SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the quarterly period ended December 31, 2009





OR





 ̈
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT





For
the transition period from ______ to __________





COMMISSION
FILE NUMBER: 001-34150





CHINA INFRASTRUCTURE
INVESTMENT CORPORATION


(Exact
name of registrant as specified in its charter)





Nevada
                
                88-0484183(State
      or other jurisdiction of incorporation or
                  organization)
                
                (IRS
      Employer Identification
No.)





Room
D, 2F, Building 12, Xinxin Huayuan, Jinshui Road, Zhengzhou, Henan
Province


The People’s Republic of
China


(Address
of principal executive offices)





(011)
86-375-2754377


(Registrant’s
Telephone Number, Including Area Code)





(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)





Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and (2)has been
subject to such filing requirements for the past 90 days. Yes x 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 filer.
 See definition of “accelerated filer” and “large accelerated filer” in
Rule 12b-2 of the Exchange Act (Check one):




Large
Accelerated Filer  ̈ Accelerated Filer
 ̈ Non-Accelerated
Filer  ̈ 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   ̈ No x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  As of February 10, 2010, the registrant
had 80,000,000 shares of common stock, par value $0.001 per share, issued and
outstanding.





TABLE
OF CONTENTS





PART
      I FINANCIAL INFORMATION
                
                3ITEM
      1. FINANCIAL STATEMENTS
                
                3ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                
                4ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                
                14ITEM
      4. CONTROLS AND PROCEDURES
                
                14PART
      II OTHER INFORMATION
                
                15ITEM
      1. LEGAL PROCEEDINGS
                
                15ITEM
      1A. RISK FACTORS
                
                15ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                
                15ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                
                15ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
                
                15ITEM
      5. OTHER INFORMATION
                
                15ITEM
      6. EXHIBITS
                
                15SIGNATURES
                
                19





2





PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS





CHINA
INFRASTRUCTURE INVESTMENT CORPORATION


AND
SUBSIDIARIES





FINANCIAL
STATEMENTS


TABLE
OF CONTENTS




PageCONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 (UNAUDITED) AND JUNE
      30, 2009
                        
                        F-1CONDENSED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS
      ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)
                        
                        F-3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS
      ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)
                        
                        F-4NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX
      MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)
                        
                        F-5


3




CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 ASSETSDecember
      31,
                        2009
                      
                      
                      June
      30,
                        2009(Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                      
                      $
                      1,159,304
                      
                      
                      $
                      1,614,260Restricted
      cash
                      
                      
                      -
                      
                      
                      
                      3,550,761Notes
      receivable, net
                      
                      
                      107,511
                      
                      
                      
                      104,676Accounts
      receivable
                      
                      
                      516,957
                      
                      
                      
                      1,089,546Other
      receivables
                      
                      
                      143,210
                      
                      
                      
                      148,934Notes
      receivable from related parties
                      
                      
                      76,565,838
                      
                      
                      
                      151,332,301Advance
      to a related party
                      
                      
                      -
                      
                      
                      
                      32,680,154Other
      current assets
                      
                      
                      85,327
                      
                      
                      
                      940,712Total current
    assets
                      
                      
                      78,578,147
                      
                      
                      
                      191,461,344Notes
      receivable from a related party
                      
                      
                      76,963,068
                      
                      
                      
                      -Advance
      to a related party
                      
                      
                      32,716,481
                      
                      
                      
                      -Toll
      road infrastructures, net
                      
                      
                      434,275,724
                      
                      
                      
                      437,178,980Plant
      and equipment, net
                      
                      
                      15,447,347
                      
                      
                      
                      15,662,302Land
      use rights, net
                      
                      
                      46,318,137
                      
                      
                      
                      47,264,452Long-term
      investment
                      
                      
                      1,579,594
                      
                      
                      
                      1,577,840Deferred
      taxes
                      
                      
                      3,990,151
                      
                      
                      
                      4,725,650Total long-term
      assets
                      
                      
                      611,290,502
                      
                      
                      
                      506,409,224TOTAL
      ASSETS
                      
                      $
                      689,868,649
                      
                      
                      $
                      697,870,568
 
 See
accompanying notes to the condensed consolidated financial
statements.
  F-1
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 LIABILITIES AND SHAREHOLDERS’
      EQUITYDecember
      31,
                      2009
                    
                    
                    June
      30,
                      2009(Unaudited)CURRENT
      LIABILITIESOther
      payables and accrued liabilities
                    
                    $
                    1,814,528
                    
                    
                    $
                    2,191,314Short-term
      bank loans
                    
                    
                    7,312,935
                    
                    
                    
                    7,304,815Current
      portion of long-term bank loans
                    
                    
                    30,240,449
                    
                    
                    
                    27,767,064Notes
      payable
                    
                    
                    438,776
                    
                    
                    
                    3,521,542Payable
      to contractors
                    
                    
                    20,828,652
                    
                    
                    
                    22,090,622Deferred
      taxes
                    
                    
                    8,441,335
                    
                    
                    
                    7,852,128Deferred
      revenue, current
                    
                    
                    82,047
                    
                    
                    
                    78,803Amount
      due to related party
                    
                    
                    731,294
                    
                    
                    
                    -Other
      current liabilities
                    
                    
                    163,327
                    
                    
                    
                    163,130Total
      current liabilities
                    
                    
                    70,053,343
                    
                    
                    
                    70,969,418LONG-TERM
      LIABILITIESLong-term
      bank loans
                    
                    
                    428,385,889
                    
                    
                    
                    440,585,554Deferred
      revenue, long-term
                    
                    
                    6,466,829
                    
                    
                    
                    6,502,203Total
      long-term liabilities
                    
                    
                    434,852,718
                    
                    
                    
                    447,087,757TOTAL
      LIABILITIES
                    
                    
                    504,906,061
                    
                    
                    
                    518,057,175CONTINGENCIESSHAREHOLDERS’
      EQUITYCommon
      stock, $.001 par value, 150,000,000 shares authorized, 80,000,000 shares
      issued and outstanding as of December 31, 2009 and June 30, 2009,
      respectively
                    
                    
                    80,000
                    
                    
                    
                    80,000Additional
      paid-in capital
                    
                    
                    141,394,003
                    
                    
                    
                    141,152,164Accumulated
      other comprehensive income
                    
                    
                    27,717,001
                    
                    
                    
                    27,516,099Retained
      earnings, (restricted portion was $43,234 at December 31, 2009 and June
      30, 2009)
                    
                    
                    15,771,584
                    
                    
                    
                    11,065,130Total
      Shareholders’ Equity
                    
                    
                    184,962,588
                    
                    
                    
                    179,813,393TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                    
                    $
                    689,868,649
                    
                    
                    $
                    697,870,568
 
 See
accompanying notes to the condensed consolidated financial
statements.
  F-2
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (UNAUDITED)
 
 Three
      Months Ended December 31,
                                        
                                        
                                        Six
      Months Ended December 31,2009
                                        
                                        
                                        2008
                                        
                                        
                                        2009
                                        
                                        
                                        2008REVENUES
                                        
                                        $
                                        11,606,494
                                        
                                        
                                        $
                                        12,101,788
                                        
                                        
                                        $
                                        25,185,736
                                        
                                        
                                        $
                                        27,502,808OPERATING
      COSTS
                                        
                                        
                                        1,309,615
                                        
                                        
                                        
                                        2,466,673
                                        
                                        
                                        
                                        2,087,778
                                        
                                        
                                        
                                        3,671,134DEPRECIATION
      AND AMORTIZATION
                                        
                                        
                                        2,101,442
                                        
                                        
                                        
                                        1,792,717
                                        
                                        
                                        
                                        4,489,220
                                        
                                        
                                        
                                        3,892,036GROSS
      PROFIT
                                        
                                        
                                        8,195,437
                                        
                                        
                                        
                                        7,842,398
                                        
                                        
                                        
                                        18,608,738
                                        
                                        
                                        
                                        19,939,638General
      and administrative expenses
                                        
                                        
                                        1,111,695
                                        
                                        
                                        
                                        1,501,042
                                        
                                        
                                        
                                        2,480,214
                                        
                                        
                                        
                                        2,842,944INCOME
      FROM OPERATIONS
                                        
                                        
                                        7,083,742
                                        
                                        
                                        
                                        6,341,356
                                        
                                        
                                        
                                        16,128,524
                                        
                                        
                                        
                                        17,096,694OTHER
      INCOME (EXPENSES)Interest
      expense
                                        
                                        
                                        (7,075,935
                                        )
                                        
                                        
                                        (8,918,410
                                        )
                                        
                                        
                                        (14,542,137
                                        )
                                        
                                        
                                        (18,181,363
                                        )Interest
      income
                                        
                                        
                                        2,143,809
                                        
                                        
                                        
                                        2,768,605
                                        
                                        
                                        
                                        4,269,607
                                        
                                        
                                        
                                        5,538,004Other
      income, net
                                        
                                        
                                        216,917
                                        
                                        
                                        
                                        185,226
                                        
                                        
                                        
                                        499,891
                                        
                                        
                                        
                                        440,838INCOME
      FROM OPERATIONS BEFORE INCOME TAXES
                                        
                                        
                                        2,368,533
                                        
                                        
                                        
                                        376,777
                                        
                                        
                                        
                                        6,355,884
                                        
                                        
                                        
                                        4,894,173INCOME
      TAX EXPENSE
                                        
                                        
                                        (597,088
                                        )
                                        
                                        
                                        (94,194
                                        )
                                        
                                        
                                        (1,649,431
                                        )
                                        
                                        
                                        (1,301,072
                                        )NET
      INCOME
                                        
                                        
                                        1,771,445
                                        
                                        
                                        
                                        282,583
                                        
                                        
                                        
                                        4,706,454
                                        
                                        
                                        
                                        3,593,101OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain
                                        
                                        
                                        9,908
                                        
                                        
                                        
                                        29,394
                                        
                                        
                                        
                                        200,902
                                        
                                        
                                        
                                        458,246OTHER
      COMPREHENSIVE INCOME
                                        
                                        
                                        9,908
                                        
                                        
                                        
                                        29,394
                                        
                                        
                                        
                                        200,902
                                        
                                        
                                        
                                        458,246COMPREHENSIVE
      INCOME
                                        
                                        $
                                        1,781,353
                                        
                                        
                                        $
                                        311,977
                                        
                                        
                                        $
                                        4,907,356
                                        
                                        
                                        $
                                        4,051,347WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
                                        
                                        
                                        80,000,000
                                        
                                        
                                        
                                        80,000,000
                                        
                                        
                                        
                                        80,000,000
                                        
                                        
                                        
                                        80,000,000NET
      INCOME PER COMMON SHARE, BASIC AND DILUTED
                                        
                                        $
                                        0.02
                                        
                                        
                                        $
                                        0.00
                                        
                                        
                                        $
                                        0.06
                                        
                                        
                                        $
                                        0.04
 
 See
accompanying notes to the condensed consolidated financial
statements.
  F-3
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
  Six
      Months Ended December 31,2009
                        
                        
                        2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                        
                        $
                        4,706,454
                        
                        
                        $
                        3,593,101Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                        
                        
                        4,800,637
                        
                        
                        
                        4,189,806Deferred
      taxes
                        
                        
                        1,324,706
                        
                        
                        
                        1,054,598Deferred
      revenue
                        
                        
                        (302,918
                        )
                        
                        
                        (301,840
                        )Imputed
      interest
                        
                        
                        263,480
                        
                        
                        
                        265,453Interest
      income
                        
                        
                        (4,224,141
                        )
                        
                        
                        (5,502,570
                        )Debt
      forgiveness by shareholder for expenses paid
                        
                        
                        241,839
                        
                        
                        
                        -Changes
      in operating assets and liabilities:(Increase)
      Decrease In:Accounts
      receivable
                        
                        
                        572,589
                        
                        
                        
                        1,434,967Other
      receivables
                        
                        
                        5,724
                        
                        
                        
                        275,787Other
      current assets
                        
                        
                        855,385
                        
                        
                        
                        520,797Increase
      (Decrease) In:Other
      payables and accrued liabilities
                        
                        
                        (376,786
                        )
                        
                        
                        (2,692,452
                        )Other
      current liabilities
                        
                        
                        197
                        
                        
                        
                        (166,510
                        )Net
      cash provided by operating activities
                        
                        
                        7,867,166
                        
                        
                        
                        2,671,137CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of construction in progress
                        
                        
                        -
                        
                        
                        
                        (848,587
                        )Purchases
      of plant and equipment
                        
                        
                        (181,136
                        )
                        
                        
                        (311,068
                        )(Decrease)
      increase in payable to contractors
                        
                        
                        (1,261,970
                        )
                        
                        
                        2,755,596Decrease
      in notes receivable from related parties for interest
                        
                        
                        -
                        
                        
                        
                        10,967,199Decrease
      in notes receivable from related parties for principal
                        
                        
                        2,193,441
                        
                        
                        
                        -Increase
      in advance to a related party
                        
                        
                        -
                        
                        
                        
                        (10,967,399
                        )Net
      cash provided by investing activities
                        
                        
                        750,335
                        
                        
                        
                        1,595,741CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from long-term bank loans
                        
                        
                        -
                        
                        
                        
                        17,913,556Repayments
      of long-term bank loans
                        
                        
                        (10,244,832
                        )
                        
                        
                        (25,691,501
                        )Proceeds
      from notes payable
                        
                        
                        438,688
                        
                        
                        
                        -Repayments
      of notes payable
                        
                        
                        (3,524,750
                        )
                        
                        
                        -Proceeds
      from a related party
                        
                        
                        731,294
                        
                        
                        
                        -Restricted
      cash
                        
                        
                        3,550,761
                        
                        
                        
                        -Net
      cash used in financing activities
                        
                        
                        (9,048,839
                        )
                        
                        
                        (7,777,945
                        )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                        
                        
                        (431,338
                        )
                        
                        
                        (3,511,067
                        )Effect
      of exchange rate changes on cash
                        
                        
                        (23,618
                        )
                        
                        
                        (65,748
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        1,614,260
                        
                        
                        
                        5,769,344CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                        
                        $
                        1,159,304
                        
                        
                        $
                        2,192,529SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                        
                        $
                        14,246,180
                        
                        
                        $
                        17,913,556
  SUPPLEMENTAL
NON-CASH DISCLOSURES:
  1.
              During
      the six months ended December 31, 2009 and 2008, $0 and $848,587 were
      transferred from construction in progress to toll road infrastructures,
      respectively.
 See
accompanying notes to the condensed consolidated financial
statements.
  F-4
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  1.     ORGANIZATION
AND PRINCIPAL ACTIVITIES
  China
Infrastructure Investment Corporation (Formerly Learning Quest Technologies,
Inc.) and subsidiaries (“CIIC” or the “Company”) was incorporated under the laws
of the State of Nevada on January 11, 2001.
  With the
approval from Henan Transportation Bureau and the State Development and
Revolution Committee of China [NO. 2003-1784], the Company is permitted to
construct and operate the toll road from Pingdingshan to Linru, Henan, China,
for 30 years from 2003. Pursuant to the permission from Henan Transportation
Bureau and Henan Development and Revolution Committee [NO. 2005-1885], the
Company is entitled to operate 6 toll gates. All the rates applicable to the
automobiles are defined by the Henan Transportation Bureau and Henan Development
and Revolution Committee.
  The
principal activities of the Company are investment, construction, operation, and
management of the Pingdingshan – Linru section (“Pinglin Expressway”), and the
rent of petrol stations and service districts along the toll
roads.  Currently, all the operations of the Company are in the
People’s Republic of China (“PRC”).
  2.     SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
  (a)           Principles
of Consolidation
  On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB statement No. 162). ASC 105-10 establishes the FASB
ASC as the source of authoritative accounting principles recognized by the FASB
to be applied in preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America. The
adoption of this standards had no impact on the Company’s condensed consolidated
financial statements.
  The
condensed consolidated financial statements include the accounts of China
Infrastructure Investment Corporation and the following
subsidiaries:
  (i)
                Color
      Man Holdings Limited (“CMH”) (An inactive holding company, 100% subsidiary
      of CIIC).
 
 (ii)
                Wise
      On China Limited (“WOCL”) ( An inactive holding company,100% subsidiary of
      CMH)
 
 (iii)
                Pingdingshan
      Pinglin Expressway Co., Ltd. (“Ping”) ( 100% subsidiary of
      WOCL)
 
 Inter-company
accounts and transactions have been eliminated in
consolidation.
  F-5
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 (b)         Concentrations
  The
location of the toll road and the operations of the Company are solely in the
Henan Province, PRC.
  The
Company has a concentration of related party receivables from Tai Ao Expressway
Co., Ltd. and Xinyang Expressway Co., Ltd. as of December 31, 2009 and June 30,
2009. Also see Note 4.
  (c)          Economic
and Political Risks
  The
Company’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
  (d)         Use
of Estimates
  The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.
  A
significant estimate of the Company is the estimate of future total traffic
volume. This estimate is used for the calculation of depreciation relating to
the toll road. Also see Note 2(g).
  Management
makes these estimates using the best information available at the time the
estimates are made.  Actual results could differ materially from those
estimates.
  (e)         Fair
Value of Financial Instruments
  ASC
820-10 (formerly SFAS No. 157, fair value measurement)
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. The hierarchy prioritizes the inputs into three levels
based on the extent to which inputs used in measuring fair value are observable
in the market.
  F-6
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (e)         Fair
Value of Financial Instruments (continued)
  These
tiers include:
  •
Level 1—defined as observable inputs such as quoted prices in active
markets;
 •
Level 2—defined as inputs other than quoted prices in active markets that
are either directly or indirectly observable; and
 •
Level 3—defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
  The
assets measured at fair value on a recurring basis subject to the disclosure
requirements of ASC 820-10 as of December 31, 2009 are as
follows:
 Fair
      Value Measurements at Reporting Date UsingCarrying
      value
                            as
      of
                            December 31,
                            2009
                          
                          
                          Quoted
      Prices in
                            Active
      Markets
                            for
      Identical
                            Assets
                            (Level 1)
                          
                          
                          Significant
      Other
                            Observable
                            Inputs
                            (Level 2)
                          
                          
                          Significant
                            Unobservable
      Inputs
                            (Level 3)Cash
      and cash equivalents
                          
                          $
                          1,159,304
                          
                          
                          
                          1,159,304
                          
                          
                          
                          -
                          
                          
                          
                          -
 
 Cash and
cash equivalents consist primarily of highly rated money market funds at a
variety of well-known institutions with original maturities of three months or
less. The original cost of these assets approximates fair value due to their
short term maturity. The Company does not maintain any bank accounts in the
United States of America.
  F-7
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (f)         Plant
and Equipment
  Plant and
equipment is carried at cost less accumulated depreciation and impairment
losses. Depreciation is provided over the estimated useful lives, using the
straight-line method.  Estimated useful lives of the plant and
equipment are as follows:
  Motor
      vehicles
                  
                  8
      yearsMachinery
                  
                  8
      yearsOffice
      equipment
                  
                  6
      yearsToll
      stations and ancillary facilities
                  
                  27
      yearsCommunication
      and monitoring equipment
                  
                  10
      years
  The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to expense as
incurred, whereas significant renewals and betterments are
capitalized.
  (g)         Toll
Road Infrastructures
  Toll road
infrastructures are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization of the toll road infrastructures are
calculated to write off their cost, commencing from the date of commencement of
commercial operation of the toll roads, based on the ratio of actual traffic
volume compared to the total expected traffic volume of the toll roads as
assessed by management each year. The total expected traffic volume is derived
from a traffic projection report prepared by an independent PRC organization.
Also see Note 2(d).
  (h)         Construction
in Progress
  Construction
in progress represents costs incurred in the construction of expressways and
bridges. The costs include development expenditures and other direct costs,
including interest cost on the related borrowed funds during the construction
period attributable to the development of plant and equipment and toll road
infrastructures. Construction in progress is transferred to the appropriate
category of plant and equipment and toll road infrastructures when completed and
ready for intended use. Depreciation commences when the assets are ready for
their intended use.
  F-8
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.   
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (i)         Capitalized
Interest
  The
Company capitalizes interest as a component of communication and monitoring
equipment and toll toad construction costs. No interest expense was capitalized
by the Company for the six months ended December 31, 2009 and 2008, since
construction was completed.
  (j)        Land
Use Rights
  According
to the laws of China, land in the PRC is owned by the Government and cannot be
sold to an individual or company.  However, the government grants the user
a “land use right” to use the land.   The land use rights granted
to the Company are being amortized when the toll road is ready to operate, using
the straight-line method over the approved toll road operating period of 27
years.
  (k)        Impairment
of Long-Term Assets
  Long-term
assets of the Company are reviewed annually as to whether their carrying value
has become impaired, pursuant to the guidelines established in ASC 360-10
(formerly SFAS No. 144). The Company considers assets to be impaired if the
carrying value exceeds the future projected cash flows from the related
operations.  The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. There were no impairments for the six months ended December 31,
2009 and 2008.
  (l)         Revenue
Recognition
  Revenue
represents toll revenue net of business tax, and is recognized when all of the
following criteria are met:
  -      The
amount of revenue can be measured reliably,
  -      It
is probable that the economic benefits associated with the transaction will flow
to the enterprise,
  -      The
costs incurred or to be incurred in respect of the transaction can be measured
reliably, and
  -      Collectibility
is reasonably assured.
  (m)         Rental
Income
  The
Company rents gas stations, advertising booths and toll road service districts
to lessees. Rental income is measured at the fair value of the consideration
receivable and represents amounts receivable for services provided in the normal
course of business, net of discounts and sales tax. Also see Note
12.
  F-9
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (n)         Retirement
Benefits
  Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to operations as
incurred.  Retirement benefits amounting to $124,685 and $66,340 were
charged to operations for the six months ended December 31, 2009 and
2008.
  (o)         Income
Taxes
  Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain.  Also see Note 13.
  (p)         Earnings
Per Share
  Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
There were no potentially dilutive securities for the six months ended December
31, 2009 and 2008.
  F-10
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (q)         Foreign
Currency Translation
  The
accompanying financial statements are presented in United States
dollars.  The functional currency of the Company is the Renminbi
(RMB).  The financial statements are translated into United States
dollars from RMB at year-end exchange rates as to assets and liabilities and
average exchange rates as to revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.
  December
      31,
                        2009
                      
                      
                      June
      30,
                        2009
                      
                      
                      December
      31,
                        2008Periods
      ended RMB: US$ exchange rate
                      
                      
                      6.8372
                      
                      
                      
                      6.8448
                      
                      
                      
                      -Average
      RMB:  US$ exchange rate for the three months
    ended
                      
                      
                      6.8360
                      
                      
                      
                      -
                      
                      
                      
                      6.8547Average
      RMB:  US$ exchange rate for the six months ended
                      
                      
                      6.8386
                      
                      
                      
                      -
                      
                      
                      
                      6.8630
 
 (r)         Comprehensive
Income
  Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income should be reported in
a financial statement that is presented with the same prominence as other
financial statements. The Company’s current component of comprehensive income is
the foreign currency translation adjustment.
  (s)         Recent
Accounting Pronouncements
  In
December 2008, the Financial Accounting Standards Board (” FASB”) approved ASC
715-20 (formerly FSP No. FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets, which provides guidance on an
employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. These disclosures include how investment allocation
decisions are made, information about major categories of plan assets,
significant concentrations of risks within plan assets, and fair value
measurements of plan assets. Our effective date is June 30, 2009. The
adoption of ASC 715-20did not have an impact on the Company’s financial
statements.
 
 In
April 1, 2009, the FASB approved ASC 805-20 (formerly FSP FAS 141(R)-1,
Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from
Contingencies, which amends Statement 141(R) and eliminates the
distinction between contractual and non-contractual contingencies. Under ASC
805-20, an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to
determine whether the contingency should be recognized
as of the acquisition date or after it. The adoption of ASC 805-10 did not have
an impact on the Company’s financial statements.
  F-11
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  2.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (s)         Recent
Accounting Pronouncements (continued)
 
 ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2, amend the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. The adoption of ASC
320-10 did not have an impact on the Company’s financial
statements.
 
 On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by ASC 825-10, Interim Financial Reporting. We are required
to adopt this ASC for our interim and annual reporting periods ending after
June 15, 2009. This ASC does not require disclosures for periods presented
for comparative purposes at initial adoption.  The adoption of ASC
825-10 did not have an impact on the Company’s financial
statements.
 
 In
February 2008, the FASB issued ASC 820-10 (formerly FSP SFAS 157-2, Effective
Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157,
Fair Value Measurement (“SFAS No. 157”), for all non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. ASC 820-10 partially defers the effective date of
SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. The
adoption of SFAS No. 157 for all non-financial assets and non-financial
liabilities is effective for us beginning July 1, 2009. It’s not expected that
this adoption will have a material impact on the Company’s financial
statements.
 
 In May
2009, the FASB issued ASC 855-10 (formerly SFAS No. 165, Subsequent Events.) ASC
855-10 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. ASC 855-10 is effective for interim and
annual periods ending after June 15, 2009. It’s not expected that this adoption
will have a material impact on the Company’s financial
statements.
  In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167, Amendments to FASB Interpretation
No. 46(R)). ASC 810-10 requires an enterprise to perform an analysis and
ongoing reassessments to determine whether the enterprises variable interest or
interests give it a controlling financial interest in a variable interest entity
and amends certain guidance for determining whether an entity is a variable
interest entity. It also requires enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprises involvement in a variable interest entity. ASC
810-10 is effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009 and for all interim
reporting periods after that, and is not anticipated to have any material impact
on the Company’s consolidated financial statements. The Company is currently
evaluating the impact of the adoption of ASC 810-10.
 
 F-12
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  3.     NOTES
RECEIVABLE
  A)
Current notes receivable from unrelated companies consist of the
following:
  December
      31,
                            2009
                          
                          
                          June
      30,
                            2009(Unaudited)Notes
      receivable from unrelated companies
                          
                          $
                          887,512
                          
                          
                          $
                          884,677Less:
      Provision for doubtful accounts
                          
                          
                          780,001
                          
                          
                          
                          780,001$
                          107,511
                          
                          
                          $
                          104,676
 
 On June
20, 2007, the Company loaned to Pingdingshan Traffic Administration $655,403.
The note is unsecured and was due December 20, 2007, bearing a 5.85% interest
rate per annum. On December 20, 2007, the Company entered into a renewal
agreement with Pingdingshan Traffic Administration, whereby the note was
extended to December 20, 2008 with a 7.47% interest rate per annum. Considering
the aging of the note receivable has exceeded two years and the Company has
never received the interest or principal from the note, the Company’s management
believes there is uncertainty as to collection of the note. A full provision
amounting to $780,001 was provided by the Company as of December 31,
2009.
  On
January 22, 2009, the Company loaned to Pingdingshan Expressway Construction
Co., Ltd. $104,676. The note is unsecured and is due January 21, 2010, and bears
a 5.31% interest rate per annum.
  Interest
income for the six months ended December 31, 2009 and 2008 was $2,718 and
$27,665, respectively.
  F-13
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  4.      NOTES
RECEIVABLE FROM RELATED PARTIES
  December
      31,
                                          2009
                                          (Unaudited)
                                        
                                        
                                        June
      30,
                                          2009B)
      Current notes receivable from related parties:Tai Ao Expressway Co., Ltd.Principal
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        70,130,050Interest
      receivable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,664,700-
                                        
                                        
                                        
                                        74,794,750Xinyang Expressway Co.,
Ltd.Principal
                                        
                                        
                                        69,747,776
                                        
                                        
                                        
                                        69,670,334Interest
      receivable
                                        
                                        
                                        6,726,915
                                        
                                        
                                        
                                        4,650,23776,474,691
                                        
                                        
                                        
                                        74,320,571Henan Ruijia Industry Co.,
    Ltd.Principal
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,191,445Interest
      receivable
                                        
                                        
                                        68,278
                                        
                                        
                                        
                                        25,53568,278
                                        
                                        
                                        
                                        2,216,980Henan Hairun Trade Co.,
      Ltd.Interest
      receivable
                                        
                                        
                                        22,869
                                        
                                        
                                        
                                        -Total
      notes receivable from related parties
                                        
                                        $
                                        76,565,838
                                        
                                        
                                        $
                                        151,332,301C)
      Long-term note receivable from a related party:Tai Ao Expressway Co., Ltd.Principal
                                        
                                        $
                                        70,208,004
                                        
                                        
                                        $
                                        -Interest
      receivable
                                        
                                        
                                        6,755,064
                                        
                                        
                                        
                                        -76,963,068
                                        
                                        
                                        
                                        -$
                                        153,528,906
                                        
                                        
                                        $
                                        151,332,301
 
 On June
26, 2008, Tai Ao Expressway Co., Ltd. (“Tai Ao”) entered into a renewal
agreement with the Company. Pursuant to the agreement, the note receivable from
Tai Ao was extended to June 29, 2010 with a 7.83% interest rate per annum.
Interest shall be paid annually and the principal shall be repaid at maturity.
Thenote
receivablefrom Tai Ao isclassified asanon-current assetbecausetheCompanyplansto settle this amount by
acquiringTai
Ao.
  On June
26, 2008, Xinyang Expressway Co., Ltd. (“Xinyang”) entered into a renewal
agreement with the Company. Pursuant to the agreement, the note receivable to
Xinyang was extended to June 29, 2010 with a 7.83% interest rate per annum.
Interest is paid annually and the principal is repaid at
maturity.
  F-14
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  4.      NOTES
RECEIVABLE FROM RELATED PARTIES (CONTINUED)
  On April
12, 2009, Henan Ruijia Industry Co., Ltd. (“Ruijia”) entered into an agreement
with the Company. Pursuant to the agreement, the Company provided a note
receivable for $2,191,445 to Ruijia. Such note receivable is due April 11, 2010,
and bears a 5.31% interest rate per annum. The principal and the interest are
repaid at maturity. On November 12, 2009, the Company received the principal of
such note receivable.
  On July
28, 2009, Henan Hairun Trade Co., Ltd. (“Hairun”) entered into an agreement with
the Company. Pursuant to the agreement, the Company provided a note receivable
for $1,462,501 to Hairun. Such note receivable is due July 27, 2010, and bears a
5.31% interest rate per annum. The principal and the interest are repaid at
maturity. On November 12, 2009, the Company received the principal of such note
receivable.
  The notes
receivable were provided to these companies for their construction and operation
working capital. Tai Ao, Xinyang and Ruijia are related to the Company through a
common shareholder of the Company. Hairun is a trading company substantially
controlled by Lin Jie, the vice president of operations of the Company. The
notes receivable are interest bearing and unsecured. Interest income was
$4,221,423 and $5,474,905 for the six months ended December 31, 2009 and 2008,
respectively.
  On
September 27, 2009, the board of directors of the Company approved a share
purchase resolution. Pursuant to a letter of intent dated September 27, 2009,
the Company shall purchase at least 51% of Tai Ao. The consideration for such
purchase will be settled first with a credit to Xinyang, and then the remainder
in cash. If the Company successfully negotiates with Tai Ao’s shareholders, the
consideration will be determined in accordance with the audited net assets of
Tai Ao at the purchase date. If the Company consummates such transaction, Tai Ao
would become a subsidiary of the Company and as a result, the note issued and
the advance made by the Company to Tai Ao would be eliminated in the
consolidated financial statements of the Company. This transaction is expected
to be accounted for as an acquisition of a company under common control. Also
see Note 5.
 
 5. ADVANCE
TO A RELATED PARTY
 
 December
      31,
                              2009
                            
                            
                            June
      30,
                              2009Tai
      Ao Expressway Co., Ltd.
                            
                            $
                            32,716,481
                            
                            
                            $
                            32,680,154
  The
Company made advances to suppliers on behalf of Tai Ao for the purchase of
construction materials commencing in 2006 in order to assist Tai Ao with its
working capital needs.
  The
balances of $32,716,481 and $32,680,154 at December 31, 2009 and June 30, 2009,
respectively, are unsecured, interest free and due on demand.
  The
advance to Tai Ao is classified as a non-current asset because the
Company plans to settle this amount by acquiring Tai Ao. Also see Note
4.
  F-15
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  6.     
TOLL ROAD INFRASTRUCTURES, NET
  Toll road
infrastructures consist of the following:
  December
      31,
                                2009
                                (Unaudited)
                              
                              
                              June
      30,
                                2009At
      cost:
                              
                              $
                              457,019,334
                              
                              
                              $
                              456,511,890Less:  Accumulated
      depreciation
                              
                              
                              22,743,610
                              
                              
                              
                              19,332,910Toll
      road infrastructures, net
                              
                              $
                              434,275,724
                              
                              
                              $
                              437,178,980
 
 Depreciation
expense for the six months ended December 31, 2009 and 2008 was $3,388,530 and
$2,795,850, respectively. Also see Notes 2(d) and 2(g).
  The
Company financed its construction of the toll road infrastructures substantially
through long-term loans from banks. These bank loans were secured by the toll
road operating right owned by the Company. Also see Note 11.
  7.    
PLANT AND EQUIPMENT, NET
  Plant and
equipment consist of the following:
  December
      31,
                                2009
                                (Unaudited)
                              
                              
                              June
      30,
                                2009At
      cost:Toll
      station and ancillary facilities
                              
                              $
                              10,513,155
                              
                              
                              $
                              10,422,227Communication
      and monitoring equipment
                              
                              
                              5,799,018
                              
                              
                              
                              5,757,340Motor
      vehicles
                              
                              
                              1,496,483
                              
                              
                              
                              1,466,485Machinery
                              
                              
                              298,017
                              
                              
                              
                              297,686Office
      equipment
                              
                              
                              611,216
                              
                              
                              
                              572,39518,717,889
                              
                              
                              
                              18,516,133Less:  Accumulated
      depreciationToll
      station and ancillary facilities
                              
                              
                              1,306,808
                              
                              
                              
                              1,136,852Communication
      and monitoring equipment
                              
                              
                              669,391
                              
                              
                              
                              575,571Motor
      vehicles
                              
                              
                              895,336
                              
                              
                              
                              804,005Machinery
                              
                              
                              128,566
                              
                              
                              
                              110,376Office
      equipment
                              
                              
                              270,441
                              
                              
                              
                              227,0273,270,542
                              
                              
                              
                              2,853,831Plant
      and equipment, net
                              
                              $
                              15,447,347
                              
                              
                              $
                              15,662,302
 
 Depreciation
expense for the six months ended December 31, 2009 and 2008 was $413,454 and
$398,857, respectively.
  F-16
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  8.    
LAND USE RIGHTS
  Land use
rights consist of the following:
  December
      31,
                                2009
                                (Unaudited)
                              
                              
                              June
      30,
                                2009Cost
                              
                              $
                              53,777,721
                              
                              
                              $
                              53,718,010Less:
      Accumulated amortization
                              
                              
                              7,459,584
                              
                              
                              
                              6,453,558Land
      use rights, net
                              
                              $
                              46,318,137
                              
                              
                              $
                              47,264,452
 
 Amortization
expense for the six months ended December 31, 2009 and 2008 was $998,653 and
$995,099, respectively.
  Amortization
expense for the next five years and thereafter is as follows:
  December
      31, 2010
                      
                      $
                      1,997,706December
      31, 2011
                      
                      
                      1,997,706December
      31, 2012
                      
                      
                      1,997,706December
      31, 2013
                      
                      
                      1,997,706December
      31, 2014
                      
                      
                      1,997,706Thereafter
                      
                      
                      36,329,607Total
                      
                      $
                      46,318,137
  F-17
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  9.     LONG-TERM
INVESTMENT
  December
      31, 2009
                                        (Unaudited)
                                      
                                      
                                      June
      30, 2009Ownership
                                        Interest
                                      
                                      
                                      Net
      Book
                                        Value
                                      
                                      
                                      Ownership
                                        Interest
                                      
                                      
                                      Net
      Book
                                        ValueAt
      cost:Pingdingshan
      City Credit Corporation
                                      
                                      
                                      2.39
                                      %
                                      
                                      $
                                      1,579,594
                                      
                                      
                                      
                                      2.39
                                      %
                                      
                                      $
                                      1,577,840
 
 The
Company invested in Pingdingshan City Credit Corporation (“PCCC”), a commercial
banking corporation established in 2005. The Company deposited Rmb20 million
(approximately $2.5 million) in December 2005 and then purchased 3% of the total
equity interest in PCCC in exchange for Rmb10 million (approximately $1.3
million) in 2007. As a consequence, Rmb10 million (approximately $1.3 million)
was refunded to the Company in 2007. As of September 30, 2009 and June 30, 2009,
the Company does not have more than a 20% interest in the investment and does
not exercise significant influence over the investee. The Company accounts for
the investment under the cost method.  Investment income is recognized
by the Company when the investee declares a dividend and the Company believes it
is collectible.  No dividend income was recognized for the six months
ended December 31, 2009 and 2008.
  On March
29, 2006, Ping entered into a share purchase agreement with PCCC, a local
financial institution.  Pursuant to the agreement, the Company
obtained 3% of the total equity interest of PCCC with the consideration
amounting to Rmb10 million (approximately US$1.3 million). After PCCC increased
its share capital, the Company’s share of the total equity interest of the total
equity interest in PCCC was diluted to 2.39%. Management of the Company adopted
the cost method for the accounting of such investment.
  10.   SHORT-TERM
BANK LOAN
  Short-term
bank loan consist of the following:
 
 December
      31,
                          2009
                        
                        
                        June
      30,
                          2009Loan
      from China Minsheng Banking Corp., Ltd., due March 23, 2010, monthly
      interest only payments at 5.31% per annum, co-secured by Tai Ao Expressway
      Co., Ltd., the chief executive officer Mr. Li Xipeng and the expressway
      toll right owned by the Company.
                        
                        $
                        7,312,935
                        
                        
                        $
                        7,304,815
 
 Interest
expense for this loan for the six months ended December 31, 2009 and 2008 was
$194,120 and $0, respectively.
  F-18
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  11.   LONG-TERM
BANK LOANS
  Long-term
bank loans consist of the following:
 
 December
      31,
                          2009
                          (Unaudited)
                        
                        
                        June
      30,
                          2009Loan
      from National Development Bank of China Henan Branch, due May 20, 2017,
      bearing a 6.12% interest rate per annum, secured by the toll road
      operating right owned by the Company.  Principal is repaid every
      6 months in 20 unequal installments from November 2007, and interest is
      paid quarterly.
                        
                        $
                        90,680,395
                        
                        
                        $
                        93,501,636Loan
      from Agricultural Bank of China, due November 20, 2011, bearing a 5.94%
      interest rate per annum, secured by the toll road operating right owned by
      the Company.  Principal is to be repaid every year in 2 equal
      installments from February 2010, and interest is paid
    monthly.
                        
                        
                        29,251,741
                        
                        
                        
                        29,219,261Loan
      from Agricultural Bank of China, due March 20, 2012, bearing a 5.94%
      interest rate per annum, secured by the toll road operating right owned by
      the Company.  Principal is to be repaid on maturity, and
      interest is paid monthly.
                        
                        
                        29,251,741
                        
                        
                        
                        29,219,261Loan
      from Industrial and Commercial Bank of China Pingdingshan Branch, due July
      21, 2020, bearing a 7.05% interest rate per annum, secured by the toll
      road operating right owned by the Company.  Principal is repaid
      every year in 13 unequal installments from November 2007, and interest is
      paid monthly.
                        
                        
                        163,183,759
                        
                        
                        
                        170,316,152Loan
      from National Development Bank of China Henan Branch, due November 28,
      2022, bearing a 6.12% interest rate per annum, secured by the toll road
      operating right owned by the Company.  Principal is to be repaid
      every 6 months in 12 unequal installments from May 2017, and interest is
      paid quarterly.
                        
                        
                        146,258,702
                        
                        
                        
                        146,096,308Total
      long-term bank loans
                        
                        
                        458,626,338
                        
                        
                        
                        468,352,618Less:
      current portion
                        
                        
                        30,240,449
                        
                        
                        
                        27,767,064Long-term
      portion
                        
                        $
                        428,385,889
                        
                        
                        $
                        440,585,554
  F-19
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  11.   LONG-TERM
BANK LOANS (CONTINUED)
  For the
six months ended December 31, 2009 and 2008, interest expense was $14,081,178
and $17,913,556, respectively.  No interest was capitalized as a
component of construction costs during the reporting periods.
  According
to the loan agreements with National Development Bank of China Henan Branch, the
bank has the right to demand repayment of the loans in full if the Company
provides any guarantee to other third party debt that exceeds 70% of the
Company’s total assets. The Company did not provide any guarantees to the third
parties as of December 31, 2009 and June 30, 2009.  The repayment
schedule for the long-term bank loans is as follows:
  December
      31, 2010
                        
                        $
                        30,240,449December
      31, 2011
                        
                        
                        40,004,680December
      31, 2012
                        
                        
                        54,630,551December
      31, 2013
                        
                        
                        27,315,275December
      31, 2014
                        
                        
                        27,315,275Thereafter
                        
                        
                        279,120,108Total
                        
                        $
                        458,626,338
  F-20
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  12. DEFERRED
REVENUE
  December
      31,
                              2009
                              (Unaudited)
                            
                            
                            June
      30, 2009Deferred
      revenue
                            
                            $
                            15,754,876
                            
                            
                            $
                            16,040,024Imputed
      interest discount
                            
                            
                            (9,206,000
                            )
                            
                            
                            (9,459,018
                            )Total
                            
                            
                            6,548,876
                            
                            
                            
                            6,581,006Less:
      current portion
                            
                            
                            82,047
                            
                            
                            
                            78,803Long-term
      portion
                            
                            $
                            6,466,829
                            
                            
                            $
                            6,502,203
 
 The
Company rents four gas stations to Petro China Company Limited Pingdingshan
Branch (“PCCL”) from January 1, 2006 for 30 years. The Company received the
entire 30 year rental fee of $5,372,708 from PCCL in 2006. The amount received
was net of business tax.
  The
Company imputed interest on the amount using an 8% discount rate, under the
effective interest rate method. The rental income recognized during the six
months ended December 31, 2009 and 2008 was $302,918 and $301,840 respectively.
The imputed interest for the six months ended December 31, 2009 and 2008 was
$263,480 and $265,453, respectively.
  13.   INCOME
TAX
  On March
16, 2007, the National People’s Congress of China approved the Corporate Income
Tax Law of the People’s Republic of China (the “new CIT Law”), which was
effective on January 1, 2008.Under the new CIT Law, the corporate income tax
rate applicable to the Company starting from January 1, 2008 will be 25%. The
new CIT Law has an impact on the deferred tax assets and liabilities of the
Company. The Company adjusted deferred tax balances as of December 31, 2009
based on their best estimates and will continue to assess the impact of such new
law in the future. The effects arising from the enforcement of the new CIT law
have been reflected in the accounts.
  The
Company uses ASC 740-10 (formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes). The Interpretation addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return should be recorded in
the financial statements. Under FIN 48, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. ASC 740-10 also provides guidance on recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. As of December 31, 2009, the Company did not
have a liability for unrecognized tax benefits.
  F-21
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  13.   INCOME
TAX (CONTINUED)
  Income
tax expense is summarized as follows:
  Six
      Months Ended
                            December
      31,2009
                          
                          
                          2008(Unaudited)
                          
                          
                          (Unaudited)Current
                          
                          $
                          741,972
                          
                          
                          $
                          254,229Deferred
                          
                          
                          907,459
                          
                          
                          
                          1,046,843Income
      tax expense
                          
                          $
                          1,649,431
                          
                          
                          $
                          1,301,072
  The
Company’s income tax expense differs from the “expected” tax expense (computed
by applying the CIT rate of 25% percent to income before income taxes) as
follows:
  Six
      Months Ended
                          December
      31,2009
                          (Unaudited)
                        
                        
                        2008
                          (Unaudited)Computed
      “expected” expense
                        
                        $
                        1,588,971
                        
                        
                        $
                        1,223,543Valuation
      allowance
                        
                        
                        60,460
                        
                        
                        
                        77,529Income
      tax expense
                        
                        $
                        1,649,431
                        
                        
                        $
                        1,301,072
  F-22
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  13.   INCOME
TAX (CONTINUED)
  The tax
effects of temporary differences that give rise to the Company’s net deferred
tax assets and liabilities are as follows:
  December
                                    31,
      2009
                                    (Unaudited)
                                  
                                  
                                  June
      30,
                                    2009Current
      portion:G&A
      expenses
                                  
                                  $
                                  352,300
                                  
                                  
                                  $
                                  349,858Road
      maintenance costs
                                  
                                  
                                  175,884
                                  
                                  
                                  
                                  438,142Other
      expenses
                                  
                                  
                                  125,882
                                  
                                  
                                  
                                  125,742Tax
      loss carry forward
                                  
                                  
                                  60,460
                                  
                                  
                                  
                                  -Valuation
      allowance
                                  
                                  
                                  (60,460
                                  )
                                  
                                  
                                  -Net
      operating loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  413,130Total
      deferred tax assets
                                  
                                  
                                  654,066
                                  
                                  
                                  
                                  1,326,872Sales
      cut-off
                                  
                                  
                                  (1,186,639
                                  )
                                  
                                  
                                  (999,885
                                  )Interest
      income
                                  
                                  
                                  (7,890,422
                                  )
                                  
                                  
                                  (7,478,740
                                  )Interest
      expense
                                  
                                  
                                  1,917
                                  
                                  
                                  
                                  (533,679
                                  )Consulting
      fees
                                  
                                  
                                  (3,225
                                  )
                                  
                                  
                                  (124,968
                                  )Other
      expenses
                                  
                                  
                                  (17,032
                                  )
                                  
                                  
                                  (41,728
                                  )Total
      deferred tax liabilities
                                  
                                  
                                  (9,095,401
                                  )
                                  
                                  
                                  (9,179,000
                                  )Net
      deferred tax liabilities
                                  
                                  $
                                  (8,441,335
                                  )
                                  
                                  $
                                  (7,852,128
                                  )Non-current
      portion:Rental
      income
                                  
                                  $
                                  159,175
                                  
                                  
                                  $
                                  112,064Capitalized
      interest
                                  
                                  
                                  2,236,590
                                  
                                  
                                  
                                  2,234,106Amortization
                                  
                                  
                                  1,864,896
                                  
                                  
                                  
                                  1,613,390Bad
      debts
                                  
                                  
                                  2,694,817
                                  
                                  
                                  
                                  2,691,824Total
      deferred tax assets
                                  
                                  
                                  6,955,478
                                  
                                  
                                  
                                  6,651,384Depreciation
                                  
                                  
                                  (2,965,327
                                  )
                                  
                                  
                                  (1,925,734
                                  )Total
      deferred tax liabilities
                                  
                                  
                                  (2,965,327
                                  )
                                  
                                  
                                  (1,925,734
                                  )Net
      deferred tax assets
                                  
                                  $
                                  3,990,151
                                  
                                  
                                  $
                                  4,725,650
  F-23
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)
  14.   CONTINGENCIES
  The
Company entered into an agreement to purchase a land use right from Pingdingshan
No. 3 Cement Factory for $1,843,646. However, the Company was not informed that
such land use right was pledged by the cement factory as collateral for loans
from Pingdingshan Suburb Huancheng Credit Corporation
(“PSHCC”).  Pingdingshan No. 3 Cement Factory went bankrupt and PSHCC
who loaned them money then sued the Company for the loss of the collateral. On
July 13, 2006, judgment was made by the Henan Pingdingshan Intermediary Court in
which the Company was required to pay PSHCC $485,851. The amount was paid in
August 2006. The Company appealed the ruling to Henan Pingdingshan Intermediary
Court again. Pursuant to the final judgment made on April 25, 2008, the
compensating claim from PSHCC was rejected. Currently, the Company is in the
progress of pursuing receipt of the amount paid. While during the pursuing
progress, PSHCC appealed such final judgment to Henan Higher Court and is
waiting for the judgment. No receivable for the contingency was recorded as of
December 31, 2009 or June 30, 2009.
  15. CONTRIBUTED
CAPITAL
  Contributed
capital, included in additional paid-in capital, represents the debt forgiveness
from a shareholder of the Company. One of the Company’s shareholders, Long
Triumph Investments Limited (“LTII”) paid certain expenses on behalf of the
Company. The debt associated with such expenses were forgiven by LTII for the
six months ended December 31, 2009.
  16. SUBSEQUENT
EVENTS
  In
preparing the unaudited condensed consolidated financial statements, the Company
has evaluated all subsequent events and transactions for potential recognition
or disclosure through February 12, 2010, the date the unaudited condensed
consolidated financial statements were issued.
  F-24




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION





Forward
Looking Statements




The
following discussion of our financial condition and results of operations is
based upon and should be read in conjunction with our consolidated financial
statements and their related notes included in this Report. This Report contains
forward-looking statements. Generally, the words “believes”, ”anticipates”,
“may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar
expressions or the negative thereof or comparable terminology are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, including the matters set forth in this report or other
reports or documents we file with the SEC from time to time, which could cause
actual results or outcomes to differ materially from those projected. Undue
reliance should not be placed on these forward-looking statements which speak
only as of the date hereof. We undertake no obligation to update these
forward-looking statements.




Business
Overview





The Company is engaged in the
investment, construction, operation and management of the Pinglin Expressway
toll road in the Province of Henan, China and the rental of petrol stations and
service districts along the toll roads.




With the approval from Henan
Communications Bureau and the State Development and Reform Committee of China
[NO. 2003-1784], the Company is permitted to construct and operate the
Pinglin Expressway in Henan, China for thirty (30) years from 2003. Pursuant to
the permission from Henan Communications Bureau and Henan Development and Reform
Committee [NO. 2005-1885], the Company is entitled to operate six toll
gates. All the rates applicable to the automobiles are defined by the Henan
Communications Bureau and Henan Development and Reform Committee.




The Pinglin Expressway is a significant
part of the Nanluo Expressway, a key national trunk highway in China which
connects Nanjing to Luoyang.  The Nanluo Expressway links the
northwestern regions to the southeastern coastal regions of China. The
construction of the Pinglin Expressway started on October 23, 2003 and was
completed in two (2) phases. The first phase of the construction (covering a
section of approximately 86 kilometers in length) linking Ruzhou and
Pingdingshan in Henan Province, began commercial operations on December 31,
2005.  On May 31, 2006, the second phase of the construction (covering
a section of approximately 21 kilometers in length) linking Pingdingshan to
Yexian in Henan Province was completed. With the operation of Pinglin Expressway
the Nanluo Expressway became completely operational.




The Pinglin Expressway is a dual
carriageway four lane expressway, the toll section of which is 106 km in length.
Toll revenue from vehicles passing through the Expressway’s six toll gates
(South Pingdingshan, Pingdingshan New Town, Baofeng, Xiaotun, Ruzhou and
Wenquan) is the primary source of the Company’s revenue.  The
Expressway is also located between two key cities, Luoyang and Luohe. The
Expressway extends from east to west, from Shilipu (the end of the
Luohe-Pingdingshan expressway), through Yexian and Pingdingshan and then to New
Xiying village at the joint of Pingdingshan and Luoyang. The road is linked with
the Lianhuo (Lianyungang-Huoerguosi) national highway in Luoyang, and then
extends to the southeast of Luohe City and connects with the Beijing-Zhuhai
national highway to form a convenient channel between Luoyang and Luohe. In
addition to the traffic flow of the line itself, we believe it also attracts the
traffic flow from the Lianhuo highway to Zhengzhou and then to the
Beijing-Zhuhai national highway to alter the route of the Pinglin
Expressway.  Furthermore, the Expressway extends east to link the
highway network of the Jiangsu and Anhui provinces and also links seaports,
including Shanghai.


4


The Company’s operating revenue is
generated through toll charges on vehicles that pass through the toll gate. The
standard of toll charges is approved and set by the provincial price
administrative bureau. The Company’s revenue is equal to the relevant standard
toll rate for the types of vehicles, multiplied by the relative miles of travel
through the Expressway which the Company is operating, and is cleared by the
Henan Expressway System Toll Collection Center each month (Henan Expressway has
a system of charges and a clearing center which calculates and allocates toll
charge income according to the charge standards and the miles of vehicle travel
in the Expressway). The Company specializes in the operation and management of
expressways, and maintenance projects are outsourced to professional road
construction enterprises.




The Company began generating operating
revenue in January 2006.  The Expressway was not fully operational
until June 2006, therefore our operating income was low and growth was moderate.
After several years of operations, awareness of the Expressway and passenger and
commercial vehicle traffic has gradually increased. We believe that along with
income growth in the future, the profit earning capacity of the Company will
improve steadily.




Enterprise
Strategy




Henan is the province with the largest
population in China.  However, its urbanization rate is far below the
national average level. With rapid economic and social development and the
accelerated process of urbanization in Henan, demand is growing rapidly for
infrastructure, such as the Expressway and other transportation infrastructure,
urban facilities such as heating, water supply, and sewerage treatment. The
existing infrastructure can no longer meet the needs of the region’s social
development.




Because the Chinese government’s
financial revenue growth is limited, its investment alone is unable to build
huge infrastructure projects in a relatively short period of time. In order to
attract other funding, local governments are willing to grant to commercial
companies the right to invest in the construction and operation of projects, or
directly sell the equity of the established enterprises to recover their early
input.




The Company plans to invest in the
construction and purchase of additional expressways, thermoelectricity, water
supply, sewage treatment facilities and other infrastructure assets with good
profit prospects in the next few years. In doing so, it intends to seize the
current historic opportunity of rapid development of infrastructure in China and
Henan.  We believe that this will rapidly strengthen and expand the
Company’s place in infrastructure industries.  This should also create
advantages of scale thereby further reducing costs of operation.  The
amount of investment in infrastructure is often relatively large, and investment
funds need to be in position within two or three years in advance, therefore the
amount of capital from the Company’s operations alone cannot meet the demand for
investment in the future. The Company desires to actively participate in the
capital markets and to use various channels of financing to enhance its ability
to raise funds, thereby promoting and achieving its long-term development
strategies.




Based on the operation and management
of the Expressway, the Company desires to take full advantage of free cash flow
and capital market instruments to invest in the construction or purchase of
infrastructure assets and to exploit all the advantages in management,
government relationships and stockholder support to make the Company a
professional, continuously-growing infrastructure investment
operator.




In addition, the Company intends to
energetically push forward its standard management, human-based services,
establish an information management platform and continue to improve the road
conditions and traffic capacity so as to provide travelers with a smooth, safe
and comfortable traveling environment. With the increasing influence of the
Expressway on the substitution and division of other transportation lines in the
context of the great macroeconomic environment which is resulting in continuous
and rapid growth in China and given the specific area where the roads are
located, we believe that the Company’s income from toll and profits will
increase.


5





Significant
Accounting Policies and Estimates




We prepare our financial statements in
accordance with generally accepted accounting principles in the United States,
which require us to make estimates and assumptions that affect the reported
amounts of our assets and liabilities, to disclose contingent assets and
liabilities on the date of the financial statements, and to disclose the
reported amounts of revenues and expenses incurred during the financial
reporting period. We continue to evaluate these estimates and assumptions that
we believe to be reasonable under the circumstances. We rely on these
evaluations as the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Since
the use of estimates is an integral component of the financial reporting
process, actual results could differ from those estimates. Some of our
accounting policies require higher degrees of judgment than other in their
application.




This section should be read together
with the Summary of Significant Accounting Policies included as Note 2 to the
consolidated financial statements included herein.




We determine the estimated useful lives
and related depreciation charges for our toll road infrastructures, property,
plant and equipment. This estimate is based on the historical experience of the
actual useful lives of toll road infrastructures, property, plant and equipment
of a similar nature and functions and the practice in similar industries. Toll
road infrastructures, property, plant and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation and amortization of the
toll road infrastructures are calculated to write off their cost, commencing
from the date of commencement of commercial operations of the toll roads, based
on the ratio of actual traffic volume compared to the total expected traffic
volume of the toll roads as estimated by reference to traffic projection reports
prepared by an independent PRC organization each year. It could change
significantly as a result of technical innovations and competitor actions in
response to severe industry cycles. Other properties, plant and equipment are
depreciated or amortized over their estimated useful lives, using the
straight-line method. We will increase the depreciation charge where useful
lives are less than previously estimated lives, or we will write-off or
write-down technically obsolete or non-strategic assets that have been abandoned
or sold.




Revenue
Recognition




The Company’s revenue represents toll
revenue net of business tax, and is recognized when all of the following
criteria are met:




·
            The
      amount of revenue can be measured
reliably;




·
            It
      is probable that the economic benefits associated with the transaction
      will flow to the enterprise;




·
            The
      costs incurred or to be incurred in respect of the transaction can be
      measured reliably; and




·
            Collectibility
      is reasonably assured.




The rental income is measured at the
fair value of the consideration receivable and represents amounts receivable for
services provided in the normal course of business, net of discounts and sales
tax.




Fair
Value of Financial Instruments




The Company’s financial instruments
include restricted cash, accounts receivable, notes receivable, due from related
parties, other receivables, other payables and accrued liabilities, short-term
bank loans, payable to contractors, other current liabilities and deferred
taxes. We estimated that the carrying amount approximates fair value due to
their short-term nature. The fair value of the Company’s long-term bank loans
and deferred revenue are estimated based on the current rates offered to the
Company for debt of similar terms and maturities.  The Company’s fair
value of long-term bank loans and deferred revenue was not significantly
different from the carrying value at December 31, 2009 and
2008.


6




Depreciation
of Toll Road Infrastructures





Toll road
infrastructures are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization of the toll road infrastructures are
calculated to write off their cost, commencing from the date of commencement of
commercial operation of the toll roads, based on the ratio of actual traffic
volume compared to the total expected traffic volume of the toll roads as
assessed by management each year.  The total expected traffic volume
is derived from a traffic projection report prepared by an independent PRC
organization.




Impairment
of Long-Lived Assets




We review periodically the carrying
amounts of long-lived assets including toll road infrastructures, property,
plant and equipment, land use rights, construction in progress, long-term
investment and long-term deferred assets with finite useful lives or beneficial
periods, to assess whether they are impaired. We evaluate these assets for
impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable such as a change of business plan or a
period of continuous losses. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its projected future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the assets. In determining estimates of
future cash flows, significant judgment in terms of projection of future cash
flows and assumptions is required. There were no impairments for the three
months ended December 31, 2009 and 2008 or for the six months ended
December 31, 2009 and 2008.




Contingencies




In the normal course of business, we
are subject to contingencies, including legal proceedings and claims arising out
of the business that relate to a wide range of matters. We recognize a liability
for such contingency if we determine that it is probable that a loss has
incurred and a reasonable estimate of the loss can be made. We may consider many
factors in making these assessments, including past history and the specifics of
each matter. As we have not become aware of any toll related claim since
operations commenced, we have not recognized such a liability for the three
months ended December 31, 2009 and 2008 or for the six months ended
December 31, 2009 and 2008.




Recent
Accounting Pronouncements




In
December 2008, the Financial Accounting Standards Board (“FASB”) approved ASC
715-20 (formerly FSP No. FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets, which provides guidance on an
employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. These disclosures include how investment allocation
decisions are made, information about major categories of plan assets,
significant concentrations of risks within plan assets, and fair value
measurements of plan assets. Our effective date is June 30, 2009. The
adoption of ASC 715-20 did not have an impact on the Company’s financial
statements.




In
April 1, 2009, the FASB approved ASC 805-20 (formerly FSP FAS 141(R)-1,
Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from
Contingencies, which amends Statement 141(R) and eliminates the
distinction between contractual and non-contractual contingencies. Under ASC
805-20, an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to
determine whether the contingency should be recognized as of the acquisition
date or after it. The adoption of ASC 805-10 did not have an impact on the
Company’s financial statements.


7


ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2, amend the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. The adoption of ASC
320-10 did not have an impact on the Company’s financial
statements.





On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by ASC 825-10, Interim Financial Reporting. We are required
to adopt this ASC for our interim and annual reporting periods ending after
June 15, 2009. This ASC does not require disclosures for periods presented
for comparative purposes at initial adoption.  The adoption of ASC
825-10 did not have an impact on the Company’s financial
statements.





In
February 2008, the FASB issued ASC 820-10 (formerly FSP SFAS 157-2, Effective
Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157,
Fair Value Measurement (“SFAS No. 157”), for all non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. ASC 820-10 partially defers the effective date of
SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. The
adoption of SFAS No. 157 for all non-financial assets and non-financial
liabilities is effective for us beginning July 1, 2009. It’s not expected that
this adoption will have a material impact on the Company’s financial
statements.





In May
2009, the FASB issued ASC 855-10 (formerly SFAS No. 165, Subsequent Events). ASC
855-10 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. ASC 855-10 is effective for interim and
annual periods ending after June 15, 2009. It’s not expected that this adoption
will have a material impact on the Company’s financial statements.





In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167, Amendments to FASB
Interpretation No. 46(R)). ASC 810-10 requires an enterprise to perform an
analysis and ongoing reassessments to determine whether the enterprises variable
interest or interests give it a controlling financial interest in a variable
interest entity and amends certain guidance for determining whether an entity is
a variable interest entity. It also requires enhanced disclosures that will
provide users of financial statements with more transparent information about an
enterprises involvement in a variable interest entity. ASC 810-10 is effective
as of the beginning of each reporting entity’s first annual reporting period
that begins after November 15, 2009 and for all interim reporting periods after
that, and is not anticipated to have any material impact on the Company’s
consolidated financial statements. The Company is currently evaluating the
impact of the adoption of ASC 810-10.





Results
of Operations




Results
of Operations for the Three Months Ended December 31, 2009 Compared to the
Three Months Ended December 31, 2008




The following table sets forth a
summary of certain key components of our results of operations for the periods
indicated, in dollars and as a percentage of revenues.


8




Three Months Ended
                  December 31
                  (Unaudited)
              
              
              Three Months Ended
                  December 31
                  (Unaudited)2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              11,606,494
              
              
              $
              12,101,788
              
              
              
              100
              %
              
              
              100
              %Operating
      costs
              
              
              1,309,615
              
              
              
              2,466,673
              
              
              
              11.3
              %
              
              
              20.4
              %Depreciation
      and amortization
              
              
              2,101,442
              
              
              
              1,792,717
              
              
              
              18.1
              %
              
              
              14.8
              %Gross
      profit
              
              
              8,195,437
              
              
              
              7,842,398
              
              
              
              70.6
              %
              
              
              64.8
              %General
      and administrative expenses
              
              
              1,111,695
              
              
              
              1,501,042
              
              
              
              9.6
              %
              
              
              12.4
              %Income
      from operations
              
              
              7,083,742
              
              
              
              6,341,356
              
              
              
              61.0
              %
              
              
              52.4
              %Interest
      expense, net
              
              
              4,932,126
              
              
              
              6,149,805
              
              
              
              42.5
              %
              
              
              50.8
              %Other
      income, net
              
              
              216,917
              
              
              
              185,226
              
              
              
              1.9
              %
              
              
              1.5
              %Income
      from operations before income taxes
              
              
              2,368,533
              
              
              
              376,777
              
              
              
              20.4
              %
              
              
              3.1
              %Income
      tax expense
              
              
              597,088
              
              
              
              94,194
              
              
              
              5.1
              %
              
              
              0.8
              %Net
      income
              
              
              1,771,445
              
              
              
              282,583
              
              
              
              15.3
              %
              
              
              2.3
              %




Revenues




Our revenues are derived from the
operation of the Expressway. Our revenues decreased by approximately $0.5
million, or 4.1%, from approximately $12.1 million for the three months ended
December 31, 2008 to approximately $11.6 million for the three months ended
December 31, 2009. The decrease was mainly due to an unprecedented heavy
snow storm in November 2009. Severe weather, harsh cold, heavy snow and freezing
rain disrupted air, road and rail transportation, which caused the Pinglin
Expressway to close for a long time. As a result, the converted average daily
traffic volume decreased 1,089 units, or 8.2%, from 13,349 units for the three
months ended December 31, 2008 to 12,260 units for the three months ended
December 31, 2009.




Operating
Costs




Our operating costs mainly represent
road maintenance costs, road management costs, direct construction costs and
labor costs associated with toll operations. For the three months ended
December 31, 2009, our operating costs sharply decreased by approximately
$1.2 million, or 46.9%, to approximately $1.3 million, compared to approximately
$2.5 million for the three months ended December 31, 2008. The decrease is
mainly due to the decrease in our road maintenance costs. Due to the decline in
our revenues during the three months ended December 31, 2009, costs related only
to routine maintenance and improvement of traffic signs and road surfaces were
incurred.




Depreciation
and Amortization




Our total depreciation and amortization
related to toll operations increased by approximately $0.3 million, or 17.2%,
from approximately $1.8 million for the three months ended December 31,
2008 to approximately $2.1 million for the three months ended December 31,
2009.




Depreciation of toll
road infrastructures is calculated to write-off such cost on a
units-of-usage basis.  The Company recorded the depreciation based on
the ratio of actual traffic volume incurred during the period compared to the
total expected traffic volume of the toll roads during the operation licensing
period, as estimated.




Management
assessed the future total expected traffic volume at each period end.
Considering the current economic environment and the actual traffic volume
evolvement during the year ended June 30, 2009, compared to prior years’
estimate, management believed there was significant decline in future total
anticipated volume. Based on such estimation, the depreciation for the
three months ended December 31, 2009 increased 17.2% compared to the three
months ended December 31, 2008, by the calculation according to the
aforementioned units-of-usage basis.


9




Gross
Profit




Our gross profit increased by
approximately $0.4 million, or 4.5%, from approximately $7.8 million for the
three months ended December 31, 2008 to approximately $8.2 million for the
three months ended December 31, 2009.  Such gross profit increase
is primarily due to the decrease in our operating costs, partially offset by the
decrease in our revenues.




Gross profit as a percentage of
revenues increased from 64.8% for the three months ended December 31, 2008
to 70.6% for the three months ended December 31, 2009.




General
and Administrative Expenses




Our general and administrative expenses
mainly represent employee payroll and welfare, traveling expenses, vehicle
gasoline and maintenance costs, entertainment expenses, consulting fees,
provisions for doubtful accounts, depreciation and miscellaneous taxes. General
and administrative expenses decreased by approximately $0.4 million, or 25.9%,
from approximately $1.5 million for the three months ended December 31, 2008 to
approximately $1.1 million for the three months ended December 31, 2009. Such
decrease is primarily due to the decrease in our consulting fees, amounting to
approximately $0.3 million.




Interest
Expense, Net




Net interest expense decreased by
approximately $1.2 million, or 19.8%, from approximately $6.1 million for the
three months ended December 31, 2008 to approximately $4.9 million for the
three months ended December 31, 2009. This decrease is primarily due to the
decreased interest rate of our loans and the decrease in our loan
principal.  The People’s Bank of China decreased the benchmark of the
interest rate for long term loans over five years from 7.83% for the three
months ended December 31, 2008 to 5.94% for the three months ended December 31,
2009. Accordingly, our lenders decreased their interest rates to some degree. In
addition, our loan principal decreased approximately $4.7 million from December
31, 2008 to December 31, 2009, which also decreased our interest
expense.




Income
Tax Expense




Income tax expense increased by
approximately $0.5 million, or 533.9%, from approximately $0.1 million for the
three months ended December 31, 2008 to approximately $0.6 million for the
three months ended December 31, 2009, as a result of the increase in our
income from operations. Our effective tax rate was 25% for both the three months
ended December 31, 2009 and 2008.




Net
Income




Our net income increased by
approximately $1.5 million, or 526.9%, from approximately $0.3 million for the
three months ended December 31, 2008 to approximately $1.8 million for the
three months ended December 31, 2009. This increase is primarily due to the
decrease in our costs and expenses, partially offset by the decrease in our
revenues.




Results
of Operations for the Six Months Ended December 31, 2009 Compared to the
Six Months Ended December 31, 2008




The following table sets forth a
summary of certain key components of our results of operations for the periods
indicated, in dollars and as a percentage of revenues.


10




Six Months Ended
                  December 31
                  (Unaudited)
              
              
              Six Months Ended
                  December 31
                  (Unaudited)2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              25,185,736
              
              
              $
              27,502,808
              
              
              
              100
              %
              
              
              100
              %Operating
      costs
              
              
              2,087,778
              
              
              
              3,671,134
              
              
              
              8.3
              %
              
              
              13.3
              %Depreciation
      and amortization
              
              
              4,489,220
              
              
              
              3,892,036
              
              
              
              17.8
              %
              
              
              14.2
              %Gross
      profit
              
              
              18,608,738
              
              
              
              19,939,638
              
              
              
              73.9
              %
              
              
              72.5
              %General
      and administrative expenses
              
              
              2,480,214
              
              
              
              2,842,944
              
              
              
              9.8
              %
              
              
              10.3
              %Income
      from operations
              
              
              16,128,524
              
              
              
              17,096,694
              
              
              
              64.1
              %
              
              
              62.2
              %Interest
      expense, net
              
              
              10,272,530
              
              
              
              12,643,359
              
              
              
              40.9
              %
              
              
              46.0
              %Other
      income, net
              
              
              499,891
              
              
              
              440,838
              
              
              
              2.0
              %
              
              
              1.6
              %Income
      from operations before income taxes
              
              
              6,355,884
              
              
              
              4,894,173
              
              
              
              25.2
              %
              
              
              17.8
              %Income
      tax expense
              
              
              1,649,431
              
              
              
              1,301,072
              
              
              
              6.5
              %
              
              
              4.7
              %Net
      income
              
              
              4,706,454
              
              
              
              3,593,101
              
              
              
              18.7
              %
              
              
              13.1
              %




Revenues




Our
revenues are derived from the operation of the Expressway. Our revenues
decreased by approximately $2.3 million, or 8.4%, from approximately $27.5
million for the six months ended December 31, 2008 to approximately $25.2
million for the six months ended December 31, 2009. The decrease was mainly
due to an unprecedented heavy snow storm in November 2009. Severe weather, harsh
cold, heavy snow and freezing rain disrupted air, road and rail transportation,
which caused the Pinglin Expressway to close for a long time. As a result, the
converted average daily traffic volume decreased 1,632 units, or 10.8% from
15,087 units for the six months ended December 31, 2008 to 13,455 units for the
six months ended December 31, 2009.




Operating
Costs




Our operating costs mainly represent
the road maintenance costs, road management costs, direct construction costs and
labor costs associated with toll operations. For the six months ended
December 31, 2009, our operating costs sharply decreased by approximately
$1.6 million, or 43.1%, to approximately $2.1 million, compared to approximately
$3.7 million for the six months ended December 31, 2008. The decrease is
mainly due to the decrease in our road maintenance costs. Due to the decline in
our revenues during the six months ended December 31, 2009, costs related only
to routine maintenance and improvement of traffic signs and road surfaces were
incurred.




Depreciation
and Amortization




Our total depreciation and amortization
related to toll operations increased by approximately $0.6 million, or 15.3%,
from approximately $3.9 million for the six months ended December 31, 2008
to approximately $4.5 million for the six months ended December 31,
2009.




Depreciation of toll
road infrastructures is calculated to write-off such cost on a
units-of-usage basis.  The Company recorded the depreciation based on
the ratio of actual traffic volume incurred during the period compared to the
total expected traffic volume of the toll roads during the operation licensing
period, as estimated.




Management
assessed the future total expected traffic volume at each period end.
Considering the current economy environment and the actual traffic volume
evolvement during the year ended June 30, 2009, compared to prior years’
estimate, management believed that there was significant decline in future total
anticipated volume. Based on such estimation, the depreciation for the six
months ended December 31, 2009 increased 15.3% compared to the six months ended
December 31, 2008, by the calculation according to the aforementioned
units-of-usage basis.


11




Gross
Profit




Our gross profit decreased by
approximately $1.3 million, or 6.7%, from approximately $19.9 million for the
six months ended December 31, 2008 to approximately $18.6 million for the
six months ended December 31, 2009.  Such gross profit decrease
is primarily due to the decrease in our revenues and the increase in our
depreciation and amortization, partially offset by the decrease in our operating
costs.




Gross profit as a percentage of
revenues increased from 72.5% for the six months ended December 31, 2008 to
73.9% for the six months ended December 31, 2009.




General
and Administrative Expenses




Our general and administrative expenses
mainly represent employee payroll and welfare, traveling expenses, vehicle
gasoline and maintenance costs, entertainment expenses, consulting fees,
provisions for doubtful accounts, depreciation and miscellaneous taxes. General
and administrative expenses decreased by approximately $0.3 million, or 12.8%,
from approximately $2.8 million for the six months ended December 31, 2008 to
approximately $2.5 million for the six months ended December 31, 2009. Such
decrease is primarily due to the decrease in our consulting fees, amounting to
approximately $0.2 million.




Interest
Expense, Net




Net interest expense decreased by
approximately $2.4 million, or 18.8%, from approximately $12.6 million for the
six months ended December 31, 2008 to approximately $10.3 million for the
six months ended December 31, 2009. This decrease is primarily due to the
decreased interest rate of our loans and the decrease in our loan
principal.  The People’s Bank of China decreased the benchmark of the
interest rate for long term loans over five years from 7.83% for the six months
ended December 31, 2008 to 5.94% for the six months ended December 31, 2009.
Accordingly, our lenders decreased their interest rates to some degree. In other
hand, our loan principal decreased approximately $4.7 million from December 31,
2008 to December 31, 2009, which also decreased our interest
expense.




Income
Tax Expense




Income tax expense increased by
approximately $0.3 million, or 26.8%, from approximately $1.3 million for the
six months ended December 31, 2008 to approximately $1.6 million for the
six months ended December 31, 2009, as a result of the increase in our
income from operations. Our effective tax rate was 26% and 27% for the six
months ended December 31, 2009 and 2008, respectively.




Net
Income




Our net income increased by
approximately $1.1 million, or 31.0%, from approximately $3.6 million for the
six months ended December 31, 2008 to approximately $4.7 million for the
six months ended December 31, 2009. This increase is primarily due to the
decrease in our costs and expenses, partially offset by the decrease in our
revenues.




Liquidity
and Capital Resources




We generally finance our operations
through, to a substantial extent, operating profit and a combination of
borrowings from banks and capital contributions from Wise On China Limited.
During the reporting periods, we arranged a number of bank loans to satisfy our
financing needs. As of the date of this report, we have not experienced any
difficulty in raising funds by bank loans, and we have not experienced any
liquidity problems in settling our payables in the normal course of business and
repaying our bank loans when they fall due.


12




The following table sets forth the
summary of our cash flow, in dollars, for the periods indicated:




Six Months Ended December 312009
                
                
                2008Net
      cash provided by operating activities
                
                $
                7,867,166
                
                
                $
                2,671,137Net
      cash provided by investing activities
                
                
                750,335
                
                
                
                1,595,741Net
      cash used in financing activities
                
                
                (9,048,839
                )
                
                
                (7,777,945
                )Net
      decrease in cash and cash equivalents
                
                
                (431,338
                )
                
                
                (3,511,067
                )Effect
      of exchange rate changes on cash
                
                
                (23,618
                )
                
                
                (65,748
                )Cash
      and cash equivalents at beginning of period
                
                
                1,614,260
                
                
                
                5,769,344Cash
      and cash equivalents at end of period
                
                $
                1,159,304
                
                
                $
                2,192,529




Operating
Activities




Net cash provided by operating
activities was approximately $7.9 million for the six months ended
December 31, 2009, as compared to $2.7 million for the six months ended
December 31, 2008.  This increase is primarily due to the
increase in our net income and to a lesser extent, the delay of payment of
relevant expenditures.




Investing
Activities




Net cash provided by investing
activities was approximately $0.8 million for the six months ended December 31,
2009 as compared to approximately $1.6 million for the six months ended
December 31, 2008.  This decrease is primarily due to the fact
that we settled more payables with our contractors during the six months ended
December 31, 2009, as compared to the six months ended December 31, 2008, which
resulted in a net cash outflow of approximately $4.0 million during the periods,
partially offset by a decrease in capital expenditures of approximately $1.0
million and a repayment from a related party of approximately $2.2 million
during the period ended December 31, 2009.




Financing
Activities




Net cash used in financing activities
was $9.0 million for the six months ended December 31, 2009, as compared to
approximately $7.8 million for the six months ended December 31, 2008. Such
change is primarily due to the fact that we repaid more long-term bank loans
during the six months ended December 31, 2009, as compared to the six
months ended December 31, 2008.




Working
Capital




Our working capital decreased by
approximately $112.0 million from approximately $120.5 million as of
June 30, 2009 to approximately $8.5 million as of December 31,
2009.  This was primarily due to a decrease in current notes
receivable from a related party, an advance to a related party, accounts
receivable, restricted cash, cash and cash equivalents and other current assets
of approximately $74.8 million, $32.7 million, $0.6 million, $3.6 million, $0.5
million and $0.9 million, respectively, and an increase in current portion of
long-term bank loans and amount due to related party of approximately $2.5
million and $0.7 million, respectively, partially offset by an decrease in notes
payable, payable to contractors and other payables and accrued liabilities of
approximately $3.1 million, $1.3 million and $0.4 million,
respectively.




The
Company currently generates its cash flow through operations and the Company
believes that its cash flow generated from operations will be sufficient to
sustain operations for the next twelve (12) months. From time to time, the
Company may explore new expansion opportunities and funding sources from which
our management may consider seeking external funding and
financing.


13




Capital
Expenditures




We made capital expenditures of
approximately $0.2 million and $1.2 million for the six months ended
December 31, 2009 and 2008, respectively. Capital expenditures principally
consisted of toll road infrastructures, toll stations and ancillary facilities,
communication and monitoring equipment and other equipment related to our toll
operations. If we are permitted to construct and operate a new toll road or
invest other toll road companies, we may require additional funds.  We
have no current plans to construct or invest in any new toll road companies at
this time.




Off-Balance
Sheet Arrangements




We do not have any outstanding
derivative financial instruments, off-balance sheet guarantees, interest rate
swap transactions or foreign currency forward contracts. Furthermore, we do not
have any retained or contingent interest in assets transferred to an
unconsolidated entity that serves as credit, liquidity or market risk support to
such entity. We do not have any variable interest in an unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or that
engages in leasing, hedging or research and development services
with us.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Interest
Rate Risk




Our
exposure to interest rate risk for changes in interest rates relates primarily
to the interest expense incurred by the bank loans and the interest income
generated by the loans to our related parties or bank deposits. We have not used
any derivative financial instruments in our investment portfolio or for cash
management purposes. Interest-earning instruments carry a degree of interest
rate risk. We have not been exposed nor do we anticipate being exposed to
material risks due to changes in interest rates. However, our future interest
expense or interest income may increase of expectations due to changes in
interest rates in the PRC.




Foreign
Exchange Risk




We do not
hold any derivative instruments and do not engage in any hedging activities.
Because most of our purchases and sales are made in RMB, any exchange rate
change affecting the value of the RMB relative to the U.S. dollar could have an
effect on our financial results as reported in U.S. dollars. If the RMB were to
depreciate against the U.S. dollar, amounts reported in U.S. dollars would be
correspondingly reduced. If the RMB were to appreciate against the U.S. dollar,
amounts reported in U.S. dollars would be correspondingly
increased.




ITEM
4. CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures




Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rule 13a-15(e) under the Exchange
Act. Based on this evaluation, our management, including our principal executive
officer and our principal financial officer, concluded that our disclosure
controls and procedures were effective as of the fiscal quarter covered by this
Report, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act (i) is recorded, processed,
summarized and reported within the time period specified in SEC rules and forms,
and (ii) is accumulated and communicated to our management, including our
principal executive officer and our principal financial officer, as appropriate
to allow appropriate decisions on a timely basis regarding required
disclosure.




Internal
Control over Financial Reporting




There
were no changes in internal control over financial reporting that occurred
during the fiscal quarter covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.


14




PART
II


OTHER
INFORMATION




ITEM
1. LEGAL PROCEEDINGS




In the
normal course of business, we are named as defendant in lawsuits in which claims
are asserted against us. In our opinion, the liabilities, if any, which may
ultimately result from such lawsuits, are not expected to have a material
adverse effect on our financial position, results of operations or cash flows.
As of the date hereof, there is no outstanding litigation with the Company
except as set forth below.




ITEM
1A. RISK FACTORS




Not
required for a “smaller reporting company”.




ITEM
2. UREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




During
the quarter ended December 31, 2009, the Company had no unregistered sales of
equity securities.




ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS




None.




ITEM
5. OTHER INFORMATION




None.




ITEM
6. EXHIBITS




(a)
            Exhibits




EXHIBIT NO.
                              
                              DESCRIPTION
                              
                              LOCATION3.1
                              
                              Articles
      of Incorporation of Learning Quest Technologies, Inc.
                              
                              Incorporated
      by reference to Exhibit 3.01 to the Company’s Form 10-SB as filed with the
      SEC on December 17, 2004.3.2
                              
                              Amended
      and Restated Bylaws of China Infrastructure Investment Corporation, dated
      as of May 21, 2008.
                              
                              Incorporated
      by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K as
      filed with the SEC on May 22,
2008.


15





3.3
                                  
                                  Certificate
      of Incorporation of Color Man Holdings Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.4
                                  
                                  Certificate
      of Incorporation of Wise On China Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.5
                                  
                                  Certificate
      of Incorporation of Pingdingshan Pinglin Expressway Co., Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.6
                                  
                                  Company
      Charter of Color Man Holdings Limited (Memorandum of Association and
      Articles of Association
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.7
                                  
                                  Company
      Charter of Wise On China Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.8
                                  
                                  Articles
      of Association of Pingdingshan Pinglin Expressway Co., Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.1
                                  
                                  Share
      Exchange Agreement, dated February 8, 2008, by and among Learning Quest
      Technologies, Inc., Color Man Holdings Ltd. and Joylink Holdings
      Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.2
                                  
                                  Chartered
      Rights Agreement on Pingdingshan-Linru Expressway Project, dated April 10,
      2003, by and between Pingdingshan Pinglin Expressway Co., Ltd. and
      Pingdingshan Bureau of Communications
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.3
                                  
                                  Loan
      Contract of the Year 2004, dated December 28, 2004, by and between the
      China Development Bank and Pingdingshan Pinglin Expressway Co.,
      Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.4
                                  
                                  Loan
      Contract of the Fixed Assets (No. YBZ No. 0054, 2005), dated July 29,
      2005, by and between The Pingdingshan Branch of Industrial and Commerical
      Bank of China and Pingdingshan Pinglin Expressway Co.,
Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.


16





10.5
                                
                                Loan
      Contract, dated February 25, 2005, by and between the Agricultural Bank of
      China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin
      Expressway Co., Ltd.
                                
                                Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.6
                                
                                Loan
      Contract of the Year 2007, dated September 28, 2007, by and between the
      China Development Bank and Pingdingshan Pinglin Expressway Co.,
      Ltd.
                                
                                Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.7
                                
                                Loan
      Contract, dated June 7, 2005, by and between the Agricultural Bank of
      China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin
      Expressway Co., Ltd.
                                
                                Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.8
                                
                                General
      Loan Contract, dated November 29, 2004, by and between the China
      Development Bank and Pingdingshan Pinglin Expressway Co.,
    Ltd.
                                
                                Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.9
                                
                                Loan
      Contract of the Fixed Assets (No. YBZ No. 0051, 2005), dated July 29,
      2005, by and between The Pingdingshan Branch of Industrial and Commerical
      Bank of China and Pingdingshan Pinglin Expressway Co.,
Ltd.
                                
                                Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.14.1
                                
                                Code
      of Ethics
                                
                                Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on September 29, 200816.1
                                
                                Auditor
      Letter
                                
                                Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on September 29, 200831.1
                                
                                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002
                                
                                Provided
      herewith31.2
                                
                                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                                
                                Provided
      herewith32.1
                                
                                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                                
                                Provided
      herewith


17





32.2
                      
                      Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                      
                      Provided
      herewith99.1
                      
                      Audit
      Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22, 200899.2
                      
                      Compensation
      Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22, 200899.3
                      
                      Corporate
      Governance and Nominating Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22,
2008


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SIGNATURES




Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Quarterly Report on Form
10-Q report to be signed on its behalf by the undersigned, thereunto duly
authorized.




Date: February
      12, 2010
                          By:
                          /s/ Li XipengName:Li
      XipengChief
      Executive Officer, Principal
                            ExecutiveOfficer
      and Chairman of the BoardDate: February
      12, 2010
                          By:
                          /s/
      Zhang ChunxianName:Zhang
      ChunxianChief
      Financial Officer, Principal
                            Financial
      andAccounting
      Officer and Director


19