UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x  QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For the
quarterly period ended February 28, 2010


or





o 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: 333-146758





China Infrastructure
Construction Corporation


(Exact
name of registrant as specified in its charter)




Colorado
            
            16-1718190(State
      or other jurisdiction of incorporation)
            
            (IRS
      Employer Identification Number)





Shidai
Caifu Tiandi Suite 1906-1909


1
Hangfeng Road Fengtai District


Beijing,
China 100070


(Address
of principal executive offices)





86-10-5809-0217


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for 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.  x
Yes   o No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was Required to submit and post such files).  o Yes  o
No





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





Large
      accelerated filer o
            
            Accelerated
      filer oNon-accelerated
      filer o  (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 Exchange Act). o Yes   x No





As of
April 14, 2010 the Issuer had 12,815,620 shares of common stock issued and
outstanding.










TABLE OF
CONTENTS




PagePART I Financial
      InformationItem
      1. Financial Statements.
                            
                            3Consolidated
      Balance Sheets as of February 28, 2010 (Unaudited) and May 31,
      2009
                            
                            F-1Consolidated
      Statements of Operations And Comprehensive Income (Loss) for the three and
      nine months ended February 28, 2010 and 2009 (Unaudited)
                            
                            F-2Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2010 and
      2009 (Unaudited)
                            
                            F-3Notes
      to Consolidated Financial Statements (Unaudited)
                            
                            F-4Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                            
                            4Item
      4T. Controls and Procedures
                            
                            11PART II Other
    InformationItem
      6. Exhibits
                            
                            11Signatures
                            
                            12Exhibits/Certifications




2




PART
I-FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
FINANCIAL STATEMENTS FEBRUARY 28, 2010


(UNAUDITED)







PageIndex
      to Consolidated Financial StatementsConsolidated
      Balance Sheets
              
              F-1Consolidated
      Statements of Operations and Comprehensive Income (loss)
      (Unaudited)
              
              F-2Consolidated
      Statements of Cash Flows (Unaudited)
              
              F-3Notes
      to Consolidated Financial Statements (Unaudited)
              
              F-4




3


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
BALANCE SHEETS
 AS OF
FEBRUARY 28, 2010 AND MAY 31, 2009
 
 February28, 2010
                    
                    
                    May 31, 2009(UNAUDITED)AssetsCurrent
      assetsCash
      and cash equivalents
                    
                    $
                    1,867,417
                    
                    
                    $
                    921,841Restricted
      cash
                    
                    
                    158,089
                    
                    
                    
                    -Trade
      accounts receivable, net
                    
                    
                    40,925,026
                    
                    
                    
                    26,438,106Inventories
                    
                    
                    1,975,142
                    
                    
                    
                    885,834Total
      current assets
                    
                    
                    44,925,674
                    
                    
                    
                    28,245,781Property,
      plant and equipment, net
                    
                    
                    5,063,711
                    
                    
                    
                    5,649,835Other
      receivables
                    
                    
                    5,872,791
                    
                    
                    
                    270,819Related
      party receivables
                    
                    
                    -
                    
                    
                    
                    674,289Total
      other assets
                    
                    
                    5,872,791
                    
                    
                    
                    945,108Total
      assets
                    
                    $
                    55,862,176
                    
                    
                    $
                    34,840,724Liabilities
      and equityCurrent
      liabilitiesTrade
      accounts payable
                    
                    $
                    10,677,538
                    
                    
                    $
                    10,173,765Related
      party payable
                    
                    
                    106,280
                    
                    
                    
                    564,419Other
      payables
                    
                    
                    1,911,563
                    
                    
                    
                    1,730,290Current
      portion of capital lease obligations
                    
                    
                    624,678
                    
                    
                    
                    -Accrued
      expenses
                    
                    
                    287,667
                    
                    
                    
                    277,329Bank
      loan payable
                    
                    
                    1,466,000
                    
                    
                    
                    -Total
      current liabilities
                    
                    
                    15,073,726
                    
                    
                    
                    12,745,803Long-term
      liabilitiesLong-term
      portion of capital lease obligations
                    
                    
                    834,175
                    
                    
                    
                    -Other
      payables - long-term
                    
                    
                    802,447
                    
                    
                    
                    -Total
      long-term liabilities
                    
                    
                    1,636,622
                    
                    
                    
                    -Total
      liabilities
                    
                    
                    16,710,348
                    
                    
                    
                    12,745,803Stockholders'
      equityPreferred
      stock, no par value; 10,000,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock: no par value; 100,000,000 shares authorized; 11,555,529 and
      1,529,550 shares issued and outstanding as of February 28, 2010 and May
      31, 2009
                    
                    
                    37,482,542
                    
                    
                    
                    1,396,644Retained
      earnings (deficit)
                    
                    
                    (1,575,785)
                    
                    
                    
                    17,755,631Accumulated
      other comprehensive income
                    
                    
                    1,567,143
                    
                    
                    
                    1,731,951Total
      China Infrastructure Construction Corporation stockholders'
      equity
                    
                    
                    37,473,900
                    
                    
                    
                    20,884,226Noncontrolling
      interests
                    
                    
                    1,677,928
                    
                    
                    
                    1,210,695Total
      liabilities and equity
                    
                    $
                    55,862,176
                    
                    
                    $
                    34,840,724
 
 The
accompanying notes are an integral part of this statement.
  F-1
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 FOR THE
THREE AND NINE MONTHS ENDED FEBRUARY 28, 2010 AND 2009
 (UNAUDITED)
 
 THREE MONTHS ENDED FEBRUARY
                                        28,
                                      
                                      
                                      NINE MONTHS ENDED FEBRUARY 28,2010
                                      
                                      
                                      2009
                                      
                                      
                                      2010
                                      
                                      
                                      2009Net
      Revenue
                                      
                                      $
                                      20,249,742
                                      
                                      
                                      $
                                      27,351,505
                                      
                                      
                                      $
                                      51,660,602
                                      
                                      
                                      $
                                      54,371,630Cost
      of goods sold
                                      
                                      
                                      16,472,119
                                      
                                      
                                      
                                      22,137,655
                                      
                                      
                                      
                                      40,976,286
                                      
                                      
                                      
                                      44,643,940Gross
      profit
                                      
                                      
                                      3,777,623
                                      
                                      
                                      
                                      5,213,850
                                      
                                      
                                      
                                      10,684,316
                                      
                                      
                                      
                                      9,727,690Selling,
      general and administrative expenses
                                      
                                      
                                      762,894
                                      
                                      
                                      
                                      455,432
                                      
                                      
                                      
                                      29,946,379
                                      
                                      
                                      
                                      965,058Net
      operating income (loss)
                                      
                                      
                                      3,014,729
                                      
                                      
                                      
                                      4,758,418
                                      
                                      
                                      
                                      (19,262,063
                                      )
                                      
                                      
                                      8,762,632Other
      income (expense):Interest
      income (expense)
                                      
                                      
                                      (92,889
                                      )
                                      
                                      
                                      190
                                      
                                      
                                      
                                      (96,544
                                      )
                                      
                                      
                                      1,133Other
      income
                                      
                                      
                                      498,249
                                      
                                      
                                      
                                      336
                                      
                                      
                                      
                                      503,245
                                      
                                      
                                      
                                      -Other
      expense
                                      
                                      
                                      (147
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (147
                                      )
                                      
                                      
                                      (11,930
                                      )Total
      other income (expense)
                                      
                                      
                                      405,213
                                      
                                      
                                      
                                      526
                                      
                                      
                                      
                                      406,554
                                      
                                      
                                      
                                      (10,797
                                      )Net
      income (loss) before income taxes
                                      
                                      
                                      3,419,942
                                      
                                      
                                      
                                      4,758,944
                                      
                                      
                                      
                                      (18,855,509
                                      )
                                      
                                      
                                      8,751,835Income
      taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      income (loss)
                                      
                                      
                                      3,419,942
                                      
                                      
                                      
                                      4,758,944
                                      
                                      
                                      
                                      (18,855,509
                                      )
                                      
                                      
                                      8,751,835Less:
      Net income attributable to noncontrolling interests
                                      
                                      
                                      191,773
                                      
                                      
                                      
                                      260,606
                                      
                                      
                                      
                                      475,907
                                      
                                      
                                      
                                      479,610Net
      income (loss) attributable to China Infrastructure Construction
      Corporation
                                      
                                      $
                                      3,228,169
                                      
                                      
                                      $
                                      4,498,338
                                      
                                      
                                      $
                                      (19,331,416
                                      )
                                      
                                      $
                                      8,272,225Earnings
      (loss) per share - basic
                                      
                                      $
                                      0.28
                                      
                                      
                                      $
                                      0.29
                                      
                                      
                                      $
                                      (2.97
                                      )
                                      
                                      $
                                      0.60Basic
      weighted average shares outstanding
                                      
                                      
                                      11,546,195
                                      
                                      
                                      
                                      15,295,500
                                      
                                      
                                      
                                      6,514,531
                                      
                                      
                                      
                                      13,733,189Earnings
      (loss) per share - diluted
                                      
                                      $
                                      0.28
                                      
                                      
                                      $
                                      0.29
                                      
                                      
                                      $
                                      (2.96
                                      )
                                      
                                      $
                                      0.60Diluted
      weighted average shares outstanding
                                      
                                      
                                      11,587,053
                                      
                                      
                                      
                                      15,295,500
                                      
                                      
                                      
                                      6,527,849
                                      
                                      
                                      
                                      13,733,189Comprehensive
      incomeNet
      income (loss)
                                      
                                      
                                      3,419,942
                                      
                                      
                                      
                                      4,758,944
                                      
                                      
                                      
                                      (18,855,509
                                      )
                                      
                                      
                                      8,751,835Foreign
      currency translation adjustment
                                      
                                      
                                      17,787
                                      
                                      
                                      
                                      (7,115
                                      )
                                      
                                      
                                      (173,482
                                      )
                                      
                                      
                                      144,748Comprehensive
      income (loss)
                                      
                                      $
                                      3,437,729
                                      
                                      
                                      $
                                      4,751,829
                                      
                                      
                                      $
                                      (19,028,991
                                      )
                                      
                                      $
                                      8,896,583Comprehensive
      income attributable to non-controlling interests
                                      
                                      $
                                      192,662
                                      
                                      
                                      $
                                      260,250
                                      
                                      
                                      $
                                      467,233
                                      
                                      
                                      $
                                      486,847Comprehensive
      income (loss) attributable to China Infrastructure Construction
      Corporation
                                      
                                      $
                                      3,245,067
                                      
                                      
                                      $
                                      4,491,579
                                      
                                      
                                      $
                                      (19,496,224
                                      )
                                      
                                      $
                                      8,409,736
 
 The
accompanying notes are an integral part of this statement.
  F-2
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE
NINE MONTHS ENDED FEBRUARY 28, 2010 AND 2009
 (UNAUDITED)
 
 February 28,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    (18,855,509
                    )
                    
                    $
                    8,751,835Adjustments
      to reconcile net income (loss) to net cash provided by (used in)
      operations:Gain
      from property, plant and equipment disposal
                    
                    
                    (496,782
                    )
                    
                    
                    -Bad
      debt expenses
                    
                    
                    420,217
                    
                    
                    
                    -Depreciation
                    
                    
                    813,751
                    
                    
                    
                    523,196Shares
      issued for compensation
                    
                    
                    27,422,242
                    
                    
                    
                    -Stock
      option expenses
                    
                    
                    58,030
                    
                    
                    
                    -Changes
      in operating liabilities and assets:Trade
      accounts receivable
                    
                    
                    (14,867,003
                    )
                    
                    
                    (14,320,425
                    )Prepayments
                    
                    
                    -
                    
                    
                    
                    195,750Inventories
                    
                    
                    (1,088,087
                    )
                    
                    
                    378,188Other
      receivables
                    
                    
                    (1,961,370
                    )
                    
                    
                    (1,930,828
                    )Trade
      accounts payable
                    
                    
                    487,288
                    
                    
                    
                    4,275,748Other
      payables
                    
                    
                    76,478
                    
                    
                    
                    1,816,538Accrued
      expenses
                    
                    
                    9,887
                    
                    
                    
                    320,482Net
      cash provided by (used in) operating activities
                    
                    
                    (7,980,858
                    )
                    
                    
                    10,484Cash
      flows from investing activities:Property,
      plant, and equipment additions
                    
                    
                    (1,209,849
                    )
                    
                    
                    (47,580
                    )Proceeds
      from related party receivable
                    
                    
                    -
                    
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (1,209,849
                    )
                    
                    
                    (47,580
                    )Cash
      flows from financing activities:Shares
      issued for cash
                    
                    
                    8,605,626
                    
                    
                    
                    -Restricted
      cash
                    
                    
                    (158,089
                    )
                    
                    
                    -Bank
      loan payable
                    
                    
                    1,466,300
                    
                    
                    
                    -Proceeds
      from related party payable
                    
                    
                    211,755
                    
                    
                    
                    -Payments
      to related party payable
                    
                    
                    -
                    
                    
                    
                    (199,489
                    )Cash
      acquired in recapitalization
                    
                    
                    -
                    
                    
                    
                    28,623Net
      cash provided by (used in) financing activities
                    
                    
                    10,125,592
                    
                    
                    
                    (170,866
                    )Effect
      of rate changes on cash
                    
                    
                    10,691
                    
                    
                    
                    9,820Increase
      (decrease) in cash and cash equivalents
                    
                    
                    945,576
                    
                    
                    
                    (198,142
                    )Cash
      and cash equivalents, beginning of period
                    
                    
                    921,841
                    
                    
                    
                    836,978Cash
      and cash equivalents, end of period
                    
                    $
                    1,867,417
                    
                    
                    $
                    638,836Supplemental
      disclosures of cash flow information:Interest
      paid in cash
                    
                    $
                    94,159
                    
                    
                    $
                    -Income
      taxes paid in cash
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing activities:Acquisition
      of property, plant and equipment through other payable
                    
                    $
                    2,261,763
                    
                    
                    $
                    -Disposal
      of property, plant and equipment through other receivable
                    
                    $
                    3,808,660
                    
                    
                    $
                    -Related
      party receivable offset by payable to related party
payable
                    
                    $
                    674,289
                    
                    
                    $
                    -
 
 See
accompanying notes to unaudited consolidated financial
statements
  F-3




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





1.   Nature
of Operations





China
Infrastructure Construction Corporation (the “Company”, “China Infrastructure”,
“CHNC”, “We”, “Our”) was organized on February 28, 2003 as Fidelity Aircraft
Partners LLC, a Colorado limited liability company (“Fidelity LLC”). On December
16, 2004, Fidelity LLC converted itself into Fidelity Aviation Corporation by
filing a Statement of Conversion and Articles of Incorporation with the Colorado
Secretary of State. Effective August 24, 2009, the Company changed its name from
Fidelity Aviation Corporation to China Infrastructure Construction
Corporation.





On
October 8, 2008, China Infrastructure entered into and consummated the
transactions contemplated under a Share Exchange Agreement with Northern
Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its
shareholder pursuant to which China Infrastructure issued 12,000,000 pre-split
shares, or 1,200,000 post-split shares, of China Infrastructure common
stock (the “Share Exchange”) in exchange for all issued and outstanding common
stock of NCH.





The Share
Exchange resulted in (i) a change in control of China Infrastructure with the
shareholder of NCH owning approximately 78% of issued and outstanding shares of
common stock of China Infrastructure, (ii) NCH becoming a wholly-owned
subsidiary of China Infrastructure, and (iii) appointment of certain nominees of
the shareholder of NCH as directors and officers of China Infrastructure and
resignation of John Schoenauer as director, Chief Executive Officer, Chief
Financial Officer, Secretary and Treasurer of China
Infrastructure.





As a
result of the Share Exchange Agreement, Beijing Fortune Capital Management Co.,
Ltd. (“BFCM”), a 95% owned subsidiary of NCH, became our indirect majority-owned
subsidiary.  Also as a result of the Share Exchange Agreement, Beijing
Chengzhi Qianmao Concrete Co., Ltd., (“Beijing Concrete”), the operating
company, and a 99.5% owned subsidiary of BFCM then, also became our
majority-owned subsidiary.





For
accounting purposes, the share exchange transaction was treated as a capital
transaction where the acquiring corporation issued stock for the net monetary
assets of the shell corporation, accompanied by a recapitalization. The
accounting is similar in form to a reverse acquisition, except that goodwill or
other intangibles are not recorded.  All references to NCH common
stock have been restated to reflect the equivalent numbers of China
Infrastructure common shares.





On
January 15, 2010, Beijing Concrete increased its registered capital from RMB 15
million (approximately $2.2 million) to RMB 30 million (approximately $4.4
million) and BFCM increased its investment in Beijing Concrete accordingly. Its
share capital increased from RMB 10 million (approximately $1.47 million) to RMB
15 million (approximately $2.2 million). As a result, BFCM owns 99.67% of
Beijing Concrete from January 15, 2010.




F-4




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





On
February 1, 2010, Beijing Concrete formed a subsidiary, Shaanxi Hongruida
Concrete Ltd. (“Hongruida”) and contributed RMB 10 million (approximately $1.47
million) to its capital. Beijing Concrete is the sole shareholder of Hongruida.
Hongruida was organized to implement the 10-year strategic cooperative agreement
with one of the Company’s major clients, China Railway Construction Group Co.,
Ltd (“CRCG”). Under the Agreement, the Company and CRCG will jointly manage the
concrete mixing stations to be operated by Hongruida. CRCG will provide the
cement for manufacturing the concrete mix in such concrete mixing stations, and
will be able to purchase the concrete mix at discounted prices. Also, in
accordance with the Agreement, each party will lease certain equipment to
Hongruida.  The Company and CRCG will share 75% and 25% of Hongruida’s
annual profits.





When we
refer in this report to business and financial information for periods prior to
the consummation of the reverse acquisition, we are referring to the business
and financial information of NCH on a consolidated basis unless the context
suggests otherwise.





2.   Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 8-03
of Regulation S-X.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.  All
such adjustments are of a normal recurring nature. Operating results for
the nine month period ended February 28, 2010, are not necessarily indicative of
the results that may be expected for the fiscal year ending May 31,
2010.  For further information refer to the consolidated financial
statements and footnotes thereto included in the Company’s annual report for the
year ended May 31, 2009.





3.   Summary
of Significant Accounting Policies





Economic and Political
Risks





The
Company faces a number of risks and challenges as a result of having primary
operations and marketing in the PRC. Changing political climates in the PRC
could have a significant effect on the Company’s business.




F-5




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





Control by Principal
Stockholders





The
directors, executive officers and their affiliates or related parties own,
beneficially and in the aggregate, the majority of the outstanding shares of the
Company. Accordingly, the directors, executive officers and their affiliates, if
they voted their shares uniformly, would have the ability to control the
approval of most corporate actions, including increasing the authorized capital
stock of the Company and the dissolution, merger or sale of the Company’s
assets.





Principles of
Consolidation





The
consolidated financial statements include the financial statements of China
Infrastructure, and its wholly-owned and majority-owned subsidiaries. All
significant inter-company balances and transactions have been eliminated in
consolidation. Non-controlling interests consist of other stockholders’
ownership interests in majority-owned subsidiaries of the Company.





Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosures of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.




Cash and Cash
Equivalents





For
purposes of the statements of cash flows, cash and cash equivalents includes
cash on hand and demand deposits held by banks. Deposits held in financial
institutions in the PRC are not insured by any government entity or
agency.





Restricted
Cash





In
accordance with the Escrow Agreement and the Subscription Agreement (note 11)
signed by China Infrastructure Construction Corporation, Trillion Growth China
General Partner and Anslow & Jaclin, LLP (the “Escrow Agent”) in
October 2009, the Company was required to keep with the Escrow Agent $120,000
immediately on the Closing Date of the Subscription Agreement. This fund can
only be disbursed when certain criteria are met. The escrow account also keeps
$38,089 of attorney fees as a covenant for future services. As of February 28,
2010 and May 31, 2009, the amount not disbursed was $158,089 and $0,
respectively, and these are included in restricted cash in the consolidated
balance sheets. Deposits held in the escrow account are not insured by any
government entity or agency.




F-6




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





Trade Accounts
Receivable




The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. Trade accounts receivable are recognized
and carried at original invoice amount less an allowance for any uncollectible
amounts. An allowance for doubtful accounts is established and determined based
on management’s regular assessment of known requirements, aging of receivables,
payment history, the customer’s current credit worthiness and the economic
environment. These factors continuously change, and can have an impact on
collections and the Company’s estimation process. These impacts may be material.
Management reviews and maintains an allowance for doubtful accounts that
reflects the management’s best estimate of potentially uncollectible trade
receivables. Certain accounts receivable amounts are charged off against
allowances after a designated period of collection efforts. Subsequent cash
recoveries are recognized as income in the period when they occur. Allowance for
doubtful debts amounted to $732,568 and $311,928 as of February 28, 2010 and May
31, 2009, respectively.





Inventories





Inventories
are stated at the lower of cost, determined on a weighted average basis, and net
realizable value. Net realizable value is the estimated selling price, in the
ordinary course of business, less estimated costs to complete and dispose.
Inventories consist of the following:




February 28, 2010
                
                
                May 31, 2009Raw materials
                
                $
                1,975,142
                
                
                $
                885,834





Property, Plant and
Equipment





Property,
plant and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the useful lives of
the assets. Major renewals are capitalized and depreciated; maintenance and
repairs that do not extend the life of the respective assets are charged to
expense as incurred. Upon disposal of assets, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Depreciation related to manufacturing is reported in cost of revenues.
Depreciation not related to manufacturing is reported in selling, general and
administrative expenses. Property, plant and equipment are depreciated over
their estimated useful lives as follows:




Office
      trailers
            10
      yearsMachinery
      and equipment
            3-8
      yearsFurniture
      and office equipment
            5-8
      yearsMotor
      vehicles
            3-5
      years




F-7




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





Impairment of Long-Lived and
Intangible Assets





Long-lived
assets of the Company are reviewed annually to assess whether the carrying value
has become impaired according to the guidelines established in FASB Codification
(ASC) 360.  The Company
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations. The Company also re-evaluates the
periods of depreciation to determine whether subsequent events and circumstances
warrant revised estimates of useful lives. As of February 28, 2010, the Company
expects these assets to be fully recoverable. No impairment of assets was
recorded in the periods reported.





Accumulated Other
Comprehensive Income





Accumulated
other comprehensive income represents foreign currency translation
adjustments.





Revenue
Recognition




The
Company receives revenue from sales of concrete products and from provision of
concrete pumping service and consulting service. The Company's revenue
recognition policies are in compliance with ASC 605 (previously Staff Accounting
Bulletin 104). Sales revenue is recognized at the date of shipment to customers
or services have been rendered when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed, no other significant
obligations of the Company exist and collectability is reasonably assured. Our
sales are non-returnable. Therefore, we do not estimate deductions or allowance
for sales returns. Sales are presented net of any discounts, reward, or
incentive given to customers.  Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.





Our
products delivered to customers would be checked on site by customers and, once
the products are accepted by customers, they will sign the acceptance notice.
There is no warranty issue after the delivery.





Reward or
incentive given to our customers is an adjustment of the selling prices of our
products; therefore, the consideration is characterized as a reduction of
revenue when recognized in our income statement.




F-8




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





The
Company recognizes its revenues net of value-added taxes (“VAT”).  The
Company is subject to VAT which is levied at the rate of 6% on the invoiced
value of sales. However, the Company enjoys a free VAT policy according to the
national policy, which encourages the development of the cement industry if
the manufacturer satisfies the environmental protection requirements. The
Company has enjoyed the free VAT policy from January 1, 2006 and has been
reviewed every year by the local tax bureau.





Cost of Goods
Sold





Cost of
goods sold consists primarily of the costs of the raw materials, freight
charges, direct labor, depreciation of plant and machinery, warehousing cost and
overhead associated with the manufacturing process and commission
expenses.





Selling, General and
Administration Expenses





Selling,
general and administrative expenses include costs incurred in connection with
performing selling, general and administrative activities such as executives and
administrative and sale employee salaries, related employee benefits, office
supplies, and professional services (legal and audit).





Shipping and Handling
Costs




ASC
605-45-20 “Shipping and
Handling costs” establishes standards for the classification of shipping
and handling costs. All amounts billed to a customer related to shipping and
handling are classified as revenue.




Advertising
Costs





The
Company expenses advertising costs as incurred.  Advertising expenses
charged to operations were $0 for the three and nine months ended February 28,
2010 and 2009, respectively. Advertising costs, if any, are included in selling,
general and administrative expense on the income statement.





Foreign Currency and
Comprehensive Income





The
accompanying financial statements are presented in US dollars. The functional
currency is the Renminbi (“RMB”) of the PRC. The financial statements are
translated into US dollars from RMB at period-end exchange rates for assets and
liabilities, and weighted average exchange rates for revenues and expenses.
Capital accounts are translated at their historical exchange rates when the
capital transactions occurred.




F-9




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





On July
21, 2005, the PRC changed its foreign currency exchange policy from a fixed
RMB/USD exchange rate into a flexible rate under the control of the PRC’s
government. We use the Closing Rate Method in currency translation of the
financial statements of the Company.





RMB is
not freely convertible into the currency of other nations. All such exchange
transactions must take place through authorized institutions. There is no
guarantee the RMB amounts could have been, or could be, converted into US
dollars at rates used in translation.





Income
Taxes





The
Company accounts for income taxes in accordance with ASC 740 (formerly SFAS 109,
“Accounting for Income Taxes.”) Under the asset and liability method as required
by ASC 740 (formerly SFAS 109), deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Under ASC
740, the effect on deferred income taxes of a change in tax rates is recognized
in income in the period that includes the enactment date. A valuation allowance
is recognized if it is more likely than not that some portion, or all of, a
deferred tax asset will not be realized. As of February 28, 2010 and May 31,
2009, the Company did not have any deferred tax assets or liabilities, and as
such, no valuation allowances were recorded at February 28, 2010 and May 31,
2009.





ASC 740
(formerly FIN 48) clarifies the accounting and disclosure for uncertain tax
positions and prescribes a recognition threshold and measurement attribute for
recognition and measurement of a tax position taken or expected to be taken in a
tax return. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.




Under ASC
740, evaluation of a tax position is a two-step process. The first step is to
determine whether it is more-likely-than-not that a tax position will be
sustained upon examination, including the resolution of any related appeals or
litigation based on the technical merits of that position. The second step is to
measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement. Tax positions that
previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent period in which the threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting
period in which the threshold is no longer met.




F-10




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





The
Company’s operations are subject to income and transaction taxes in the United
States, Hong Kong, and the PRC jurisdictions. Significant estimates and
judgments are required in determining the Company’s worldwide provision for
income taxes. Some of these estimates are based on interpretations of existing
tax laws or regulations, and as a result the ultimate amount of tax liability
may be uncertain. However, the Company does not anticipate any events that
would lead to changes to these uncertainties.





Restrictions on Transfer of
Assets Out of the PRC





Dividend
payments by the Company are limited by certain statutory regulations in the PRC.
No dividends may be paid by the Company without first receiving prior approval
from the Foreign Currency Exchange Management Bureau. However, no such
restrictions exist with respect to loans and advances.





Financial
Instruments




ASC 825
(formerly SFAS 107, “Disclosures about Fair Value of Financial Instruments”)
defines financial instruments and requires disclosure of the fair value of those
instruments. ASC 820 (formerly SFAS 157, “Fair Value Measurements”), adopted
July 1, 2008, defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosure requirements
for fair value measures. The carrying amounts reported in the balance sheets for
current receivables and payables, including short-term loans, qualify as
financial instruments and are a reasonable estimate of fair value because of the
short period of time between the origination of such instruments, their expected
realization and, if applicable, the stated rate of interest is equivalent to
rates currently available. The three levels are defined as follows:




o
            Level
      1: inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.





o
            Level
      2: inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the assets or liability, either directly or indirectly, for
      substantially the full term of the financial
  instruments.





o
            Level
      3: inputs to the valuation methodology are unobservable and significant to
      the fair value.




The
Company did not identify any assets or liabilities that are required to be
presented on the balance sheet at fair value in accordance with ASC 820
(formerly SFAS 157).




F-11




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





Stock-Based
Compensation





The
Company records stock-based compensation expense pursuant to ASC 718 (formerly
SFAS 123R, “Share Based Payment.”) The Company uses the Black-Scholes option
pricing model which requires the input of highly complex and subjective
variables including the expected life of options granted and the Company’s
expected stock price volatility over a period equal to or greater than the
expected life of the options. Because changes in the subjective assumptions can
materially affect the estimated value of the Company’s employee stock options,
it is management’s opinion that the Black-Scholes option pricing model may not
provide an accurate measure of the fair value of the Company’s employee stock
options. Although the fair value of employee stock options is determined in
accordance with ASC 718 using an option pricing model, that value may not
be indicative of the fair value observed in a willing buyer/willing seller
market transaction.




Stock-based
compensation expense is recognized based on awards expected to vest, and there
were no estimated forfeitures as the Company has a short history of issuing
options. ASC 718 (formerly SFAS 123R) requires forfeitures to be estimated at
the time of grant and revised in subsequent periods, if necessary, if actual
forfeitures differ from those estimates.





Basic and Diluted Earnings
Per Share





The
Company reports earnings per share in accordance with the provisions of ASC 260
(formerly SFAS No. 128, "Earnings Per Share.") ASC 260 requires
presentation of basic and diluted earnings per share in conjunction with the
disclosure of the methodology used in computing such earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average common shares
outstanding during the period. Diluted earnings per share takes into account the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.




F-12




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





The
following is a reconciliation of the basic and diluted earnings per
share:




THREE MONTHS ENDED
                        FEBRUARY 28,
                      
                      
                      NINE MONTHS ENDED
                        FEBRUARY 28,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Net
      income (loss) for earnings per share
                      
                      $
                      3,228,169
                      
                      
                      $
                      4,498,338
                      
                      
                      $
                      (19,331,416
                      )
                      
                      $
                      8,272,225Weighted
      average shares used in basic computation
                      
                      
                      11,546,195
                      
                      
                      
                      15,295,500
                      
                      
                      
                      6,514,531
                      
                      
                      
                      13,733,189Diluted
      effect of warrants and options
                      
                      
                      40,858
                      
                      
                      
                      -
                      
                      
                      
                      13,318
                      
                      
                      
                      -Weighted
      average shares used in diluted computation
                      
                      
                      11,587,053
                      
                      
                      
                      15,295,500
                      
                      
                      
                      6,527,849
                      
                      
                      
                      13,733,189Earnings
      (loss) per share, basic
                      
                      $
                      0.28
                      
                      
                      $
                      0.29
                      
                      
                      $
                      (2.97
                      )
                      
                      $
                      0.60Earnings
      (loss) per share, diluted
                      
                      $
                      0.28
                      
                      
                      $
                      0.29
                      
                      
                      $
                      (2.96
                      )
                      
                      $
                      0.60





Statement of Cash
Flows




In
accordance with FASB ASC 230 cash flows from the Company's operations is
calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows may not
necessarily agree with changes in the corresponding balances on the balance
sheet.





Segment
Reporting





Statement
of Financial Accounting Standards No. 131 (SFAS 131), (ASC 250) “Disclosure
about Segments of an Enterprise and Related Information” requires use of the
management approach model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a
company.




F-13




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




Since
management does not disaggregate Company data, the Company has determined that
only one segment exists.




Recent Accounting
Pronouncements




In
June 2009, the FASB issued ASC 860 (previously SFAS No. 166,
“Accounting for Transfers of Financial Assets”), which requires additional
information regarding transfers of financial assets, including securitization
transactions, and where companies have continuing exposure to the risks related
to transferred financial assets. SFAS 166 eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures. SFAS 166 is effective for
fiscal years beginning after November 15, 2009. The Company does not
believe this pronouncement will impact its financial statements.




In
June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for
determining whether to consolidate a variable interest entity. These amended
standards eliminate a mandatory quantitative approach to determine whether a
variable interest gives the entity a controlling financial interest in a
variable interest entity in favor of a qualitatively focused analysis, and
require an ongoing reassessment of whether an entity is the primary beneficiary.
We are currently evaluating the impact that adoption will have on our
consolidated financial statements.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends
ASC Topic 820, Measuring
Liabilities at Fair Value, which provides additional guidance on the
measurement of liabilities at fair value. These amended standards clarify that
in circumstances in which a quoted price in an active market for the identical
liability is not available, we are required to use the quoted price of the
identical liability when traded as an asset, quoted prices for similar
liabilities, or quoted prices for similar liabilities when traded as assets. If
these quoted prices are not available, we are required to use another valuation
technique, such as an income approach or a market approach. We do not expect it
to have a significant impact on our consolidated financial
statements.





In
October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue
Recognition (Topic 605): Multiple Deliverable Revenue
Arrangements - A Consensus of the FASB Emerging Issues Task Force.” This
update provides application guidance on whether multiple deliverables exist, how
the deliverables should be separated and how the consideration should be
allocated to one or more units of accounting. This update establishes a selling
price hierarchy for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor-specific objective
evidence, if available, third-party evidence if vendor-specific objective
evidence is not available, or estimated selling price if neither vendor-specific
or third-party evidence is available. The Company will be required to apply this
guidance prospectively for revenue arrangements entered into or materially
modified after January 1, 2011; however, earlier application is permitted.
Management is in the process of evaluating the impact of adopting this ASC
update on the Company’s financial statements.




F-14







CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)


Reclassifications





Certain
prior period amounts have been reclassified to conform to the current period
presentation.





4.  Property, Plant and
Equipment





Plant and
equipment consist of the following:





February
      28, 2010
                    
                    
                    May 31, 2009Office
      trailers
                    
                    $
                    903,789
                    
                    
                    $
                    902,319Machinery
      and equipment
                    
                    
                    6,293,900
                    
                    
                    
                    2,922,504Motor
      vehicles
                    
                    
                    550,587
                    
                    
                    
                    466,117Furniture
      and office equipment
                    
                    
                    484,
      819
                    
                    
                    
                    462,300Construction
      in progress
                    
                    
                    58,553
                    
                    
                    
                    3,305,813Total
      property, plant and equipment
                    
                    
                    8,291,648
                    
                    
                    
                    8,059,053Accumulated
      depreciation
                    
                    
                    (3,227,937
                    )
                    
                    
                    (2,409,218
                    )Net
      property, plant and equipment
                    
                    $
                    5,063,711
                    
                    
                    $
                    5,649,835





Depreciation
expense included in selling, general and administrative expenses for the three
months ended February 28, 2010 and 2009 was $54,303 and $49,826, respectively.
Depreciation expense included in selling, general and administrative expenses
for the nine months ended February 28, 2010 and 2009 was $160,656 and $155,227,
respectively. Depreciation expense included in cost of goods sold for the three
months ended February 28, 2010 and 2009 was $211,016 and $45,061, respectively.
Depreciation expense included in cost of goods sold for the nine months ended
February 28, 2010 and 2009 was $653,095 and $367,969, respectively.




Construction
in progress represents direct costs incurred for the Company’s new plant
construction in Hongruida. All construction costs associated with this project
are accumulated and capitalized as construction in progress. The construction in
progress is closed out to the appropriate asset classification when the project
is substantially complete, occupied, or placed into service. No depreciation is
provided until it is completed and ready for its intended use.





On
February 28, 2010, we sold construction in progress in Tangshan to an unrelated
third party at a price of approximately $3.8 million. The amount will be due in
4 annual equal installments starting September 1, 2010. As of February 28, 2010,
the book value of the construction in progress sold was approximately $3.3
million. A gain from property, plant and equipment disposal of $496,782 was
recorded in other income.





Interest
costs totaling $0 were capitalized into construction in progress for the three
and nine months ended February 28, 2010 and 2009, respectively.




F-15




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




5. Other Receivables





As of
February 28, 2010, other receivables amounted to $5,872,791. It includes $3.8
million related to construction in progress disposal to an unrelated party. The
receivable is unsecured, interest free, and with fixed repayment dates (note 4).
It also includes approximately $1.55 million due from unrelated parties, that
are unsecured, interest free, and without fixed repayment dates. As of April 8,
2010, appromixately $1 million of this $1.55 million has been collected. It also
includes insurance claims and deposits, that are from unrelated parties,
interest free, unsecured, and with no fixed repayment date, and advances to
employees for business purposes.





As of May
31, 2009, other receivables amounted to $270,819, which mainly consists of
insurance claims and the temporary lending to the staff with no fixed repayment
date, unsecured, and with no interest bearing on it.





The
allowances on the other accounts receivable are recorded when circumstances
indicate collection is doubtful for particular accounts
receivable.  The Company provides for allowances on a specific account
basis. There is no provision made for the other receivables at February 28, 2010
and May 31, 2009.





6.  
Other Payables





Other
payables in current liabilities consist of the following as of February 28, 2010
and May 31, 2009:




February 28, 2010
                  
                  
                  May 31, 2009Commission
      payable
                  
                  $
                  1,456,407
                  
                  
                  $
                  1,541,579Staff  and
      other companies deposit
                  
                  
                  455,156
                  
                  
                  
                  188,711Total
      other payables - current
                  
                  $
                  1,911,563
                  
                  
                  $
                  1,730,290





Other
Payables – Long-Term





Long-term
other payables amounted to $802,447 and $0 as of February 28, 2010 and May 31,
2009. The long-term other payables are payments due to unrelated vendors for
machinery and equipment purchases.





7.  Accrued
Expenses





Accrued
expenses amounted to $287,667 and $277,329 as of February 28, 2010 and May 31,
2009. The accrued expenses mainly include accrued land lease expenses, accrued
electricity and utility expenses, and accrued interest.




F-16




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




8.   Related Party
Transactions





Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.





Total
outstanding amount of related party payable was $106,280 and $564,419 as of
February 28, 2010 and May 31, 2009, respectively. These payables bear no
interest, are unsecured, and have no fixed payment terms. The related party
payable consists of the following:





February 28, 2010
                  
                  
                  May 31, 2009Rong
      Yang (Chairman)
                  
                  $
                  106,280
                  
                  
                  $
                  372,489Liao
      Shunjun (Chairman’s brother-in-law)
                  
                  
                  -
                  
                  
                  
                  98,723RongHua
      Chang Shen Transportation (20% owned by a common
    shareholder)
                  
                  
                  -
                  
                  
                  
                  93,207$
                  106,280
                  
                  
                  $
                  564,419





Total
outstanding amount of related party receivables was $0 and $674,289 as of
February 28, 2010 and May 31, 2009, respectively. These receivables require no
interest, are unsecured, and have no fixed re-payment terms. All the related
party receivables are loans to related parties for business developments. As a
public company, the Company has set up stricter rules to forbid loans to related
parties. The receivables from related party consist of the
following:





February 28, 2010
                            
                            
                            May 31, 2009Lao
      Zhan (common shareholder)
                            
                            $
                            -
                            
                            
                            $
                            465,332Yang
      Ming (Chairman Yang Rong’s brother)
                            
                            
                            -
                            
                            
                            
                            187,490Heng
      Jian (20% owned  by a common shareholder )
                            
                            
                            -
                            
                            
                            
                            20,736Liao
      Guiping (Chairman’s wife)
                            
                            
                            -
                            
                            
                            
                            731$
                            -
                            
                            
                            $
                            674,289




In the
nine months ended February 28, 2010, related party receivable of $674,289
was offset against payable to a related party, CEO and chairman of the
Company, according to an agreement in which the CEO agreed to such
obligation.




F-17




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




9.
Debt




Bank Loan
Payable




On
October 16, 2009, the Company borrowed $1,466,000 from Beijng Bank. The loan is
unsecured, and with an annual interest rate of 5.31%. $1,318,500 of the total
amount is guaranteed by an unrelated party. The due dates are as follows:
$146,600 due on April 16, 2010, $146,600 due on July 16, 2010, $293,200 due on
August 16, 2010, $439,800 due on September 16, 2010, and $439,800 due on October
16, 2010. Interest expenses are due on the 16th of every third month. As of
February 28, 2010, the loan payable to bank amounted to $1,466,000. There is no
interest expense capitalized into construction in progress for the three and
nine months ended February 28, 2010 and 2009.




There was
no bank loan payable as of May 31, 2009.





Interest




Total
interest expense and financial charges for the three and nine months ended
February 28, 2010 on all debt amounted to $92,889 and $96,544, respectively.
Total interest income for the three and nine months ended February 28, 2009
amounted to $190 and $1,133, respectively.





Capital
Lease




In July,
2009, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,776,792 with an annual interest rate of 6.76%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for three years, with total payments of approximately
$1,968,028. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $22,137 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 28 months from March 2010 to June 2012 are as follows:





Total
      lease payment
                    
                    $
                    1,585,356Less
      imputed interest
                    
                    
                    126,503Total
      capital lease obligation as of February 28, 2010
                    
                    
                    1,458,853Less
      current maturity
                    
                    
                    624,678Capital
      lease obligation – long-term portion as of February 28,
    2010
                    
                    $
                    834,175





The
future lease commitments for the next three year after February 28, 2010 are as
follows:





1
      year after
                  
                  $
                  710,6772
      years after
                  
                  
                  656,0093
      years after
                  
                  
                  218,670Total
                  
                  $
                  1,
      585, 356




F-18




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




10.
Non-controlling Interest





Non-controlling
interest consists of other stockholders’ ownership interest in majority-owned
subsidiaries of the Company, which is about 5.48% of the total ownership before
the change of the non-controlling interest and 5.32% of the total ownership
after the change of the non-controlling interest (Note 1). As of February 28,
2010 and May 31, 2009, the balance of non-controlling interest was $1,677,928
and $1,210,695, respectively.





11.
Shareholder’s Equity





Reverse Stock
Split





On
September 28, 2009, the Company effectuated a 1-for-10 reverse stock split of
the Company’s common stock, with no par value (the “Common Stock”) (the “Reverse
Split”). Upon the Reverse Stock Split, ten (10) shares of the outstanding Common
Stock were automatically converted into one (1) share of Common Stock. The
Reverse Stock Split, however, did not alter the number of shares the Company is
authorized to issue, but only reduced the number of shares of its Common Stock
issued and outstanding. Any fractional share issued as a result of the reverse
split was rounded up. Immediately before the Reverse Split there were
15,295,500 shares of Common Stock issued and outstanding. Immediately after
giving effect to the Reverse Split, there were 1,529,550 shares of Common Stock
issued and outstanding. All statements are retroactively stated to show the
effects of the Reverse Split as if it had occurred at the beginning of the first
period presented.





Stock Issuance For
Compensation





On
October 14, 2009, to provide incentives to the Company’s management and to
adjust the Company’s capital structure, the Company issued 7,031,344 shares of
its common stock to Rui Shen, as a trustee holding the shares for the Company’s
Chief Executive Officer and Chairman Mr.Yang. The Company has used the closest
share issuance price as the fair market value to calculate the compensation
expense. A total of $27,422,242 in compensation expense was included in selling,
general and administrative expenses.




F-19




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)




Stock Issuance For
Cash





On
October 16, 2009, the Company entered into and consummated the sale of
securities pursuant to a Subscription Agreement with a number of institutional
investors (the “Investors”), providing for the sale to the Investors of an
aggregate of approximately 2,564,108 shares of Common Stock for an aggregate
purchase price of approximately $10,000,000 (or $3.90 per Share).  Net
proceeds of $8,605,626 had been received and recorded as share capital. In
connection with the Private Placement, the Company issued to the placement agent
warrants to purchase 153,846 shares of Common Stock exercisable for a period of
five years at an exercise price of $3.90 per share and paid a transaction fee
equal to 8% of the gross proceeds of the Private Placement. Additionally, the
Company issued to an advisor in the PRC 288,963 shares of Common Stock and
paid a transaction fee equal to 2.5% of the gross proceeds of the Private
Placement for the service provided purely relating to the equity
financing.  Thus, the Company paid $1,394,396 in total and issued 403,431
shares to various parties as fund raising costs. These costs were classified as
equity and accounted for as common stock issuance cost.





The
Company also entered into several covenants in the Subscription Agreement, the
breach of which can result in penalties, which are capped at 15% of the
aggregate purchase price of the Private Placement.  These covenants
include:





·
            Structuring
      the Company’s board of directors to be in compliance with the Nasdaq
      Corporate Governance standards;


·
            Listing
      on a National Securities Exchange within 24 months of the Closing
      Date;


·
            Hiring
      of a new full-time Chief Financial Officer, subject to the approval of
      certain Investors;


·
            Hiring
      of an internal control consultant for Sarbanes-Oxley 404 compliance;
      and


·
            Delivery
      of additional shares of common stock to the Investors on a pro rata basis
      for no additional consideration in the event that the Company’s after tax
      net income for each of the fiscal years ending May 31, 2010 and 2011 is
      less than $14,000,000 and $18,000,000, respectively, subject to certain
      adjustments, which number of shares should be equal to the percentage of
      variation between the actual net income and the target net
      income.





In
connection with the Subscription Agreement, the Company also entered into an
Investor Relations Escrow Agreement with an escrow agent and an investor
representative, wherein the Company agreed to deposit $120,000 of the proceeds
of the Private Placement into an escrow account (the “IR Escrow Funds”) and to
utilize such IR Escrow Funds for a three-year investor relations program (the
“IR Escrow Agreement”). In accordance with the Subscription Agreement, the
Company shall retain an investor relations firm within 30 days after the Closing
Date, subject to the approval of the investor representative. The Company is
obligated to replenish the IR Escrow Funds on the second and third anniversaries
of the Closing Date to bring the balance of such funds to $120,000 as of
then.





F-20




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)


Options





On
December 17, 2009, we granted to our newly appointed CFO options to purchase
300,000 shares of common stock, with an exercise price of $3.90 per share, which
was the closest stock issuance price of the date of grant. The options will vest
over 2 years and expire 3 years after the vesting date or after a termination
date whichever is earlier.





On
February 12, 2010, we granted to our CEO options to purchase 400,000 shares of
common stock, with an exercise price of $3.90 per share. The options will vest
over 2 years and no option can be exercised after 5 years from the vesting
date.





On
February 12, 2010, we granted three independent directors each, options to
purchase 10,000 shares of common stock, with an exercise price of $3.90 per
share. The options will vest over 1 year and no option can be exercised after 3
years from the vesting date.





The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option- pricing model are as follows:





Risk-free
      interest rate
                  
                  
                  0.86
                  %Expected
      life of the options
                  
                  2
      yearsExpected
      volatility
                  
                  
                  45
                  %Expected
      dividend yield
                  
                  
                  0





Following
is a summary of the stock option activity:





Options
                      outstanding
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding,
      May 31, 2009
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Granted
                    
                    
                    730,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00Forfeited
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      February 28, 2010
                    
                    
                    730,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00


F-21


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





Following
is a summary of the status of options outstanding at February 28,
2010:





Outstanding Options
                      
                      Exercisable OptionsExercise Price
                      
                      Number
                      
                      Average
                        Remaining
                        Contractual
                        Life
                      
                      Average
                        Exercise
                        Price
                      
                      Number
                      
                      Average
                        Exercise Price$
                      3.90
                      
                      730,000
                      
                      1.89
                      
                      $
                      3.90
                      
                      -
                      
                      $
                      3.90





Warrants





On
October 16, 2009, in connection with the Share Purchase Agreement, the Company
issued 153,846 warrants to Hunter Wise Financial Group, LLC, the Placement
Agent. The warrants carry an exercise price of $3.90 and a 5-year term. The
Warrants contain standard adjustment provisions upon stock dividend, stock
split, stock combination, recapitalization, and a change of control
transaction.





Placement
Agent Warrants meet the conditions for equity classification pursuant to FASB
ASC 815 “Derivatives and Hedging” and EITF 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's
Own Stock.” Therefore, these warrants were classified as equity and accounted
for as common stock issuance cost.





Warrants
                    Outstanding
                  
                  
                  Warrants
                    Exercisable
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Average
                    Remaining
                    Contractual
                    LifeOutstanding,
      May 31, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -Granted
                  
                  
                  153,846
                  
                  
                  
                  153,846
                  
                  
                  
                  3.90
                  
                  
                  
                  4.63Forfeited
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      February 28, 2010 (Unaudited)
                  
                  
                  153,846
                  
                  
                  
                  153,846
                  
                  
                  $
                  3.90
                  
                  
                  
                  4.63


F-22


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)


12.
Employee Welfare Plan




The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes contributions to an employee welfare
plan.  The total expense for the above plan was $30,407 and $204,447
for the three months ended February 28, 2010 and 2009, respectively. The total
expense for the above plan was $78,572 and $205,401 for the nine months ended
February 28, 2010 and 2009, respectively.





13.
Income Tax





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the nine months ended February 28, 2010 and 2009:




2010
                  
                  
                  2009U.S.
      Statutory rates
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %Foreign
      income not recognized in USA
                  
                  
                  (34.0
                  )
                  
                  
                  (34.0
                  )China
      income taxes
                  
                  
                  0
                  
                  
                  
                  0China
      income tax exemption
                  
                  
                  0
                  
                  
                  
                  0Total
      provision for income taxes
                  
                  
                  0
                  %
                  
                  
                  0
                  %




People’s Republic of China
(PRC)





Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in
the statutory financial statements after appropriate tax adjustments. Currently,
the Company is charged at 0% income tax rate because of a special tax exemption
approved by the PRC tax department. The income tax expenses for the three
and nine months ended February 28, 2010 and 2009 are $0. The exemption of
income tax to the Company will last until December 31, 2010 and from year 2011,
the Company will be subject to an income tax at a standard rate of 25%. There
were no significant book and tax basis differences.





The
estimated tax savings due to the tax exemption for the three and nine months
ended February 28, 2009 amounted to approximately $1,363,114 and $2,303,114,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease the basic and diluted earnings per share for the three
and nine months ended February 28, 2009 by $0.09 and $0.17, respectively. The
estimated tax savings due to the tax exemption for the three and nine months
ended February 28, 2010 amounted to approximately $893,876 and $2,193,876,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease the basic and diluted earnings per share for the three
and nine months ended February 28, 2010 by $0.08 and $0.34,
respectively.


F-23


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)


14.
Other Income (Expenses)





Other
income was $498,249 and $503,245 for the three and nine months ended February
28, 2010, respectively.It mainly consists of
gain on property, plant and equipment disposal (note 4). Other expenses were
$147 for the three and nine months ended February 28, 2009, respectively. It
mainly consists of fines to the Company such as fines for traffic
violations.





Other
income was $336 for the three months ended February 28, 2009. It mainly consists
of income from selling used paper and other items. Other expenses were $0 and
$11,930 for the three and nine months ended February 28, 2009, respectively. It
mainly consists of fines to the Company such as fines for traffic
violations.





15.
Concentration of Credit Risks and Uncertainties





The
Company’s practical operations are all carried out in the PRC. Accordingly, the
Company’s business, financial condition, and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC's economy.




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





Concentration
of credit risk exists when changes in economic, industry or geographic factors
similarly affect groups of counter parties whose aggregate credit exposure is
material in relation to the Company’s total credit exposure.





For the
three months ended February 28, 2010, there is one major customer that
individually comprised more than 10% of the Company’s total sales. (China
Railway Construction Corp., 11%). For the nine months ended February 28, 2010,
there is one customer that individually comprised more than 10% of the Company’s
total sales. (China Railway Construction Corp., 16%).





For the
three months ended February 28, 2009, there are two major customers that each
individually comprised more than 10% of the Company’s total sales. (China
Railway Construction Corp., 25%, and Guangzhou Tianli Construction Projects
Inc., 13%). For the nine months ended February 28, 2009, there are two customers
that each individually comprised more than 10% of the Company’s total sales.
(China Railway Construction Corp., 24%, and Guangzhou Tianli Construction
Projects Inc., 13%).


F-24


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)





One
customer, China Railway Construction Corp., comprised 23% of the Company’s
accounts receivable balance at February 28, 2010. China Railway Construction
Corp. comprised 33% of the Company’s accounts receivable balance at May 31,
2009.





The top
five major vendors accounted for 26% of the Company’s total purchases for the
three months ended February 28, 2010, with no one major vendor accounting for
more than 10% of the total purchases. The top five major vendors accounted for
28% of the Company’s total purchases for the nine months ended February 28,
2010, with no one major vendor accounting for more than 10% of the total
purchases.





The top
five major vendors accounted for 44% of the Company’s total purchases for the
three months ended February 28, 2009, with one major vendor, Tianjin Zhenxing
Cement Company, accounting for 22% of the total purchases. The top five major
vendors accounted for 45% of the Company’s total purchases for the nine months
ended February 28, 2009, with one major vendor, Tianjin Zhenxing Cement Company,
accounting for 21% of the total purchases.





No vendor
accounted for more than 10% of the Company’s accounts payable at February 28,
2010.  Three major vendors, Beijing Hongmaoweiye Additive Company,
Beijing Shengshishoujia Ore Company, and Tianjin Zhenxing Cement Company,
accounted for 7%, 5% and 5% of the Company’s accounts payable at February 28,
2010. No vendor accounted for more than 10% of the Company’s accounts payable at
May 31, 2009.  One major vendor, Zhuozhou Shuishang Leyuan Shashiliao,
accounted for 8% of the Company’s accounts payable at May 31, 2009.





The
Company’s exposure to foreign currency exchange rate risk primarily relates to
cash and cash equivalents and short-term investments, denominated in the U.S.
dollar. Any significant revaluation of RMB may materially and adversely affect
the cash flows, revenues, earnings and financial position of the
Company.





16.
Subsequent Events





We have
reviewed subsequent events from the balance sheet date up through the date that
the financial statements were issued.


F-25


CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


February
28, 2010


(UNAUDITED)


Share
issuance for cash





On March
11, 2010, the Company consummated a private placement pursuant to a Subscription
Agreement dated March 5, 2010 with a number of investors, providing for the sale
to the Investors of an aggregate of approximately 1,282,091 shares of the
Company’s common stock, no par value for an aggregate purchase price of
approximately $5,000,000 (or $3.90 per Share). Net proceeds of $4,461,011 had
been received and recorded as share capital. In connection with the Private
Placement, the Company issued to the placement agent and finder warrants to
purchase in the aggregate 69,231 shares of Common Stock exercisable for a period
of five years at an exercise price of $3.90 per share and paid a transaction fee
of approximately $360,000 of the gross proceeds of the Private
Placement.





Amendment
to 2009 Subscription Agreement





On March
5, 2010, the Company and investors (the “2009 Investors”) named in that certain
Subscription Agreement dated October 16, 2009 (the “2009 Subscription
Agreement”) entered into an Amendment (the “Amendment”) to the 2009 Subscription
Agreement. The Amendment modified certain covenants to which the Company had
previously agreed pursuant to the 2009 Subscription Agreement, including
exemption of the above described Private Placement from certain restrictions on
subsequent offerings contained in the 2009 Subscription Agreement.





Under the
Amendment, the Company will have to file a registration statement covering the
securities issued in connection with the 2009 Subscription Agreement (the
“Registrable Shares”), if at anytime after December 31, 2010 not all of the
Registrable Shares may be sold without registration pursuant to Rule 144 under
the 1933 Act. Such registration statement shall be filed within 45 days after
receipt of a written demand from the 2009 Investors representing not less than
50% of the then outstanding Registrable Shares. The 2009 Investors also have
piggy-back registration rights exercisable after December 31, 2010 with respect
to the Registrable Shares that may not be sold without registration pursuant to
Rule 144.





In
consideration of the Amendment, the Company issued the 2009 Investors warrants
to purchase in the aggregate approximately 1,281,083 shares of Common Stock at
an exercise price of $6.00 per share. The Company also agreed to (i) a minimum
per share price of $5.20 in case it undertakes a follow-on public offering, and
(ii) net income target for fiscal year 2011 be increased to $19.8 million from
$18.0 million if such public offering does not take place.





Options





On March
22, 2010, we granted one independent director options to purchase 10,000 shares
of common stock, with an exercise price of $3.90 per share. The options will
vest over 1 year and no option can be exercised after 3 years from the vesting
date.


F-26


ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.





SPECIAL
NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS





CERTAIN
STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE
WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS" (AS SUCH TERM IS DEFINED IN
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934), WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT
REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN
ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL",
"HOPES", "SEEKS", "ANTICIPATES", "EXPECTS"AND THE LIKE OFTEN IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS
A FORWARD-LOOKING STATEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS
CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE
OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH
PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS.
NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS
AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH
OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE
REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING
DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER
FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY'S OTHER FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE
FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE
PERFORMANCE OR FUTURE RESULTS.





The "Company", "we," "us," and
"our," refer to (i) China Infrastructure Construction Corporation (formerly
Fidelity Aviation Corporation); (ii) Beijing Chengzhi Qianmao Concrete
Corporation Ltd. (“Beijing Concrete”), (iii) Beijing Fortune Capital Management,
Ltd. (“BFCM”), and (iv) Northern Construction Holdings, Ltd.
(“NCH”)





Overview





China
Infrastructure Construction Corporation (the “Company”, “China Infrastructure”,
“CHNC”, “We”, “Our”) was organized in Colorado on February 28, 2003. The Company
through its subsidiaries in Hong Kong and the People’s Republic of China (“PRC”
or “China”), engages in production of ready-mixed concrete for developers and
the construction industry in the PRC. The Company primarily operates through its
indirect majority-owned subsidiary, Beijing Chengzhi Qianmao Concrete Co., Ltd.
(“Beijing Concrete”), a company organized under the laws of the PRC. Beijing
Concrete currently has five production facilities. One facility is located in
the Nanhaizi area, on the west side of the Yizhuang economic development zone in
Beijing, one is in Shidu, a suburban area of Beijing, one is in Xi’an West New
High-tech Zone, and another two are located at the Tangshan harbor, about two
hundred kilometers from Beijing. The plant located in Xian was put into
operation at the end of March 2010.


4


Recent
Developments





On
February 1, 2010, Beijing Concrete formed a subsidiary, Shaanxi Hongruida
Concrete Ltd. (“Hongruida”) and contributed RMB 10 million (approximately $1.47
million) to its capital. Beijing Concrete is the sole shareholder of Hongruida.
Hongruida was organized to implement the 10-year strategic cooperative agreement
with one of the Company’s major clients, China Railway Construction Group Co.,
Ltd (“CRCG”). Under the Agreement, the Company and CRCG will jointly manage the
concrete mixing stations to be operated by Hongruida. CRCG will provide the
cement for manufacturing the concrete mix in such concrete mixing stations, and
will be able to purchase the concrete mix at discounted prices. Also, in
accordance with the Agreement, each party will lease certain equipment to the
concrete mixing stations.  The Company and CRCG will share 75% and 25%
of the annual profits of such concrete mixing stations in Xi’an.




Results
of Operations





Three
Months Ended February 28, 2010 Compared to Three Months Ended February
28,2009





Net
Revenue





Net
revenue for the three months ended February 28, 2010 was $20,249,742 as compared
to $27,351,505 for the same period last year, a decrease of $7,101,763 or
approximately 25.96%. The decrease in net revenue is attributable to the
decrease of the unit prices as well as the decrease of sales volume. The sales
volume of concrete products decreased approximately 15% for the three months
ended February 28, 2010 as compared to the same period last year. The
decrease is mainly due to the decreased sales in the Beijing area. The Company
has given a longer Chinese New Year vacation in Beijing in February this year
than last year, which caused the decrease of the sales in this quarter. The
average unit prices of concrete products decreased approximately 13% for the
three months ended February 28, 2010 as compared to the same period last
year.  The decrease of the unit price is because of the decrease of
the raw material prices. Net revenue from pumping services decreased
approximately 68% for the three months ended February 28, 2010 as compared to
the same period last year.  Net revenue from pumping services
accounted for approximately 2% and 4% of the total net revenue for the three
months ended February 28, 2010 and 2009, respectively.





Cost
of Goods Sold





Cost of
goods sold for the three months ended February 28, 2010 was $16,472,119 as
compared to $22,137,655 for the same period last year, a decrease of $5,665,536,
or approximately 25.59%. The decrease in cost of goods sold is in line with the
decrease of the net revenue.


5


Gross
Profit





Gross
profit for the three months ended February 28, 2010 was $3,777,623, a decrease
of $1,436,227 or approximately 27.55%, as compared to $5,213,850 for the same
period last year. The decrease in gross profit is attributable to the decrease
of the net revenue.





Gross
Profit Margin




Gross
profit margin for the three months ended February 28, 2010 was 18.66%, compared
to 19.06% for the same period last year. The gross profit margin remains
stable.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the three months ended February 28, 2010
were $762,894, as compared to $455,432 for the same period last year, an
increase of $307,462, or approximately 67.51%. The increase of the selling,
general and administrative expenses was primarily due to increased professional
expenses as a public company. Non cash stock option expense of $58,030 was
included.





Operating
Income





Our
operating income for the three months ended February 28, 2010 was $3,014,729, a
decrease of $1,743,689 or approximately 36.64%, as compared to operating income
of $4,758,418 for the three months ended February 28, 2009. The decrease was
mainly due to decreased gross net revenue and increased professional expenses as
a public company.





Income
Taxes





During
the three months ended February 28, 2010, our business operations were solely
conducted by our subsidiaries incorporated in the PRC and we are governed by the
PRC Enterprise Income Tax Laws.  PRC enterprise income tax is
calculated based on taxable income determined under PRC GAAP. In accordance with
the Income Tax Laws, a PRC domestic company is subject to enterprise income tax
at the rate of 25%.





However,
our PRC subsidiary is considered by the respective tax authorities a resource
multipurpose utilization enterprise, which qualifies it for an exemption from
income tax until December 31, 2010.





Net
Income Attributable To China Infrastructure Construction
Corporation





Our net
income for the three months ended February 28, 2010 was $3,228,169, a decrease
of $1,270,169 or approximately 28.24%, as compared to net income of $4,498,338
for the three months ended February 28, 2009. The decrease was mainly due to
decreased net revenue and increased professional expenses as a public
company.


6


Nine
Months ended February 28, 2010 Compared to Nine Months Ended February 28,
2009





Net
Revenue





Net
revenue for the nine months ended February 28, 2010 was $51,660,602 as compared
to $54,371,630 for the same period last year, a decrease of $2,711,028, or
approximately 4.99%. The decrease in net revenue is attributable to the decrease
of unit prices. The average unit prices of concrete products decreased
approximately 5% for the nine months ended February 28, 2010 as compared to the
same period last year.  The sales volume of concrete products remains
approximately the same for the nine months ended February 28, 2010 as compared
to the same period last year. Net revenue from pumping services accounted for
approximately 4% and 4% of the total net revenue for the nine months ended
February 28, 2010 and 2009, respectively.





Cost
of Goods Sold





Cost of
goods sold for the nine months ended February 28, 2010 was $40,976,286 as
compared to $44,643,940 for the same period last year, a decrease of $3,667,654,
or approximately 8.22%. The decrease in cost of goods sold is because the
decrease of the equipment leasing expenses included in cost of goods sold. The
Company used more internal trucks in the nine months ended February 28, 2010,
compared to the same period last year.





Gross
Profit





Gross
profit for the nine months ended February 28, 2010 was $10,684,316, an increase
of $956,626 or approximately 9.83%, as compared to $9,727,690 for the same
period last year. The increase in gross profit is attributable to the decrease
of cost of goods sold.





Gross
Profit Margin




Gross
profit margin for the nine months ended February 28, 2010 was 20.68%, compared
to 17.89% for the same period last year. The increase of the gross profit margin
is mainly due to the decrease of the equipment leasing expenses that are
included in the overhead costs, which then are transferred to the cost of goods
sold.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the nine months ended February 28, 2010
were $29,946,379, as compared to $965,058 for the same period last year, an
increase of $28,981,321, or approximately 3,003.07%. The increase of the
selling, general and administrative expenses was primarily due to a one-time non
cash compensation expense of $27,422,242.


7


Operating
Income (Loss)





Our
operating loss for the nine months ended February 28, 2010 was $19,262,063, a
decrease of $28,024,695 or approximately 319.82/%, as compared to operating
income of $8,762,632 for the nine months ended February 28, 2009. The decrease
was mainly due to the $27,422,242 one-time non cash compensation expense
included in the selling, general, and administrative expenses.





Income
Taxes





During
the nine months ended February 28, 2010, our business operations were solely
conducted by our subsidiaries incorporated in the PRC and we are governed by the
PRC Enterprise Income Tax Laws.  PRC enterprise income tax is
calculated based on taxable income determined under PRC GAAP. In accordance with
the Income Tax Laws, a PRC domestic company is subject to enterprise income tax
at the rate of 25%.





However,
our PRC subsidiary is considered by the respective tax authorities a resource
multipurpose utilization enterprise, which qualifies it for an exemption from
income tax until December 31, 2010.





Net
Income (Loss) Attributable To China Infrastructure Construction
Corporation





Net loss
was $19,331,416 for the nine months ended February 28, 2010, compared to net
income of $8,272,225 for the nine months ended February 28, 2009, a decrease of
$27,603,641 or approximately 333.69%. The decrease was primarily due to the
$27,422,242 one-time non cash compensation expense included in the selling,
general, and administrative expenses.





Liquidity
and Capital Resources





As of
February 28, 2010, we had cash and cash equivalents of $1,867,417. We have
historically funded our working capital needs from operations, advance payments
from customers, bank borrowings, and capital from shareholders. Our working
capital requirements are influenced by the level of our operations, the
numerical and dollar volume of our project contracts, the progress of our
contract execution, and the timing of accounts receivable
collections.




The
following table sets forth a summary of our cash flows for the periods
indicated:




Nine Months Ended
                    February 28,2010
                  
                  
                  2009Net
      cash provided by (used in) operating activities
                  
                  $
                  (7,980,858
                  )
                  
                  $
                  10,484Net
      cash used in investing activities
                  
                  
                  (1,209,849
                  )
                  
                  
                  (47,580
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  10,125,592
                  
                  
                  
                  (170,866
                  )Effect
      of exchange rate change on cash and cash equivalents
                  
                  
                  10,691
                  
                  
                  
                  9,820Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  945,576
                  
                  
                  
                  (198,142
                  )Cash
      and cash equivalents, beginning balance
                  
                  
                  921,841
                  
                  
                  
                  836,978Cash
      and cash equivalents, ending balance
                  
                  $
                  1,867,417
                  
                  
                  $
                  638,836


8


Operating
Activities





Net cash
used in operating activities was $7,980,858 for the nine months ended February
28, 2010, compared to net cash provided by operating activities of $10,484 for
the nine months ended February 28, 2009, a decrease of $7,991,342, or
76,224.17%. The decrease of net cash provided by operating activities was due to
the increase of trade accounts receivable. The trade accounts receivable
increased because of the growing sales. We typically had long-term annual and
multi-year contracts with our major customers. We entered into varying payment
terms with our customers ranging from payment before delivery, payment on
delivery or up to 1 year after the project completion. As of February 28, 2010,
trade accounts receivable with aging over twelve months old amounted to
$1,092,506, only 2.62% of total trade accounts receivable.





Investing
Activities





Net cash
used in investing activities was $1,209,849 for the nine months ended
February 28, 2010, an increase of $1,162,269, or 2,442.77%, compared to $47,580
for the nine months ended February 28, 2009. Acquisitions of plant, properties
and equipment were the main contributor to the increase of net cash used in
investing activities.





Financing
Activities





Net cash
provided by financing activities was $10,125,592 for the nine months ended
February 28, 2010, an increase of $10,296,458, or 6,026.04%, compared to
$170,866 net cash used in financing activities for the nine months ended
February 28, 2009. The increase was primarily due to the sale of stock by the
Company to investors resulting in net proceeds of $8,605,626 and receipt of a
bank loan of $1,466,300.





Critical
Accounting Policies and Estimates





Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
Our financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See note 3 to our consolidated financial statements, "Summary of Significant
Accounting Policies." Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe that the following reflect the more
critical accounting policies that currently affect our financial condition and
results of operations.


9


Revenue
recognition.





The
Company receives revenue from sales of concrete products and from provision of
concrete pumping service and consulting service. The Company's revenue
recognition policies are in compliance with ASC 605 (previously Staff Accounting
Bulletin 104). Sales revenue is recognized at the date of shipment to customers
or services have been rendered when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed, no other significant
obligations of the Company exist and collectability is reasonably assured. Our
sales are non-returnable. Therefore, we do not estimate deductions or allowance
for sales returns. Sales are presented net of any discounts, reward, or
incentive given to customers.  Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.





Our
products delivered to customers would be checked on site by customers and, once
the products are accepted by customers, they will sign the acceptance notice.
There is no warranty issue after the delivery.




Reward or
incentive given to our customers is an adjustment of the selling prices of our
products therefore the consideration is characterized as a reduction of revenue
when recognized in our income statement.




The
Company recognizes its revenues net of value-added taxes (“VAT”).  The
Company is subject to VAT which is levied at the rate of 6% on the invoiced
value of sales. However, the Company enjoys a free VAT policy according to the
national policy, which encourages the development of the cement industry if
the manufacturer satisfies the environmental protection requirements. The
Company has enjoyed the free VAT policy from January 1, 2006 and has been
reviewed every year by the local tax bureau.




Use
of estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the combined
financial statements and accompanying notes. Management believes that the
estimates utilized in preparing its financial statements are reasonable and
prudent. Actual results could differ from these estimates.





Inventories





Inventories
are stated at the lower of cost, determined on a weighted average basis, and net
realizable value. Net realizable value is the estimated selling price, in the
ordinary course of business, less estimated costs to complete and
dispose.





Off-Balance
Sheet Arrangements





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


10


ITEM
4T.   CONTROLS AND PROCEDURES.





Disclosure
Controls and Procedures





The
Securities and Exchange Commission defines the term “disclosure controls and
procedures” to mean controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports that it files
or submits under the Securities Exchange Act of 1934 is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.  The
Company maintains such a system of controls and procedures in an effort to
ensure that all information which it is required to disclose in the reports it
files under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified under the SEC's rules
and forms and that information required to be disclosed is accumulated and
communicated to principal executive and principal financial officers to allow
timely decisions regarding disclosure.




As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our chief executive officer and
chief financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.  Based on this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures were not effective as of the end of the period covered
by this report.




Changes
in Internal Control over Financial Reporting





There was
no change in the Company's internal control over financial reporting during the
period ended February 28, 2010, that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.




PART
II-OTHER INFORMATION





ITEM
6.   EXHIBITS.





(a) The
following exhibits are filed herewith:





31.1
            Certifications
      by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of
  2002.





31.2
            Certifications
      by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of
  2002.





32.1
            Certifications
      by the Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.


11


SIGNATURES





Pursuant
to the requirements 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.





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION





By:
              /s/ Rong YangRong
      Yang,
                Chief
      Executive Officer, Director
                (principal
      executive officer)





By:
              /s/ Yiru ShiYiru
      Shi,
                Chief
      Financial Officer
                (principal
      financial and accounting
officer)





Date:
 April 14, 2010


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