaries. The water abstraction has not been regulated in the Shangzhai mine area. We do not know and have not basis to predict when water abstraction regulations will be implemented in the Shangzhai mine area. We will monitor the status of potential implementation of water abstraction regulations in the Shangzhai mine area closely and be ready for future compliance requirements. When the relevant regulations are in place, Shangzhai intends to apply for these approvals. The water for mine operation is now shared with the local people at a pre-agreed payment. The written contractual agreement between Fujian Huilong and the villagers is valid until June 2016 and provides that Fujian Huilong shall pay Xia Village Charitable Affairs Commission an annual payment of RMB15,000 for the right to share the water resources with Xia Village.

4011 INCOME TAX

~~The~~Grand ~~mine~~China production in 2009 exceeded the permitted production capacity, as well as using a newly constructed coal gangue storage facility that may result in a fine up to about US$31,250 (equivalent to RMB 200,000) and ~~temporarily~~ ~~shut-down~~its ofsubsidiaries ~~mine operation. The management is of the view that the~~are ~~likelihood~~subject of our company being fined or our mine operation being temporarily shut-down because of the use of the newly constructed coal gangue storage facility is small because we have already paid the first instalment of the Ecological Environment Rehabilitation Deposit, which we believe is being applied to ~~ensure~~income ~~our~~tax ~~use~~laws ofin ~~the~~their ~~newly~~respective ~~constructed~~tax coal gangue storage facility will not have severe environmental impact. Another material level risk is the lack of the firefighting design approval or firefighting completion inspection approval has not been presented during the site visit made by ERMjurisdictions, ~~retained by Wardrop to undertake an EHS and community review of the Shangzhai Mine~~ which is part of the independent technical report in accordance with the NI 43-101. The lack of firefighting design approval may result in a fine up to about US$46,875 (equivalent to RMB 300,000) and shut-down for non-compliance with the firefighting law. The original firefighting approval documents had been submitted to and filed in Longyan Coal Administrator Bureau in the application progress for the previous expansion in 2008 on the 5.7 km2 area. Fujian Huilong provided the 2008 expansion approval document issued by Longyan Coal Administrator Bureau “Longmeianjian 2008 (34)”. The approval and inspection occurred in the 5.7 km2 area covered by our mining permit No. 3500000620055. We believe that the risks of not receiving the environmental, health and safety approvals in connection with our coal mining operations outside of the area of your mining permits are ~~now minimal because we have obtained~~ the ~~mining~~same ~~permit~~as ~~for~~their anrespective ~~area~~place of 6incorporation.8 km2 that is adjacent to (and with a small overlapping area with) the 5.7 km2 area covered by our existing mining permit, which also allows it to mine at different mining levels, and we intend to limit our mining operations the areas covered by our mining permits only in the future. The file shows the inspection and acceptance for the 5.7 km2 area covered by mining permit No. 3500000620055 were made in four disciplines: i) safety, ii) mining, iii) ventilation, including methane monitoring system and firefighting system, and iv) mechanics and electrical. Because the approval document issued by Longyan Coal Administrator Bureau “Longmeianjian 2008 (34)” indicated inspection and acceptance of “methane monitoring system and firefighting system”, we believe the likelihood of our company being fined for lack of firefighting design approval is relatively small. We also believe that the inspection and acceptance in the approval document covers firefighting design approval and we currently have no intention of applying for firefighting design approval. The inspection and acceptance for the 6.8 km2 area covered by mining permit C3500002011051120112047 in the following four disciplines: i) safety, ii) mining, iii) ventilation, including methane monitoring system and firefighting system, and iv) mechanics and electrical, is underway right now and we anticipate that we will receive final acceptance in all four disciplines by June of 2012. We believe that because the inspection and acceptance in the four disciplines described above cover firefighting design approval, we will not need to apply separately for firefighting design approval. Accordingly, we currently have no intention of applying for firefighting design approval for the 6.8 km2 area covered by mining permit C3500002011051120112047.

~~According~~Income totax ~~the~~expenses ~~technical~~represents ~~report of Wardrop Engineering Inc., in order to expand capacity of~~ the ~~Shangzhai coal mine, the following~~current ~~environmental,~~tax ~~health, and safety permitting requirements are applicable for mine expansion:~~ expenses.

~~Environmental~~A ~~Impact~~reconciliation ~~Assessment~~of ~~Report~~the ~~and~~income ~~subsequent~~tax ~~approval from the~~expenses ~~appropriate~~is ~~Environmental~~as ~~Protection Bureaus (EPB);~~ follows:

Environmental Completion Acceptance Inspection Investigation and the subsequent approval from the appropriate EPB;

	2014			2013
	$			$
(Loss)/income before income taxes		(216,817	)		(101,901	)
Expected income tax (credits)expenses		(56,372	)		(26,494	)

Adjustments resulting from:
Non-deductible items		-			125,018
Change in estimates		-			-
Rate differences in other jurisdictions		38,969			(12,640	)
Changes in enacted rates		-			-
Other		4,674			-
Change in valuation allowance		12,729			(65,884	)
		-			20,000

~~ODHA Report and subsequent approval from the appropriate Health Bureau;~~ F-17

~~ODHCEA~~Deferred ~~Report~~taxes ~~and~~arise ~~subsequent~~from ~~approval~~temporary differences ~~from~~in the ~~appropriate~~recognition ~~Health~~of ~~Bureau;~~income and expenses for financial reporting and tax purposes. The significant components of deferred tax assets (liabilities) are as follows:

Safety Pre-assessment Report and subsequent approval from the appropriate Safe Production Supervision and Management Bureau;

	2014			2013
	$			$
Deferred tax assets(liabilities):
Operating tax losses carried forward		345,445			358,171
Equipment		-			-
		345,445			358,171
Valuation allowance		(345,445	)		(358,171	)
		-			-

~~Safety~~As ~~Completion~~at ~~Acceptance~~December ~~Assessment~~31, ~~Report~~2014, ~~and~~the ~~subsequent~~Company had ~~approval~~available ~~from the~~for ~~appropriate~~deduction ~~Safe~~against ~~Production~~future ~~Supervision~~taxable ~~and~~income ~~Management~~in ~~Bureau;~~Canada non-capital losses of approximately $1,328,636. These losses, if unutilized, have expiration year until 2034.

~~Firefighting~~During ~~Design~~the ~~Approval~~years ~~and~~ended ~~Firefighting~~December ~~Completion~~31, 2014 ~~Inspection~~and 2013 and ~~approval~~ to the current date, the Company had not received any tax re-assessment from the ~~appropriate~~federal ~~firefighting~~and ~~authority.~~regional governmental authorities.

~~ERM~~12 COMMITMENTS ~~recommended that we comply with these permitting requirements for any future expansion of the Shangzhai coal mine, which we plan to do so.~~

~~ITEM~~As 3.at ~~LEGAL~~December ~~PROCEEDINGS~~31, 2014, the company doesn’t have any capital or operating commitments.

We13 SEGMENT know of no material pending legal proceedings to which our company is a party or of which any of our property is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.INFORMATION

WeSince ~~know~~the ofCompany nodisposed ~~material~~its ~~proceedings in which any director,~~subsidiaries ~~officer~~on orDecember ~~affiliate of our company~~19, or2013 ~~any~~as ~~registered~~disclosed orin ~~beneficial~~note ~~stockholder of~~4, ~~our~~the company, orreassessed ~~any~~its ~~associate~~operations ofand ~~any~~considers ~~such~~the ~~director,~~Company ~~officer,~~had ~~affiliate,~~one orsingle operating ~~stockholder~~segment isand aone ~~party~~georgraphical ~~adverse~~segment toat ~~our~~December ~~company~~31, ~~or has a material interest adverse to our company~~2013.

41The Company derives its revenues from a few key customers. The customers from which more than 10% of total revenue has been derived and the percentage of total revenue from those customers is summarized as follows:

ITEM 4. MINE SAFETY DISCLOSURES

	2014		2013
	$		$

Customer A		-		200,000

Percentage of total revenue		-		100	%

~~Under Section 1503(a) of the Dodd~~F-Frank Wall Street Reform and Consumer Protection Act and under the SEC's recently adopted Item 104 of Regulation S-K, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of the our quarries is subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. We do not own any mines in the United States and as a result, this information is not required. Please refer to the subheading “Mining Safety” beginning on page 17. 18

~~PART~~ITEM II9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS

~~ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~None

~~Market~~ITEM ~~information~~9A. CONTROLS AND PROCEDURES

~~Our~~Disclosure ~~common~~controls ~~shares are quoted on the OTCQB Venture Marketplace of the OTC Markets Group Inc. Our symbol is “SGBHF”~~ and ~~our CUSIP number is 78417V 104.~~procedures

~~Set~~We ~~forth~~maintain ~~below~~“disclosure ~~are~~controls and procedures”, as that term is defined in Rule 13a-15(e), and Rule 15d-15(e) promulgated by the ~~range~~Securities and Exchange Commission pursuant to the Securities Exchange Act of ~~high~~1934, as amended. Disclosure controls and ~~low~~procedures ~~bid~~include ~~quotations~~controls and procedures ~~for~~designed to ensure that information required to be disclosed in our company's reports filed under the Securities ~~period~~Exchange Act ~~indicated~~of as1934 is recorded, processed, summarized and reported bywithin the ~~OTCQB~~time ~~Market.~~periods ~~The~~specified ~~market~~in ~~quotations~~the Securities and Exchange ~~reflect~~Commission’s ~~inter-dealer~~rules ~~prices~~and forms, ~~without~~and ~~retail~~that ~~mark-up,~~such ~~mark-down~~information oris ~~commissions~~accumulated and communicated to our management, including our principal executive officer and ~~may~~our ~~not~~principal ~~necessarily~~accounting ~~represent~~officer, ~~actual~~as ~~transactions~~appropriate, to allow timely decisions regarding required disclosure.

Quarter End	Bid High	Bid Low
12/31/2012	$0.00	$0.00
09/30/2012	$0.00	$0.00
06/30/2012	$0.00	$0.00
03/31/2012	$0.00	$0.00
12/31/2011	$0.00	$0.00
09/30/2011	-	-
06/30/2011	$0.16	$0.00
03/31/2011	$0.10	$0.00

Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our management concluded that as of the end of the period covered by this annual report on Form 10-K, our disclosure controls and procedures were effective.

~~Transfer~~Internal ~~Agent~~control over financial reporting

~~The~~Management's ~~transfer~~annual ~~agent~~report ~~and~~on ~~registrar~~internal ~~for~~control ~~our~~over ~~common stock is~~financial ~~Pacific Stock Transfer Company 500 E. Warm Springs Road, Suite 240, Las Vegas NV 89119 (702) 361-3033.~~ reporting

~~Holders~~Our management, including our principal executive officer, our principal financial officer and our principal accounting officer and our Board of ~~Common~~Directors, ~~Stock~~is responsible for establishing and maintaining a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

AsOur management, with the participation of ~~April~~our 8,principal ~~2013~~executive officer and our principal financial officer, ~~there~~evaluated ~~were~~the 79effectiveness ~~holders~~of our internal control over financial reporting as defined in Rule 13(a)-15(f) and Rule 15d-15(f) as of ~~record~~December 31, 2014. Our management’s evaluation of our internal control over ~~common~~financial ~~stock.~~reporting Aswas based on the framework in Internal Control—Integrated Framework, issued by the Committee of ~~such~~Sponsoring Organizations ~~date~~of the Treadway Commission. Based on this evaluation, ~~373~~our management concluded that our internal control over financial reporting was not effective as of December 31,~~793,578~~ ~~shares~~2014 ~~were~~due ~~issued~~to ~~and~~material weaknesses in our internal control over financial reporting ~~outstanding.~~as follows:

~~Dividends~~● lack of segregation of duties; and

We● ~~have~~inadequate ~~not declared any dividends on our common stock since the inception of our company~~security. There is no restriction in our articles of incorporation and bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

~~Recent~~Our ~~Sales~~management ofcontinues ~~Unregistered~~to ~~Securities;~~review ~~Use~~processes ofand ~~Proceeds~~will make ~~from~~necessary ~~Registered~~changes ~~Securities~~to strengthen our system of internal controls over financial reporting

~~During~~A ~~our~~material ~~fiscal~~weakness ~~year~~is ~~ended~~a ~~December~~deficiency ~~31,~~or ~~2012,~~a wecombination ~~did~~of ~~not sell~~control ~~any~~deficiencies ~~equity~~in ~~securities~~internal ~~that~~control ~~were~~over ~~not~~financial ~~registered~~reporting ~~under~~such ~~the~~that ~~Securities~~there ~~Act~~is ofa ~~1933~~ reasonable possibility that ~~were~~a ~~not~~material ~~previously~~misstatement of ~~reported~~our inannual aor ~~quarterly~~interim ~~report~~financial onstatements ~~Form~~will ~~10-Q~~not orbe inprevented ~~a current~~or ~~report~~detected on ~~Form~~a ~~8-K.~~timely basis.

42 25

~~Securities~~Limitations ~~authorized~~on ~~for~~Effectiveness ~~issuance~~of ~~under equity compensation plans.~~ Controls

Our principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The ~~following~~design ~~table~~of ~~summarizes~~any system of controls also is based in part upon certain ~~information~~assumptions ~~regarding~~about the likelihood of future events, and there can be no assurance that any design ~~our~~will ~~equity~~succeed ~~compensation~~in ~~plans~~achieving asits atstated ~~December~~goals 31under all potential future conditions; over time, ~~2012~~controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	Nil	N/A	2,282,044
Equity compensation plans not approved by security holders	Nil	N/A	Nil
Total	Nil	N/A	2,282,044

Changes in Internal Control over Financial Reporting

~~2010~~There ~~Equity~~were ~~Compensation~~no ~~Plan~~changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OnITEM ~~October 27, 2010, our board of directors approved and adopted our 2010 equity compensation plan and on November 30, 2010, our shareholders approve the plan~~9B. ~~Pursuant~~OTHER to the plan, our board of directors may grant stock options or stock awards to employees, directors, officers or consultants of our company or subsidiary. A maximum of 10% of the total issued and outstanding common shares of our company at the time of grant may be issued upon exercise of stock options granted under the plan or as stock awards granted under the plan.INFORMATION

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~None

WePART ~~did not purchase any of our shares of common stock or other securities during our fiscal year ended December 31, 2012.~~ III

ITEM 610. ~~SELECTED~~DIRECTORS, ~~FINANCIAL~~EXECUTIVE ~~DATA~~OFFICERS AND CORPORATE GOVERNANCE

~~Not~~Directors ~~applicable.~~and Executive Officers

~~ITEM~~Our 7directors ~~MANAGEMENT’S~~and ~~DISCUSSION~~executive ~~AND~~officers, their ~~ANALYSIS~~age, OFpositions ~~FINANCIAL CONDITION~~held, ~~AND~~and ~~RESULTS~~duration OFof ~~OPERATION~~such, are as follows:

Results of Operations of SGB International

Name	Position Held with our Company	Age	Date First Elected or Appointed
Shibi Chen	President, Chief Executive Officer and Director	54	July 8, 2013
Peifeng Huang	Chief Financial Officer and Secretary	36
Wensi Lin	Director	62	September 23, 2013
Vincent Xu	Director	30	March 20, 2014
Baozhu Feng	Director	25	March 20, 2014
Quan Gu	Director	39	April 20, 2014
Wei Gu	Director	47	April 20, 2014
Chang Gu	Director	45	April 20, 2014
Sheng Liu	Director	48	December 24, 2014
Peide Wang	Director	38	December 24, 2014
Changwei Zhao	Director	48	December 24, 2014

~~For the years ended December 31, 2012 and 2011~~ 26

~~The~~Family ~~following table sets forth the consolidated financial statements of the Company for the years ended December 31, 2012 and 2011.~~ Relationships

	Year Ended		Year Ended
	December 31, 2012		December 31, 2011
	$	% of Sales	$	% of Sales
Net sales	12,718,068	100%	14,353,067	100%
Cost of sales	9,068,615	71%	8,782,818	61%
Gross profit	3,649,453	29%	5,570,249	39%
Operating expenses	3,018,925	24%	2,521,421	18%
Profit from operations	630,528	5%	3,048,828	21%
Other items and income tax	90,823	1%	1,354,353	9%
Net income	539,705	4%	1,694,475	12%

There are no family relationships between any director or executive officer except that Messrs. Quan Gu, Wei Gu, and Chang Gu are brothers.

43Business Experience

~~Net~~Shibi ~~Sales~~ Chen

~~Our~~Mr. ~~revenues~~Chen ~~are~~has ~~derived~~over ~~from~~30 ~~the~~years ~~sales~~ of coal. ~~The~~mining ~~overall revenue decreased by $1~~experience.63 ~~million or 11% from $14.35 million in 2011 to $12.72~~Since ~~million in 2012~~1982, inhe ~~line~~has ~~with~~served ~~the~~as ~~decrease~~deputy ~~of the~~ production ~~volume~~director byat ~~20,667 tons~~Fujian orLongyan ~~15%~~Hong ~~from~~Shang ~~about~~Coal ~~134,668~~Mine ~~tons~~before injoining ~~2011~~the toCompany ~~about~~as ~~114,001~~Deputy ~~tons~~Production Director in ~~2012~~2006. ~~We have~~Mr. ~~yet~~Chen tohas ~~attain~~been ~~the~~our ~~full~~President, ~~production~~Chief ~~capacity~~Executive Officer inand ~~2012~~Director since ~~due~~July ~~mainly~~8, ~~to the on-going construction of the new shafts which has slowed down the mining production~~2013.

~~Despite~~Peifeng the lower production volume registered in 2012 as compared to 2011, our average selling price increased by $5 per ton or 5% from about $107 per ton in 2011 to about $112 per ton in 2012 mainly due to higher market demands.Huang

~~Cost~~Mr. Huang has served as a production manager of ~~Sales~~Tong Duan Ping Coal Mine in Fujian Province from 1997 to 2005 and has served as coal mine production manager of Fujian Huilong since 2006. Mr. Huang graduated from Fujian Coal University with a degree in coal mining.

~~Cost~~Mr. ofHuang ~~sales~~served ~~increased~~as bya ~~$0.29~~director ~~million or 3%~~ from ~~$8.78 million~~May in11, 2011 tountil ~~$9.07~~April ~~million in 2012~~20, ~~principally~~2014. Mr. ~~due~~Huang tohas ~~the~~been ~~increase~~our ofChief Financial ~~certain~~Officer ~~raw~~and ~~material,~~Corporate ~~labour~~Secretary ~~costs~~since ~~and~~May ~~overhead~~7, ~~costs~~2013. inWe ~~2012~~believe Mr. ~~Accordingly,~~Huang ~~the average~~is ~~cost~~qualified ~~per~~to ~~ton~~serve ~~increased~~on byour ~~$14~~board ~~per~~of ~~ton~~directors because orof ~~22%~~his ~~from~~knowledge ~~about~~of ~~$65~~our ~~per~~current ~~ton~~operations in ~~2011~~ addition to ~~about~~his ~~$79~~education ~~per~~and ~~ton~~business inexperiences ~~2012~~described above.

~~Gross~~Wensi ~~Profit~~ Lin

InMr. ~~line~~Lin ~~with~~has ~~the~~been our ~~higher~~director ~~costs~~since ~~registered~~September 23, ~~our~~2013. ~~gross~~He ~~profit decreased~~serves byas ~~$1.92~~an ~~million~~independent ormember ~~34%~~of ~~from~~our $5Board.57 ~~million~~Mr. inLin ~~2011~~has toapproximately ~~$3.65~~30 ~~million~~years inof ~~2012~~working ~~which~~experience ~~resulted~~ in acoal ~~lower~~mine ~~gross~~operation ~~profit~~and ~~margin~~management. ofHe ~~29%~~joined ~~registered~~the Company in ~~2012~~December 2005 as ~~compared~~ todeputy ~~39%~~technical ~~in 2011~~manager.

~~Operating~~Vincent ~~Expenses~~ Xu

~~Operating~~Vincent ~~expenses~~Xu ~~increased~~graduated byfrom $0Griffith University in Australia and received his Master’s degree of Applied Finance in Queensland University of Technology in 2007.50 ~~million~~Mr. orXu ~~20%~~has ~~from~~been $2a corporate advisor since 2012.52 He served as a senior account executive at Well & Well JP Capital Group Limited and currently as a senior ~~million~~executive invice ~~2011~~president toat $3Strategic Capital Management (Asia) Limited.02 ~~million~~He has extensive experience in ~~2012~~working closely with CEOs, their ~~due~~leadership ~~principally~~teams, toand ~~the~~corporate ~~increase~~boards ~~of salary~~in ~~for~~such ~~the~~areas ~~management~~as team development, formulating and ~~higher~~implementing ~~operating~~corporate ~~costs.~~strategy and capital restructuring.

WeBaozhu anticipate that considerable costs of approximately $200,000 per year will be incurred and significant management time and other resources will be used in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. Feng

~~Other~~Baozhu ~~items~~Feng is the Administration Manager of Hong Kong Jardine Chemical Limited, a chemical product trading company. She was graduated from Agricultural University of South China with a major in accounting and ~~income~~auditing. ~~tax~~She served as the Administration and Operation manager of Carnival City Hotel in Dong Guan from 2007 to 2011, leading the team to provide high quality hospitality service for 4 years.

Other items and income tax represent the interest, other operating expenses and income tax which decreased by about $1.26 million or almost doubled from about $1.35 million in 2011 to about $91,000 in 2012, due to the decrease of an interest bearing loan of RMB49.00 million being replaced by an issuance of 128,769,132 new ordinary shares to the unrelated debtors for US$0.06 per share in pursuant to a debt-to-equity conversion agreement on December 29, 2011.27

~~Net~~Quan ~~Income~~ Gu

~~With~~Mr. ~~the~~Quan ~~lower~~Gu, ~~gross~~39 ~~profit~~years ~~and~~old, ~~higher~~graduated ~~operating~~from ~~expenses~~National University ~~recorded~~of Kyrhyz Republic major in ~~2012,~~international ~~the~~business. ~~net~~Mr. ~~income~~Gu ~~decreased~~has byfocused ~~about~~on $1mining advisory and exploration since 2004.15 ~~million~~He orserved as ~~68%~~project ~~from~~management director at Xinjing Zhonghai Mining Company Limited and currently as an executive director and founding member $1of Beijing Shuntianying Project Management Co.69 ~~million~~Ltd. Mr. Gu has extensive experience in ~~2011~~mining toindustry ~~$0.54~~and ~~million~~strong networking in the ~~2012~~industry.

44Wei Gu

~~Impact~~Mr. Wei Gu, 47 years old, graduated from Xian Institute of Physical ~~Inflation~~Education in sports medicine. Mr. Gu has focused on marketing and human resources development since 1995. He served as the human resources director at Beijing Zhonghai Ziguang Co. Limited and currently serves as the senior project manager in Beijing Shuntianing Project Manage Co. Ltd.

WeChang believe inflation has had a net negative impact on our results of operations in 2012. The average inflation rate in China was at 2.62% in 2012 relative to an average inflation rate in China during of 5.53% in 2011. Chinese government has carried out a serial of financial and monetary policies to control the increasing inflation.Gu

~~Liquidity~~Chang Gu, 45 years old, graduated from Xinjing Normal University in Bachelor of Education. Mr. Gu has focused on marketing and ~~Capital~~human ~~Resources~~resources development since 1992. He served in Xinjiang Institute of Politics and Law from 1991 to 1994 and as senior project officer in charge of project schedule management and human resources management from 1994 to 2006. He is currently the executive director of Beijing Shuntianing Project Manage Co. Ltd.

~~Working~~Sheng ~~Capital at December 31, 2012 and 2011~~ Liu

		2012			2011
Current Assets	$	536,127		$	741,046
Non-Current Assets	$	22,070,929		$	21,597,580
Total Assets	$	22,607,056		$	22,338,626
Current Liabilities	$	4,486,599		$	4,650,605
Non-Current Liabilities	$	137,840		$	196,062
Total Liabilities	$	4,624,439		$	4,846,667
Working Capital (Deficit)	$	(3,950,472	)	$	(3,909,559	)

Mr. Sheng Liu, 48 years old, graduated from Xian University in China, major in marketing. Mr. Liu has focused on marketing and advertising since 1988. He currently serves as the chairman of Yulin City Puda Technology Co. Ltd and the Vice Chairman for Yulin City Federation of industry and Commerce. Mr. Liu has extensive experience in project management and strong networks in both the business chamber and governments.

~~Current~~Peide assets decreased by $0.20 million or 28% from $0.74 million as at December 31, 2011 to $0.54 million as at December 31, 2012, principally due to the decrease of cash and cash in bank which was mainly used as working capital for payment of the daily operating expenses and as capital expenditure for the on-going construction of the new shafts.Wang

~~Current liabilities decreased by $0~~Mr.16 ~~million~~Peide ~~or 3% from $4.65 million as at December 31~~Wang, ~~2011~~38 toyears ~~$4.49 million as at December 31~~old, ~~2012,~~obtained ~~principally~~his ~~due~~master’s todegree ~~the~~from ~~settlement~~Beijing ~~made~~University, bymajor ~~the~~in ~~Company during the year on the amounts due to a related party~~philosophy. ~~As a result, the amounts due to a related party (~~Mr. ~~Lin~~Wang ~~Longwen,~~serves as the ~~Chairman,~~managing ~~CEO~~director ~~and~~for ~~Controlling~~Beijing ~~Shareholders of the Company)~~Shuntianying ~~decreased~~Management ~~from~~Co. $3Ltd.02 ~~million~~Mr. asWang athas ~~December~~extensive ~~31,~~experience ~~2011~~in tohuman ~~$2.11~~resources ~~million~~management asand ~~at December~~strong ~~31,~~government ~~2012~~policy.

~~Taken~~Changwei ~~as a whole of the above, we registered a reduced deficit working capital of $3.95 million in as at December 31, 2012 compared to $3.91 million as at December 31, 2011.~~Zhao

~~Cash~~Mr. ~~Flows~~Changwei Zhao, 48 years old, obtained his bachelor’s degree in Xian Medical University, major in medicine, and his master’s degree was granted by Southern Medical University, major in clinical cardiovascular. Mr. Zhao worked as a senior cardiologist in Peking University People’s Hospital until he joined Founder Group in 2006. He established and managed the PKU Medical Group since 2006 until March 2014. Mr. Zhao has extensive experience in the medical industry and strong management skills.

~~For~~Term ~~the~~of ~~years ended December 31, 2012 and 2011~~ Office

		2012			2011
Net cash provided by operating activities	$	2,629,790		$	4,732,737
Net cash used in investing activities	$	(1,992,125	)	$	(4,725,823	)
Net cash provided by financing activities	$	(803,032	)	$	31,540
Cash and cash equivalents at end of year	$	440,308		$	614,445

Our directors hold office until their successors are elected or appointed, or until their deaths, resignations or removals. Our officers hold office at the discretion of our board of directors, or until their deaths, resignations or removals.

The net cash provided by operating activities decreased by $2.10 million or 44% from $4.73 million in 2011 to $2.63 million in 2012, due principally to the lower sales and higher operating costs registered in 2012. 28

~~Net~~Involvement ~~cash used~~ in ~~investing~~Certain ~~activities~~Legal ~~decreased by $2.73 million or 58% from $4.73 million in 2011 to $1.99 million in 2012 as the construction of mine shafts and facilities is almost near completion.~~ Proceedings

WeOur ~~registered~~directors ~~net~~and ~~cash~~executive ~~used~~officers inhave ~~financing~~not ~~activities~~been ~~of $0.80~~involved ~~million~~ in ~~2012~~any ~~vis-à-vis net cash generated by financing activities~~ of ~~about $0.32~~the ~~million~~following inevents ~~2011.~~during ~~Net cash provided by financing activities in 2011 was mainly due from proceeds collected from capital contribution and net-off with settlement made by~~ the ~~Company~~past ~~for~~ten ~~the term loan and amounts due to Mr. Lin Longwen. Net cash used in financial activities in 2012 was used for payment to Mr. Lin Longwen’s outstanding loans.~~years:

451. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

~~Taken~~4. asbeing found by a ~~whole~~court of competent jurisdiction (in a civil action), ~~our~~the ~~cash~~Securities and ~~cash~~Exchange ~~equivalents~~Commission asor atthe ~~December 31~~Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, ~~2012~~and ~~decreased~~the byjudgment ~~$174~~has not been reversed,~~137~~ suspended, or ~~28%~~vacated; ~~from~~5. ~~$614~~being the subject of,~~445~~ asor ata ~~December~~party 31to, ~~2011~~any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to ~~$440~~ an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including,~~308~~ asbut atnot ~~December~~limited 31to, ~~2012~~a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 6. being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

~~Off~~Compliance ~~Balance~~with ~~Sheet~~section ~~Arrangements~~16(a) of the Exchange Act

WeBecause ~~have~~we noare ~~off-balance~~a ~~sheet~~foreign ~~arrangements~~private ~~that~~issuer ~~have~~as ordefined ~~are~~under ~~reasonably~~Rule ~~likely~~3b-4 topromulgated ~~have~~under athe Securities ~~current~~Exchange orAct ~~future~~of ~~effect~~1934, on our ~~financial~~executive ~~condition, changes~~officers inand ~~financial~~directors ~~condition,~~and ~~revenues~~persons orwho own ~~expenses,~~more ~~results~~than 10% of ~~operations, liquidity,~~our ~~capital~~common ~~expenditures~~stock orare ~~capital~~not ~~resources~~required ~~that~~to isfile ~~material~~reports toregarding ownership of, and transactions in, our securities ~~stockholders.~~with the Securities and Exchange Commission.

~~ITEM~~Code 7Aof ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Ethics

~~Not~~We ~~Applicable~~have not adopted a code of ethics because our board of directors believes that our small size does not merit the expense of preparing, adopting and administering a code of ethics. Our board of directors intends to adopt a code of ethics when circumstances warrant.

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~29

~~Our~~Corporate ~~audited consolidated financial statements are stated in United States dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.~~Governance

46Nominating or Compensation Committees

~~SGB~~We ~~INTERNATIONAL~~currently ~~HOLDINGS~~do ~~INC~~not have nominating or compensation committees or committees performing similar functions nor do we have a written nominating or compensation committee charter. ~~AND~~Our ~~SUBSIDIARIES~~board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our board of directors.

~~CONSOLIDATED~~We ~~FINANCIAL~~do ~~STATEMENTS~~not ~~FOR~~have ~~THE~~any ~~YEAR~~defined ~~ENDED~~policy or procedure requirements ~~DECEMBER~~for 31shareholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, ~~2012~~whether submitted by management or shareholders, and makes recommendations for election or appointment.

~~REPORT~~A OFshareholder ~~INDEPENDENT~~who ~~REGISTERED~~wishes ~~PUBLIC~~to ~~ACCOUNTING~~communicate with our board of ~~FIRM~~directors may do so by directing a written request to the address appearing on the first page of this annual report.

ToAudit ~~the~~Committee ~~Board of Directors~~ and ~~Stockholders~~Audit ofCommittee Financial Expert

~~SGB~~The ~~International~~full ~~Holdings~~text ~~Inc~~of our audit committee charter is disclosed as Schedule A to Exhibit 20-1 attached to our current report on Form 8-K filed with the SEC on June 8, 2012.

WeComposition ~~have audited the consolidated balance sheets~~ of ~~SGB International Holdings Inc. (~~the ~~“Company”)~~Audit as at December 31, 2012 and 2011, and the related consolidated statements of income and comprehensive income, cash flows and stockholders’ equity, for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. Committee

WeThe ~~conducted~~entire ~~our~~board ~~audits~~of indirectors ~~accordance~~acts ~~with~~as the ~~standards~~audit committee of the ~~Public~~ Company ~~Accounting~~and ~~Oversight~~oversees ~~Board~~the ~~(United~~accounting ~~States). Those~~and ~~standards~~financial ~~require~~reporting ~~that~~processes ~~we plan~~ and ~~perform~~audits anof ~~audit to obtain reasonable assurance whether~~ the financial statements ~~are free~~ of ~~material~~the ~~misstatement. The~~ Company ~~is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting~~. Our ~~audit~~board ~~included~~of ~~consideration~~directors ofhas ~~internal~~determined ~~control~~that ~~over~~we ~~financial~~do ~~reporting~~not ashave a ~~basis~~board ~~for~~member ~~designing audit procedures~~ that ~~are~~qualifies ~~appropriate~~as ~~in the circumstance, but not for the purpose of expressing~~ an ~~opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An~~ “audit ~~includes~~committee ~~examining, on a test basis, evidence supporting the amounts and disclosures in the~~ financial expert” ~~statements. An audit also includes assessing the accounting principles used and significant estimates made by management,~~ as ~~well~~defined asin ~~evaluating~~Item ~~the~~407(d)(5)(ii) ~~overall~~of ~~financial~~Regulation ~~statement presentation~~S-K. ~~We believe that our audits provide a reasonable basis for our opinion.~~

InShibi ~~our~~Chen ~~opinion,~~Not ~~the~~independent ~~consolidated~~Financially ~~financial~~literate ~~statements~~Wensi ~~referred~~Lin toIndependent ~~above~~Financially ~~present~~literate ~~fairly,~~Vincent inXu ~~all~~Independent ~~material~~Financially ~~respects,~~literate ~~the~~Baozhu ~~financial~~Feng ~~position~~Independent ofFinancially ~~the~~literate ~~Company~~Quan asGu atNot ~~December~~Independent ~~31,~~Financially ~~2012~~literate ~~and~~Wei ~~2011~~Gu ~~and~~Not ~~the~~Independent ~~result~~Financially ofliterate ~~its~~Chang ~~operations~~Gu ~~and~~Not ~~its~~Independent ~~cash~~Financially ~~flows~~literate ~~for~~Sheng ~~the~~Liu ~~years~~Independent ~~then~~Financially ~~ended~~literate inPeide ~~conformity~~Wang ~~with~~Not ~~accounting~~Independent ~~principles~~Financially ~~generally~~literate ~~accepted~~Changwei inZhao ~~the~~Not ~~United~~Independent ~~States~~Financially ~~of America.~~literate

~~Vancouver,~~We ~~Canada~~believe ~~March~~that 27our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, ~~2013~~we ~~Chartered~~believe ~~Accountants~~that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any revenues from operations to date.

~~SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)~~30

		2012	2011
	Note	$	$
ASSETS
Current Assets
Cash and cash equivalents	4	440,308	614,445
Receivables	5	55,952	97,931
Prepaid expenses and deposits	6	39,867	28,670
Total Current Assets		536,127	741,046
Non-current Assets
Prepaid expenses and deposits	6	672,704	507,863
Property, equipment and mine development costs	7	21,063,400	20,735,551
Intangible assets	8	334,825	354,166
Total Non-current Assets		22,070,929	21,597,580
Total Assets		22,607,056	22,338,626
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Account payable and accrued liabilities	9	1,814,738	1,410,772
Asset retirement obligation	10	257,139	171,404
Amounts due to a related party	11	2,106,747	3,019,409
Deferred revenue		108,428	-
Term loan – current	12	199,547	49,020
Total Current Liabilities		4,486,599	4,650,605
Non-current Liabilities:
Asset retirement obligation	10	127,780	186,268
Term loan	12	10,060	9,794
Total Non-current Liabilities		137,840	196,062
Total Liabilities		4,624,439	4,846,667
Stockholders’ Equity
Common stocks	13	9,138,544	1,412,396
Stocks to be issued	13	-	7,726,148
Contributed surplus		100,000	100,000
Reserve		650,182	429,769
Retained earnings		7,527,909	7,208,617
Accumulated other comprehensive income		565,982	615,029
Total Stockholders’ Equity		17,982,617	17,491,959
Total Liabilities and Stockholders’ Equity		22,607,056	22,338,626

ITEM 11. EXECUTIVE COMPENSATION

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

SGB INTERNATIONAL HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(STATED IN US DOLLARS)
	2012		2011
	$		$
Revenue	12,718,068		14,353,067
Cost of revenue	(9,068,615	)	(8,782,818	)
Gross profit	3,649,453		5,570,249
Selling expenses	(280,466	)	(112,721	)
General and administrative	(2,738,459	)	(2,408,700	)
Total operating expenses	(3,018,925	)	(2,521,421	)
Net income from operations	630,528		3,048,828
Other items:
Interest expense	(8,956	)	(1,223,895	)
Other expense	(37,811	)	(15,557	)
Other income	55,263		-
	8,496		(1,239,452	)
Income before income tax expense	639,024		1,809,376
Income tax expense	(99,319	)	(114,901	)
Net income	539,705		1,694,475
Foreign currency translation adjustment	(49,047	)	466,105
Comprehensive income	490,658		2,160,580
Earnings Per Share – Basic and Diluted	0.01		0.01
Weighted Average Shares Outstanding – Basic and Diluted	323,344,302		236,230,417

The particulars of compensation paid to the following persons:

~~The~~● ~~accompanying~~our ~~notes~~principal ~~are~~executive ~~an integral part of these consolidated financial statements~~officer;

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(STATED IN US DOLLARS)
	2012		2011
Cash flows from operating activities	$		$
Net income	539,705		1,694,475
Items not involving cash:
Depreciation & amortization	1,658,832		1,538,813
Interest expense	27,142		31,791
Imputed interest from a related party	-		100,000
Loss on retirement of fixed assets	28,224		-
Changes in non-cash working capital:
Receivable	42,117		(5,783	)
Prepaid expenses and deposit	(175,529	)	1,771,772
Accounts payable and accrued liabilities	401,103		(353,120	)
Deferred revenue	108,196		(45,211	)
Net cash provided by operating activities	2,629,790		4,732,737
Cash flows from investing activities
Purchase of property, equipment and mine development costs	(1,992,125	)	(4,725,823	)
Net cash (used in) investing activities	(1,992,125	)	(4,725,823	)
Cash flows from financing activities
Capital contribution	-		1,284,917
Increase (decrease) of term loan	20,021		(465,513	)
Cash provide in connection with acquisitions	-		4,285
Amounts due to related parties	(823,053	)	(792,149	)
Net cash provided by (used in) financing activities	(803,032	)	31,540
Increase (decrease) in cash and cash equivalents	(165,367	)	38,454
Effect of exchange rate changes on cash	(8,770	)	49,427
Cash and cash equivalents – beginning of year	614,445		526,564
Cash and cash equivalents – end of year	440,308		614,445
Supplemental disclosure of cash flow information:
Income taxes paid	99,319		114,901
Interest expenses paid	9,736		1,887,656

●

each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2014 that received compensation in excess of $100,000 in 2014; and

~~The~~● ~~accompanying~~up ~~notes~~to ~~are~~two additional individuals that received compensation in excess of $100,000 in 2014 for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an ~~integral~~executive ~~part~~officer at the end of ~~these consolidated~~the most recently completed financial ~~statements~~year,

~~SGB~~who ~~INTERNATIONAL~~we ~~HOLDINGS~~will ~~INC.~~collectively ~~AND~~refer ~~SUBSIDIARIES~~to ~~CONSOLIDATED~~as ~~STATEMENTS~~the OFnamed ~~STOCKHOLDERS’~~executive officers, ~~EQUITY~~for ~~FOR~~our ~~THE~~years ~~YEARS~~ended ~~ENDED~~December ~~DECEMBER~~ 31, ~~2012~~2013 ~~AND~~and ~~2011~~2014 are set out in the following summary compensation table:

	Common shares													Accumulated			Total
Name and Principal Position	Year			Salary ($)				Bonus ($)		Stock Awards ($)	Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
						Stocks to			Contributed	Reserve		Retained		other			stockholders’
Peifeng Huang Chief Financial Officer and		2014			NIL				NIL	NIL	NIL		NIL	NIL		NIL			NIL
	Shares		Amount			be issued			surplus			earnings		comprehensive			equity
Secretary		2013			16,917				NIL	NIL	NIL		NIL	NIL		NIL			16,917
														income
Shibi Chen President, Chief Executive Officer and		2014			NIL				NIL	NIL	NIL		NIL	NIL		NIL			NIL
			$			$			$	$		$		$			$
Director		2013			NIL				NIL	NIL	NIL		NIL	NIL		NIL			NIL
Balance at December 31, 2010 (Restated)	220,522,000		123,913			-			-	71,725		5,872,186		148,924			6,216,748
Recapitalization – Dragon International	-		1,277,694			-			-	-		-		-			1,277,694
Recapitalization – SGB	24,502,446		10,789			-			-	-		-		-			10,789
Settlement of debt	-		-			7,726,148			-	-		-		-			7,726,148
Imputed interest from a related party	-		-			-			100,000	-		-		-			100,000
Net income for the year	-		-			-			-	-		1,694,475		-			1,694,475
Appropriation to reserve	-		-			-			-	358,044		(358,044	)	-			-
Currency translation adjustments	-		-			-			-	-		-		466,105			466,105
Balance at December 31, 2011	245,024,446		1,412,396			7,726,148			100,000	429,769		7,208,617		615,029			17,491,959
Net income for the year	-		-			-			-	-		539,705		-			539,705
Appropriation to reserve										220,413		(220,413	)
Shares issued	128,769,132		7,726,148			(7,726,148	)		-	-		-		-			-
Currency translation	-		-			-			-	-		-		(49,047	)		(49,047	)
Balance at December 31, 2012	373,793,578		9,138,544			-			100,000	650,182		7,527,909		565,982			17,982,617

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

~~SGB~~We ~~INTERNATIONAL~~have ~~HOLDINGS~~not ~~INC.~~entered ~~AND~~into ~~SUBSIDIARIES~~any ~~NOTES~~employment agreement TOor ~~CONSOLIDATED~~consulting ~~FINANCIAL~~agreement ~~STATEMENTS~~with ~~FOR~~our ~~THE~~directors ~~YEARS~~and ~~ENDED~~executive ~~DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)~~officers.

1Retirement ~~ORGANIZATION~~or ~~AND~~Similar ~~PRINCIPAL ACTIVITIES~~Benefit Plans

~~SGB~~There ~~International~~are ~~Holdings~~no ~~Inc.~~arrangements ~~(“SGB”~~ or ~~the~~plans ~~“Company”) was incorporated~~ in ~~British~~which ~~Columbia,~~we ~~Canada~~provide ~~on November 6, 1997. Through its~~retirement ~~subsidiary,~~or ~~the~~similar ~~Company~~benefits isfor ~~engaged~~our indirectors ~~coal~~or ~~production~~executive ~~and sales by exploring, developing, and mining coal properties in China~~officers.

~~On May 11~~Resignation, ~~2011~~Retirement, ~~the~~Other ~~Company completed the acquisition of Dragon International Resources Group Co.~~Termination, ~~Limited~~or ~~(“Dragon International”), a~~Change ~~Hong Kong corporation incorporated on October 5, 2010, and its wholly-owned subsidiary through a share exchange which resulted~~ in ~~the~~Control former shareholders of Dragon International acquiring the control of SGB. This transaction was accounted for as a reverse takeover transaction (“RTO”) for accounting purpose, as Dragon International was deemed to be the acquirer, and these consolidated financial statements are a continuation of the consolidated financial statements of Dragon International. The carrying amounts of SGB’s assets and liabilities are included in these consolidated financial statements.Arrangements

~~Prior~~We tohave ~~the~~no ~~above noted RTO~~contract, ~~and on February 21~~agreement, ~~2011, pursuant~~plan toor ~~a share transfer agreement~~arrangement, ~~Dragon International completed the~~whether ~~acquisition~~written ofor ~~Fujinan Huilong Coal Mine Co.~~unwritten, ~~Ltd.~~that ~~(“Fujian~~provides ~~Huilong”)~~for ~~(formerly known~~payments asto ~~Yongding~~our ~~Shangzhai~~directors ~~Coal~~or ~~Mine~~executive ~~Co.~~officers at, ~~Ltd.)~~following, aor ~~People’s~~in ~~Republic~~connection ofwith ~~China corporation and was incorporated on August 4 2005. Upon~~ the ~~completion of the~~ ~~acquisition~~resignation, ~~Fujian~~retirement ~~Huilong~~or ~~became~~other ~~the~~termination ~~wholly-owned subsidiary~~ of ~~Dragon International~~our ~~and~~directors ~~the~~or ~~control~~executive ~~in substance was not changed. For accounting purposes~~officers, ~~the~~or ~~acquisition~~a ~~has~~change ~~been~~in ~~accounted~~control ~~for using the continuity~~ of ~~interest~~ ~~method,~~our ~~which~~company ~~recognizes~~or ~~Fujian Huilong as the successor. The net~~a ~~assets~~change ofin ~~Dragon~~our ~~International~~directors’ ~~prior~~or toexecutive ~~the~~officers’ ~~acquisition~~responsibilities ~~has~~following ~~been~~a ~~accounted~~change ~~as recapitalization~~in ~~as at the date of acquisition~~control.

In connection with the above acquisitions, the 2011 comparative consolidated financial statements included the operations of SGB, Dragon International and Fujian Huilong for the periods from May 12, 2011 to December 31~~, 2011, periods from February 21, 2011 to December 31, 2011 and for the year ended December 31, 2011, respectively.~~

~~The~~Outstanding ~~Company~~Equity ~~and~~Awards ~~its~~at ~~subsidiaries~~Fiscal ~~are considered to be operating in one segment based on its organizational structure and strategic decision making method.~~Year-End

~~These~~The ~~financial~~following ~~statements~~table ~~have~~sets ~~been~~forth ~~prepared~~for ineach ~~accordance with~~named ~~U.S.~~executive ~~generally accepted accounting principles applicable to a going~~officer ~~concern,~~certain ~~which~~information ~~contemplates~~concerning the ~~realization~~outstanding ofequity ~~assets~~awards and the satisfaction of liabilities and commitments in the normal course of business. As at December 31, 2012 and 2011, the Company had working capital deficiency of $3,950,472 and $3,909,559, respectively, and requires additional funds to maintain its operations. In view of the working capital deficiency, the management has reviewed the cash position as at the balance sheet date and the cash flow forecast for the next twelve months and taken into factors that (i) the major and controlling shareholder has undertaken that payment on the amounts due to him of ~~$2,106,747 (2011: $3,019,409) as at~~ December 31, 2012 will only be made if the Company has surplus cash after paying for the operations and capital expenditure; (ii) stable client base and strong coal demands in Fujian Province ensure revenue can be continue to generate from the existing coal mine operation; and (iii) to raise equity financing as required; and (iv) to obtain the principle shareholder’s support in funding the required working capital2014. After taking the above circumstances and facts into consideration, the management of the Company is satisfied that the Company will have sufficient funds to complete the current development and to meet in full its financial obligation and operations or capital expenditure as they fall due for the foreseeable future.

~~SGB~~Option ~~INTERNATIONAL~~awards ~~HOLDINGS~~Stock ~~INC.~~awards ~~AND~~Name ~~SUBSIDIARIES~~Number ~~NOTES~~of TOsecurities ~~CONSOLIDATED~~underlying ~~FINANCIAL~~unexercised ~~STATEMENTS~~options ~~FOR~~(#) ~~THE~~exercisable ~~YEARS~~Number ~~ENDED~~of ~~DECEMBER~~securities 31underlying unexercised options (#) unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares of units of stock that have not vested ($) Equity incentive plan awards: Number of unearned shares, ~~2012~~units ~~AND~~or ~~2011~~other rights that have not vested (~~STATED~~#) INEquity USincentive ~~DOLLARS~~plan awards: Market or payout value of unearned shares, units or other rights that have not ($) Peifeng Huang Nil Nil Nil Nil Nil Nil Nil Nil Nil Shibi Chen Nil Nil Nil Nil Nil Nil Nil Nil Nil

2(1) ~~ACQUISITIONS~~Longwen Lin ceased to be director, Chief Executive Officer and President of the Company on July 8, 2013.

~~Dragon~~(2) ~~International~~Thomas Yeo ceased to be Chief Financial Officer and Corporate Secretary of the Company on May 7, 2013.

OnCompensation ~~May 11, 2011, SGB completed a reverse acquisition transaction with the shareholders~~ of Dragon International pursuant to which SGB acquired 100% of the issued and outstanding capital stock of Dragon International in exchange for an aggregate of 220,522,000 common shares of SGB, which constituted 90% of SGB’s issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the reverse acquisition. Prior to the acquisition, SGB has no business with a minimal assets and liabilities which did not meet the definition of a business, therefore, the reverse take-over of SGB by Dragon International has been accounted for as a capital transaction. A breakdown of SGB’s net assets as at May 11, 2011 is as follows:Directors

	$
Cash and cash equivalents	2,758
Tax receivable	6,562
Prepaid expenses	5,197
Accounts payable and accrued liabilities	(3,728	)
Net assets	10,789

We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

~~Fujian~~ITEM ~~Huilong~~12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

OnThe ~~November~~following 1,table ~~2010~~sets forth, ~~Mr.~~as ~~Longwen Lin (chief executive officer who held control in substance in Fujian Huilong and was also the primary beneficiary~~ of ~~Fujian~~June ~~Huilong)~~30, ~~caused~~2015 ~~Dragon International entering into a share~~certain ~~transfer~~information ~~agreement~~ with ~~Mr.~~respect ~~Chuanzhen~~to ~~Lin,~~the ~~Mr.~~beneficial ~~Wensi~~ownership ~~Lin, and Mr. Qingdong Shi, under which Dragon International acquired all~~ of ~~the~~our ~~outstanding~~common ~~equity~~ shares of ~~Fujian~~by ~~Huilong.~~each Onstockholder ~~February~~known ~~21,~~by ~~2011,~~us ~~Fujian Huilong received its new business license and became a wholly foreign owned entity (“WFOE”) under the People’s Republic of China (“PRC”) laws. Subsequent~~ to ~~and~~be ~~upon~~ the ~~completion~~beneficial owner of ~~acquisition,~~more ~~Mr.~~than ~~Longwen Lin acquired 94~~5% of ~~Dragon~~our ~~International~~common ~~which resulted~~shares, noby ~~change~~each of ~~substantial~~our ~~control~~directors, ~~after~~our ~~the~~named ~~acquisition.~~executive ~~For accounting purpose~~officers, ~~the~~and ~~acquisition~~executive ~~has~~officers, ~~been~~and by ~~accounted~~our ~~for~~directors ~~using~~and ~~the~~executive ~~continuity~~officers ofas ~~interest method,~~a ~~which~~group. ~~recognizes~~We ~~Fujian~~have ~~Huilong~~determined as the ~~successor.~~number ~~The~~and ~~net~~percentage ~~assets~~ of ~~Dragon~~ ~~International~~shares ~~prior~~beneficially toowned ~~the acquisition has been accounted as~~by ~~recapitalization~~such ~~into~~person ~~Fujian~~in ~~Huilong’s~~accordance ~~equity~~with asRule at13d-3 under the Securities ~~date~~Exchange Act of ~~acquisition~~1934. ~~A breakdown~~This ofinformation ~~Dragon~~does ~~International’s~~not ~~net~~necessarily indicate ~~assets~~beneficial asownership atfor ~~February~~any ~~21,~~other ~~2011 is as follows:~~purpose.

	$
Cash and cash equivalents	1,527
Share subscriptions receivable	1,285,000
Accounts payable and accrued liabilities	(8,833	)
Net assets	1,277,694

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

Name and Address of Beneficial Owner	Title of Class	Amount and Nature of Beneficial Ownership		Percentage of Class(1)

Shibi Chen Room 401, Suxi Building, Jiuyi-Nan Road, Longyan City, Fujian Province China	Common Shares	Nil		N/A

Peifeng Huang Jinhuai Middle Street, Hong Hua Yuan Block 1 Unit 907 Fengze District, Quanzhou City, Fujian Province PRC China 362300	Common Shares	Nil		N/A

Changwei Zhao Room 204, Building 6, No. 26, Zhugezhuang. Haidian District, Beijing City, China. 100020	Common Shares	Nil		N/A

Wensi Lin Room 401, Suxi Building, Jiuyi-Nan Road, Longyan City Fujian Province, China	Common Shares	Nil		N/A

Vincent Xu Room 33/C, Tower M7, No 9, Yuen Lung Road, Yuen Long, NT. Hong Kong SAR	Common Shares	Nil		N/A

Baozhu Feng NO.271 Zhen'an Road Chang'an Town Dongguan Guangdong China	Common Shares	Nil		N/A

WEI GU M 702 BLK 1 ZONE 2 YUE QUAN BAI LITIAN CUN SHAN NAN RD BEIJING, CHINA	Common Shares	79,309,174 18,300,000 61,009,174	Shares Direct Indirect(2)	21.22%

QUAN GU RM 702 BLK 1 ZONE 2 YUE QUAN BAI LITIAN CUN SHAN NAN RD BEIJING, CHINA	Common Shares	79,309,174 18,300,000 61,009,174	Shares Direct Indirect(2)	21.22%

CHANG GU RM 702 BLK 1 ZONE 2 YUE QUAN BAI LITIAN CUN SHAN NAN RD BEIJING, CHINA	Common Shares	79,309,174 18,300,000 61,009,174	Shares Direct Indirect(2)	21.22%

SHENG LIU NO 16 FUQIANG XIANG BAONING ROAD YUYANG DISTRICT YULIN CITY, SHANXI PROVINCE CHINA	Common Shares	38,715,901	Shares, Direct	10.36%

PEIDE WANG UNIT 502, BUILDING 1, NO 16 ZIJIN CHANGAN HAIDIAN DISTRICT BEIJING CITY, CHINA	Common Shares	45,648,054	Shares, Direct	12.21%

All directors and executive officers as a group (11 persons)	Common Shares	322,291,477		86.22%

~~3 SIGNIFICANT ACCOUNTING POLICIES~~33

~~Use~~1 Percentage of ownership ~~estimates~~is based on 373,793,578 shares of our common shares issued and outstanding as of June 30, 2015. Except as otherwise indicated, we believe that the beneficial owners of the common shares listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Common shares subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

~~The Company's consolidated financial statements have been~~2 Includes ~~prepared~~approximately in7,333,333 ~~accordance~~shares ~~with~~owned ~~accounting~~through ~~principles~~JM ~~generally~~Capital ~~accepted~~Limited, ina ~~the United~~Hong ~~States~~Kong ofcorporation, 36,386,130 ~~America~~shares ~~(“US GAAP”). The preparation of the Company's~~owned ~~consolidated~~through ~~financial~~Inter ~~statements~~Dynamic ~~requires~~Worldwide ~~management~~Limited, toa ~~make~~British ~~estimates~~Virgin ~~and assumptions~~Islands ~~that~~corporation, ~~affect the reported amounts of assets~~ and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include inventories; asset impairments; environmental and reclamation obligations; acquisition accounting; other employee benefit obligations; useful lives for depreciation17, ~~depletion~~289,710 ~~and~~shares ~~amortization;~~owned ~~current and~~through ~~deferred~~Grand ~~income~~China ~~taxes; and fair value of financial instruments. Estimates~~Energy ~~are~~Group ~~based on facts and circumstances believed to be reasonable at the time; however~~Limited, ~~actual~~a ~~results~~British ~~could~~Virgin ~~differ~~Islands ~~from those estimates~~corporation.

~~Principles~~Change ofin ~~consolidation~~Control

~~These~~There ~~consolidated~~are ~~financial~~no ~~statements~~provisions ~~included~~in ~~the~~our ~~accounts~~articles that would delay, defer or prevent a change in control of ~~the~~our ~~Company~~company and ~~its~~that ~~wholly-owned~~would ~~subsidiaries~~operate only with respect to an extraordinary corporate transaction involving our company or subsidiary, such as ~~follows:~~merger, reorganization, tender offer, sale or transfer of substantially all of our assets, or liquidation.

~~Dragon~~ITEM ~~International,~~13. aCERTAIN ~~Hong~~RELATIONSHIPS ~~Kong~~AND ~~corporation~~RELATED ~~incorporated on~~TRANSACTIONS, ~~October~~AND 5,DIRECTOR ~~2010.~~INDEPENDENCE

~~Fujian~~Transactions ~~Huilong,~~with aRelated ~~People’s Republic of China corporation incorporated on August 4, 2005.~~Persons

~~All~~Since ~~significant~~January ~~intercompany~~1, ~~accounts~~2014, there have been no transactions and there are no currently proposed transactions, ~~have~~in which our company was or is to be a participant and ~~been~~the ~~eliminated~~amount ~~upon~~involved ~~consolidation.~~exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

~~Foreign~~(i) ~~currency~~Any ~~translation~~director or executive officer of our company; (ii) Any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding common shares; (iii) Any person who acquired control of our company when it was a shell company or any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common shares, that acquired control of our company when it was a shell company; and (iv) Any immediate family member (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.

The Company’s functional currency and presentation currency is Canadian dollars (“CAD”) and U.S. dollars, respectively. The Company’s subsidiaries’ functional currencies are Hong Kong dollars (“HKD”) for Dragon International and Chinese RMB (“RMB”) for Fujian Huilong.34

~~Transactions~~Director in a currency other than the functional currency (“foreign currency”) are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Exchange gains and losses are recorded in the statements of income and comprehensive income.Independence

~~Assets~~We ~~and~~currently ~~liabilities~~act with ten directors consisting of ~~the~~Shibi ~~Company~~Chen, Peifeng Huang, Vincent Xu, Baozhu Feng, Quan Gu, Wei Gu, Chang Gu, Sheng Liu Peide Wang and ~~its~~Changwei ~~subsidiaries~~Zhao. ~~are~~Our common shares ~~translated~~are ~~into~~eligible for quotation on the UOTCQB Market operated by OTC Markets Group Inc.S., ~~dollars~~which atdoes ~~exchange~~not ~~rates~~impose atany ~~the~~director ~~balance~~independence requirements. ~~sheet~~Under ~~date~~NASDAQ rule 5605(a)(2), ~~equity~~ ~~accounts~~a ~~are~~director ~~translated~~is atnot ~~historical~~independent ~~exchange~~if ~~rate~~he ~~and~~or ~~revenues~~she ~~and~~is also an executive officer or employee ~~expenses~~of ~~are~~the ~~translated~~corporation, bywas, ~~using~~at any time during the ~~average~~past ~~exchange~~three ~~rates.~~years, ~~Translation adjustments~~employed ~~are~~by ~~reported~~the ascorporation ~~cumulative~~or ~~translation~~has ~~adjustments~~a ~~and~~relationship ~~are~~with ~~shown~~the asCompany awhich ~~separate~~would ~~component~~interfere with the exercise of ~~other~~independent ~~comprehensive~~judgment ~~income~~on incarrying out the ~~statements~~responsibility of a director. Using this definition ~~stockholders’~~of ~~equity~~independent director, Vincent Xu, Baozhu Feng, Wensi Chen and Changwei Zhao are independent.

~~Cash~~ITEM ~~and~~14. ~~cash~~PRINCIPAL ~~equivalents~~ACCOUNTING FEES AND SERVICES.

~~Cash~~Audit and cash equivalents include those short-term money market instruments which are highly-liquid investments and readily convertible into cash with a term to maturity of 90 days or less when acquired. As of December 31, 2012 and 2011, cash and cash equivalents consisted of cash only.Fees

~~SGB~~The ~~INTERNATIONAL~~following ~~HOLDINGS~~table ~~INC.~~sets ~~AND~~forth ~~SUBSIDIARIES~~the ~~NOTES~~fees TObilled ~~CONSOLIDATED~~to ~~FINANCIAL~~our ~~STATEMENTS~~company for ~~FOR~~the ~~THE~~year ~~YEARS~~ended ~~ENDED~~December ~~DECEMBER~~ 31, ~~2012~~2014 ~~AND~~and ~~2011~~2013 ~~(STATED~~for INprofessional USservices ~~DOLLARS)~~rendered by our independent registered accounting firm.

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

	Year Ended		Year Ended
	December 31,		December 31,
	2014		2013
Audit and Audit Related Fees	$	38,710	$	19,148
Tax Fees		-		-
All Other Fees		-		-
Total	$	38,710	$	19,148

~~Inventories~~Pre-Approval Policies and Procedures

~~Coal~~Our ~~inventories~~board ~~are stated at the lower~~ of ~~average~~directors ~~cost~~pre-approves ~~or market.~~all ~~The~~services ~~cost of coal inventories is determined based on average cost of~~provided ~~production,~~by ~~which~~our ~~includes~~independent ~~all costs incurred to extract, transport and process the coal~~auditors. ~~Market~~All ~~represents~~of the ~~estimated~~above ~~replacement~~services ~~cost,~~and ~~subject~~fees towere areviewed ~~floor~~ and ~~ceiling,~~approved ~~which~~by ~~considers~~ the ~~future~~board ~~sales price~~ of ~~the~~directors ~~product~~before ~~as well as~~the ~~remaining~~respective ~~estimated~~services ~~preparation~~were ~~and selling costs~~rendered. ~~Coal is reported as inventory at the point in time the coal is extracted from the mine and weighed at a loading facility.~~

~~As at December 31, 2012 and 2011, the Company carried no inventories.~~35

~~Property,~~PART ~~equipment and mine development costs~~IV

~~Property,~~ITEM ~~plant and equipment, are stated at cost less depreciation and amortization and accumulated impairment loss~~15. ~~Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation of property~~EXHIBITS, ~~plant~~FINANCIAL ~~and~~STATEMENT ~~equipment is calculated to written off the cost, less their estimated residual value, if any, using the straight-line method over their estimated useful lives~~SCHEDULES. ~~The estimated useful lives are as follows:~~

Machinery / Mobile mining equipment	10 years
Exhibit Number		Description
Motor vehicles	5 years
3.1		Articles of Incorporation (incorporated by reference to an exhibit to our Registration Statement on Form SB-2 filed on August 7, 2007)
Office equipment	5 years
3.2		Notice of Alteration filed with the Ministry of Finance, BC Registry Services effective March 3, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on March 5, 2009)
Leasehold improvement	Lease term
3.3		Amended and Restated Articles of Incorporation of SGB International Holdings Inc. (incorporated by reference to our Current Report on Form 8-K filed on March 5, 2009)
3.4		Notice of Alteration and Certificate of Name Changed filed with the Ministry of Finance BC Registry Services effective August 6, 2014 (incorporated by reference to our Current Report on Form 8-K filed on August 12, 2014)
10.1		Form of stock option agreement (incorporated by reference to our Current Report on Form 8-K filed on January 21, 2011)
10.2		Loan agreements between Yongding Shangzhai Coal Mine Co., Ltd. and Mr. Longwen Lin (incorporated by reference to Amendment No. 2 of our Current Report on Form 8-K/A filed on September 13, 2011)
10.3		Loan agreements between Yongding Shangzhai Coal Mine Co., Ltd. and Mr. Longwen Lin (incorporated by reference to Amendment No. 3 of our Current Report on Form 8-K/A filed on October 24, 2011)
20.1		Notice of Annual and Special Meeting of Shareholders and Information Circular (incorporated by reference to our Current Report on Form 8-K filed on September 5, 2013)
20.2		Form of Proxy (incorporated by reference to our Current Report on Form 8-K filed on September 5, 2013)
20.3		Supplemental Mailing list form (incorporated by reference to our Current Report on Form 8-K filed on September 5, 2013)
21.1*		Subsidiaries of Registrant
21.2		Fujian Huilong Mining Co., Ltd. (formerly Yongding Shangzhai Coal Mine Co., Ltd.), a People’s Republic of China corporation
31.1*		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
32.2*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
101.INS*		XBRL INSTANCE DOCUMENT
101.SCH*		XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*		XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

~~Costs~~* ~~for~~Filed mineral properties and mine development incurred to expand capacity of operating mines or to develop new mines are capitalized and charged to operations using the units-of-production method over the estimated proven and probable reserve tons directly benefiting from the capital expenditures but up to the Company’s allowable quotas set by the local governmentherewith. ~~Mine development costs include costs incurred for site preparation and development of the mines during the development stage.~~

Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefitted. Maintenance and repairs are expensed as incurred. When equipment is retired or disposed, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposal is recognized in cost of coal sales. 36

~~SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)~~SIGNATURES

3Pursuant ~~SIGNIFICANT~~to ~~ACCOUNTING~~the ~~POLICIES~~requirements of Section 13 or 15(~~cont’~~d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Intangible asset

	Grand China Energy Group Limited

	By:	/s/ Shibi Chen
		Shibi Chen
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
		Date: July 6, 2015

Intangible asset represents the coal mining right and is recorded at cost less accumulated amortization. Amortization is provided using the units-of-production method over the estimated proven and probable reserve tons directly benefiting from the capital expenditures but up to the Company’s allowable quotas set by the local government.

	By:	/s/ Peifeng Huang
		Peifeng Huang
		Chief Financial Officer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)
		Date: July 6, 2015

Pursuant to the requirements of the Securities Exchange Act ~~Asset~~of ~~impairment~~1934, ~~and~~this ~~disposal~~report has been signed below by the following persons on behalf of ~~long-lived~~the ~~assets~~registrant and in the capacities and on the dates indicated.

Long-lived assets, such as property, equipment and mine development costs, owned and leased mineral rights and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would separately be presented in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the consolidated balance sheets.

	By:	/s/ Shibi Chen
		Shibi Chen
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
		Date: July 6, 2015

Asset Retirement Obligation

	By:	/s/ Peifeng Huang
		Peifeng Huang
		Chief Financial Officer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)
		Date: July 6, 2015

Minimum standards for mine reclamation have been established by various regulatory agencies and dictate the reclamation requirements at the Company's operations. The Company's asset retirement obligations consist principally of costs to reclaim acreage disturbed at surface operations and estimated costs to reclaim support acreage and perform other related functions at underground mines. The Company records these reclamation obligations at fair value in the period in which the legal obligation associated with the retirement of the long-lived asset is incurred. When the liability is initially recorded, the offset is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset using the units-of-production method over the estimated proven and probable reserve tons directly benefiting from the capital expenditures but up to the Company’s allowable quotas set by the local government. To settle the liability, the obligation is paid, and to the extent there is a difference between the liability and the amount of cash paid, a gain or loss upon settlement is recorded. The Company annually reviews its estimated future cash flows for its asset retirement obligations.37

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

	By:	/s/ Vincent Xu
		Vincent Xu
		Director
		Date: July 6, 2015

	By:	/s/ Wensi Lin
		Wensi Lin
		Director
		Date: July 6, 2015

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

	By:	/s/ Baozhu Feng
		Baozhu Feng
		Director
		Date: July 6, 2015

	By:	/s/ Quan Gu
		Quan Gu
		Director
		Date: July 6, 2015

Stock based compensation

	By:	/s/ Wei Gu
		Wei Gu
		Director
		Date: July 6, 2015

The Company adopted ASC Topic 718-10, Compensation - Stock Compensation - Overall, to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC Topic 718-10 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.

	By:	/s/ Chang Gu
		Chang Gu
		Director
		Date: July 6, 2015

Borrowing costs

	By:	/s/ Sheng Liu
		Sheng Liu
		Director
		Date: July 6, 2015

Borrowing costs are capitalized as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalization of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalized until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

	By:	/s/ Peide Wang
		Peide Wang
		Director
		Date: July 6, 2015

Income tax

	By:	/s/ Changwei Zhao
		Changwei Zhao
		Director
		Date: July 6, 2015

The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The effect on deferred income tax assets and liabilities of a change in income tax rates is included in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.38

Other comprehensive income

The Company accounts for comprehensive income under the provisions of ASC Topic 220-10, Comprehensive Income - Overall, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statements of Income and Comprehensive Income. The Company’s comprehensive income consists of net earnings for the period and currency translation adjustments.

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Earnings per share

Basic earnings per share is calculated using the weighted average number of shares outstanding during the year. The Company has adopted ASC Topic 260-10, Earnings per Share - Overall, and uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. As at December 31, 2012 and 2011, the basic earnings per share is equal to diluted earnings per share as there were no dilutive instruments outstanding as at December 31, 2012 and 2011.

Revenue recognition

The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 480). Coal sales revenues represent sales to individual customers who sold the coal to coal processing companies, power stations and steel factories. Sales revenue is recognized when a formal arrangement exists, which is generally represented by a contract between the Company and the buyer; the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no other significant obligations of the Company exist and collectability is reasonably assured.

Cost of revenue

Cost of revenue consists primarily of labour cost, governmental charges of coal excavation and related expenses and overhead which are directly attributable to coal excavation.

Fair value of financial instruments

The estimated fair values for financial instruments under ASC Topic 825-10, Financial Instruments, are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of the Company’s financial instruments includes cash and cash equivalents, receivables, accounts payable and accrued liabilities, asset retirement obligation, due to a related party and term loan. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.

The Company adopted ASC Topic 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in US GAAP, and expands disclosures about fair value measurements.

ASC Topic 820-10 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Fair value of financial instruments (cont’d)

Level one – Quoted market prices in active markets for identical assets or liabilities;

Level two – Inputs other than level one inputs that are either directly or indirectly observable; and

Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

For the years ended December 31, 2012 and 2011, the fair value of cash and cash equivalents was measured using Level one inputs.

The book values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and amounts due to a related party approximate their respective fair values due to the short-term nature of these instruments. The book value of asset retirement obligation and term loan as at December 31, 2012 and 2011 approximates the fair value. Items identified are measured at fair value on a recurring basis.

There were no assets or liabilities measured at fair value on a non-recurring basis during the years ended December 31, 2012 and 2011.

Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker whose members are responsible for allocating resources and assessing performance of the operating segments.

Statutory reserves

Pursuant to the applicable laws in PRC, PRC entities are required to make appropriations to three non-distributable reserve funds, the statutory surplus reserve, statutory public welfare fund, and discretionary surplus reserve, based on after-tax net earnings as determined in accordance with the PRC GAAP, after offsetting any prior years’ losses. Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net earnings until the reserve is equal to 50% of the entity's registered capital.

The Company allocated $220,413 and $358,044 from after-tax net earnings to statutory surplus reserve for the years ended December 31, 2012 and 2011, respectively.

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

New accounting pronouncements adopted

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. The Company adopted ASU 2011-04 on January 1, 2012 and the adoption did not have a material effect on the Company’s consolidated financial position or results of operations.

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The Company adopted ASU 2011-05 on January 1, 2012 and the adoption did not have a material impact on the Company’s financial position or results of operations.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment”. ASU 2011-08 amends the required annual impairment testing of goodwill by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test under Topic 350-24 and Topic 350-20-35-9 is unnecessary. However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-24 by calculating the fair value of the reporting unit and comparing the results with the carrying amount. If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-20-35-9. An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test. Additionally, the entity has the option to resume with the qualitative testing in any subsequent period. The Company adopted ASU 2011-08 on January 1, 2012 and the adoption did not have a material effect on the Company’s consolidated financial position or results of operations.

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

3 SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities”. The guidance in this update requires the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The Company’s adoption of the new standard is not expected to have a material effect on the Company’s consolidated financial position or results of operations.

In July, 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic). ASU 2012-02 amends the required annual impairment testing of indefinite-lived intangible assets by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived asset is less than its carrying amount. If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of the indefinite-lived asset is less than its carrying amount, then performing the two-step impairment test under Topic 350-30 is unnecessary. However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-30-35-18F by calculating the fair value of the reporting unit and comparing the results with the carrying amount. If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-30-35-19. An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test. Additionally, the entity has the option to resume with the qualitative testing in any subsequent period. The pronouncement is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. The Company’s adoption of the new standard is not expected to have a material effect on the Company’s consolidated financial position or results of operations.

In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income". The amendments do not change the current requirements for reporting net income or oother comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S.GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The pronouncement is effective for fiscal years and interim periods ending after December 15, 2012.The adoption of this pronouncement is not expected to have a material effect on the Company's consolidated financial position or results of operations.

SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (STATED IN US DOLLARS)

4 CASH AND CASH EQUIVALENTS

Filing Compare · Grand China Energy Group Ltd