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, 2010


or





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


EXCHANGE
ACT OF 1934





For the
transition period from ___________ to ______________





Commission
File Number: 333-146758





China Infrastructure
Construction Corporation


(Exact
name of registrant as specified in its charter)




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





Shidai
Caifu Tiandi Suite 1906-1909


1
Hangfeng Road Fengtai District


Beijing, China
100070


(Address
of principal executive offices)





86-10-5809-0217


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.  x
Yes    ̈ No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was Required to submit and post such files).


 ̈ Yes   ̈ No





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





Large
      accelerated filer  ̈
            
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈  (Do
      not check if a smaller reporting
              company)
            
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  ̈ Yes   x No





As of
January 14, 2011, there were outstanding 12,930,620 shares of the
registrant’s common stock, no par value.







TABLE
OF CONTENTS




PagePART
      I Financial Information
                  F-1Item
      1. Financial Statements.
                  F-1Consolidated
      Balance Sheets as of November 30, 2010 (Unaudited) and May 31,
      2010
                  F-1Consolidated
      Statements of Income And Comprehensive Income for the three and six months
      ended November 30, 2010 and 2009 (Unaudited)
                  F-2Consolidated
      Statements of Cash Flows for the six months ended November 30, 2010 and
      November 30, 2009 (Unaudited)
                  F-3Notes
      to Consolidated Financial Statements (Unaudited)
                  F-4Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                  3Item
      4T. Controls and Procedures
                  12PART
      II Other Information
                  13Item
      6. Exhibits.
                  13Signatures
                  14Exhibits/Certifications




2


PART
I-FINANCIAL INFORMATION





CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
BALANCE SHEETS
 AS OF
NOVEMBER 30, 2010 AND MAY 31, 2010
 
 November 30,
                              
                              
                              May 31,2010
                              
                              
                              2010(UNAUDITED)AssetsCurrent
      assetsCash
      and cash equivalents
                              
                              $
                              803,470
                              
                              
                              $
                              1,102,879Restricted
      cash
                              
                              
                              69,409
                              
                              
                              
                              146,089Trade
      accounts receivable, net
                              
                              
                              66,786,773
                              
                              
                              
                              53,411,689Other
      receivables
                              
                              
                              381,786
                              
                              
                              
                              950,671Inventories
                              
                              
                              533,472
                              
                              
                              
                              575,452Total
      current assets
                              
                              
                              68,574,910
                              
                              
                              
                              56,186,780Property,
      plant and equipment, net
                              
                              
                              7,618,902
                              
                              
                              
                              7,995,701Prepayments
                              
                              
                              5,004,059
                              
                              
                              
                              1,289,007Other
      receivables - long term
                              
                              
                              5,366,335
                              
                              
                              
                              4,955,648Related
      party receivables
                              
                              
                              1,225,696
                              
                              
                              
                              1,286,945Total
      other assets
                              
                              
                              11,596,090
                              
                              
                              
                              7,531,600Total
      assets
                              
                              $
                              87,789,902
                              
                              
                              $
                              71,714,081Liabilities
      and equityCurrent
      liabilitiesTrade
      accounts payable
                              
                              $
                              16,472,613
                              
                              
                              $
                              13,376,119Related
      party payable
                              
                              
                              681,306
                              
                              
                              
                              47,125Other
      payables
                              
                              
                              3,908,353
                              
                              
                              
                              2,217,307Current
      portion of capital lease obligations
                              
                              
                              2,230,000
                              
                              
                              
                              1,949,183Accrued
      expenses
                              
                              
                              500,611
                              
                              
                              
                              491,885Tax
      payable
                              
                              
                              1,036,799
                              
                              
                              
                              -Shares
      to be issued
                              
                              
                              77,700
                              
                              
                              
                              -Bank
      loan payable
                              
                              
                              -
                              
                              
                              
                              1,317,600Total
      current liabilities
                              
                              
                              24,907,382
                              
                              
                              
                              19,399,219Long-term
      liabilitiesLong-term
      portion of capital lease obligations
                              
                              
                              1,474,775
                              
                              
                              
                              2,185,820Total
      long-term liabilities
                              
                              
                              1,474,775
                              
                              
                              
                              2,185,820Total
      liabilities
                              
                              
                              26,382,157
                              
                              
                              
                              21,585,039Stockholders'
      equityPreferred
      stock, no par value; 10,000,000 shares authorized; no shares issued and
      outstanding
                              
                              
                              -
                              
                              
                              
                              -Common
      stock: no par value; 100,000,000 shares authorized; 12,930,620 and
      12,815,620 shares issued and outstanding as of November 30, 2010 and May
      31, 2010
                              
                              
                              42,916,468
                              
                              
                              
                              42,252,295Retained
      earnings
                              
                              
                              13,175,921
                              
                              
                              
                              4,321,221Accumulated
      other comprehensive income
                              
                              
                              2,671,276
                              
                              
                              
                              1,509,314Total
      China Infrastructure Construction Corporation stockholders'
      equity
                              
                              
                              58,763,665
                              
                              
                              
                              48,082,830Noncontrolling
      interests
                              
                              
                              2,644,080
                              
                              
                              
                              2,046,212Total
      liabilities and equity
                              
                              $
                              87,789,902
                              
                              
                              $
                              71,714,081
 
 The
accompanying notes are an integral part of this statement.
  F-1
 
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 FOR THE
THREE AND SIX MONTHS ENDED NOVEMBER 30, 2010 AND 2009
 (UNAUDITED)
 
 THREE MONTHS ENDED NOVEMBER 30,
                        
                        
                        SIX MONTHS ENDED NOVEMBER 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Sales
      Revenue, Net
                        
                        $
                        25,930,120
                        
                        
                        $
                        19,155,132
                        
                        
                        $
                        47,117,650
                        
                        
                        $
                        31,410,860Cost
      of goods sold
                        
                        
                        18,703,068
                        
                        
                        
                        14,655,122
                        
                        
                        
                        33,757,085
                        
                        
                        
                        24,504,167Gross
      profit
                        
                        
                        7,227,052
                        
                        
                        
                        4,500,010
                        
                        
                        
                        13,360,565
                        
                        
                        
                        6,906,693General
      and administrative expenses
                        
                        
                        1,851,878
                        
                        
                        
                        28,794,545
                        
                        
                        
                        3,294,188
                        
                        
                        
                        29,183,485Net
      operating income (loss)
                        
                        
                        5,375,174
                        
                        
                        
                        (24,294,535
                        )
                        
                        
                        10,066,377
                        
                        
                        
                        (22,276,792
                        )Other
      income (expense):Interest
      income
                        
                        
                        450
                        
                        
                        
                        -
                        
                        
                        
                        994
                        
                        
                        
                        -Interest
      expense
                        
                        
                        (51,574
                        )
                        
                        
                        (3,183
                        )
                        
                        
                        (103,207
                        )
                        
                        
                        (3,655
                        )Other
      income
                        
                        
                        8,482
                        
                        
                        
                        4,996
                        
                        
                        
                        18,666
                        
                        
                        
                        4,996Other
      expense
                        
                        
                        (8,877
                        )
                        
                        
                        -
                        
                        
                        
                        (8,877
                        )
                        
                        
                        -Total
      other (expense)
                        
                        
                        (51,519
                        )
                        
                        
                        1,813
                        
                        
                        
                        (92,424
                        )
                        
                        
                        1,341Net
      income (loss) before income taxes
                        
                        
                        5,323,655
                        
                        
                        
                        (24,292,722
                        )
                        
                        
                        9,973,953
                        
                        
                        
                        (22,275,451
                        )Income
      taxes
                        
                        
                        174,175
                        
                        
                        
                        -
                        
                        
                        
                        580,930
                        
                        
                        
                        -Net
      income (loss)
                        
                        
                        5,149,480
                        
                        
                        
                        (24,292,722
                        )
                        
                        
                        9,393,023
                        
                        
                        
                        (22,275,451
                        )Less:
      Net income attributable to noncontrolling interests
                        
                        
                        271,229
                        
                        
                        
                        173,666
                        
                        
                        
                        538,323
                        
                        
                        
                        284,134Net
      income (loss) attributable to China Infrastructure Construction
      Corporation
                        
                        $
                        4,878,251
                        
                        
                        $
                        (24,466,388
                        )
                        
                        $
                        8,854,700
                        
                        
                        $
                        (22,559,585
                        )Earnings
      (loss) per share - basic and diluted
                        
                        $
                        0.38
                        
                        
                        $
                        (3.72
                        )
                        
                        $
                        0.68
                        
                        
                        $
                        (5.60
                        )Basic
      and dilutive weighted average shares outstanding
                        
                        
                        12,930,620
                        
                        
                        
                        6,578,625
                        
                        
                        
                        12,929,992
                        
                        
                        
                        4,026,345Comprehensive
      incomeNet
      income (loss)
                        
                        
                        5,149,480
                        
                        
                        
                        (24,292,722
                        )
                        
                        
                        9,393,023
                        
                        
                        
                        (22,275,451
                        )Foreign
      currency translation adjustment
                        
                        
                        985,304
                        
                        
                        
                        (194,921
                        )
                        
                        
                        1,221,507
                        
                        
                        
                        (191,269
                        )Comprehensive
      income (loss)
                        
                        $
                        6,134,784
                        
                        
                        $
                        (24,487,643
                        )
                        
                        $
                        10,614,530
                        
                        
                        $
                        (22,466,720
                        )Comprehensive
      income attributable to non-controlling interests
                        
                        $
                        320,500
                        
                        
                        $
                        173,525
                        
                        
                        $
                        597,868
                        
                        
                        $
                        274,571Comprehensive
      income (loss) attributable to China Infrastructure Construction
      Corporation
                        
                        $
                        5,814,284
                        
                        
                        $
                        (24,661,168
                        )
                        
                        $
                        10,016,662
                        
                        
                        $
                        (22,741,291
                        )
 
 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, 2010 AND 2009
 (UNAUDITED)
 
 November
      30,2010
                        
                        
                        2009Cash
      flows from operating activities:Net
      income (loss)
                        
                        $
                        9,393,023
                        
                        
                        $
                        (22,275,451
                        )Adjustments
      to reconcile net income (loss) to net cash provided by (used in)
      operations:Loss
      from property, plant and equipment disposal
                        
                        
                        8,877
                        
                        
                        
                        -Depreciation
                        
                        
                        873,212
                        
                        
                        
                        548,431Shares
      issued for compensation
                        
                        
                        393,950
                        
                        
                        
                        27,422,242Stock
      option expenses
                        
                        
                        347,923
                        
                        
                        
                        -Changes
      in operating liabilities and assets:Trade
      accounts receivable
                        
                        
                        (11,812,272
                        )
                        
                        
                        (11,186,190
                        )Prepayments
                        
                        
                        (3,637,611
                        )
                        
                        
                        -Inventories
                        
                        
                        56,639
                        
                        
                        
                        (281,126
                        )Other
      receivables
                        
                        
                        311,844
                        
                        
                        
                        (1,064,571
                        )Trade
      accounts payable
                        
                        
                        2,710,530
                        
                        
                        
                        2,353,912Other
      payables
                        
                        
                        1,599,842
                        
                        
                        
                        738,976Accrued
      expenses and tax payable
                        
                        
                        23,230
                        
                        
                        
                        81,826Tax
      payable
                        
                        
                        1,024,659
                        
                        
                        
                        -Net
      cash provided by (used in) operating activities
                        
                        
                        1,293,846
                        
                        
                        
                        (3,661,951
                        )Cash
      flows from investing activities:Property,
      plant, and equipment additions
                        
                        
                        (336,332
                        )
                        
                        
                        (754,827
                        )Property,
      plant, and equipment disposal
                        
                        
                        37,135
                        
                        
                        
                        -Payments
      to related party receivable
                        
                        
                        (93,000
                        )
                        
                        
                        (163,458
                        )Proceeds
      from related party receivable
                        
                        
                        31,751
                        
                        
                        
                        -Net
      cash used in investing activities
                        
                        
                        (360,446
                        )
                        
                        
                        (918,285
                        )Cash
      flows from financing activities:Shares
      issued for cash
                        
                        
                        -
                        
                        
                        
                        8,605,625Restricted
      cash
                        
                        
                        76,680
                        
                        
                        
                        (158,089
                        )Proceeds
      from Bank loan payable and capital lease obligations
                        
                        
                        31,111
                        
                        
                        
                        1,466,200Payment
      to Bank loan payable and capital lease obligations
                        
                        
                        (1,902,024
                        )
                        
                        
                        -Proceeds
      from related party payable
                        
                        
                        540,894
                        
                        
                        
                        237,278Payments
      to related party payable
                        
                        
                        -
                        
                        
                        
                        -Net
      cash provided by (used in) financing activities
                        
                        
                        (1,253,339
                        )
                        
                        
                        10,151,014Effect
      of rate changes on cash
                        
                        
                        20,530
                        
                        
                        
                        10,510(Decrease)
      Increase in cash and cash equivalents
                        
                        
                        (299,409
                        )
                        
                        
                        5,581,288Cash
      and cash equivalents, beginning of period
                        
                        
                        1,102,879
                        
                        
                        
                        921,841Cash
      and cash equivalents, end of period
                        
                        $
                        803,470
                        
                        
                        $
                        6,503,129Supplemental
      disclosures of cash flow information:Interest
      paid in cash
                        
                        $
                        102,044
                        
                        
                        $
                        -Income
      taxes paid in cash
                        
                        $
                        -
                        
                        
                        $
                        -Non-cash
      investing activities:Acquisition
      of property, plant and equipment through loan payable
                        
                        $
                        -
                        
                        
                        $
                        -Disposal
      of property, plant and equipment through other receivable
                        
                        $
                        
                        
                        
                        $
                        2,073,287Related
      party receivable offset by payable to related party
payable
                        
                        $
                        
                        
                        
                        $
                        674,289
 
 The
accompanying notes are an integral part of this statement.
  F-3
 CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
 NOVEMBER
30, 2010
 (UNAUDITED)
 
 1.
              Nature of
      operations
 
 China
Infrastructure Construction Corporation (“China Infrastructure”), formerly
Fidelity Aviation Corporation, was organized on February 28, 2003 as Fidelity
Aircraft Partners LLC, a Colorado limited liability company (“Fidelity LLC”). On
December 16, 2004, Fidelity LLC converted itself into Fidelity Aviation
Corporation by filing a Statement of Conversion and Articles of Incorporation
with the Colorado Secretary of State. Fidelity was formed to purchase large
commercial (transport category) jet airframes, salvage the usable aircraft parts
and components from them and sell the parts and components. The Board of
Directors evaluated the future market for aircraft parts business and resolved
not to pursue this line of business anymore.
 
 On
October 8, 2008, China Infrastructure entered into and consummated the
transactions contemplated under a Share Exchange Agreement with Northern
Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its
shareholder pursuant to which China Infrastructure issued 1,200,000 (12,000,000
pre-reverse split) shares of China Infrastructure common stock (the “Share
Exchange”) in exchange for all issued and outstanding common stock of
NCH.
 
 The Share
Exchange resulted in (i) a change in control of China Infrastructure with the
shareholder of NCH owning approximately 78% of the issued and outstanding shares
of common stock of China Infrastructure, (ii) NCH becoming a wholly-owned
subsidiary of China Infrastructure, and (iii) appointment of certain nominees of
the shareholder of NCH as directors and officers of China Infrastructure and
resignation of John Schoenauer as director, Chief Executive Officer, Chief
Financial Officer, Secretary and Treasurer of China
Infrastructure.
 
 As a
result of the Share Exchange Agreement, Beijing Fortune Capital Management Co.,
Ltd. (“BFCM”), a 95% owned subsidiary of NCH, became our indirect majority-owned
subsidiary.  Also as a result of the Share Exchange Agreement, Beijing
Chengzhi Qianmao Concrete Co., Ltd., (“Beijing Concrete”), the operating
company, and a 99.5% owned subsidiary of BFCM, also became our
indirect majority-owned subsidiary.
 
 For
accounting purposes, the share exchange transaction was treated as a capital
transaction where the acquiring corporation issued stock for the net monetary
assets of the shell corporation, accompanied by a recapitalization. The
accounting is similar in form to a reverse acquisition, except that goodwill or
other intangibles are not recorded. All references to NCH common stock have
been restated to reflect the equivalent numbers of China Infrastructure common
shares.
  F-4
  On
January 15, 2010, Beijing Concrete increased its registered capital from RMB 15
million (approximately $2.2 million) to RMB 30 million (approximately $4.4
million) and BFCM increased its investment in Beijing Concrete accordingly. Its
share capital increased from RMB 10 million (approximately $1.47 million) to RMB
15 million (approximately $2.2 million). As a result, BFCM owns 99.67% of
Beijing Concrete from January 15, 2010.
 
 On
February 1, 2010, Beijing Concrete formed a subsidiary, Shanxi Hongruida
Concrete Ltd. (“Hongruida”) and contributed RMB 10 million (approximately $1.47
million) to its capital. Beijing Concrete is the sole shareholder of Hongruida.
Hongruida was organized to implement the 10-year strategic cooperative agreement
with one of the Company’s major clients, China Railway Construction Group Co.,
Ltd (“CRCG”). Under the Agreement, the Company and CRCG will jointly manage the
concrete mixing stations to be operated by Hongruida. CRCG will provide the
cement for manufacturing the concrete mix in such concrete mixing stations, and
will be able to purchase the concrete mix at discounted prices. Also, in
accordance with the Agreement, each party will lease certain equipment to the
concrete mixing stations. The Company and CRCG will share 75% and 25% of
the annual profits of such concrete mixing stations in Xi’an. Hongruida
commenced its operations at the end of March 2010.
 
 When we
refer in this report to business and financial information for periods prior to
the consummation of the reverse acquisition, we are referring to the business
and financial information of NCH on a consolidated basis unless the context
suggests otherwise.
 
 The
Company through its subsidiaries in Hong Kong and the People’s Republic of China
(“PRC” or “China”), engages in the production of ready-mixed concrete for
developers and the construction industry in the PRC. In addition, we have a
technical service agreement with an independently owned concrete mixture
station, pursuant to which we are paid by percentages of sales for technical
support provided.
 
 2.
              Basis of
      Presentation
 
 The
accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“US GAAP”). This
basis differs from that used in the statutory accounts of the Company, which
were prepared in accordance with the accounting principles and relevant
financial regulations applicable to enterprises in the PRC.  All
necessary adjustments have been made to present the financial statements in
accordance with US GAAP. Operating results for the six-month period ended
November 30, 2010 are not necessarily indicative of the results that may be
expected for the fiscal year ending May 31, 2011. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company’s annual report for the year ended May 31,
2010.
  F-5
 
 3.
              Summary of
      Significant Accounting
Policies
 
 Economic and Political
Risks
 
 The
Company faces a number of risks and challenges as a result of having primary
operations and marketing in the PRC. Changing political climates in the PRC
could have a significant effect on the Company’s business.
 
 Control by Principal
Stockholders
 
 The
directors, executive officers and their affiliates or related parties own,
beneficially and in the aggregate, the majority of the voting power of the
registered capital of the Company. Accordingly, the directors, executive
officers and their affiliates, if they voted their shares uniformly, would have
the ability to control the approval of most corporate actions, including
increasing the authorized capital stock of the Company and the dissolution,
merger or sale of the Company’s assets.
 
 Principles of
Consolidation
 
 The
consolidated financial statements include the financial statements of China
Infrastructure and its wholly-owned and majority-owned subsidiaries. All
significant inter-company balances and transactions have been eliminated in
consolidation. The Company’s foreign subsidiaries have fiscal year ends of May
31 and the results are consolidated up to that date. Noncontrolling 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-6
 
 Cash and Cash
Equivalents
 
 For
purposes of the statements of cash flows, cash and cash equivalents includes
cash on hand and demand deposits held by banks. Deposits held in financial
institutions in the PRC are not insured by any government entity or
agency.
 
 Restricted
Cash
 
 In
accordance with the Escrow Agreement and the Subscription Agreement (note 12)
signed by China Infrastructure Construction Corporation, Trillion Growth China
General Partner and Anslow & Jaclin, LLP (the “Escrow Agent”) in
October 2009, the Company was required to keep with the Escrow Agent $120,000
immediately on the Closing Date of the Subscription Agreement. This fund can
only be disbursed when certain criteria are met. The escrow account also keeps
$38,089 of attorney fees as a covenant for future services. As of November 30,
2010 and May 31, 2010, the amount not disbursed was $69,409 and $146,089,
respectively, and these are included in restricted cash in the consolidated
balance sheets. Deposits held in the escrow account are not insured by any
government entity or agency.
 
 Trade Accounts
Receivable
 
 The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. Trade accounts receivable are recognized
and carried at original invoice amount less an allowance for any uncollectible
amounts. An allowance for doubtful accounts is established and determined based
on management’s regular assessment of known requirements, aging of receivables,
payment history, the customer’s current credit worthiness and the economic
environment. These factors continuously change and can have an impact on
collections and the Company’s estimation process. These impacts may be material.
Management reviews and maintains an allowance for doubtful accounts that
reflects management’s best estimate of potentially uncollectible trade
receivables. Certain accounts receivable amounts are charged off against
allowances after a designated period of collection efforts. Subsequent cash
recoveries are recognized as income in the period when they occur. Allowance for
doubtful debts amounted to $407,619 and $397,042 as of November 30, 2010 and May
31, 2010, respectively.
  F-7
  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, 2010
                  
                  
                  May 31, 2010Raw materials
                  
                  $
                  533,472
                  
                  
                  $
                  575,452
 
 Property and
Equipment
 
 Property,
plant and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the useful lives of
the assets. Major renewals are capitalized and depreciated; maintenance and
repairs that do not extend the life of the respective assets are charged to
expense as incurred. Upon disposal of assets, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Depreciation related to property and equipment is reported in cost of
revenues. Property, plant and equipment are depreciated over their estimated
useful lives as follows:
 
 Office
      trailers
                10
      yearsMachinery
      and equipment
                3-8
      yearsFurniture
      and office equipment
                5-8
      yearsMotor
      vehicles
                3-5
      years
 
 Impairment of Long-Lived and
Intangible Assets
 
 Long-lived
assets of the Company are reviewed annually to assess whether the carrying value
has become impaired according to the guidelines established in FASB Codification
(ASC) 360.The Company
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations. The Company also re-evaluates the
periods of depreciation to determine whether subsequent events and circumstances
warrant revised estimates of useful lives. As of November 30, 2010, the Company
expects these assets to be fully recoverable. No impairment of assets was
recorded in the periods reported.
  F-8
  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 services and consulting services. The Company's revenue
recognition policies are in compliance with ASC 605 (previously Staff Accounting
Bulletin 104). Sales revenue is recognized at the date of shipment to customers
or services have been rendered when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed, no other significant
obligations of the Company exist and collectability is reasonably assured. Our
sales are non-returnable. Therefore, we do not estimate deductions or allowance
for sales returns. Sales are presented net of any discounts, reward, or
incentive given to customers.  Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
 
 Our
products delivered to customers are checked on site by customers and, once the
products are accepted by customers, they will sign the acceptance notice. There
is no warranty issue after the delivery.
 
 Reward or
incentive given to our customers is an adjustment of the selling prices of our
products; therefore, the consideration is characterized as a reduction of
revenue when recognized in our income statement.
 
 The
Company recognizes its revenues net of value-added taxes (“VAT”).  The
Company is subject to VAT which is levied at the rate of 6% on the invoiced
value of sales. However, the Company enjoys a free VAT policy according to the
national policy, which encourages the development of the cement industry if
the manufacturer satisfies the environmental protection requirements. The
Company has enjoyed the free VAT policy from January 1, 2006 and has been
reviewed every year by the local tax bureau.
 
 Cost of Goods
Sold
 
 Cost of
goods sold consists primarily of the costs of the raw materials, freight
charges, direct labor, depreciation of plant and machinery, warehousing cost and
overhead associated with the manufacturing process and commission
expenses.
  F-9
  Shipping Income and
Expense
 
 ASC
605-45-20 “Shipping and Handling Costs” establishes standards for the
classification of shipping and handling costs. All amounts billed to a customer
related to shipping and handling are classified as revenue.
 
 Advertising
Costs
 
 The
Company expenses advertising costs as incurred.  Advertising expenses
charged to operations were $0 for the six months ended November 30, 2010 and
2009, respectively. Advertising costs, if any, are included in selling, general
and administrative expense on the income statement.
 
 Foreign Currency and
Comprehensive Income
 
 The
accompanying financial statements are presented in US dollars. The functional
currency of the Company is U.S. Dollars and that of Beijing Concrete is the
Renminbi (“RMB”) of the PRC. The financial statements are translated into US
dollars from RMB at period-end exchange rates for assets and liabilities, and
weighted average exchange rates for revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.
 
 On July
21, 2005, the PRC changed its foreign currency exchange policy from a fixed
RMB/USD exchange rate into a flexible rate under the control of the PRC’s
government. We use the Closing Rate Method in currency translation of the
financial statements of the Company.
 
 RMB is
not freely convertible into the currency of other nations. All such exchange
transactions must take place through authorized institutions. There is no
guarantee the RMB amounts could have been, or could be, converted into US
dollars at rates used in translation.
 
 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.
  F-10
  ASC 740
(formerly FIN 48) clarifies the accounting and disclosure for uncertain tax
positions and prescribes a recognition threshold and measurement attribute for
recognition and measurement of a tax position taken or expected to be taken in a
tax return. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.
 
 Under ASC
740, evaluation of a tax position is a two-step process. The first step is to
determine whether it is more-likely-than-not that a tax position will be
sustained upon examination, including the resolution of any related appeals or
litigation based on the technical merits of that position. The second step is to
measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement. Tax positions that
previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent period in which the threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting
period in which the threshold is no longer met.
 
 The
Company’s operations are subject to income and transaction taxes in the United
States, Hong Kong, and the PRC jurisdictions. Significant estimates and
judgments are required in determining the Company’s worldwide provision for
income taxes. Some of these estimates are based on interpretations of existing
tax laws or regulations, and as a result the ultimate amount of tax liability
may be uncertain. However, the Company does not anticipate any events that
would lead to changes to these uncertainties.
 
 USA
 
 The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Group has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of November 30, 2010 and May 31, 2010.
  F-11
  Hong
Kong
 
 As the
Group has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of November 30, 2010 and May 31,
2010.
 
 PRC
 
 Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an income tax at an effective rate of 25% on income reported in the statutory
financial statements after appropriate tax adjustments.
 
 Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. The exemption of income tax to the Company will last until
December 31, 2010, and from year 2011, the Company will be subject to an income
tax at a standard rate of 25%.
 
 BFCM has
an accumulated operating loss, thus there is no income tax expense for BFCM. The
Company has not recorded deferred taxes, as valuation allowances were provided
because all significant differences in tax basis and financial statement amounts
are permanent differences.
 
 For the six months ended November 30,2010
                    
                    
                    2009Income
      tax expensesCurrent
      tax
                    
                    $
                    -
                    
                    
                    $
                    -Change
      in deferred tax assets
                    
                    
                    128,645
                    
                    
                    
                    3,196Change
      in valuation allowance
                    
                    
                    (128,645
                    )
                    
                    
                    (3,196
                    )Total
                    
                    $
                    -
                    
                    
                    $
                    -
 
 Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of November 30, 2010, the Company has
accrued income tax payable of $1,032,164 for income tax expenses for
Hongruida.
 
 The
current income tax expense and deferred tax expense for the three and six months
ended November 30, 2010 and 2009 are as follows:
  F-12
  
 Three Months Ended November 30,
                      
                      
                      Six Months Ended November 30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Current
      tax expense
                      
                      $
                      174,175
                      
                      
                      $
                      -
                      
                      
                      $
                      580,930
                      
                      
                      $
                      -Deferred
      tax expense
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
 
 Restrictions on Transfer of
Assets Out of the PRC
 
 Dividend
payments by the Company are limited by certain statutory regulations in the PRC.
No dividends may be paid by the Company without first receiving prior approval
from the Foreign Currency Exchange Management Bureau. However, no such
restrictions exist with respect to loans and advances.
 
 Financial
Instruments
 
 ASC 825
(formerly SFAS 107, “Disclosures about Fair Value of Financial Instruments”)
defines financial instruments and requires disclosure of the fair value of those
instruments. ASC 820 (formerly SFAS 157, “Fair Value Measurements”), adopted
July 1, 2008, defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosure requirements
for fair value measures. The carrying amounts reported in the balance sheets for
current receivables and payables, including short-term loans, qualify as
financial instruments and are a reasonable estimate of fair value because of the
short period of time between the origination of such instruments, their expected
realization and, if applicable, the stated rate of interest is equivalent to
rates currently available. The three levels are defined as follows:
   ̈
              Level 1: inputs to the valuation
      methodology are quoted prices (unadjusted) for identical assets or
      liabilities in active
markets.
 
  ̈
              Level 2: inputs to the valuation
      methodology include quoted prices for similar assets and liabilities in
      active markets, and inputs that are observable for the assets or
      liability, either directly or indirectly, for substantially the full term
      of the financial
instruments.
 
  ̈
              Level 3: inputs to the valuation
      methodology are unobservable and significant to the fair
      value.
 
 The
Company did not identify any assets or liabilities that are required to be
presented on the balance sheet at fair value in accordance with ASC 820
(formerly SFAS 157).
  F-13
  Stock-Based
Compensation
 
 The
Company records stock-based compensation expense pursuant to ASC 718 (formerly
SFAS 123R, “Share Based Payment.”) The Company uses the Black-Scholes option
pricing model which requires the input of highly complex and subjective
variables including the expected life of options granted and the Company’s
expected stock price volatility over a period equal to or greater than the
expected life of the options. Because changes in the subjective assumptions can
materially affect the estimated value of the Company’s employee stock options,
it is management’s opinion that the Black-Scholes option pricing model may not
provide an accurate measure of the fair value of the Company’s employee stock
options. Although the fair value of employee stock options is determined in
accordance with ASC 718 using an option pricing model, that value may not
be indicative of the fair value observed in a willing buyer/willing seller
market transaction.
 
 Stock-based
compensation expense is recognized based on awards expected to vest, and there
were no estimated forfeitures as the Company has a short history of issuing
options. ASC 718 (formerly SFAS 123R) requires forfeitures to be estimated at
the time of grant and revised in subsequent periods, if necessary, if actual
forfeitures differ from those estimates.
 
 Basic and Diluted Earnings
Per Share
 
 The
Company reports earnings per share in accordance with the provisions of ASC 260
(formerly SFAS No. 128, "Earnings Per Share.") ASC 260 requires
presentation of basic and diluted earnings per share in conjunction with the
disclosure of the methodology used in computing such earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average common shares
outstanding during the period. Diluted earnings per share takes into account the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.
  The
following is a reconciliation of the basic and diluted earnings per
share:
 
 The
following is a reconciliation of the basic and diluted earnings per share for
the three and six months ended November 30, 2010 and 2009:
  F-14
 
 THREE MONTHS ENDED
                          NOVEMBER 30,
                        
                        
                        SIX MONTHS ENDED
                          NOVEMBER 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Net
      income (loss) for earnings per share attributable to China Infrastructure
      Construction Corporation
                        
                        $
                        4,878,251
                        
                        
                        $
                        (24,466,388
                        )
                        
                        $
                        8,854,700
                        
                        
                        $
                        (22,559,585
                        )Weighted
      average shares used in basic computation
                        
                        
                        12,930,620
                        
                        
                        
                        6,578,625
                        
                        
                        
                        12,929,992
                        
                        
                        
                        4,026,345Diluted
      effect of warrants and options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Weighted
      average shares used in diluted computation
                        
                        
                        12,930,620
                        
                        
                        
                        6,578,625
                        
                        
                        
                        12,929,992
                        
                        
                        
                        4,026,345Earnings
      (loss) per share, basic
                        
                        $
                        0.38
                        
                        
                        $
                        (3.72
                        )
                        
                        $
                        0.68
                        
                        
                        $
                        (5.60
                        )Earnings
      (loss) per share, diluted
                        
                        $
                        0.38
                        
                        
                        $
                        (3.72
                        )
                        
                        $
                        0.68
                        
                        
                        $
                        (5.60
                        )
 
 Statement of Cash
Flows
 
 In
accordance with FASB ASC 230, cash flows from the Company's operations is
calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows may not
necessarily agree with changes in the corresponding balances on the balance
sheet.
 
 Segment
Reporting
 
 ASC 280
“Segment reporting” (formerly SFAS 131) requires use of the management approach
model for segment reporting. The management approach model is based on the way a
company's management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company.
 
 Since
management does not disaggregate Company data, the Company has determined that
only one segment exists.
  F-15
  Recent Accounting
Pronouncements
 
 In
June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for
determining whether to consolidate a variable interest entity. These amended
standards eliminate a mandatory quantitative approach to determine whether a
variable interest gives the entity a controlling financial interest in a
variable interest entity in favor of a qualitatively focused analysis, and
require an ongoing reassessment of whether an entity is the primary beneficiary.
We are currently evaluating the impact that adoption will have on our
consolidated financial statements.
 
 In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends
ASC Topic 820, Measuring
Liabilities at Fair Value, which provides additional guidance on the
measurement of liabilities at fair value. These amended standards clarify that
in circumstances in which a quoted price in an active market for the identical
liability is not available, we are required to use the quoted price of the
identical liability when traded as an asset, quoted prices for similar
liabilities, or quoted prices for similar liabilities when traded as assets. If
these quoted prices are not available, we are required to use another valuation
technique, such as an income approach or a market approach. We do not expect it
to have a significant impact on our consolidated financial
statements.
 
 In
October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue
Recognition (Topic 605): Multiple Deliverable Revenue
Arrangements- A Consensus of the FASB Emerging Issues Task Force.” This
update provides application guidance on whether multiple deliverables exist, how
the deliverables should be separated and how the consideration should be
allocated to one or more units of accounting. This update establishes a selling
price hierarchy for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor-specific objective
evidence, if available, third-party evidence if vendor-specific objective
evidence is not available, or estimated selling price if neither vendor-specific
or third-party evidence is available. The Company will be required to apply this
guidance prospectively for revenue arrangements entered into or materially
modified after January 1, 2011; however, earlier application is permitted.
Management is in the process of evaluating the impact of adopting this ASC
update on the Company’s financial statements.
 
 In
February 2010, the FASB issued Accounting Standards Update 2010-09, “Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure
Requirements,” or ASU 2010-09. ASU 2010-09 primarily rescinds the requirement
that, for listed companies, financial statements clearly disclose the date
through which subsequent events have been evaluated. Subsequent events must
still be evaluated through the date of financial statement issuance; however,
the disclosure requirement has been removed to avoid conflicts with other SEC
guidelines. ASU 2010-09 was effective immediately upon issuance and was adopted
in February 2010.
  F-16
  In July
2010, the FASB issued Accounting Standards Update 2010-20 which amend
“Receivables” (Topic 310). ASU 2010-20 is intended to provide additional
information to assist financial statement users in assessing an entity’s risk
exposures and evaluating the adequacy of its allowance for credit losses. The
disclosures as of the end of a reporting period are effective for interim and
annual reporting periods ending on or after December 15, 2010. The disclosures
about activity that occurs during a reporting period are effective for interim
and annual reporting periods beginning on or after December 15, 2010. The
amendments in ASU 2010-20 encourage, but do not require, comparative disclosures
for earlier reporting periods that ended before initial adoption. However, an
entity should provide comparative disclosures for those reporting periods ending
after initial adoption. The Company does not expect the adoption of ASU 2010-20
to have a significant impact on its consolidated financial
statements.
 
 The
Company has reviewed the Accounting Standards Updates up through
2010-29.
 
 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, 2010
                      
                      
                      May 31, 2010Office
      trailers
                      
                      $
                      926,600
                      
                      
                      $
                      902,556Machinery
      and equipment
                      
                      
                      9,301,305
                      
                      
                      
                      8,292,669Motor
      vehicles
                      
                      
                      693,566
                      
                      
                      
                      1,452,308Furniture
      and office equipment
                      
                      
                      582,860
                      
                      
                      
                      509,611Construction
      in progress
                      
                      
                      610,973
                      
                      
                      
                      421,716Total
      property, plant and equipment
                      
                      
                      12,115,304
                      
                      
                      
                      11,578,860Accumulated
      depreciation
                      
                      
                      (4,496,402
                      )
                      
                      
                      (3,583,159
                      )Net
      property, plant and equipment
                      
                      $
                      7,618,902
                      
                      
                      $
                      7,995,701
 
 Depreciation
expense included in general and administrative expenses for the three months
ended November 30, 2010 and 2009 was $36,180 and $52,799, respectively.
Depreciation expense included in general and administrative expenses for the six
months ended November 30, 2010 and 2009 was $104,983 and $106,353, respectively.
Depreciation expense included in cost of sales for the three months ended
November 30, 2010 and 2009 was $406,708 and $241,481, respectively. Depreciation
expense included in cost of sales for the six months ended November 30, 2010 and
2009 was $768,229 and $442,078, respectively.
  F-17
  Construction
in progress represents direct costs of construction and design fees incurred for
the Company’s new project in Tangshan. All construction costs associated with
this project are accumulated and capitalized as construction in progress. The
construction in progress is closed out to the appropriate asset classification
when the project is substantially complete, occupied, or placed into service. No
depreciation is provided until it is completed and ready for its intended
use.
  Interest
costs totaling $0 were capitalized into construction in progress for the six
months ended November 30, 2010 and 2009.
 
 5.
              Prepayments
 
 Prepayments
consist of the prepaid expenses and the monies deposited with the suppliers for
purchasing vehicles and raw material. The total outstanding amount was
$5,004,059 and $1,289,007 as of November 30, 2010 and May 31, 2010,
respectively. There is no provision made for the prepayment at November 30, 2010
and May 31, 2010.
 
 6.
              Other
      Receivables
 
 Other
receivables in current assets amounted to $381,786 and $950,671 as of November
30, 2010 and May 31, 2010, respectively.
 
 Other
receivables in long-term assets amounted to $5,366,335 and $4,955,648 as of
November 30, 2010 and May 31, 2010, respectively.
 
 As of
November 30, 2010, other receivables include approximately $3.32 million related
to construction in progress disposal to an unrelated party. On February 28,
2010, we sold construction in progress in Tangshan to an unrelated third party
at a price of approximately $3.8 million. The amount will be due in 4 annual
equal installments starting September 1, 2010. The receivable is unsecured,
interest free, and with fixed repayment dates. Other receivables also include
insurance claims and deposits that are due from unrelated parties, interest
free, unsecured, and with no fixed repayment date, and advances to employees for
business purposes.
 
 The
allowances on the other accounts receivable are recorded when circumstances
indicate collection is doubtful for particular accounts receivable. The
Company provides for allowances on a specific account basis. There is no
provision made for the other receivables at November 30, 2010 and May 31,
2010.
  F-18
 
 7.
              Other
      Payables
 
 Other
payables in current liabilities consist of the following as of November 30, 2010
and May 31, 2010
 
 November 30, 2010
                    
                    
                    May 31, 2010Commission
      payable
                    
                    $
                    2,426,225
                    
                    
                    $
                    1,488,213Payable
      to CRCG (note 1)
                    
                    
                    736,867
                    
                    
                    
                    265,838Staff and
      other companies deposit
                    
                    
                    745,261
                    
                    
                    
                    463,256Total
      other payables
                    
                    $
                    3,908,353
                    
                    
                    $
                    2,217,307
 
 Commission
expense has been included in cost of goods sold.
 
 8.
              Accrued
      Expenses
 
 Accrued
expenses amounted to $500,611 and $491,885 as of November 30, 2010 and May 31,
2010, respectively. The accrued expenses mainly include accrued land lease
expenses, accrued electricity and utility expenses, and accrued
interest.
 
 9.
              Related Party
      Transactions
 
 Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
 
 Total
outstanding amount of related party payable was $681,306 and $47,125 as of
November 30, 2010 and May 31, 2010, respectively. These payables bear no
interest and have no fixed payment terms. Currently, the related party payable
consists of the following:
  F-19
  
 November 30, 2010
                    
                    
                    May 31, 2010Rong
      Yang (Chairman)
                    
                    $
                    681,306
                    
                    
                    $
                    47,125Total
                    
                    $
                    681,306
                    
                    
                    $
                    47,125
 
 Total
outstanding amount of related party receivables was $1,225,696 and $1,286,945 as
of November 30, 2010 and May 31, 2010, respectively. These receivables require
no interest and have no fixed re-payment terms. Currently, the receivables from
related party consist of the following:
 
 November 30, 2010
                    
                    
                    May 31, 2010Yang
      Ming (Chairman Yang Rong’s brother)
                    
                    $
                    161,000
                    (1)
                    
                    $
                    147,817Guiping
      Liao (CEO’s wife)
                    
                    
                    1,044,696
                    (1)
                    
                    
                    1,126,661Xi
      Yang (CEO’s son)
                    
                    
                    20,000
                    (1)
                    
                    
                    12,467$
                    1,225,696
                    
                    
                    $
                    1,286,945
  
 (1)
              The
      purpose of these related party receivables are for business purposes such
      as travel advances and advances to vendors paid through related
      parties.
 
 10.
              Debt
 
 Bank Loan
Payable
 
 On
October 16, 2009, the Company borrowed $1,466,000 from Beijng Bank. The loan is
unsecured, and with an annual interest rate of 5.31%. $1,317,600 of the total
amount is guaranteed by an unrelated party. The due dates are as follows:
$146,400 due on July 16, 2010, $292,800 due on August 16, 2010, $439,200 due on
September 16, 2010, and $439,200 due on October 16, 2010. Interest expenses are
due on the 16th of every third month. As of November 30, 2010 and May 31, 2010,
the loan payable to bank amounted to $0 and $1,317,600, respectively. There is
no interest expense capitalized into construction in progress for the three and
six months ended November 30, 2010 and 2009.
 
 Interest
 
 Total
interest expense and financial charges for the three months ended November 30,
2010 and 2009 on all debt amounted to $51,574 and $3,183, respectively. Total
interest expense and financial charges for the six months ended November 30,
2010 and 2009 on all debt amounted to $103,207 and $3,655, respectively. Total
interest income for the three months ended November 30, 2010 and 2009 amounted
to $450 and $0, respectively. Total interest income for the six months ended
November 30, 2010 and 2009 amounted to $994 and $0, respectively.
  F-20
  Capital
Leases
 
 In July
2009, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,774,368 with an annual interest rate of 6.76%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for three years, with total payments of approximately
$1,965,343. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $22,106 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 19 months from December 2010 to June 2012 are as follows:
 
 Total
      lease payment
                    
                    $
                    1,272,753Less
      imputed interest
                    
                    
                    83,205Total
      capital lease obligation as of November 30, 2010
                    
                    
                    1,189,548Less
      current maturity
                    
                    
                    662,398Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    527,150
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    728,6142012
                    
                    
                    544,1392013
                    
                    
                    -Total
                    
                    $
                    1,272,753
 
 In
November 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $187,392 with an annual interest rate of
5.94%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for three years, with total payments of
approximately $205,050. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $2,811 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 28 months from December 2010 to March 2013 are as
follows:
  F-21
 
 Total lease payment
                    
                    $
                    169,580Less
      imputed interest
                    
                    
                    11,976Total
      capital lease obligation as of November 30, 2010
                    
                    
                    157,604Less
      current maturity
                    
                    
                    67,869Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    89,735
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    76,0192012
                    
                    
                    81,8662013
                    
                    
                    11,695Total
                    
                    $
                    169,580
 
 In
December 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $545,779 with an annual interest rate of
5.94%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for three years, with total payments of
approximately $597,200. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $6,822 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 29 months from December 2010 to April 2013 are as
follows:
 
 Total lease payment
                    
                    $
                    596,078Less
      imputed interest
                    
                    
                    50,017Total
      capital lease obligation as of November 30, 2010
                    
                    
                    546,061Less
      current maturity
                    
                    
                    269,043Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    277,018
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    306,5542012
                    
                    
                    153,2772013
                    
                    
                    136,247Total
                    
                    $
                    596,078
 
 In
December 2009, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $249,466 with an annual interest rate of
5.94%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for three years, with total payments of
approximately $272,920. The title of the equipment will be transferred back to
the Company upon the last payment. A one time processing fee of $3,118 was paid
by the Company related to this lease. The minimum payments for the remaining
lease term of 28 months from December 2010 to March 2013 are as
follows:
  F-22
 
 Total lease payment
                    
                    $
                    256,889Less
      imputed interest
                    
                    
                    20,424Total
      capital lease obligation as of November 30, 2010
                    
                    
                    236,465Less
      current maturity
                    
                    
                    117,003Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    119,462
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    132,3372012
                    
                    
                    93,4142013
                    
                    
                    31,138Total
                    
                    $
                    256,889
  In
January 2010, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $56,979 with an annual interest rate of
6.70%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for one year, with total payments of approximately
$59,067. The title of the equipment will be transferred back to the Company upon
the last payment. A one time processing fee of $814 was paid by the Company
related to this lease. The minimum payments for the remaining lease term of 2
months from December 2010 to January 2011 are as follows:
 
 Total lease payment
                    
                    $
                    12,592Less
      imputed interest
                    
                    
                    584Total
      capital lease obligation as of November 30, 2010
                    
                    
                    12,008Less
      current maturity
                    
                    
                    12,008Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    0
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    12,5922012
                    
                    
                    -2013
                    
                    
                    -Total
                    
                    $
                    12,592
  F-23
  In
February 2010, the Company entered into a capital leaseback arrangement with an
unrelated third party for approximately $14,640 with an annual interest rate of
9.98%. The lease has been accounted for as a capital lease with the same third
party to lease the equipment for three years, with total payments of
approximately $17,034. The title of the equipment will be transferred back to
the Company upon the last payment. The minimum payments for the remaining lease
term of 27 months from December 2010 to February 2013 are as
follows:
 
 Total lease payment
                    
                    $
                    13,090Less
      imputed interest
                    
                    
                    1,409Total
      capital lease obligation as of November 30, 2010
                    
                    
                    11,681Less
      current maturity
                    
                    
                    6,390Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    5,291
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    7,7572012
                    
                    
                    4,3632013
                    
                    
                    970Total
                    
                    $
                    13,090
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $203,789 with an annual interest rate of 5.94%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for three years, with total payments of approximately
$222,991. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $2,547 was paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 28 months from December 2010 to March 2013 are as follows:
 
 Total
      lease payment
                    
                    $
                    203,493Less
      imputed interest
                    
                    
                    15,729Total
      capital lease obligation as of November 30, 2010
                    
                    
                    187,764Less
      current maturity
                    
                    
                    90,177Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    97,587
 
  F-24
  The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    101,7472012
                    
                    
                    76,3102013
                    
                    
                    25,436Total
                    
                    $
                    203,493
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $28,489 with an annual interest rate of 6.70%. The
lease has been accounted for as a capital lease with the same third party to
lease the equipment for one year, with total payments of approximately $29,534.
The title of the equipment will be transferred back to the Company upon the last
payment. A one time processing fee of $407 was paid by the Company related to
this lease. The minimum payments for the remaining lease term of 5 months from
December 2010 to April 2011 are as follows:
 
 Total lease payment
                    
                    $
                    12,633Less
      imputed interest
                    
                    
                    210Total
      capital lease obligation as of November 30, 2010
                    
                    
                    12,423Less
      current maturity
                    
                    
                    12,102Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    321
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    12,6332012
                    
                    
                    -2013
                    
                    
                    -Total
                    
                    $
                    12,633
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $339,642 with an annual interest rate of 11.13%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for two years, with total payments of approximately
$380,403. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $293 will be paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 17 months from December 2010 to April 2012 are as follows:
  F-25
  
 Total lease payment
                    
                    $
                    325,450Less
      imputed interest
                    
                    
                    29,644Total
      capital lease obligation as of November 30, 2010
                    
                    
                    295,806Less
      current maturity
                    
                    
                    216,659Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    79,147
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    244,0872012
                    
                    
                    81,3632013
                    
                    
                    -Total
                    
                    $
                    325,450
 
 In March
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $1,161,830 with an annual interest rate of 11.13%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for two years, with total payments of approximately
$1,301,262. The title of the equipment will be transferred back to the Company
upon the last payment. A one time processing fee of $2,928 will be paid by the
Company related to this lease. The minimum payments for the remaining lease term
of 17 months from December 2010 to April 2012 are as follows:
 
 Total lease payment
                    
                    $
                    1,113,274Less
      imputed interest
                    
                    
                    101,401Total
      capital lease obligation as of November 30, 2010
                    
                    
                    1,011,873Less
      current maturity
                    
                    
                    741,132Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    270,741
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    834,9552012
                    
                    
                    278,3192013
                    
                    
                    -Total
                    
                    $
                    1,113,274
  F-26
  In May
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $28,505 with an annual interest rate of 6.70%. The
lease has been accounted for as a capital lease with the same third party to
lease the equipment for one year, with total payments of approximately $29,549.
The title of the equipment will be transferred back to the Company upon the last
payment. A one time processing fee of $407 was paid by the Company related to
this lease. The minimum payments for the remaining lease term of 5 months from
December 2010 to May 2011 are as follows:
 
 Total lease payment
                    
                    $
                    12,641Less
      imputed interest
                    
                    
                    209Total
      capital lease obligation as of November 30, 2010
                    
                    
                    12,432Less
      current maturity
                    
                    
                    12,432Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    0
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
 
 2011
                    
                    $
                    12,6412012
                    
                    
                    -2013
                    
                    
                    -Total
                    
                    $
                    12,641
 
 In May
2010, the Company entered into a capital leaseback arrangement with an unrelated
third party for approximately $36,673 with an annual interest rate of 11.13%.
The lease has been accounted for as a capital lease with the same third party to
lease the equipment for two years, with total payments of approximately $41,331.
The title of the equipment will be transferred back to the Company upon the last
payment. A one time processing fee of $1,710 was paid by the Company related to
this lease. The minimum payments for the remaining lease term of 17 months from
December 2010 to April 2012 are as follows:
 
 Total
      lease payment
                    
                    $
                    34,227Less
      imputed interest
                    
                    
                    3,117Total
      capital lease obligation as of November 30, 2010
                    
                    
                    31,110Less
      current maturity
                    
                    
                    22,787Capital
      lease obligation – long-term portion as of November 30,
    2010
                    
                    $
                    8,323
 
 The
future lease commitments for the next three years after November 30, 2010 are as
follows:
  F-27
  2011
                    
                    $
                    25,6712012
                    
                    
                    8,5562013
                    
                    
                    -Total
                    
                    $
                    34,227
  The
summary of all lease commitments is as follows:
 
 Total lease payment
                    
                    $
                    4,022,700Less
      imputed interest
                    
                    
                    317,925Total
      capital lease obligation as of November 30, 2010
                    
                    
                    3,704,775Less
      current maturity
                    
                    
                    2,230,000Capital
      lease obligation – long term portion as of November 30,
    2010
                    
                    $
                    1,474,775
 
 The
summary of future lease commitments for the next three years after November 30,
2010 is as follows:
 
 2011
                    
                    $
                    2,495,6072012
                    
                    
                    1,321,6072013
                    
                    
                    205,486Total
                    
                    $
                    4,022,700
 
 11.
              Noncontrolling
      Interest
 
 Noncontrolling
interest consists of other stockholders’ ownership interest in majority-owned
subsidiaries of the Company, which is about 5.48% of the total ownership before
the change of the noncontrolling interest and 5.32% of the total ownership after
the change of the noncontrolling interest (Note 1). As of November 30, 2010 and
May 31, 2010, the balance of noncontrolling interest was $2,644,080 and
$2,046,212, respectively.
  F-28
 
 12.
              Shareholder’s
      Equity
 
 Stock Issuance for
Compensation
 
 On June
1, 2010, the Company hired a consulting company. As compensation, the Company
paid $45,000 and issued 115,000 shares of restricted common stock, and another
100,000 shares of restricted common stock will be issued upon certain terms. The
shares are valued at market price of a total of $316,250 at $2.75 per share. The
cash paid was first recorded as prepaid expenses. The shares issued are recorded
as deferred consulting fee. Both the prepaid expenses and deferred consulting
fee will amortize to expense over the agreement term of the six-month period. As
of November 30, 2010, prepaid expenses for this service has a balance of $0
and deferred consulting fee has a balance of $0.
 
 On
November 18, 2010, the Company hired an investor relationship company. As
compensation, the Company agreed to issue 30,000 shares of restricted common
stock. The shares are valued at market price of a total of $77,700 at $2.59 per
share. As of November 30, 2010, the shares have not been issued and are recorded
as shares to be issued in liabilities.
 
 Options
 
 On
December 17, 2009, we granted to the previous CFO options to purchase 300,000
shares of common stock, with an exercise price of $3.90 per share, which was the
closest stock issuance price at the date of grant. The options will vest over 2
years and expire 3 years after the vesting date or after a termination date
whichever is earlier. All the options were forfeited immediately when the CFO
resigned the position on October 25, 2010.
 
 On
February 12, 2010, we granted to our CEO options to purchase 400,000 shares of
common stock, with an exercise price of $3.90 per share. The options will vest
over 2 years and no option can be exercised after 5 years from the vesting
date.
 
 The
assumptions used in calculating the fair value of the above options granted
using the Black-Scholes option- pricing model are as follows:
 
 Risk-free
      interest rate
                              
                              
                              0.86
                              %Expected
      life of the options
                              1-
      2 yearsExpected
      volatility
                              
                              
                              45
                              %Expected
      dividend yield
                              
                              
                              0
 
 On
February 12, 2010, we granted three independent directors each, options to
purchase 10,000 shares of common stock, with an exercise price of $3.90 per
share. The options will vest over 1 year and no option can be exercised after 3
years from the vesting date.
  F-29
  On March
22, 2010, we granted one independent director options to purchase 10,000 shares
of common stock, with an exercise price of $3.90 per share. The options will
vest over 1 year and no option can be exercised after 3 years from the vesting
date.
 
 The
assumptions used in calculating the fair value of the above options granted
using the Black-Scholes option- pricing model are as follows:
 
 Risk-free interest rate
                  
                  
                  0.35
                  %Expected
      life of the options
                  
                  1-
      2 yearsExpected
      volatility
                  
                  
                  45
                  %Expected
      dividend yield
                  
                  
                  0
 
 On
October 25, 2010, we granted to our newly appointed CFO options to purchase
150,000 shares of common stock, with an exercise price of $3.90 per share. The
options will vest over 1 year and expire 3 years after the vesting date or after
a termination date whichever is earlier.
 
 The
assumptions used in calculating the fair value of the above option granted using
the Black-Scholes option- pricing model are as follows:
 
 Risk-free
      interest rate
                  
                  
                  0.22
                  %Expected
      life of the options
                  
                  1-
      2 yearsExpected
      volatility
                  
                  
                  81
                  %Expected
      dividend yield
                  
                  
                  0
 
 Following
is a summary of the stock option activity for the three months ended
November 30, 2010:
 
 Options
                      outstanding
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding,
      May 31, 2010
                    
                    
                    740,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00Granted
                    
                    
                    150,000
                    
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    300,000
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      November 30, 2010
                    
                    
                    590,000
                    
                    
                    $
                    3.90
                    
                    
                    $
                    0.00
  Following
is a summary of the status of options outstanding at November 30,
2010:
  F-30
 
 Outstanding Options
                  
                  Exercisable
      OptionsExercise Price
                  
                  Number
                  
                  Average
                    Remaining
                    Contractual
                    Life
                  
                  Average
                    Exercise
                    Price
                  
                  Number
                  
                  Average
                    Exercise Price$
                  3.90
                  
                  590,000
                  
                  1.06
                  
                  $
                  3.90
                  
                  -
                  
                  $
                  3.90
 
 Warrants
 
 On
October 16, 2009, in connection with the Share Purchase Agreement in October
2009, the Company issued 153,846 warrants to Hunter Wise Financial Group, LLC,
the Placement Agent. The warrants carry an exercise price of $3.90 and a 5-year
term. The Warrants contain standard adjustment provisions upon stock dividend,
stock split, stock combination, recapitalization, and a change of control
transaction.
 
 On March
22, 2010, in connection with the Share Purchase Agreement in March 2010, the
Company issued 69,231 warrants to various parties as part of placement cost. The
warrants carry an exercise price of $3.90 and a 5-year term. The Warrants
contain standard adjustment provisions upon stock dividend, stock split, stock
combination, recapitalization, and a change of control transaction.
 
 On March
22, 2010, in connection with the Share Purchase Agreement in March 2010, the
Company issued 1,281,083 warrants to October 2009 investors. The warrants carry
an exercise price of $6.00 and a 3-year term. The Warrants contain standard
adjustment provisions upon stock dividend, stock split, stock combination,
recapitalization, and a change of control transaction.
 
 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.
  F-31
 
 Warrants
                                Outstanding
                              
                              
                              Warrants
                                Exercisable
                              
                              
                              Weighted
                                Average
                                Exercise
                                Price
                              
                              
                              Average
                                Remaining
                                Contractual
                                LifeOutstanding,
      May 31, 2010
                              
                              
                              1,504,160
                              
                              
                              
                              1,504,160
                              
                              
                              $
                              5.69
                              
                              
                              
                              3.05Granted
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Forfeited
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Exercised
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Outstanding,
      November 30, 2010
                              
                              
                              1,504,160
                              
                              
                              
                              1,504,160
                              
                              
                              $
                              5.69
                              
                              
                              
                              2.55
 
 13.
              Employee
      Welfare Plan
 
 The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes contributions to an employee welfare
plan. The total expense for the above plan was $33,417 and $43,488 for the
three months ended November 30, 2010 and 2009, respectively. The total expense
for the above plan was $35,558 and $48,161 for the six months ended November 30,
2010 and 2009, respectively.
 
 14.
              Income
      Tax
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the six months ended November 30, 2010 and 2009:
 
 2010
                    
                    
                    2009U.S.
      Statutory rates
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %Foreign
      income not recognized in USA
                    
                    
                    (34.0
                    )
                    
                    
                    (34.0
                    )China
      income taxes
                    
                    
                    25.0
                    
                    
                    
                    0China
      income tax exemption
                    
                    
                    19.1
                    
                    
                    
                    0Total
      provision for income taxes
                    
                    
                    5.9
                    %
                    
                    
                    0
                    %
 
 USA
 
 The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Group has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of November 30, 2010 and May 31, 2010.
  F-32
  Hong
Kong
 
 As the
Group has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of November 30, 2010 and May 31,
2010.
 
 People’s Republic of China
(PRC)
 
 Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in
the statutory financial statements after appropriate tax
adjustments.
 
 Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. The exemption of income tax to the Company will last until
December 31, 2010, and from year 2011, the Company will be subject to an income
tax at a standard rate of 25%.
 
 BFCM has
an accumulated operating loss, thus there is no income tax expense for BFCM. The
Company has not recorded deferred taxes, as valuation allowances were provided
because all significant differences in tax basis and financial statement amounts
are permanent differences.
 
 For the six months ended November
      30,2010
                    
                    
                    2009Income
      tax expensesCurrent
      tax
                    
                    $
                    -
                    
                    
                    $
                    -Change
      in deferred tax assets
                    
                    
                    128,645
                    
                    
                    
                    3,196Change
      in valuation allowance
                    
                    
                    (128,645
                    )
                    
                    
                    (3,196
                    )Total
                    
                    $
                    -
                    
                    
                    $
                    -
 
 Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of November 30, 2010, the Company has
accrued tax payable of $1,032,164 for income tax expenses for
Hongruida.
 
 The
estimated tax savings due to the tax exemption for the three months ended
November 30, 2010 and 2009 amounted to approximately $1,492,075 and $791,525,
respectively. The estimated tax savings due to the tax exemption for the six
months ended November 30, 2010 and 2009 amounted to approximately $2,800,486 and
$1,298,041, respectively. The net effect on earnings per share if the income tax
had been applied would decrease the basic and diluted earnings per share for the
three months ended November 30, 2010 by $0.12. 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 six months ended November 30, 2010 by $0.22. The net
effect on earnings per share if the income tax had been applied would decrease
the basic and diluted earnings per share for the three months ended November 30,
2009 by $0.12. 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 six
months ended November 30, 2009 by $0.32.
  F-33
 
 15.
              Other Income
      (Expenses)
 
 Other
income was $8,482 and $18,666 for the three and six months ended November 30,
2010, respectively. It consists of income from selling recycled paper and
vehicle accident compensation. Other expenses were $8,877 and $8,877 for the
three and six months ended November 30, 2010, respectively. Other expenses are
net losses from property, plant and equipment disposal.
 
 Other
income was $4,996 and $4,996 for the three and six months ended November 30,
2009, respectively. It mainly consists of fines from employees. Other
expenses were $0 and $0 for the three and six months ended November 30, 2009,
respectively.
 
 16.
              Concentration
      of Credit Risks and
Uncertainties
 
 Concentration
of credit risk exists when changes in economic, industry or geographic factors
similarly affect groups of counter parties whose aggregate credit exposure is
material in relation to the Company’s total credit exposure.
 
 Three
major customers, China Railway Construction Group, China Construction
Group, and Jiangxi Jinggangshan Road and Bridge construction Company accounted
for 16%, 14% and 11% of the Company’s total sales for the three months
ended November 30, 2010, respectively. Three major customers, China Railway
Construction Group, Jiangxi Jinggangshan Road and Bridge construction Company,
and China Construction Group accounted for 17%, 16% and 10% of the
Company’s total sales for the six months ended November 30, 2010,
respectively.
 
 Four
major customers, Mingsheng Group, China Construction Group, Guangzhou
Tianli Construction Group, and Beijing Sanyuan Construction Inc. accounted
for 14%, 14%, 11% and 11% of the Company’s total sales for the three months
ended November 30, 2009, respectively. Three major customers, Mingsheng
Group, China Construction Group, and Beijing Sanyuan Construction Group
accounted for 11%, 11% and 11% of the Company’s total sales for the six
months ended November 30, 2009, respectively.
  F-34
  Three
customers, China Construction Group, China Railway Construction Group, and
Guangzhou Tianli Construction Group accounted for 11%, 11%, and 10% of the
Company’s accounts receivable balance at November 30, 2010. Two customers, China
Railway Construction Group, and Guangzhou Tianli Construction Group, accounted
for 26% and 10% of the Company’s accounts receivable balance at May 31,
2010.
 
 Two major
vendors, Tangshan Jidong Cement Company, and Hekai Stone and Sand Company
accounted for 19% and 13% of the Company’s total inventory purchases for the
three months ended November 30, 2010. Two major vendors, Tangshan Jidong Cement
Company and Hekai Stone and Sand Company accounted for accounted for 12% and 12%
of the Company’s total inventory purchases for the six months ended November 30,
2010.
 
 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. One major vendor accounted for 11% of the
Company’s accounts payable at May 31, 2010.
 
 No major
vendor accounted for over 10% of the Company’s accounts payable at November 30,
2010. No vendor accounted for more than 10% of the Company’s accounts payable at
November 30, 2009.
 
 The
Company’s exposure to foreign currency exchange rate risk primarily relates to
cash and cash equivalents and short-term investments, denominated in the U.S.
dollar. Any significant revaluation of RMB may materially and adversely affect
the cash flows, revenues, earnings and financial position of the
Company.
 
 Contingencies
 
 The
Company has not, historically, carried any property or casualty insurance. No
amounts have been accrued for any liability that could arise from the lack of
insurance. Management feels the chances of such an obligation arising are
remote.
 
 Deposits
in banks in the PRC are not insured by any government entity or agency, and are
consequently exposed to risk of loss. Management believes the probability of a
bank failure, causing loss to the Company, is remote.
  F-35
  Operating Lease Commitment
 
 As of
November 30, 2010, the Company was committed to minimum rentals for the leased
land under long-term non-cancellable operating leases as follows:
 
 Twelve
      Months Ended November 30,2011
                    
                    $
                    267,8902012
                    
                    
                    144,7742013
                    
                    
                    109,7192014
                    
                    
                    109,7192015
                    
                    
                    109,719Thereafter
                    
                    
                    652,678Total:
                    
                    $
                    1,394,499
 
 We
currently have a ten-year lease with an annual payment of approximately $48,000,
from March 1, 2008 to February 28, 2018, for our Beijing production base. We
have built our offices and manufacturing facilities on this site. We also lease
land for our Xi’an production facility. The annual payment is approximately
$59,000. We also leased two offices in Beijing as our headquarter office. One
office lease is from July 11, 2010 to July 10, 2012, with an annual payment of
approximately $48,000. One office lease is from December 15, 2009 to December
14, 2011, with an annual payment of approximately $106,000.
 
 Operating
lease expenses amounted to $66,654 and $12,100 for the three months ended
November 30, 2010 and 2009, respectively. Operating lease expenses amounted to
$126,888 and $24,192 for the six months ended November 30, 2010 and 2009,
respectively.
 
 17.
              Subsequent
      events
 
 There are
no material subsequent events. The Company has evaluated subsequent events from
the balance sheet date through the date the report is issued.
  F-36




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





SPECIAL
NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS





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





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





Overview





China
Infrastructure Construction Corporation (the “Company”, “China Infrastructure”,
“CHNC”, “We”, “Our”) was organized in Colorado on February 28, 2003. The Company
through its subsidiaries in Hong Kong and the People’s Republic of China (“PRC”
or “China”), engages in production of ready-mixed concrete for developers and
the construction industry in the PRC.





Beijing
Concrete currently has four production facilities. One facility is located in
the Nanhaizi area, on the west side of the Yizhuang economic development zone in
Beijing, one is in Shidu, a suburban area of Beijing, one is in Xi’an West New
High-tech Zone, and another one is located at the Tangshan harbor, about two
hundred kilometers from Beijing. The plant located in Xi’an was put into
operation at the end of March 2010.


3




Results
of Operations





Three
months ended November 30, 2010 Compared to Three months ended November 30,
2009





Net
Revenue





Net
Revenue for the three months ended November 30, 2010 was $25,930,120 as compared
to $19,155,132 for the same period last year, an increase of $6,774,988, or
approximately 35.37%. The increase in net revenue is mainly attributable to our
geographic expansion. We had set up new factories in Xi’an and Shidu in 2010.
The sales volume of concrete products increased by approximately 31.31% for the
three months ended November 30, 2010, as compared to the same period last
year. The increase in net revenue is also attributable to technical
services we provided to a Tianjin concrete producer since late March 2010, which
is a new addition to our main business. These services generated
approximately $0.47 million in our net revenue for the three months ended
November 30, 2010.





Costs of Goods
Sold





Cost of
goods sold for the three months ended November 30, 2010 was $18,703,068 as
compared to $14,655,122 for the same period last year, an increase of $4,047,946
or approximately 27.62%. The increase in cost of goods sold is mainly because of
our increased sales volume.





Gross
Profit





Gross
profit for the three months ended November 30, 2010 was $7,227,052, an increase
of $2,727,042 or approximately 60.60%, as compared to $4,500,010 for the same
period last year. The increase in gross profit is attributable to the increase
of sales due to geographic development of our business, our business expansion
into technical services sector, and vertical integration with one sand and stone
vendor.





Gross Profit
Margin




Gross
profit margin for the three months ended November 30, 2010 was 27.87%, compared
to 23.49% for the same period last year. The increase of the gross profit margin
is mainly because technical services provided a higher margin and our
merger with one sand and stone company lowered the cost of goods
sold.





General and administrative
Expenses





General
and administrative expenses for the three months ended November 30, 2010 were
$1,851,878, as compared to $28,794,545 for the same period last year, a decrease
of $26,942,667, or approximately 93.57%. The decrease was primarily due to the
$27,422,242 one time non-cash compensation expenses included in the general and
administrative expenses for the three months ended November 30,
2009.


4




Operating Income
(Loss)





Our
operating income for the three months ended November 30, 2010 was $5,375,174, an
increase of $29,669,709 as compared to operating loss of $24,294,535 for the
same period last year. The increased income was due to the increased sales
revenue as a result of our business expansion geographically, the increased
revenue of the same batch plants as well as our transition towards the business
of a higher profit margin. In addition, the Company in the comparable period in
2009 carried a loss because the one-time non-cash compensation expenses of
$27,422,242 were included in the general and administrative expenses for the
three months ended November 30, 2009.





Income
Taxes





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the three months ended November 30, 2010 and 2009:




2010
                  
                  
                  2009U.S.
      Statutory rates
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %Foreign
      income not recognized in USA
                  
                  
                  (34.0
                  )
                  
                  
                  (34.0
                  )China
      income taxes
                  
                  
                  25.0
                  
                  
                  
                  0China
      income tax exemption
                  
                  
                  21.5
                  
                  
                  
                  0Total
      provision for income taxes
                  
                  
                  3.5
                  %
                  
                  
                  0
                  %





USA





The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Company has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of November 30, 2010 and May 31, 2010.





Hong
Kong





As the
Company has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of November 30, 2010 and May 31,
2010.





5




People’s Republic of China
(PRC)





Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in
the statutory financial statements after appropriate tax
adjustments.




Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. The exemption of income tax to the Company will last until
December 31, 2010, and starting from year 2011, the Company will be subject to
an income tax at a standard rate of 25%.





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





For the three months ended November
      302010
                    
                    
                    2009Income
      tax expensesCurrent
      tax
                    
                    $
                    -
                    
                    
                    $
                    -Change
      in deferred tax assets
                    
                    
                    88,696
                    
                    
                    
                    3,196Change
      in valuation allowance
                    
                    
                    (88,696
                    )
                    
                    
                    (3,196
                    )Total
                    
                    $
                    -
                    
                    
                    $
                    -





Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of November 30, 2010, the Company has
accrued tax payable of $1,032,164 for income tax expenses for
Hongruida.





The
estimated tax savings due to the tax exemption for the three months ended
November 30, 2010 and 2009 amounted to approximately $1,492,075 and $791,525,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease the basic and diluted earnings per share for the three
months ended November 30, 2010 by $0.12. The net effect on earnings per share if
the income tax had been applied would decrease the basic and diluted earnings
per share for the three months ended November 30, 2009 by $0.12.





Net Income (Loss)
Attributable To China Infrastructure Construction
Corporation





Net
income was $4,878,251 for the three months ended November 30, 2010, an increase
of $29,344,639 as compared to net loss of $24,466,388 for the same period last
year. The increase was primarily due to the increased sales as a result of our
business expansion geographically and towards the business of a higher profit
margin. In addition, the Company carried a loss in the comparable period in 2009
because the one-time non-cash compensation expenses of $27,422,242 were included
in the general, and administrative expenses for the three months ended November
30, 2009.





6




Six
months ended November 30, 2010 Compared to Six months ended November 30,
2009





Net
Revenue




Net
Revenue for the six months ended November 30, 2010 was $47,117,650 as compared
to $31,410,860 for the same period last year, an increase of $15,706,790, or
approximately 50.00%. The increase in net revenue is mainly attributable to our
geographic expansion. We had set up new factories in Xi’an and Shidu in 2010.
The sales volume of concrete products increased by approximately 51.18% for the
six months ended November 30, 2010 as compared to the same period last
year. The increase in net revenue is also attributable to technical
services we provided to a Tianjin concrete producer since late March 2010, which
is a new addition to our main business. These services generated
approximately $1.70 million in net revenue for the six months ended November 30,
2010.





Costs of Goods
Sold





Cost of
goods sold for the six months ended November 30, 2010 was $33,757,085 as
compared to $24,504,167 for the same period last year, an increase of
$9,252,918, or approximately 37.76%. The increase in cost of goods sold is
mainly because of our increased sales volume.





Gross
Profit





Gross
profit for the six months ended November 30, 2010 was $13,360,565, an increase
of $6,453,872 or approximately 93.44% as compared to $6,906,693 for the same
period last year. The increase in gross profit is attributable to the increase
of sales due to geographic development of our business, our business expansion
into technical services sector and our vertical integration with one sand and
stone vendor.





Gross Profit
Margin




Gross
profit margin for the six months ended November 30, 2010 was 28.36%, compared to
21.99% for the same period last year. The increase of the gross profit margin is
mainly because technical services provided a higher margin and our merger with
one sand and stone supplier lowered the cost of goods sold.





General and administrative
Expenses





General
and administrative expenses for the six months ended November 30, 2010 were
$3,294,188, as compared to $29,183,485 for the same period last year, a decrease
of $25,889,297, or approximately 88.71%. The decrease was mainly because the
one-time non-cash compensation expenses of $27,422,242 were included in the
general and administrative expenses for the six months ended November 30,
2009.





Operating Income
(Loss)





Our
operating income for the six months ended November 30, 2010 was $10,066,377 an
increase of $32,343,169, as compared to operating loss of $22,276,792 for the
same period last year. The increased income was due to the increased sales
revenue as a result of our business expansion geographically and our transition
towards the business with higher profit margin. In addition, the one-time
non-cash compensation expenses of $27,422,242 were included in the general and
administrative expenses for the six months ended November 30,
2009.


7




Income
Taxes





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the six months ended November 30, 2010 and 2009:





2010
                  
                  
                  2009U.S.
      Statutory rates
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %Foreign
      income not recognized in USA
                  
                  
                  (34.0
                  )
                  
                  
                  (34.0
                  )China
      income taxes
                  
                  
                  25.0
                  
                  
                  
                  0China
      income tax exemption
                  
                  
                  19.1
                  
                  
                  
                  0Total
      provision for income taxes
                  
                  
                  5.9
                  %
                  
                  
                  0
                  %





USA





The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in, or derived from, the tax jurisdiction in which they operate.
As the Company has no income generated in the United States, there was no tax
expense or tax liability due to the Internal Revenue Service of the United
States as of November 30, 2010 and May 31, 2010.





Hong
Kong





As the
Company has no income generated in Hong Kong, there was no tax expense or tax
liability due to the tax rule of Hong Kong as of November 30, 2010 and May 31,
2010.





People’s Republic of China
(PRC)





Under the
Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to
an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in
the statutory financial statements after appropriate tax
adjustments.




Beijing
Concrete is subject to a special tax exemption approved by the PRC tax
department. The exemption of income tax to the Company will last until
December 31, 2010, and starting from year 2011, the Company will be subject to
an income tax at a standard rate of 25%.


8


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





For the six months ended November
      302010
                
                
                2009Income
      tax expensesCurrent
      tax
                
                $
                -
                
                
                $
                -Change
      in deferred tax assets
                
                
                128,645
                
                
                
                3,196Change
      in valuation allowance
                
                
                (128,645
                )
                
                
                (3,196
                )Total
                
                $
                -
                
                
                $
                -





Hongruida
is subject to a 25% income tax rate. According to Chinese tax law, the income
tax will be calculated at the year end. As of November 30, 2010, the Company has
accrued tax payable of $1,032,164 for income tax expenses for
Hongruida.





The
estimated tax savings due to the tax exemption for the six months ended November
30, 2010 and 2009 amounted to approximately $2,800,486 and
$1,298,041,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
six months ended November 30, 2010 by $0.22. 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 six months ended November 30, 2009 by
$0.32.





Net Income (Loss)
Attributable To China Infrastructure Construction
Corporation





Net
income was $8,854,700 for the six months ended November 30, 2010, an increase of
$ 31,414,285 as
compared to net loss of $22,559,585 for the same period last year. The increase
was primarily due to the increased sales as a result of our business expansion
geographically and our transition towards business of a higher profit margin. In
addition, the one-time non-cash compensation expenses of $27,422,242 were
included in the general and administrative expenses for the six months ended
November 30, 2009.





Liquidity
and Capital Resources





As of
November 30, 2010, we had cash and cash equivalents of $803,470. We have
historically funded our working capital needs from operations, advance payments
from customers, bank borrowings, capital from shareholders. Due to the
competitive environment, our raw materials suppliers are willing to accept our
accounts receivable and credit the Company for the payments to the accounts
payable. We usually enter into assignment agreements with our suppliers, whereby
the suppliers shall be entitled to the amounts due and owed by our customer and
the Company shall assist the suppliers on collection. Under these assignment
agreements, the Company has the obligation of notifying the customers about the
assignment, and in any event that the suppliers are not able to collect such
accounts receivable due to a fault other than the suppliers,’ the Company shall
still have the obligation to pay off the suppliers. In the concrete industry,
the raw material suppliers, with their locality and good relationship with local
construction companies who often become our customers, are in a better position
to collect the receivable from our customers. All assigned accounts receivable
to our suppliers were collected as of the end of our second fiscal quarter of
2011. In the six months ended November 30, 2010, we paid approximately
$17,672,576 or 64.99% of the raw materials with our accounts receivable. 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, the timing of accounts receivable collections and the
acceptance of our accounts receivable as payment instrument by raw material
suppliers.




9





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





Six months Ended
                  November 302010
                
                
                2009Unaudited
                
                
                UnauditedNet
      cash provided by (used in) operating activities
                
                $
                1,293,846
                
                
                $
                (3,661,951
                )Net
      cash (used in) investing activities
                
                
                (360,446
                )
                
                
                (918,285
                )Net
      cash provided by (used in) financing activities
                
                
                (1,253,339
                )
                
                
                10,151,014Effect
      of exchange rate change on cash and cash equivalents
                
                
                20,530
                
                
                
                10,510(Decrease)
      Increase in cash and cash equivalents
                
                
                (299,409
                )
                
                
                5,581,288Cash
      and cash equivalents, beginning balance
                
                
                1,102,879
                
                
                
                921,841Cash
      and cash equivalents, ending balance
                
                
                803,470
                
                
                
                6,503,129





Operating
Activities





Net cash
provided by operating activities was $1,293,846 for the six months ended
November 30, 2010, an increase of $4,955,797 as compared to $3,661,951 net cash
used in operating activities for the same period last year. The increase of net
cash provided by operating activities was mainly due to the increase of net
income and tax payable offset by prepayment. Accounts receivable increased
as well as a result 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,
2010, trade accounts receivable with aging over twelve months old amounted to
$7,294,414, accounting for 10.92% of total trade accounts
receivable.





Investing
Activities





Net cash
used in investing activities was $360,446 for the six months ended November
30, 2010, a decrease of $557,839 as compared to $918,285 used for the same
period last year. The decrease was primarily due to the decreased investments of
property, plant, and equipment and decreased payment to related party receivable
and the proceeds from the collection of related-party receivable and from the
sale of property, plant, and equipment.





Financing
Activities





Net cash
used in financing activities was $1,253,339for the six
months ended November 30, 2010, compared to $10,151,014 net cash provided by
financing activities for the same period last year. In addition to the cash from
the proceeds of the sale of the Company’s Common Stock in October 2009, the
decrease of net cash provided by financing activities was also attributable to
the repayment of the Company’s bank loans that matured during the six months
ended November 30, 2010 and the increased payment to our capital lease
obligations.


10





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.





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.


11





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
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





Effective
October 25, 2010, Ms. Yiru Shi resigned as the Chief Financial Officer of the
Company. Ms. Shi’s resignation was not the result of any disagreement with the
Company on any matter relating to the Company’s operations, policies or
practices.


12





Effective
October 25, 2010, Mr. John Bai was appointed as acting Chief Financial Officer
of the Company for a trial period of three months.





Except
for the above, there was no other change in the Company's internal control over
financial reporting during the period ended November 30, 2010, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.





PART
II-OTHER INFORMATION





ITEM
6.   EXHIBITS.





(a) The
following exhibits are filed herewith:




31.1
                Certifications
      by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
                Certifications
      by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
                Certifications
      by the Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.




13


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
      YangChief
      Executive Officer, Director(principal
      executive
officer)





By:
                  /s/ John BaiJohn
      BaiChief
      Financial Officer(principal
      financial and accounting
officer)




Date:
 January 14, 2011


14