UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For the
quarterly period ended August 31, 2010


or





 ̈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    ̈ 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).  ̈ Yes   ̈ No




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





Large
      accelerated filer  ̈
            
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈  (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).


 ̈ Yes   x No





As of
October 13, 2010, there were outstanding 12,930,620 shares of the
registrant’s common stock, no par value.





TABLE
OF CONTENTS




PagePART I Financial
      Information
                        3Item
      1. Financial Statements.
                        3Consolidated
      Balance Sheets as of August 31, 2010 (Unaudited) and May 31,
      2010
                        F-1Consolidated
      Statements of Income And Comprehensive Income for the three months ended
      August 31, 2010 and 2009 (Unaudited)
                        F-2Consolidated
      Statements of Cash Flows for the three months ended August 31, 2010 and
      August 31, 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
                        9PART II Other
    Information
                        9Item
      6. Exhibits.
                        10Signatures
                        11Exhibits/Certifications




2


PART
I-FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
FINANCIAL STATEMENTS AUGUST 31, 2010


(UNAUDITED)







Index
      to Consolidated Financial Statements
                PageConsolidated
      Balance Sheets (Unaudited)
                F-1Consolidated
      Statements of Income and Comprehensive
      Income  (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
AUGUST 31, 2010 AND MAY 31, 2010
 
 August
      31,
                      
                      
                      May
      31,2010
                      
                      
                      2010(UNAUDITED)AssetsCurrent
      assetsCash
      and cash equivalents
                      
                      $
                      903,715
                      
                      
                      $
                      1,102,879Restricted
      cash
                      
                      
                      69,409
                      
                      
                      
                      146,089Trade
      accounts receivable, net
                      
                      
                      62,427,793
                      
                      
                      
                      53,411,689Other
      receivables
                      
                      
                      381,786
                      
                      
                      
                      950,671Inventories
                      
                      
                      509,737
                      
                      
                      
                      575,452Total
      current assets
                      
                      
                      64,292,440
                      
                      
                      
                      56,186,780Property,
      plant and equipment, net
                      
                      
                      7,714,656
                      
                      
                      
                      7,995,701Prepayments
                      
                      
                      1,440,425
                      
                      
                      
                      1,289,007Other
      receivables - long term
                      
                      
                      5,189,130
                      
                      
                      
                      4,955,648Related
      party receivables
                      
                      
                      1,358,980
                      
                      
                      
                      1,286,945Total
      other assets
                      
                      
                      7,988,535
                      
                      
                      
                      7,531,600Total
      assets
                      
                      $
                      79,995,631
                      
                      
                      $
                      71,714,081Liabilities
      and equityCurrent
      liabilitiesTrade
      accounts payable
                      
                      $
                      15,800,366
                      
                      
                      $
                      13,376,119Related
      party payable
                      
                      
                      46,892
                      
                      
                      
                      47,125Other
      payables
                      
                      
                      3,002,320
                      
                      
                      
                      2,217,307Current
      portion of capital lease obligations
                      
                      
                      1,832,746
                      
                      
                      
                      1,949,183Accrued
      expenses
                      
                      
                      712,651
                      
                      
                      
                      491,885Tax
      payable
                      
                      
                      406,203
                      
                      
                      
                      -Bank
      loan payable
                      
                      
                      1,177,600
                      
                      
                      
                      1,317,600Total
      current liabilities
                      
                      
                      22,978,778
                      
                      
                      
                      19,399,219Long-term
      liabilitiesLong-term
      portion of capital lease obligations
                      
                      
                      2,056,951
                      
                      
                      
                      2,185,820Total
      long-term liabilities
                      
                      
                      2,056,951
                      
                      
                      
                      2,185,820Total
      liabilities
                      
                      
                      25,035,729
                      
                      
                      
                      21,585,039Stockholders'
      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; 12,930,620 and
      12,815,620 shares issued and outstanding as of August 31, 2010 and May 31,
      2010
                      
                      
                      42,761,534
                      
                      
                      
                      42,252,295Deferred
      consulting fee
                      
                      
                      (158,125
                      )
                      
                      
                      -Retained
      earnings
                      
                      
                      8,297,670
                      
                      
                      
                      4,321,221Accumulated
      other comprehensive income
                      
                      
                      1,735,243
                      
                      
                      
                      1,509,314Total
      China Infrastructure Construction Corporation stockholders'
      equity
                      
                      
                      52,636,322
                      
                      
                      
                      48,082,830Noncontrolling
      interests
                      
                      
                      2,323,580
                      
                      
                      
                      2,046,212Total
      liabilities and equity
                      
                      $
                      79,995,631
                      
                      
                      $
                      71,714,081
 
 The
accompanying notes are an integral part of this statement.
  F-1
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 FOR THE
THREE MONTHS ENDED AUGUST 31, 2010 AND 2009
 (UNAUDITED)
 
 August
      31,2010
                        
                        
                        2009Sales
      Revenue, Net
                        
                        $
                        21,187,530
                        
                        
                        $
                        12,255,728Cost
      of goods sold
                        
                        
                        15,054,017
                        
                        
                        
                        9,849,045Gross
      profit
                        
                        
                        6,133,513
                        
                        
                        
                        2,406,683General
      and administrative expenses
                        
                        
                        1,442,310
                        
                        
                        
                        388,940Net
      operating income
                        
                        
                        4,691,203
                        
                        
                        
                        2,017,743Other
      income (expense):Interest
      income
                        
                        
                        544
                        
                        
                        
                        -Interest
      expense
                        
                        
                        (51,633
                        )
                        
                        
                        (472
                        )Other
      income
                        
                        
                        10,184
                        
                        
                        
                        -Total
      other (expense)
                        
                        
                        (40,905
                        )
                        
                        
                        (472
                        )Net
      income before income taxes
                        
                        
                        4,650,298
                        
                        
                        
                        2,017,271Income
      taxes
                        
                        
                        406,755
                        
                        
                        
                        -Net
      income
                        
                        
                        4,243,543
                        
                        
                        
                        2,017,271Less:
      Net income attributable to noncontrolling interests
                        
                        
                        267,094
                        
                        
                        
                        110,468Net
      income attributable to China Infrastructure Construction
      Corporation
                        
                        $
                        3,976,449
                        
                        
                        $
                        1,906,803Earnings
      per share - basic and dilutive
                        
                        $
                        0.31
                        
                        
                        $
                        1.25Basic
      and dilutive weighted average shares outstanding
                        
                        
                        12,929,370
                        
                        
                        
                        1,529,550Comprehensive
      incomeNet
      income
                        
                        
                        4,243,543
                        
                        
                        
                        2,017,271Foreign
      currency translation adjustment
                        
                        
                        236,203
                        
                        
                        
                        3,652Comprehensive
      income
                        
                        $
                        4,479,746
                        
                        
                        $
                        2,020,923Comprehensive
      income attributable to non-controlling interests
                        
                        $
                        277,368
                        
                        
                        $
                        101,046Comprehensive
      income attributable to China Infrastructure Construction
      Corporation
                        
                        $
                        4,202,378
                        
                        
                        $
                        1,919,877
 
 The
accompanying notes are an integral part of this statement.
  F-2
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE
THREE MONTHS ENDED AUGUST 31, 2010 AND 2009
 (UNAUDITED)
 
 August
      31,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      income
                    
                    $
                    4,243,543
                    
                    
                    $
                    2,017,271Adjustments
      to reconcile net income to net cash used in operations:Bad
      debt expenses
                    
                    
                    71,719
                    
                    
                    
                    -Depreciation
                    
                    
                    430,323
                    
                    
                    
                    253,684Shares
      issued for compensation
                    
                    
                    158,125
                    
                    
                    
                    -Stock
      option expenses
                    
                    
                    192,989
                    
                    
                    
                    -Changes
      in operating liabilities and assets:Trade
      accounts receivable
                    
                    
                    (8,807,810
                    )
                    
                    
                    (4,831,747
                    )Prepayments
                    
                    
                    (144,511
                    )
                    
                    
                    -Inventories
                    
                    
                    68,953
                    
                    
                    
                    128,889Other
      receivables
                    
                    
                    368,177
                    
                    
                    
                    (167,240
                    )Trade
      accounts payable
                    
                    
                    2,354,312
                    
                    
                    
                    1,403,755Other
      payables
                    
                    
                    740,799
                    
                    
                    
                    248,980Accrued
      expenses and
      tax payable
                    
                    
                    657,045
                    
                    
                    
                    68,399Net
      cash provided by (used) in operating activities
                    
                    
                    333,664
                    
                    
                    
                    (878,009
                    )Cash
      flows from investing activities:Property,
      plant, and equipment additions
                    
                    
                    (105,145
                    )
                    
                    
                    (99,242
                    )Payments
      to related party receivable
                    
                    
                    (93,134
                    )
                    
                    
                    -Proceeds
      from related party receivable
                    
                    
                    447
                    
                    
                    
                    656,400Net
      cash provided by (used in) investing activities
                    
                    
                    (197,832
                    )
                    
                    
                    557,158Cash
      flows from financing activities:Restricted
      cash
                    
                    
                    76,680
                    
                    
                    
                    -Bank
      loan payable and
      capital lease obligations
                    
                    
                    (415,664
                    )
                    
                    
                    -Proceeds
      from related party payable
                    
                    
                    -
                    
                    
                    
                    -Payments
      to related party payable
                    
                    
                    (233
                    )
                    
                    
                    (564,419
                    )Net
      cash used in financing activities
                    
                    
                    (339,217
                    )
                    
                    
                    (564,419
                    )Effect
      of rate changes on cash
                    
                    
                    4,221
                    
                    
                    
                    84Decrease
      in cash and cash equivalents
                    
                    
                    (199,164
                    )
                    
                    
                    (885,186
                    )Cash
      and cash equivalents, beginning of period
                    
                    
                    1,102,879
                    
                    
                    
                    921,841Cash
      and cash equivalents, end of period
                    
                    $
                    903,715
                    
                    
                    $
                    36,655Supplemental
      disclosures of cash flow information:Interest
      paid in cash
                    
                    $
                    19,002
                    
                    
                    $
                    -Income
      taxes paid in cash
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing activities:Acquisition
      of property, plant and equipment through loan payable
                    
                    $
                    -
                    
                    
                    $
                    2,472,279
 
 The
accompanying notes are an integral part of this statement.
  F-3




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 1.
              Nature of
      operations
 
 China
Infrastructure Construction Corporation (“China Infrastructure”), formerly
Fidelity Aviation Corporation, 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. Fidelity was formed to purchase large
commercial (transport category) jet airframes, salvage the usable aircraft parts
and components from them and sell the parts and components. The Board of
Directors evaluated the future market for aircraft parts business and resolved
not to pursue this line of business anymore.
 
 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 1,200,000 (12,000,000
pre-reverse 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 the 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, also became our
indirect 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.
 
 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. Hongruida
commenced its operations at the end of March 2010.
  F-4
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 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.
   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.In addition, we have
technical service agreement withan independently owned
concrete mixture station, pursuant to which we are paid by percentages of sales
for technical support provided.
 
 2.
              Basis of
      Presentation
 
 The
accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“US GAAP”). This
basis differs from that used in the statutory accounts of the Company, which
were prepared in accordance with the accounting principles and relevant
financial regulations applicable to enterprises in the PRC.  All
necessary adjustments have been made to present the financial statements in
accordance with US GAAP. Operating results for the three-month period ended
August 31, 2010 are not necessarily indicative of the results that may be
expected for the fiscal year ending May 31, 2011.  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,
2010.
  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.
 
 Control by Principal
Stockholders
 
 The
directors, executive officers and their affiliates or related parties own,
beneficially and in the aggregate, the majority of the voting power of the
registered capital 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. The Company’s foreign subsidiaries have fiscal year ends of May
31 and the results are consolidated up to that date. 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 12)
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 August 31,
2010 and May 31, 2010, the amount not disbursed was $69,409 and $146,089,
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-5
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 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 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 $470,833 and $397,042 as of August 31, 2010 and May
31, 2010, 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:
 
 August 31, 2010
                  
                  
                  May 31, 2010Raw materials
                  
                  $
                  509,737
                  
                  
                  $
                  575,452
 
 Property 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 property and equipment is reported in cost of
revenues. 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
  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 August 31, 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.
  F-6
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 Revenue
Recognition
 
 The
Company receives revenue from sales of concrete products and from provision of
concrete pumping services and consulting services. 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 are 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.
 
 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.
  Shipping Income and
Expense
 
 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 months ended August 31, 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 of the Company is U.S. Dollars and that of Beijing Concrete 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.
  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.
  F-7
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 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.
  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.
 
 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.
 
 USA
 
 The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Group has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of August 31, 2010 and May 31, 2010.
 
 Hong
Kong
 
 As the
Group has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31,
2010.
 
 PRC
 
 Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an income tax at an effective rate of 25% on income reported in the statutory
financial statements after appropriate tax adjustments.
 
 Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. 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%.
 
 BFCM has
an accumulated operating loss, thus there is no income tax expense for BFCM. The
Company has not recorded deferred taxes, as valuation allowances were provided
because all significant differences in tax basis and financial statement amounts
are permanent differences.
  F-8
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 For the three months ended August 31,2010
                          
                          
                          2009Income
      tax expensesCurrent
      tax
                          
                          $
                          -
                          
                          
                          $
                          -Change
      in deferred tax assets
                          
                          
                          39,949
                          
                          
                          
                          -Change
      in valuation allowance
                          
                          
                          (39,949
                          )
                          
                          
                          -Total
                          
                          $
                          -
                          
                          
                          $
                          -
 
 Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of August 31, 2010, the Company has
accrued tax payable of $406,203 for income tax expenses for
Hongruida.
 
 The
current income tax expense and deferred tax expense for the three months ended
August 31, 2010 and 2009 are as follows:
  2010
                    
                    
                    2009Current
      tax expense
                    
                    $
                    406,755
                    
                    
                    $
                    -Deferred
      tax expense
                    
                    $
                    -
                    
                    
                    $
                    -
 
 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:
   ̈
              Level
      1: inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.
 
  ̈
              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.
 
  ̈
              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).
 
 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.
  F-9
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 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.
  The
following is a reconciliation of the basic and diluted earnings per share for
the three months ended August 31, 2010 and 2009:
 
 2010
                      
                      
                      2009Net
      income for earnings per share attributable
      to China Infrastructure Construction Corporation
                      
                      $
                      3,976,449
                      
                      
                      $
                      1,906,803Weighted
      average shares used in basic computation
                      
                      
                      12,929,370
                      
                      
                      
                      1,529,550Diluted
      effect of warrants and options
                      
                      
                      -
                      
                      
                      
                      -Weighted
      average shares used in diluted computation
                      
                      
                      12,929,370
                      
                      
                      
                      1,529,550Earnings
      per share, basic
                      
                      $
                      0.31
                      
                      
                      $
                      1.25Earnings
      per share, diluted
                      
                      $
                      0.31
                      
                      
                      $
                      1.25
  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
 
 ASC 280
“Segment reporting” (formerly SFAS 131) 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.
  Since
management does not disaggregate Company data, the Company has determined that
only one segment exists.
  F-10
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 Recent Accounting
Pronouncements
  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.
  In April
2010, the FASB issued Accounting Standard Update 2010-17, “Revenue
Recognition—Milestone Method (Topic 605): Milestone Method of Revenue
Recognition” or ASU 2010-17. This Update provides guidance on the
recognition of revenue under the milestone method, which allows a vendor to
adopt an accounting policy to recognize all of the arrangement consideration
that is contingent on the achievement of a substantive milestone (milestone
consideration) in the period the milestone is achieved. The pronouncement is
effective on a prospective basis for milestones achieved in fiscal years and
interim periods within those years, beginning on or after June 15, 2010.
The Company does not expect the adoption of ASU 2010-17 to have a significant
impact on its consolidated financial statements.
  F-11
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 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:
 
 August 31, 2010
                      
                      
                      May 31, 2010Office
      trailers
                      
                      $
                      907,488
                      
                      
                      $
                      902,556Machinery
      and equipment
                      
                      
                      8,386,685
                      
                      
                      
                      8,292,669Motor
      vehicles
                      
                      
                      1,467,562
                      
                      
                      
                      1,452,308Furniture
      and office equipment
                      
                      
                      532,065
                      
                      
                      
                      509,611Construction
      in progress
                      
                      
                      453,335
                      
                      
                      
                      421,716Total
      property, plant and equipment
                      
                      
                      11,747,135
                      
                      
                      
                      11,578,860Accumulated
      depreciation
                      
                      
                      (4,032,479
                      )
                      
                      
                      (3,583,159
                      )Net
      property, plant and equipment
                      
                      $
                      7,714,656
                      
                      
                      $
                      7,995,701
 
 Depreciation
expense included in general and administrative expenses for the three months
ended August 31, 2010 and 2009 was $68,803 and $54,453, respectively.
Depreciation expense included in cost of sales for the three months ended August
31, 2010 and 2009 was $361,520 and $199,231, respectively.
 
 Construction
in progress represents direct costs of construction and design fees incurred for
the Company’s new project in Tangshan. 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.
  Interest
costs totaling $0 were capitalized into construction in progress for the three
months ended August 31, 2010 and 2009.
 
 5.
              Prepayments
 
 Prepayments
consist of the prepaid expenses and the monies deposited with the suppliers for
purchasing vehicles and raw material. The total outstanding amount was
$1,440,425 and $1,289,007 as of August 31, 2010 and May 31, 2010, respectively.
There is no provision made for the prepayment at August 31, 2010 and May 31,
2010.
 
 6.
              Other
      Receivables
 
 Other
receivables in current assets amounted to $381,786 and $950,671 as of August 31,
2010 and May 31, 2010, respectively.
 
 Other
receivables in long term assets amounted to $5,189,130 and $4,955,648 as of
August 31, 2010 and May 31, 2010, respectively.
 
 As of
August 31, 2010, other receivables include $3.25 million related to construction
in progress disposal to an unrelated party. 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. The receivable is unsecured, interest
free, and with fixed repayment dates. Other receivables also include 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.
  F-12
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 As of May
31, 2010, other receivables include $3.8 million related to construction in
progress disposal to an unrelated party. 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. The receivable is unsecured, interest
free, and with fixed repayment dates. Other receivables also include 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.
 
 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 August 31, 2010
and May 31, 2010.
  7.
              Other
      Payables
 
 Other
payables in current liabilities consist of the following as of August 31, 2010
and May 31, 2010
  August 31, 2010
                      
                      
                      May 31, 2010Commission
      payable
                      
                      $
                      888,836
                      
                      
                      $
                      1,488,213Payable
      to CRCG (note 1)
                      
                      
                      496,360
                      
                      
                      
                      265,838Staff and
      other companies deposit
                      
                      
                      1,617,124
                      
                      
                      
                      463,256Total
      other payables
                      
                      $
                      3,002,320
                      
                      
                      $
                      2,217,307
 
 Commission
expense has been included in cost of goods sold.
 
 8.
              Accrued
      Expenses
 
 Accrued
expenses amounted to $712,651 and $491,885 as of August 31, 2010 and May 31,
2010,
respectively. The accrued expenses mainly include accrued land lease
expenses, accrued electricity and utility expenses, and accrued
interest.
 
 9.
              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 $46,892 and $47,125 as of August
31, 2010 and May 31, 2010, respectively. These payables bear no interest and
have no fixed payment terms. Currently, the related party payable consists of
the following:
 
 August 31, 2010
                      
                      
                      May 31, 2010Rong
      Yang (Chairman)
                      
                      $
                      46,892
                      
                      
                      $
                      47,125Total
                      
                      $
                      46,892
                      
                      
                      $
                      47,125
  Total
outstanding amount of related party receivables was $1,358,980 and $1,286,945 as
of August 31, 2010 and May 31, 2010, respectively. These receivables require no
interest and have no fixed re-payment terms. Currently, the receivables from
related party consist of the following:
 
 August 31, 2010
                    
                    
                    May 31, 2010Yang
      Ming (Chairman Yang Rong’s brother)
                    
                    $
                    161,000
                    (1)
                    
                    $
                    147,817Guiping
      Liao (CEO’s wife)
                    
                    
                    1,137,980
                    (1)
                    
                    
                    1,126,661Xi
      Yang (CEO’s son)
                    
                    
                    60,000
                    (1)
                    
                    
                    12,467$
                    1,358,980
                    
                    
                    $
                    1,286,945
 (1)
                The
      purpose of these related party receivables are for business purposes such
      as travel advances.
  F-13
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 10.
              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%. $1,317,600 of the total
amount is guaranteed by an unrelated party. The due dates are as follows:
$146,400 due on July 16, 2010, $292,800 due on August 16, 2010, $439,200 due on
September 16, 2010, and $439,200 due on October 16, 2010. Interest expenses are
due on the 16th of every third month. As of August 31, 2010 and May 31, 2010,
the loan payable to bank amounted to $1,177,600 and $1,317,600, respectively.
There is no interest expense capitalized into construction in progress for the
three months ended August 31, 2010 and 2009. By October 5, 2010, total bank
loan payable of $883,200 was paid back.
 
 Interest
 
 Total
interest expense and financial charges for the three months ended August 31,
2010 and 2009 on all debt amounted to $51,633 and $472, respectively. Total
interest income for the three months ended August 31, 2010 and 2009 amounted to
$544 and $0, respectively.
  Capital
Leases
 
 In July
2009, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,774,368 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
$1,965,343. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $22,106 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 22 months from September 2010 to June 2012 are as follows:
 
 Total
      lease payment
                      
                      $
                      1,372,281Less
      imputed interest
                      
                      
                      95,605Total
      capital lease obligation as of August 31, 2010
                      
                      
                      1,276,676Less
      current maturity
                      
                      
                      744,403Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      532,273
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                      
                      $
                      823,3712012
                      
                      
                      548,9102013
                      
                      
                      -Total
                      
                      $
                      1,372,281
 
 In
November 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $187,392 with an annual interest rate of
5.94%. 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 $205,050. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $2,811 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 31 months from September 2010 to March 2013 are as
follows:
 
 Total
      lease payment
                      
                      $
                      177,538Less
      imputed interest
                      
                      
                      13,332Total
      capital lease obligation as of August 31, 2010
                      
                      
                      164,206Less
      current maturity
                      
                      
                      45,113Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      119,093
  F-14
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                      
                      $
                      68,7262012
                      
                      
                      80,1792013
                      
                      
                      28,633Total
                      
                      $
                      177,538
 
 In
December 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $545,779 with an annual interest rate of
5.94%. 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 $597,200. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $6,822 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 32 months from September 2010 to April 2013 are as
follows:
 
 Total
      lease payment
                      
                      $
                      600,463Less
      imputed interest
                      
                      
                      51,701Total
      capital lease obligation as of August 31, 2010
                      
                      
                      548,762Less
      current maturity
                      
                      
                      187,010Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      361,752
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                      
                      $
                      266,8722012
                      
                      
                      150,1162013
                      
                      
                      183,475Total
                      
                      $
                      600,463
  In
December 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $249,466 with an annual interest rate of
5.94%. 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 $272,920. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $3,118 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 31 months from September 2010 to March 2013 are as
follows:
 
 Total
      lease payment
                      
                      $
                      251,590Less
      imputed interest
                      
                      
                      20,002Total
      capital lease obligation as of August 31, 2010
                      
                      
                      231,588Less
      current maturity
                      
                      
                      73,043Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      158,545
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                    
                    $
                    106,7352012
                    
                    
                    91,4872013
                    
                    
                    53,368Total
                    
                    $
                    251,590
  F-15
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 In
January 2010, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $56,979 with an annual interest rate of
6.70%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for one year, with total payments of approximately
$59,067. The title of the equipment will be transferred back to the Company upon
the last payment. A one time processing fee of $814 was paid by the Company
related to this lease. The minimum payments for the remaining lease term of 5
months from September 2010 to January 2011 are as follows:
 
 Total
      lease payment
                      
                      $
                      29,695Less
      imputed interest
                      
                      
                      572Total
      capital lease obligation as of August 31, 2010
                      
                      
                      29,123Less
      current maturity
                      
                      
                      29,123Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      0
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                    
                    $
                    29,6952012
                    
                    
                    -2013
                    
                    
                    -Total
                    
                    $
                    29,695
 
 In
February 2010, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $14,640 with an annual interest rate of
9.98%. 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 $17,034. The title of the equipment will be transferred back to
the Company upon the last payment. The minimum payments for the remaining lease
term of 30 months from September 2010 to February 2013 are as
follows:
 
 Total
      lease payment
                      
                      $
                      14,720Less
      imputed interest
                      
                      
                      1,792Total
      capital lease obligation as of August 31, 2010
                      
                      
                      12,928Less
      current maturity
                      
                      
                      3,813Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      9,115
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                      
                      $
                      6,1732012
                      
                      
                      5,6982013
                      
                      
                      2,849Total
                      
                      $
                      14,720
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $203,789 with an annual interest rate of 5.94%.
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
$222,991. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $2,547 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 31 months from September 2010 to March 2013 are as follows:
  F-16
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 Total
      lease payment
                      
                      $
                      205,525Less
      imputed interest
                      
                      
                      16,341Total
      capital lease obligation as of August 31, 2010
                      
                      
                      189,184Less
      current maturity
                      
                      
                      59,670Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      129,514
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                    
                    $
                    87,1922012
                    
                    
                    74,7362013
                    
                    
                    43,597Total
                    
                    $
                    205,525
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $28,489 with an annual interest rate of 6.70%. The
lease has been accounted for as a capital lease with the same third party to
lease the equipment for one year, with total payments of approximately $29,534.
The title of the equipment will be transferred back to the Company upon the last
payment. A one time processing fee of $407 was paid by the Company related to
this lease. The minimum payments for the remaining lease term of 8 months from
September 2010 to April 2011 are as follows:
 
 Total
      lease payment
                      
                      $
                      22,271Less
      imputed interest
                      
                      
                      610Total
      capital lease obligation as of August 31, 2010
                      
                      
                      21,661Less
      current maturity
                      
                      
                      21,544Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      117
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                      
                      $
                      22,2712012
                      
                      
                      -2013
                      
                      
                      -Total
                      
                      $
                      22,271
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $339,642 with an annual interest rate of 11.13%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for two years, with total payments of approximately
$380,403. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $293 will be paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 20 months from September 2010 to April 2012 are as follows:
 
 Total
      lease payment
                      
                      $
                      350,611Less
      imputed interest
                      
                      
                      34,770Total
      capital lease obligation as of August 31, 2010
                      
                      
                      315,841Less
      current maturity
                      
                      
                      136,902Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      178,939
  F-17
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                        
                        $
                        207,1792012
                        
                        
                        127,4952013
                        
                        
                        15,937Total
                        
                        $
                        350,611
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,161,830 with an annual interest rate of 11.13%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for two years, with total payments of approximately
$1,301,262. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $2,928 will be paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 20 months from September 2010 to April 2012 are as follows:
 
 Total
      lease payment
                      
                      $
                      1,199,341Less
      imputed interest
                      
                      
                      118,932Total
      capital lease obligation as of August 31, 2010
                      
                      
                      1,080,409Less
      current maturity
                      
                      
                      512,803Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      567,606
 
 The
future lease commitments for the next three years after August 31, 2010 are as
follows:
 
 2011
                    
                    $
                    763,2172012
                    
                    
                    436,1242013
                    
                    
                    -Total
                    
                    $
                    1,199,341
 
 In May
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $28,505 with an annual interest rate of 6.70%. The
lease has been accounted for as a capital lease with the same third party to
lease the equipment for one year, with total payments of approximately $29,549.
The title of the equipment will be transferred back to the Company upon the last
payment. A one time processing fee of $407 was paid by the Company related to
this lease. The minimum payments for the remaining lease term of 8 months from
September 2010 to May 2011 are as follows:
 
 Total
      lease payment
                      
                      $
                      19,807Less
      imputed interest
                      
                      
                      488Total
      capital lease obligation as of August 31, 2010
                      
                      
                      19,319Less
      current maturity
                      
                      
                      19,319Capital
      lease obligation – long-term portion as of August 31, 2010
                      
                      $
                      0
  F-18
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
    2011
                        
                        $
                        19,8072012
                        
                        
                        -2013
                        
                        
                        -Total
                        
                        $
                        19,807
 
 The
summary of all lease commitments is as follows:
 
 Total
      lease payment
                      
                      $
                      4,243,842Less
      imputed interest
                      
                      
                      354,145Total
      capital lease obligation as of August 31, 2010
                      
                      
                      3,889,697Less
      current maturity
                      
                      
                      1,832,746Capital
      lease obligation – long term portion as of August 31, 2010
                      
                      $
                      2,056,951
 
 The
summary of future lease commitments for the next three years after August 31,
2010 is as follows:
 
 2011
                    
                    $
                    2,401,2382012
                    
                    
                    1,514,7452013
                    
                    
                    327,859Total
                    
                    $
                    4,243,842
  11.
              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 August 31, 2010
and May 31, 2010, the balance of non-controlling interest was $2,323,580 and
$2,046,212, respectively.
 
 12.
              Shareholder’s
      Equity
 
 Stock Issuance For
Compensation
  On June
1, 2010, the Company hired a consulting company. As compensation, the Company
paid $45,000 and issued 115,000 shares of restricted common stock, and another
100,000 shares of restricted common stock will be issued upon certain terms. The
shares are valued at market price of a total of $316,250 at $2.75 per share. The
cash paid was first recorded as prepaid expenses. The shares issued are recorded
as deferred consulting fee. Both the prepaid expenses and deferred consulting
fee will amortize
to expenseover the agreement term of six-month period. As of August 31,
2010, prepaid expenses for this service has a balance of  $22,500 and
deferred consulting fee has a balance of $158,125.
  F-19
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 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.
  F-20
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 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.
 
 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.
 
 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
                  
                  1-
      2 yearsExpected
      volatility
                  
                  
                  45
                  %Expected
      dividend yield
                  
                  
                  0
 
 Following
is a summary of the stock option activity for the
three months ended August 31, 2010:
 
 Options
                      outstanding
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding,
      May 31, 2010
                    
                    
                    740,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00Granted
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      August 31, 2010
                    
                    
                    740,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00
  Following
is a summary of the status of options outstanding at August 31,
2010:
 
 Outstanding Options
                
                Exercisable OptionsExercise Price
                
                Number
                
                Average
                  Remaining
                  Contractual
                  Life
                
                Average
                  Exercise
                  Price
                
                Number
                
                Average
                  Exercise Price$
                3.90
                
                740,000
                
                1.34
                
                $
                3.90
                
                -
                
                $
                3.90
 
 Warrants
 
 On
October 16, 2009, in connection with the Share Purchase Agreement in October
2009, 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.
 
 On March
22, 2010, in connection with the Share Purchase Agreement in March 2010, the
Company issued 69,231 warrants to various parties as part of placement cost. 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.
 
 On March
22, 2010, in connection with the Share Purchase Agreement in March 2010, the
Company issued 1,281,083 warrants to October 2009 investors. The warrants carry
an exercise price of $6.00 and a 3-year term. The Warrants contain standard
adjustment provisions upon stock dividend, stock split, stock combination,
recapitalization, and a change of control transaction.
  F-21
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 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, 2010
                      
                      
                      1,504,160
                      
                      
                      
                      1,504,160
                      
                      
                      $
                      5.69
                      
                      
                      
                      3.05Granted
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Forfeited
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Outstanding,
      August 31, 2010
                      
                      
                      1,504,160
                      
                      
                      
                      1,504,160
                      
                      
                      $
                      5.69
                      
                      
                      
                      2.80
 
 13.
              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 $2,141 and $13,542 for
the three months ended August 31, 2010 and 2009, respectively.
 
 14.
              Income
    Tax
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the three months ended August 31, 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
                    
                    
                    25.0
                    
                    
                    
                    0China
      income tax exemption
                    
                    
                    16.2
                    
                    
                    
                    0Total
      provision for income taxes
                    
                    
                    8.8
                    %
                    
                    
                    0
                    %
 
 USA
 
 The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Group has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of August 31, 2010 and May 31, 2010.
 
 Hong
Kong
 
 As the
Group has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31,
2010.
 
 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.
 
 Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. 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%.
  F-22
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 BFCM has
an accumulated operating loss, thus there is no income tax expense for BFCM. The
Company has not recorded deferred taxes, as valuation allowances were provided
because all significant differences in tax basis and financial statement amounts
are permanent differences.
 
 For the three months ended August 31,2010
                    
                    
                    2009Income
      tax expensesCurrent
      tax
                    
                    $
                    -
                    
                    
                    $
                    -Change
      in deferred tax assets
                    
                    
                    39,949
                    
                    
                    
                    -Change
      in valuation allowance
                    
                    
                    (39,949
                    )
                    
                    
                    -Total
                    
                    $
                    -
                    
                    
                    $
                    -
 
 Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of August 31, 2010, the Company has
accrued tax payable of $406,203 for income tax expenses for
Hongruida.
 
 The
estimated tax savings due to the tax exemption for the three months ended August
31, 2010 and 2009 amounted to approximately $1,229,473 and $506,516,
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
months ended August 31, 2010 by $0.10 and $0.10, 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 months ended August 31, 2009 by
$0.33 and $0.33, respectively.
 
 15.
              Other Income
      (Expenses)
 
 Other
income was $10,184 for the three months ended August 31, 2010.It consists of income
from selling recycled paper and vehicle accident compensation. Other expenses
were $0 for the three months ended August 31, 2010.
 
 Other
income was $0 for the three months ended August 31, 2009. Other expenses were $0
for the three months ended August 31, 2009.
 
 16.
              Concentration of Credit Risks
      and Uncertainties
 
 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.
 
 Three
major customers,  China Railway Construction Group, China Construction
Group, and Guangzhou Tianli Construction Group accounted for  20%, 12%
and 10% of the Company’s total sales for the three months ended August 31, 2010,
respectively. Three major customers,  China Railway Construction
Group, Beijing Sanyuan Construction Group, and Guangzhou Tianli Construction
Group accounted for  24%, 11% and 10% of the Company’s total sales for
the three months ended August 31, 2009, respectively.
 
 Three
customers, China Railway Construction Group, Guangzhou Tianli Construction
Group, and China Construction Group accounted for 26%, 12%, and 10% of the
Company’s accounts receivable balance at August 31, 2010. Two customers, China
Railway Construction Group, and Beijing Sanyuan Construction Group accounted for
29% and 11% of the Company’s accounts receivable balance at August 31,
2009.
 
 Three
major vendors, Beijing Liulihe Cement Company, Haidebao Cement Company, and
Hekai Stone and Sand company, accounted for 15%, 14%, and 10% of the Company’s
total inventory purchases for the three months ended August 31, 2010. One major
vendor, Tianjin Zhenxin Cement Company, accounted for 13% of the Company’s total
inventory purchases for the three months ended August 31, 2009.
  F-23
  CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
31, 2010
 (UNAUDITED)
 
 One major
vendor, Beijing Liulihe Cement Company, accounted for 17% of the Company’s
accounts payable at August 31, 2010. No vendor accounted for more than 10% of
the Company’s accounts payable at August 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.
 
 Contingencies
 
 The
Company has not, historically, carried any property or casualty insurance. No
amounts have been accrued for any liability that could arise from the lack of
insurance. Management feels the chances of such an obligation arising are
remote.
 
 Deposits
in banks in the PRC are not insured by any government entity or agency, and are
consequently exposed to risk of loss. Management believes the probability of a
bank failure, causing loss to the Company, is remote.
 
 Operating
Lease Commitment
 
 As of
August 31, 2010, the Company was committed to minimum rentals for the leased
land under long-term non-cancellable operating leases as follows:
 
 Twelve
      Months Ended August 31,2011
                    
                    $
                    256,9262012
                    
                    
                    262,3652013
                    
                    
                    179,1552014
                    
                    
                    107,4562015
                    
                    
                    107,456Thereafter
                    
                    
                    714,656Total:
                    
                    $
                    1,628,014
 
 We
currently have a ten-year lease with an annual payment of approximately $48,000,
from March 1, 2008 to February 28, 2018, for our Beijing production base. We
have built our offices and manufacturing facilities on this site. We also lease
land for our Xi’an production facility. The annual payment is approximately
$59,000. We also leased two offices in Beijing as our headquarter office. One
office lease is from July 11, 2010 to July 10, 2012, with an annual payment of
approximately $48,000. One office lease is from December 15, 2009 to December
14, 2011, with an annual payment of approximately $106,000.
 
 Operating
lease expenses amounted to $62,701 and $12,161 for the three months ended August
31, 2010 and 2009, respectively.
  17.
              Subsequent
      events
 
 There are
no material subsequent events. The Company has evaluated subsequent events from
the balance sheet date through the date the report is issued.


The
Company is obligated to issue additional 100,000 restricted shares as
consultingexpenses to
an unrelated third partyunder certain
terms.Currently the
terms are not met andthe Company
estimates that the possibility of theCompany
meettheterms is
remote.Once the
shares are issued, theCompany will
bookconsulting
expensesof
$308,000.
  F-24




ITEM
2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION





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", 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.





Unless
the context otherwise requires, The "Company", "we," "us," and "our," refer to
(i) China Infrastructure Construction Corporation; (ii) Beijing Chengzhi Qianmao
Concrete Co., Ltd. (“Beijing Concrete”), (iii) Beijing Fortune Capital
Management, Ltd. (“BFCM”), (iv) Shaanxi Hongruida Concrete Ltd. (“Hongruida”)
and (v) 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.





Beijing
Concrete currently has four 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 one is located at the Tangshan harbor, about two
hundred kilometers from Beijing. The plant located in Xi’an was put into
operation at the end of March 2010.




4


Results
of Operations





Three
months ended August 31, 2010 Compared to Three months ended August 31,
2009





Net
Revenue





Net
Revenue for the three months ended August 31, 2010 were $21,187,530 as compared
to $12,255,728 for the same period last year, an increase of $8,931,802, or
approximately 72.88%. The increase in net revenue is mainly attributable to our
geographic expansion. We had set up new factories in Xi’an and Shidu in 2010.
The sales volume of concrete products increased approximately 125.09% for the
three months ended August 31, 2010 as compared to the same period last
year. The increase in net revenue is also attributable to technical
services we provided to a Tianjin concrete producer from late March
2010. These services generated approximately $1.22 million in net revenue
for the three months ended August 31, 2010.




Costs of Goods
Sold





Cost of
goods sold for the three months ended August 31, 2010 was $15,054,017 as
compared to $9,849,045 for the same period last year, an increase of $5,204,972,
or approximately 52.85%. The increase in cost of goods sold is mainly
because ofthe increase of the net revenue.





Gross
Profit





Gross
profit for the three months ended August 31, 2010 was $6,133,513, an increase of
$3,726,830 or approximately 154.85%, as compared to $2,406,683 for the same
period last year. The increase in gross profit is attributable to the increase
of sales due to geographic development of our business, our business expansion
into technical service, and vertical integration with one sand and stone
vendor.





Gross Profit
Margin




Gross
profit margin for the three months ended August 31, 2010 was 28.95%, compared to
19.64% for the same period last year. The increase of the gross profit margin is
mainly because technical service provided a higher margin and the
integration with one sand and stone company lowered the cost of goods
sold.





General and administrative
Expenses





General
and administrative expenses for the three months ended August 31, 2010 were
$1,442,310, as compared to $388,940 for the same period last year, an increase
of $1,053,370, or approximately 270.83%. The increase of the general and
administrative expenses was primarily due to expansion of business and due to
increased professional expenses as a public company.




5


Operating
Income





Our
operating income for the three months ended August 31, 2010 was $4,691,203, an
increase of $2,673,460 or approximately 132.50%, as compared to $2,017,743 for
the same period last year. The increased income was due to the increased sales
revenue from our business expansion geographically and toward higher margin
business.





Income
Taxes





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the three months ended August 31, 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
                  
                  
                  25.0
                  
                  
                  
                  0China
      income tax exemption
                  
                  
                  16.2
                  
                  
                  
                  0Total
      provision for income taxes
                  
                  
                  8.8
                  %
                  
                  
                  0
                  %





USA





The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Group has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of August 31, 2010 and May 31, 2010.





Hong
Kong





As the
Group has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31,
2010.





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.




6


Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. 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%.





BFCM has
an accumulated operating loss, thus there is no income tax expense for BFCM. The
Company has not recorded deferred taxes, as valuation allowances were provided
because all significant differences in tax basis and financial statement amounts
are permanent differences.





For
      the three months ended August 31,2010
                      
                      
                      2009Income
      tax expensesCurrent
      tax
                      
                      $
                      -
                      
                      
                      $
                      -Change
      in deferred tax assets
                      
                      
                      39,949
                      
                      
                      
                      -Change
      in valuation allowance
                      
                      
                      (39,949
                      )
                      
                      
                      -Total
                      
                      $
                      -
                      
                      
                      $
                      -





Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of August 31, 2010, the Company has
accrued tax payable of $406,203 for income tax expenses for
Hongruida.





The
estimated tax savings due to the tax exemption for the three months ended August
31, 2010 and 2009 amounted to approximately $1,229,473 and $506,516,
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
months ended August 31, 2010 by $0.10 and $0.10, 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 months ended August 31, 2009 by
$0.33 and $0.33, respectively.





Net Income Attributable To
China Infrastructure Construction Corporation





Net
income was $3,976,449 for the three months ended August 31, 2010, an increase of
$2,069,646 or approximately 108.54%, as compared to $1,906,803 for the same
period last year. The increase was primarily due to the increased sales from our
business expansion geographically and toward higher margin
business.





Liquidity
and Capital Resources





As of
August 31, 2010, we had cash and cash equivalents of $903,715. 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:


7





Three Months Ended
                      August 312010
                    
                    
                    2009Unaudited
                    
                    
                    UnauditedNet
      cash provided by (used in) operating activities
                    
                    $
                    333,664
                    
                    
                    $
                    (878,009)Net
      cash provided by (used in) investing activities
                    
                    
                    (197,832
                    )
                    
                    
                    557,158Net
      cash used in financing activities
                    
                    
                    (339,217
                    )
                    
                    
                    (564,419)Effect
      of exchange rate change on cash and cash equivalents
                    
                    
                    4,221
                    
                    
                    
                    84Decrease
      in cash and cash equivalents
                    
                    
                    (199,164)
                    
                    
                    
                    (885,186)Cash
      and cash equivalents, beginning balance
                    
                    
                    1,102,879
                    
                    
                    
                    921,841Cash
      and cash equivalents, ending balance
                    
                    
                    903,715
                    
                    
                    
                    36,655





Operating
Activities





Net cash
provided by operating activities was $333,664 for the three months ended August
31, 2010, an increase of $1,211,673, or 138.00%, as compared to $878,009 net
cash used in operating activities for the same period last year. The increase of
net cash used in operating activities was due to the increase of trade accounts
payable.  Accounts receivable increased as well. 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 August
31, 2010, trade accounts receivable with aging over twelve months old amounted
to $1,851,085, only 2.97% of total trade accounts receivable.





Investing
Activities





Net cash
used in investing activities was $197,832 for the three months ended August
31, 2010, a decrease of $754,990 or approximately 135.51%, as compared to
$557,158 net cash provided by investing activities for the same period last
year. The decrease of net cash provided by investing activities was primarily
due to the increased investments of property, plant, and equipment and
less proceeds
from related party receivable.





Financing
Activities





Net cash
used in financing activities was $339,217 for the three months ended August 31,
2010, a decrease of $225,202, or 39.90%, compared to $564,419 for the same
period last year. The decrease was primarily due to less payment to related
party payable.





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.




8


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.




9


Off-Balance Sheet
Arrangements





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





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 August 31, 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.




10





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:
 October 13, 2010


12