UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


EXCHANGE ACT OF
1934





For the
quarterly period ended November 30, 2009


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)





C915
Jia Hao International Business Center


116
Zizhuyuan Road Haidan District


Beijing,
China 100097


(Address
of principal executive offices)





86-10-5170-9287


(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 x  (Do
      not check if a smaller reporting
              company)
            
            Smaller
      reporting company  ̈





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
November 30, 2009 the Issuer had 11,528,429 shares of common stock issued and
outstanding.





TABLE OF
CONTENTS




PagePART I Financial
      InformationItem
      1. Financial Statements.
                        
                        1Consolidated
      Balance Sheets as of November 30, 2009 and May 31, 2009
      (Unaudited)
                        
                        F-1Consolidated
      Statements of Operations And Comprehensive Income (Loss) for the three and
      six months ended November 30, 2009 and 2008 (Unaudited)
                        
                        F-2Consolidated
      Statements of Cash Flows for the six months ended November 30, 2009 and
      2008 (Unaudited)
                        
                        F-3Notes
      to Consolidated Financial Statements (Unaudited)
                        
                        F-4Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                        
                        2Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                        
                        9Item
      4T. Controls and Procedures
                        
                        10PART II Other
    InformationItem
      1A. Risk Factors
                        
                        10Item
      6. Exhibits
                        
                        11Signatures
                        
                        12Exhibits/Certifications







PART
I-FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
FINANCIAL STATEMENTS NOVEMBER 30, 2009


(UNAUDITED)









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




1




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
BALANCE SHEETS


AS OF
NOVEMBER 30, 2009 AND MAY 31, 2009




November
      30, 2009
                                      
                                      
                                      May 31, 2009(UNAUDITED)AssetsCurrent
      assetsCash
      and cash equivalents
                                      
                                      $
                                      6,503,129
                                      
                                      
                                      $
                                      921,841Restricted
      cash
                                      
                                      
                                      158,089
                                      
                                      
                                      
                                      -Trade
      accounts receivable, net
                                      
                                      
                                      37,640,167
                                      
                                      
                                      
                                      26,438,106Inventories
                                      
                                      
                                      1,167,568
                                      
                                      
                                      
                                      885,834Total
      current assets
                                      
                                      
                                      45,468,953
                                      
                                      
                                      
                                      28,245,781Property,
      plant and equipment, net
                                      
                                      
                                      7,932,999
                                      
                                      
                                      
                                      5,649,835Other
      receivables
                                      
                                      
                                      1,413,083
                                      
                                      
                                      
                                      270,819Related
      party receivables
                                      
                                      
                                      163,458
                                      
                                      
                                      
                                      674,289Total
      other assets
                                      
                                      
                                      1,576,541
                                      
                                      
                                      
                                      945,108Total
      assets
                                      
                                      $
                                      54,978,493
                                      
                                      
                                      $
                                      34,840,724Liabilities
      and equityCurrent
      liabilitiesTrade
      accounts payable
                                      
                                      $
                                      12,535,381
                                      
                                      
                                      $
                                      10,173,765Related
      party payable
                                      
                                      
                                      344,030
                                      
                                      
                                      
                                      564,419Other
      payables
                                      
                                      
                                      2,547,072
                                      
                                      
                                      
                                      1,730,290Current
      portion of capital lease obligations
                                      568,178
                                      
                                      
                                      
                                      -Accrued
      expenses
                                      
                                      
                                      359,351
                                      
                                      
                                      
                                      277,329Bank
      loan payable
                                      
                                      
                                      1,465,000
                                      
                                      
                                      
                                      -Total
      current liabilities
                                      
                                      
                                      17,819,012
                                      
                                      
                                      
                                      12,745,803Long-term
      liabilitiesLong-term
      portion of capital lease obligations
                                      981,737
                                      
                                      
                                      
                                      -Other
      payables - long-term
                                      
                                      
                                      521,676
                                      
                                      
                                      
                                      -Total
      long-term liabilities
                                      
                                      
                                      1,503,413
                                      
                                      
                                      
                                      -Total
      liabilities
                                      
                                      
                                      19,322,425
                                      
                                      
                                      
                                      12,745,803Stockholders'
      equityPreferred
      stock, no par value; 10,000,000 shares authorized; no shares issued and
      outstanding
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Common
      stock: no par value; 100,000,000 shares authorized; 11,528,429 and
      1,529,550shares issued and outstanding as of November 30, 2009 and May 31,
      2009
                                      
                                      
                                      37,424,511
                                      
                                      
                                      
                                      1,396,644Retained
      earnings (deficit)
                                      
                                      
                                      (4,803,953)
                                      
                                      
                                      
                                      17,755,631Accumulated
      other comprehensive income
                                      
                                      
                                      1,550,245
                                      
                                      
                                      
                                      1,731,951Total
      China Infrastructure Construction Corporation stockholders'
      equity
                                      
                                      
                                      34,170,803
                                      
                                      
                                      
                                      20,884,226Noncontrolling
      interests
                                      
                                      
                                      1,485,265
                                      
                                      
                                      
                                      1,210,695Total
      liabilities and equity
                                      
                                      $
                                      54,978,493
                                      
                                      
                                      $
                                      34,840,724




The
accompanying notes are an integral part of this statement.




F-1




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


FOR THE
THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009 AND 2008


(UNAUDITED)




THREE
      MONTHS ENDED NOVEMBER 30,
                                                  
                                                  
                                                  SIX
      MONTHS ENDED NOVEMBER 30,2009
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2009
                                                  
                                                  
                                                  2008Net
      Revenue
                                                  
                                                  $
                                                  19,155,132
                                                  
                                                  
                                                  $
                                                  15,565,149
                                                  
                                                  
                                                  $
                                                  31,410,860
                                                  
                                                  
                                                  $
                                                  27,020,125Cost
      of goods sold
                                                  
                                                  
                                                  14,923,975
                                                  
                                                  
                                                  
                                                  12,870,609
                                                  
                                                  
                                                  
                                                  24,504,167
                                                  
                                                  
                                                  
                                                  22,251,323Gross
      profit
                                                  
                                                  
                                                  4,231,157
                                                  
                                                  
                                                  
                                                  2,694,540
                                                  
                                                  
                                                  
                                                  6,906,693
                                                  
                                                  
                                                  
                                                  4,768,802Operating
      expenses:Selling,
      general and administrative expenses
                                                  
                                                  
                                                  28,525,492
                                                  
                                                  
                                                  
                                                  499,476
                                                  
                                                  
                                                  
                                                  29,183,485
                                                  
                                                  
                                                  
                                                  764,588Net
      operating income (loss)
                                                  
                                                  
                                                  (24,294,335
                                                  )
                                                  
                                                  
                                                  2,195,064
                                                  
                                                  
                                                  
                                                  (22,276,792
                                                  )
                                                  
                                                  
                                                  4,004,214Other
      income (expense):Interest
      income (expense)
                                                  
                                                  
                                                  (3,183
                                                  )
                                                  
                                                  
                                                  258
                                                  
                                                  
                                                  
                                                  (3,655
                                                  )
                                                  
                                                  
                                                  943Other
      income (expense)
                                                  
                                                  
                                                  5,196
                                                  
                                                  
                                                  
                                                  288
                                                  
                                                  
                                                  
                                                  4,996
                                                  
                                                  
                                                  
                                                  (12,266
                                                  )Total
      other income (expense)
                                                  
                                                  
                                                  2,013
                                                  
                                                  
                                                  
                                                  546
                                                  
                                                  
                                                  
                                                  1,341
                                                  
                                                  
                                                  
                                                  (11,323
                                                  )Net
      income (loss) before income taxes
                                                  
                                                  
                                                  (24,292,322
                                                  )
                                                  
                                                  
                                                  2,195,610
                                                  
                                                  
                                                  
                                                  (22,275,451
                                                  )
                                                  
                                                  
                                                  3,992,891Income
      taxes
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Net
      income (loss)
                                                  
                                                  
                                                  (24,292,322
                                                  )
                                                  
                                                  
                                                  2,195,610
                                                  
                                                  
                                                  
                                                  (22,275,451
                                                  )
                                                  
                                                  
                                                  3,992,891Less:
      Net income attributable to noncontrolling interests
                                                  
                                                  
                                                  173,666
                                                  
                                                  
                                                  
                                                  120,590
                                                  
                                                  
                                                  
                                                  284,134
                                                  
                                                  
                                                  
                                                  219,004Net
      income (loss) attributable to China Infrastructure Construction
      Corporation
                                                  
                                                  $
                                                  (24,465,988
                                                  )
                                                  
                                                  $
                                                  2,075,020
                                                  
                                                  
                                                  $
                                                  (22,559,585
                                                  )
                                                  
                                                  $
                                                  3,773,887Earnings
      (loss) per share - basic and diluted
                                                  
                                                  $
                                                  (3.72
                                                  )
                                                  
                                                  $
                                                  1.49
                                                  
                                                  
                                                  $
                                                  (5.60
                                                  )
                                                  
                                                  $
                                                  2.91Basic
      and diluted weighted average shares outstanding
                                                  
                                                  
                                                  6,578,625
                                                  
                                                  
                                                  
                                                  1,390,400
                                                  
                                                  
                                                  
                                                  4,026,345
                                                  
                                                  
                                                  
                                                  1,295,200Comprehensive
      incomeNet
      income (loss)
                                                  
                                                  
                                                  (24,292,322
                                                  )
                                                  
                                                  
                                                  2,195,610
                                                  
                                                  
                                                  
                                                  (22,275,451
                                                  )
                                                  
                                                  
                                                  3,992,891Foreign
      currency translation adjustment
                                                  
                                                  
                                                  (195,131
                                                  )
                                                  
                                                  
                                                  17,087
                                                  
                                                  
                                                  
                                                  (191,269
                                                  )
                                                  
                                                  
                                                  151,863Comprehensive
      income (loss)
                                                  
                                                  $
                                                  (24,487,453
                                                  )
                                                  
                                                  $
                                                  2,212,697
                                                  
                                                  
                                                  $
                                                  (22,466,720
                                                  )
                                                  
                                                  $
                                                  4,144,754Comprehensive
      income attributable to non-controlling interests
                                                  
                                                  $
                                                  163,893
                                                  
                                                  
                                                  $
                                                  121,444
                                                  
                                                  
                                                  $
                                                  274,571
                                                  
                                                  
                                                  $
                                                  226,597Comprehensive
      income (loss) attributable to China Infrastructure Construction
      Corporation
                                                  
                                                  $
                                                  (24,651,346
                                                  )
                                                  
                                                  $
                                                  2,091,253
                                                  
                                                  
                                                  $
                                                  (22,741,291
                                                  )
                                                  
                                                  $
                                                  3,918,157




The
accompanying notes are an integral part of this statement.




F-2




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
SIX MONTHS ENDED NOVEMBER 30, 2009 AND 2008


(UNAUDITED)


November
      30,2009
                                                  
                                                  
                                                  2008Cash
      flows from operating activities:Net
      income (loss)
                                                  
                                                  $
                                                  (22,275,451
                                                  )
                                                  
                                                  $
                                                  3,992,891Adjustments
      to reconcile net income (loss) to net cash used in
    operations:Depreciation
                                                  
                                                  
                                                  548,431
                                                  
                                                  
                                                  
                                                  428,309Shares
      issued for compensation
                                                  
                                                  
                                                  27,422,242
                                                  
                                                  
                                                  
                                                  -Changes
      in operating liabilities and assets:Trade
      accounts receivable
                                                  
                                                  
                                                  (11,186,190
                                                  )
                                                  
                                                  
                                                  (7,810,510
                                                  )Prepayments
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  149,847Inventories
                                                  
                                                  
                                                  (281,126
                                                  )
                                                  
                                                  
                                                  464,598Other
      receivables
                                                  
                                                  
                                                  (1,064,571
                                                  )
                                                  
                                                  
                                                  (1,470,035
                                                  )Trade
      accounts payable
                                                  
                                                  
                                                  2,353,912
                                                  
                                                  
                                                  
                                                  2,498,816Other
      payables
                                                  
                                                  
                                                  738,976
                                                  
                                                  
                                                  
                                                  1,584,832Accrued
      expenses
                                                  
                                                  
                                                  81,826
                                                  
                                                  
                                                  
                                                  (30,501
                                                  )Net
      cash used in operating activities
                                                  
                                                  
                                                  (3,661,951
                                                  )
                                                  
                                                  
                                                  (191,753
                                                  )Cash
      flows from investing activities:Fixed
      assets additions
                                                  
                                                  
                                                  (754,827
                                                  )
                                                  
                                                  
                                                  (47,580
                                                  )Deposits
      - construction in progress
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payments
      to related party receivable
                                                  
                                                  
                                                  (163,458
                                                  )
                                                  
                                                  
                                                  -Net
      cash used in investing activities
                                                  
                                                  
                                                  (918,285
                                                  )
                                                  
                                                  
                                                  (47,580
                                                  )Cash
      flows from financing activities:Shares
      issued for cash
                                                  
                                                  
                                                  8,605,625
                                                  
                                                  
                                                  
                                                  -Restricted
      cash
                                                  
                                                  
                                                  (158,089
                                                  )
                                                  
                                                  
                                                  -Bank
      loan payable
                                                  
                                                  
                                                  1,466,200
                                                  
                                                  
                                                  
                                                  -Proceeds
      from related party payable
                                                  
                                                  
                                                  237,278
                                                  
                                                  
                                                  
                                                  -Payment
      to related party payable
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (136,586
                                                  )Net
      cash provided by (used in) financing activities
                                                  
                                                  
                                                  10,151,014
                                                  
                                                  
                                                  
                                                  (136,586
                                                  )Effect
      of rate changes on cash
                                                  
                                                  
                                                  10,510
                                                  
                                                  
                                                  
                                                  10,056Increase
      (decrease) in cash and cash equivalents
                                                  
                                                  
                                                  5,581,288
                                                  
                                                  
                                                  
                                                  (365,863
                                                  )Cash
      and cash equivalents, beginning of period
                                                  
                                                  
                                                  921,841
                                                  
                                                  
                                                  
                                                  865,601Cash
      and cash equivalents, end of period
                                                  
                                                  $
                                                  6,503,129
                                                  
                                                  
                                                  $
                                                  499,738Supplemental
      disclosures of cash flow information:Interest
      paid in cash
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Income
      taxes paid in cash
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Non-cash
      investing activitiesAcquisition
      of plant and equipment through other payable
                                                  
                                                  $
                                                  2,073,287
                                                  
                                                  
                                                  $
                                                  -Related
      party receivable offset by payable to related party
payable
                                                  
                                                  $
                                                  674,289
                                                  
                                                  
                                                  $
                                                  -
  See
accompanying notes to unaudited consolidated financial statements


F-3




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


NOVEMBER
30, 2009


(UNAUDITED)





1.   Nature
of Operations





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





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





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





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





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





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.


F-4




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


2.   Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 8-03
of Regulation S-X.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.  All
such adjustments are of a normal recurring nature. Operating results for
the six month period ended November 30, 2009, are not necessarily indicative of
the results that may be expected for the fiscal year ending May 31,
2010.  For further information refer to the consolidated financial
statements and footnotes thereto included in the Company’s annual report for the
year ended May 31, 2009.





3.   Summary
of Significant Accounting Policies





Economic and Political
Risks





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





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. 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.


F-5




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


Cash and Cash
Equivalents





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





Restricted
Cash





In
accordance with the Escrow Agreement and the Subscription Agreement (note 11)
signed by China Infrastructure Construction Corporation, Trillion Growth China
General Partner and Anslow & Jaclin, LLP (the “Escrow Agent”) in
October 2009, the Company was required to keep with the Escrow Agent $120,000
immediately on the Closing Date of the Subscription Agreement. This fund can
only be disbursed when certain criteria are met. The escrow account also keeps
$38,089 attorney fees as a covenant for future services. As of November 30, 2009
and May 31, 2009, the amount not disbursed was $158,089 and $0, respectively,
and these are included in restricted cash in the consolidated balance sheets.
Deposits held in the escrow account are not insured by any government entity or
agency.





Trade Accounts
Receivable




The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. Trade accounts receivable are recognized
and carried at original invoice amount less an allowance for any uncollectible
amounts. An allowance for doubtful accounts is established and determined based
on management’s regular assessment of known requirements, aging of receivables,
payment history, the customer’s current credit worthiness and the economic
environment. These factors continuously change, and can have an impact on
collections and the Company’s estimation process. These impacts may be material.
Management reviews and maintains an allowance for doubtful accounts that
reflects the management’s best estimate of potentially uncollectible trade
receivables. Certain accounts receivable amounts are charged off against
allowances after a designated period of collection efforts. Subsequent cash
recoveries are recognized as income in the period when they occur. Allowance for
doubtful debts amounted to $774,143 and $311,928 as of November 30, 2009 and May
31, 2009, respectively.





Inventories





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





November
                    30,
                    2009
                  
                  
                  May 31,
                    2009Raw materials
                  
                  $
                  1,167,568
                  
                  
                  $
                  885,834


F-6




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


Property, plant and
Equipment





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





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





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 November 30, 2009, the Company
expects these assets to be fully recoverable. No impairment of assets was
recorded in the periods reported.





Accumulated Other
Comprehensive Income





Accumulated
other comprehensive income represents foreign currency translation
adjustments.





Revenue
Recognition




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


F-7




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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.





Cost of Goods
Sold





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





Selling, General and
Administration Expenses





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





Shipping and Handling
Costs




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




Advertising
Costs





The
Company expenses advertising costs as incurred.  Advertising expenses
charged to operations were $0 for the three and six months ended November 30,
2009 and 2008, respectively. Advertising costs, if any, are included in selling,
general and administrative expense on the income statement.





Foreign Currency and
Comprehensive Income





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


F-8




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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





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





Income
Taxes





The
Company accounts for income taxes in accordance with ASC 740 (Formerly SFAS 109,
“Accounting for Income Taxes.”) Under the asset and liability method as required
by ASC 740 (Formerly SFAS 109), deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Under ASC
740, the effect on deferred income taxes of a change in tax rates is recognized
in income in the period that includes the enactment date. A valuation allowance
is recognized if it is more likely than not that some portion, or all of, a
deferred tax asset will not be realized. As of November 30, 2009 and May 31,
2009, the Company did not have any deferred tax assets or liabilities, and as
such, no valuation allowances were recorded at November 30, 2009 and May 31,
2009.





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




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





The
Company’s operations are subject to income and transaction taxes in the United
States, HongKong, 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.


F-9




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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-10




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (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:




THREE MONTHS ENDED
                  NOVEMBER 30,
                
                
                SIX MONTHS ENDED
                  NOVEMBER 30,2009
                
                
                2008
                
                
                2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Net
      income (loss) for earnings per share
                
                $
                (24,465,988
                )
                
                $
                2,075,020
                
                
                $
                (22,559,585
                )
                
                $
                3,773,887Weighted
      average shares used in basic computation
                
                
                6,578,625
                
                
                
                1,390,400
                
                
                
                4,026,345
                
                
                
                1,295,200Diluted
      effect of warrants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Weighted
      average shares used in diluted computation
                
                
                6,578,625
                
                
                
                1,390,400
                
                
                
                4,026,345
                
                
                
                1,295,200Earnings
      (loss) per share, basic and diluted
                
                $
                (3.72
                )
                
                $
                1.49
                
                
                $
                (5.60
                )
                
                $
                2.91




F-11




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


Statement of Cash
Flows




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





Segment
Reporting





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





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





Recent Accounting
Pronouncements




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




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





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


F-12




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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. The
management is in the process of evaluating the impact of adopting this ASC
update on the Company’s financial statements.





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:





November 30, 2009
                        
                        
                        May 31, 2009Office
      trailers
                        
                        $
                        903,173
                        
                        
                        $
                        902,319Machinery
      and equipment
                        
                        
                        5,749,311
                        
                        
                        
                        2,922,504Motor
      vehicles
                        
                        
                        468,314
                        
                        
                        
                        466,117Furniture
      and office equipment
                        
                        
                        463,944
                        
                        
                        
                        462,300Construction
      in progress
                        
                        
                        3,308,945
                        
                        
                        
                        3,305,813Total
      property, plant and equipment
                        
                        
                        10,893,687
                        
                        
                        
                        8,059,053Accumulated
      depreciation
                        
                        
                        (2,960,688
                        )
                        
                        
                        (2,409,218
                        )Net
      property, plant and equipment
                        
                        $
                        7,932,999
                        
                        
                        $
                        5,649,835





Depreciation
expense included in selling, general and administrative expenses for the three
months ended November 30, 2009 and 2008 was $52,799 and $60,670, respectively.
Depreciation expense included in selling, general and administrative expenses
for the six months ended November 30, 2009 and 2008 was $106,353 and $105,401,
respectively. Depreciation expense included in cost of goods sold for the three
months ended November 30, 2009 and 2008 was $241,481 and $193,994, respectively.
Depreciation expense included in cost of goods sold for the six months ended
November 30, 2009 and 2008 was $442,078 and $322,908,
respectively.


F-13




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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.
At November 30, 2009, the costs involved with construction in progress were
$3,308,945. Interest costs totaling $0 were capitalized into construction in
progress for the three and six months ended November 30, 2009 and 2008,
respectively.





5. Other Receivables





As of
November 30, 2009, other receivables amounted to $1,413,083, which mainly
consists of $876,289 in receivables from an unrelated party, unsecured, interest
free, and with no fixed repayment date. As of January 14, 2010, all of this
$876,289 has been collected. It also includes insurance claims and travel
advances to the staff. All the other receivables are from unrelated parties,
interest free, unsecured, and with no fixed repayment date. As of May 31, 2009,
other receivables amounted to $270,819, which mainly consists of insurance
claims and the temporary lending to the staff with no fixed repayment date,
unsecured, and with no interest bearing on it. The allowances on the other
accounts receivable are recorded when circumstances indicate collection is
doubtful for particular accounts receivable.  The Company provides for
allowances on a specific account basis. There is no provision made for the other
receivables at November 30, 2009 and May 31, 2009.





6.  
Other Payables





Other
payables in current liabilities consist of the following as of November 30, 2009
and May 31, 2009:




November 30, 2009
                  
                  
                  May 31, 2009Commission
      payable
                  
                  $
                  1,932,453
                  
                  
                  $
                  1,541,579Staff  and
      other companies deposit
                  
                  
                  614,619
                  
                  
                  
                  188,711Total
      other payables - current
                  
                  $
                  2,547,072
                  
                  
                  $
                  1,730,290





Other
Payables – Long-Term





Long-term
other payables amounted to $521,676 and $0 as of November 30, 2009 and May 31,
2009. The long-term other payables are payments due to unrelated vendors for
machinery and equipment purchases.





7.  Accrued
Expenses





Accrued
expenses amounted to $359,351 and $277,329 as of November 30, 2009 and May 31,
2009. The accrued expenses mainly include accrued land lease expenses, accrued
electricity and utility expenses, and accrued interest.


F-14




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


8.   Related Party
Transactions





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





Total
outstanding amount of related party payable was $344,030 and $564,419 as of
November 30, 2009 and May 31, 2009, respectively. These payables bear no
interest, are unsecured, and have no fixed payment terms. Currently, the related
party payable consists of the following:





November 30, 2009
                  
                  
                  May 31, 2009Rong
      Yang (Chairman)
                  
                  $
                  344,030
                  
                  
                  $
                  372,489Liao
      Shunjun (Chairman’s brother-in-law)
                  
                  
                  -
                  
                  
                  
                  98,723RongHua
      Chang Shen Transportation (20% owned by a common
    shareholder)
                  
                  
                  -
                  
                  
                  
                  93,207$
                  344,030
                  
                  
                  $
                  564,419





Total
outstanding amount of related party receivables was $163,458 and $674,289 as of
November 30, 2009 and May 31, 2009, respectively. These receivables require no
interest, are unsecured, and have no fixed re-payment terms. All the related
party receivables are loans to related parties for business developments. As a
public company, the Company has set up stricter rules to forbid loans to related
parties. Currently, the receivables from related party consist of the
following:





November 30, 2009
                          
                          
                          May 31, 2009Lao
      Zhan (common shareholder)
                          
                          $
                          -
                          
                          
                          $
                          465,332Yang
      Ming (Chairman Yang Rong’s brother)
                          
                          
                          69,605
                          
                          
                          
                          187,490Heng
      Jian (20% owned  by a common shareholder )
                          
                          
                          -
                          
                          
                          
                          20,736Liao
      Shunjun (Chairman’s brother-in-law)
                          
                          
                          22,372
                          
                          
                          
                          -Liao
      Guiping (Chairman’s wife)
                          
                          
                          71,481
                          
                          
                          
                          731$
                          163,458
                          
                          
                          $
                          674,289




In the
six months ended November 30, 2009, the May 31, 2009 related party receivable of
$674,289 was offset against payable to a related party, CEO and chairman of the
Company, according to an agreement in which the CEO agreed such
obligation.


F-15




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


9.
Debt





Bank Loan
Payable





On
October 16, 2009, the Company borrowed $1,465,000 from Beijng Bank. The loan is
unsecured, and with an annual interest rate of 5.31%. $1,318,500 of the total
amount is guaranteed by an unrelated party. The due dates are as follows:
$146,500 due on April 16, 2010, $146,500 due on July 16, 2010, $293,000 due on
August 16, 2010, $439,500 due on September 16, 2010, and $439,500 due on October
16, 2010. Interest expenses are due on the 16th of every third month. As of
November 30, 2009, the loan payable to bank amounted to $1,465,000. There is no
interest expense capitalized into construction in progress for the three and six
months ended November 30, 2009 and 2008.


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





Interest





Total
interest expense and financial charges for the three and six months ended
November 30, 2009 on all debt, amounted to $3,183 and $3,655, respectively.
Total interest expense and financial charges for the three and six months ended
November 30, 2008 on all debt, amounted to $258 and $943,
respectively.





Capital
Lease





In July,
2009, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,775,580 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 equipments for three years, with total payments of approximately
$1,966,685. The title of the equipments will be transferred back to the Company
upon the last payment. A one time processing fee of $22,120 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 31 months from December 2009 to June 2012 and are as follows:





Total
      lease payment
                      
                      $
                      1,693,536Less
      imputed interest
                      
                      
                      143,621Total
      capital lease obligation as of November 30, 2009
                      
                      
                      1,549,915Less
      current maturity
                      
                      
                      568,178Capital
      lease obligation – long-term portion as of November 30,
    2009
                      
                      $
                      981,737





The
future lease commitments for the next three year after November 30, 2009 are as
follows:





1
      year after
                
                $
                655,5622
      year after
                
                
                655,5623
      year after
                
                
                382,411Total
                
                $
                1,693,534





10.
Noncontrolling Interest





Noncontrolling
interest consist of other stockholders’ ownership interest in majority-owned
subsidiaries of the Company, which is about 5.48% of the total ownership. As of
November 30, 2009 and May 31, 2009, the balance of noncontrolling interest was
$1,485,265 and $1,210,695 respectively.


F-16




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


11.
Shareholder’s Equity





Reverse Stock
Split





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





Stock Issuance For
Compensation





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





Stock Issuance For
Cash





On
October 16, 2009, the Company entered into and consummated the sale of
securities pursuant to a Subscription Agreement with a number of institutional
investors (the “Investors”), providing for the sale to the Investors of an
aggregate of approximately 2,564,108 shares of Common Stock for an aggregate
purchase price of approximately $10,000,000 (or $3.90 per Share). Net proceeds
of $8,605,626 had been received and recorded as share capital. In connection
with the Private Placement, the Company issued to the placement agent warrants
to purchase 153,846 shares of Common Stock exercisable for a period of five
years at an exercise price of $3.90 per share and paid a transaction fee equal
to 8% of the gross proceeds of the Private Placement. Additionally, the Company
issued to an advisor in the PRC 289,012 shares of Common Stock and paid a
transaction fee equal to 2.5% of the gross proceeds of the Private Placement for
the service provided purely relating to the equity financing. The Company
also issued to one investor 22,000 shares for services provided related to the
fund raising. Thus, the Company paid $1,394,396 in total and issued 403,431
shares to various parties as fund raising costs. These costs were classified as
equity and accounted for as common stock issuance cost.





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





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


F-17




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


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


·
            Hiring
      of a new full-time chief financial officer, subject to the approval of
      certain Investors;


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


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





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





Warrants





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


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





Warrants
                            Outstanding
                          
                          
                          Warrants
                            Exercisable
                          
                          
                          Weighted
                            Average
                            Exercise
                            Price
                          
                          
                          Average
                            Remaining
                            Contractual
                            LifeOutstanding,
      May 31,2009
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -Granted
                          
                          
                          153,846
                          
                          
                          
                          153,846
                          
                          
                          
                          3.90
                          
                          
                          
                          4.88Forfeited
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Exercised
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Outstanding,
      November 30, 2009 (Unaudited)
                          
                          
                          153,846
                          
                          
                          
                          153,846
                          
                          
                          $
                          3.90
                          
                          
                          
                          4.88




F-18




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


12.
Employee Welfare Plan




The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes contributions to an employee welfare
plan.  The total expense for the above plan was $43,488 and $108 for
the three months ended November 30, 2009 and 2008, respectively. The total
expense for the above plan was $48,161 and $955 for the six months ended
November 30, 2009 and 2008, respectively.





13.
Income Tax





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the six months ended November 30, 2009 and 2008:





2009
                  
                  
                  2008U.S.
      Statutory rates
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %Foreign
      income not recognized in USA
                  
                  
                  (34.0
                  )
                  
                  
                  (34.0
                  )China
      income taxes
                  
                  
                  0
                  
                  
                  
                  0China
      income tax exemption
                  
                  
                  0
                  
                  
                  
                  0Total
      provision for income taxes
                  
                  
                  0
                  %
                  
                  
                  0
                  %





People’s Republic of China
(PRC)





Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in
the statutory financial statements after appropriate tax adjustments. Currently,
the Company is charged at 0% income tax rate because of a special tax exemption
approved by the PRC tax department. The income tax expenses for the three
and six months ended November 30, 2009 and 2008 are $0. The exemption of
income tax to the Company will last until December 31, 2010 and from year 2011,
the Company will be subject to an income tax at a standard rate of 25%. There
were no significant book and tax basis differences.





The
estimated tax savings due to the tax exemption for the three and six months
ended November 30, 2008 amounted to approximately $520,000 and $940,000,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease the basic and diluted earnings per share for the three
and six months ended November 30, 2008 by $0.37 and $0.73, respectively. The
estimated tax savings due to the tax exemption for the three and six months
ended November 30, 2009 amounted to approximately $500,000 and $1,300,000,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease the basic and diluted earnings per share for the three
and six months ended November 30, 2009 by $0.08 and $0.32,
respectively.




F-19




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


14.
Other Income (Expenses)





Other
income was $5,196 and $4,996 for the three and six months ended November 30,
2009,   respectively.It mainly consists of
fines from employees.





Other
income was $288 for the three months ended November 30, 2008. It mainly consists
of income from selling used newspaper. Other expenses were $12,266 for the six
months ended November 30, 2008. It mainly consists of fines for the
Company.





15.
Concentration of Credit Risks and Uncertainties





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




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





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





For the
three months ended November 30, 2009, there are four major customers that each
individually comprised more than 10% of the Company’s total sales. (Mingsheng
Group 14%, China Construction 14%, Guangzhou Tianli Construction Projects Inc.
11%, and Beijing Sanyuan Construction Inc. 11%). For the six months ended
November 30, 2009, there are three customers that each individually comprised
more than 10% of the Company’s total sales. (Mingsheng Group 11%, China
Construction 11% and Beijing Sanyuan Construction Inc., 11%).





For the
three months ended November 30, 2008, there are three major customers that each
individually comprised more than 10% of the Company’s total sales. (Jiangsu
Suzhong Construction Group 11%, Guangzhou Tianli Construction Projects Inc. 10%,
and China Construction 10%) For the six months ended November 30, 2008, there
are four customers that each individually comprised more than 10% of the
Company’s total sales. (Guangzhou Tianli Construction Projects Inc. 12%, Jiangsu
Suzhong Construction Group 11%, China Construction 11%,, and Beijing Sanyuan
Construction Inc. 11%).





Two
customers, China Railway Construction Corp. and Beijing Sanyuan, comprised 25%
and 11% of the Company’s accounts receivable balance at November 30, 2009. China
Railway Construction Corp. comprised 33% of the Company’s accounts receivable
balance at May 31, 2009.




F-20




CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 NOVEMBER
30, 2009
 (UNAUDITED)


The top
five major vendors accounted for 34% of the Company’s total purchases for the
three months ended November 30, 2009, with no one major vendor accounting for
more than 10% of the total purchases. The top five major vendors accounted for
36% of the Company’s total purchases for the six months ended November 30, 2009,
with one major vendor, Tianjin Zhenxing Cement Company, accounting for 10% of
the total purchases.





The top
five major vendors accounted for 56% of the Company’s total purchases for the
three months ended November 30, 2008, with one major vendor, Tianjin Zhenxing
Cement Company, accounting for 23% of the total purchases. The top five major
vendors accounted for 55% of the Company’s total purchases for the six months
ended November 30, 2008, with one major vendor, Tianjin Zhenxing Cement Company,
accounting for 23% of the total purchases.





No vendor
accounted for more than 10% of the Company’s accounts payable at November 30,
2009.  Two major vendors, Wushan Cement Company and Tianjin Zhenxing
Cement Company, accounted for 8% and 6% of the Company’s accounts payable at
November 30, 2009. No vendor accounted for more than 10% of the Company’s
accounts payable at May 31, 2009.  One major vendor, Zhuozhou
Shuishang Leyuan Shashiliao, accounted for 8% of the Company’s accounts payable
at May 31, 2009.





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





16.
Subsequent Events





We have
reviewed subsequent events up through January 14, 2010, which is the date that
the financial statements are issued or are available to be
issued.




Change Of
Principal Officers





On
December 17, 2009, Mr. Rong Yang resigned as the Chief Financial Officer of the
Company. Mr. Yang’s resignation was not the result of any disagreement with the
Company on any matter relating to the Company’s operations, policies or
practices





Effective
December 17, 2009, Ms. Yiru Shi was appointed as acting Chief Financial Officer
of the Company, and the Company entered into an employment agreement with Ms.
Shi, dated December 17, 2009.





The
Employment Agreement provides that Ms. Shi will serve as acting CFO of the
Company for a three-month probation period (the “Probation Period”), at the end
of which the Board will review Ms. Shi’s performance and approve her appointment
as the Company’s Chief Financial Officer. The term of the Employment Agreement
is two years, including the Probation Period, with a renewal option upon a
15-day written notice in advance (the “Term”). Ms. Shi will be compensated as
follows:





1 An
annual salary of $150,000, or $12,500 monthly payable in U.S. dollars;
and




2 Options
to purchase 300,000 shares of the Common Stock of the Company, exercisable at
$3.90 per share, to vest in two equal installments respectively on December 17,
2010 and December 17, 2011. If Ms. Shi’s employment is terminated prior to the
vesting date, any unvested options will be terminated. If her employment is
terminated after the vesting date, any vested but unexercised options shall
terminate on the 91st day following the date of the termination of her
employment.  The details of such options are set forth on the Option
Grant Agreement.
 
 Entered Into Strategic
Alliance Agreement
 
 On
December 8, 2009, the Company entered into a Strategic Alliance Agreement
for a term of 10 years with Commercial Concrete Mixer Division of China Railway
Construction Group Co., Ltd. (“CRCG”), a major customer of the Company (the
“Agreement”).
 
 Under the
Agreement, the Company will be obligated to build and set up concrete mixing
stations in Xi’an, China and to provide the raw material purchase, internal
accounting, technical and administrative staff of such stations. The Company and
CRCG will jointly run and operate the concrete mixing stations. CRCG will
provide the cement for manufacturing the concrete mix in such concrete mixing
stations, and CRCG can purchase the concrete mix at a discounted price. Also, in
accordance with the Agreement, each party will lease certain equipment to the
concrete mixing stations.  There are currently no definitive terms for
such leases.
 
 In
addition, the Company and CRCG will share 75% and 25% of the annual profits of
such concrete mixing stations in Xi’an, respectively. The details of such profit
sharing arrangement shall be further agreed upon. According to the Agreement,
the management team from  CRCG to work at the concrete mixing
stations shall be compensated by CRCG.




F-21




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





SPECIAL
NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS





CERTAIN
STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE
WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS", 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.




2




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





Overview





China
Infrastructure Construction Corporation (the “Company”, “China Infrastructure”,
“CHNC”, “We”, “Our”) was organized in Colorado on February 28, 2003. The Company
through its subsidiaries in Hong Kong and thePeople’s Republic of China (“PRC”
or “China”), engages in production of ready-mixed concrete and other special
high-performance concrete for developers and the construction industry in the
PRC. The Company primarily operates through its indirect majority-owned
subsidiary, Beijing Chengzhi Qianmao Concrete Co., Ltd. (“Beijing Concrete”), a
company organized under the laws of the PRC. It has two prime production
facilities. One facility is located in the Nanhaizi area, on the west side of
the Yizhuang economic development zone in Beijing. The other is located at the
Tangshan harbor, about two hundred kilometers from Beijing.





Recent
Developments





On
December 8, 2009, the Company entered into a  Strategic Alliance
Agreement for a term of 10 years with Commercial Concrete Mixer Division of
China Railway Construction Group Co., Ltd. (“CRCG”), a major customer of the
Company (the “Agreement”).





Under the
Agreement, the Company will be obligated to build and set up concrete mixing
stations in Xi’an, China and to provide the raw material purchase, internal
accounting, technical and administrative staff of such stations. The Company and
CRCG will jointly run and operate the concrete mixing stations. CRCG will
provide the cement for manufacturing the concrete mix in such concrete mixing
stations, and CRCG can purchase the concrete mix at a discounted price. Also, in
accordance with the Agreement, each party will lease certain equipment to the
concrete mixing stations.  There are currently no definitive terms for
such leases.





In
addition, the Company and CRCG will share 75% and 25% of the annual profits of
such concrete mixing stations in Xi’an, respectively. The details of such profit
sharing arrangement shall be further agreed upon. According to the Agreement,
the management team from CRCG to work at the concrete mixing stations shall
be compensated by CRCG.




3




Results
of Operations





Three
Months Ended November 30, 2009 Compared to Three Months Ended November 30,
2008





Net
Revenue





Net
revenue for the three months ended November 30, 2009 was $19,155,132 as compared
to $15,565,149 for the same period last year, an increase of $3,589,983, or
approximately 23.06%. The increase in net revenue is attributable to the
increased demand for concrete due to the government’s stimulus plan in the
infrastructure and real estate industries, and is mainly due to the increase of
the sales volume of concrete products. The sales volume of concrete products
increased approximately 23% for the three months ended November 30, 2009 as
compared to the same period last year.  Net revenue from pumping
services accounted for approximately 5% of the total net revenue for the three
months ended November 30, 2009 and 2008.





Cost
of Goods Sold





Cost of
goods sold for the three months ended November 30, 2009 was $14,923,975 as
compared to $12,870,609 for the same period last year, an increase of
$2,053,366, or approximately 15.95%. The increase in cost of goods sold is in
line with the increase of the net revenue.





Gross
Profit





Gross
profit for the three months ended November 30, 2009 was $4,231,157, an increase
of $1,536,617 or approximately 57.03%, as compared to $2,694,540 for the same
period last year. The increase in gross profit is attributable to the increase
of the net revenue.





Gross
Profit Margin




Gross
profit margin for the three months ended November 30, 2009 was 22.09%, compared
to 17.31% for the same period last year. The increase of the gross profit margin
is mainly due to the decrease of the sales commission expenses that are included
in the overhead costs, which are then transferred to the cost of goods sold. The
sales commission expenses decreased approximately $340,729 for the three months
ended November 30, 2009 compared to the same period of 2008. The sales
commission expenses decreased mainly because the Company paid a lower percentage
commission for the three months ended November 30, 2009, compared to the same
period last year.




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the three months ended November 30, 2009
were $28,525,492, as compared to $499,476 for the same period last year, an
increase of $28,026,016, or approximately 5,611.08%. The increase of the
selling, general and administrative expenses was primarily due to a one time non
cash compensation expenses of $27,422,242.




4




Operating
Income (Loss)





Our
operating loss for the three months ended November 30, 2009 was $24,294,335, a
decrease of $26,489,399 or approximately 1,206.77% as compared to operating
income of $2,195,064 for the three months ended November 30, 2008. The decrease
was mainly due to the $27,422,242 one time non cash compensation expense
included in the selling, general, and administrative expenses.





Income
Taxes





During
the three months ended November 30, 2009, our business operations were solely
conducted by our subsidiaries incorporated in the PRC and we are governed by the
PRC Enterprise Income Tax Laws.  PRC enterprise income tax is
calculated based on taxable income determined under PRC GAAP. In accordance with
the Income Tax Laws, a PRC domestic company is subject to enterprise income tax
at the rate of 25%.





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





Net
Income (Loss) Attributable To China Infrastructure Construction
Corporation





Net loss
was $24,465,988 for the three months ended November 30, 2009, compared to net
income of $2,075,020 for the three months ended November 30, 2008, a decrease of
$26,541,008 or approximately 1,279.07%. The decrease was primarily due to the
$27,422,242 one time non cash compensation expenses included in the selling,
general, and administrative expenses.





Six
Months ended November 30, 2009 Compared to Six Months Ended November 30,
2008





Net
Revenue





Net
revenue for the six months ended November 30, 2009 was $31,410,860 as compared
to $27,020,125 for the same period last year, an increase of $4,390,735, or
approximately 16.25%. The increase in net revenue is attributable to the
increased demand for concrete due to the government’s stimulus plan in
infrastructure and real estate industries, and is mainly due to the increase of
the sales volume of concrete products. The sales volume of concrete products
increased approximately 14% for the six months ended November 30, 2009 as
compared to the same period last year. Net revenue from pumping services
accounted for approximately 5% and 4% of the total net revenue for the six
months ended November 30, 2009 and 2008, respectively.





Cost
of Goods Sold





Cost of
goods sold for the six months ended November 30, 2009 was $24,504,167 as
compared to $22,251,323 for the same period last year, an increase of
$2,252,844, or approximately 10.12%. The increase in cost of goods sold is in
line with the increase of the net revenue.




5




Gross
Profit





Gross
profit for the six months ended November 30, 2009 was $6,906,693, an increase of
$2,137,891 or approximately 44.83%, as compared to $4,768,802 for the same
period last year. The increase in gross profit is attributable to the increase
of net revenue.





Gross
Profit Margin




Gross
profit margin for the six months ended November 30, 2009 was 21.99%, compared to
17.65% for the same period last year. The increase of the gross profit margin is
mainly due to the decrease of the sales commission expenses that are included in
the overhead costs, which then are transferred to the cost of goods sold. The
sales commission expenses decreased approximately $570,000 for the six months
ended November 30, 2009 compared to the same period of 2008. The sales
commission expenses decreased mainly because the Company paid a lower percentage
commission for the six months ended November 30, 2009, compared to the same
period last year.




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses for the six months ended November 30, 2009
were $29,183,485, as compared to $764,588 for the same period last year, an
increase of $28,418,897, or approximately 3,716.89%. The increase of the
selling, general and administrative expenses was primarily due to a one time non
cash compensation expenses of $27,422,242.





Operating
Income (Loss)





Our
operating loss for the six months ended November 30, 2009 was $22,276,792, a
decrease of $26,281,006 or approximately 656.33% as compared to operating income
of $4,004,214 for the six months ended November 30, 2008. The decrease was
mainly due to the $27,422,242 one time non cash compensation expenses included
in the selling, general, and administrative expenses.





Income
Taxes





During
the six months ended November 30, 2009, our business operations were solely
conducted by our subsidiaries incorporated in the PRC and we are governed by the
PRC Enterprise Income Tax Laws.  PRC enterprise income tax is
calculated based on taxable income determined under PRC GAAP. In accordance with
the Income Tax Laws, a PRC domestic company is subject to enterprise income tax
at the rate of 25%.





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




6




Net
Income (Loss) Attributable To China Infrastructure Construction
Corporation





Net loss
was $22,559,585 for the six months ended November 30, 2009, compared to net
income of $3,773,887 for the six months ended November 30, 2008, a decrease of
$26,333,472 or approximately 697.78%. The decrease was primarily due to the
$27,422,242 one time non cash compensation expenses included in the selling,
general, and administrative expenses.





Liquidity
and Capital Resources





As of
November 30, 2009, we had cash and cash equivalents of $6,503,129. 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:





Six
      Months Ended
                          November
      30,2009
                        
                        
                        2008Net
      cash used in operating activities
                        
                        $
                        (3,661,951
                        )
                        
                        $
                        (191,753
                        )Net
      cash used in investing activities
                        
                        
                        (918,285
                        )
                        
                        
                        (47,580
                        )Net
      cash provided by (used in) financing activities
                        
                        
                        10,151,014
                        
                        
                        
                        (136,586
                        )Effect
      of exchange rate change on cash and cash equivalents
                        
                        
                        10,510
                        
                        
                        
                        10,056Net
      increase (decrease) in cash and cash equivalents
                        
                        
                        5,581,288
                        
                        
                        
                        (365,863
                        )Cash
      and cash equivalents, beginning balance
                        
                        
                        921,841
                        
                        
                        
                        865,601Cash
      and cash equivalents, ending balance
                        
                        $
                        6,503,129
                        
                        
                        $
                        499,738




Operating
Activities





Net cash
used in operating activities was $3,661,951 for the six months ended November
30, 2009, an increase of $3,470,198, or 1,809.72%, as compared to $191,753 for
the six months ended November 30, 2008. The increase of net cash used in
operating activities was due to the increase of trade accounts receivable. The
trade accounts receivable increased because of the growing sales. We typically
had long-term annual and multi-year contracts with our major customers. We
entered into varying payment terms with our customers ranging from payment
before delivery, payment on delivery or up to 1 year after the project
completion. As of November 30, 2009, trade accounts receivable with aging over
twelve months old amounted to $554,357, only 1.47% of total trade accounts
receivable.





Investing
Activities





Net cash
used in investing activities was $918,285 for the six months ended November
30, 2009, an increase of $870,705, or 1,829.98%, compared to $47,580 for the six
months ended November 30, 2008. Acquisitions of plant, properties and equipment
were the main contributor to the increase of net cash used in investing
activities.




7




Financing
Activities





Net cash
provided by financing activities was $10,151,014 for the six months ended
November 30, 2009, an increase of $10,287,600, or 7,531.96%, compared to
$136,586 net cash used in financing activities for the six months ended November
30, 2008. The increase was primarily due to the sale of stock by the Company to
investors resulting in net proceeds of $8,605,625 and receipt of a bank loan of
$1,466,200.





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.





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.




8




Use
of estimates





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





Inventories





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





Off-Balance
Sheet Arrangements





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





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





Foreign
Exchange Risk





We
currently do not hold or use any derivative or other financial instruments that
expose us to substantial market risk and we have no foreign exchange
contracts.





We are
exposed to foreign exchange risk arising from fluctuations in the exchange rate
between U.S. Dollars and Renminbi. Our operations are located in the People’s
Republic of China and substantially all of our revenues and assets are
denominated in Renminbi. However our reporting currency is the U.S. Dollar and
some of our expenses are denominated in U.S. Dollars. As a result, our financial
results are potentially subject to the impact of changes in value between U.S.
Dollars and Renminbi. If the Renminbi depreciates relative to the U.S. Dollar,
the value of our revenues, earnings and assets as reported in our financial
statements will decline.





Credit
Risk





We have
not experienced significant credit risk, as most of our customers are long-term
customers with excellent payment records. We review our accounts receivable on a
regular basis to determine if the allowance for doubtful accounts is adequate at
each quarter-end. We extend 270 to 300 day trade credit to our largest
customers, which tend to be well-established and large businesses, and we have
not seen any major customer’s accounts receivable go uncollected beyond 365 days
or experienced any material write-off of accounts receivable in the
past.




9




Inflation
Risk





In recent
years, China has not experienced significant inflation, and thus inflation has
not had a material impact on our results of operations. According to the
National Bureau of Statistics of China (NBS) (www.stats.gov.cn), the change in
Consumer Price Index (CPI) in China was 1.5%, 4.7% and 5.9% in 2006, 2007 and
2008, respectively. Inflationary factors, such as increases in the cost of our
products and overhead costs, could impair our operating results. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, a high rate of inflation may have an adverse
effect on our ability to maintain current levels of gross margin and selling,
general and administrative expenses as a percentage of sales revenue if the
selling prices of our products do not increase with these increased
costs.





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 November 30, 2009, that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.




PART
II-OTHER INFORMATION





ITEM
1A.  RISK FACTORS.





The risk
factors included in our Annual Report on Form 10-K for the fiscal year ended May
31, 2009 have not materially changed as of November 30, 2009.




10




ITEM
6.   EXHIBITS.





(a) The
following exhibits are filed herewith:





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





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




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




11




SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION




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





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





Date:
 January 14, 2010




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