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, 2008





OR





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





For
the transition period from ______ to __________





COMMISSION
FILE NUMBER: 000-51081





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 o





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 16, 2009, 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
              
              13ITEM
      4. CONTROLS AND PROCEDURES
              
              13PART
      II OTHER INFORMATION
              
              14ITEM
      1. LEGAL PROCEEDINGS
              
              14ITEM
      1A. RISK FACTORS
              
              14ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
              
              14ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
              
              14ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
              
              14ITEM
      5. OTHER INFORMATION
              
              14ITEM
      6. EXHIBITS
              
              15SIGNATURES
              
              17EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32.2




2




PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS




TABLE
OF CONTENTS





PageCONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 (UNAUDITED) AND JUNE
      30, 2008
              
              F-1
      – F-2CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE
      AND SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
(UNAUDITED)
              
              F-3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER
      31, 2008 AND 2007 (UNAUDITED)
              
              F-4
      – F-5NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX
      MONTHS ENDED DECEMBER 31, 2008 AND 2007
              
              F-6
      – F-19





3




CHINA
INFRASTRUCTURE INVESTMENT CORPORATION


(FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





ASSETS





December 31,
                    2008
                  
                  
                  June 30,
                    2008(Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  2,192,529
                  
                  
                  $
                  5,769,344Restricted
      cash
                  
                  
                  29,179
                  
                  
                  
                  29,104Notes
      receivable
                  
                  
                  806,631
                  
                  
                  
                  776,936Accounts
      receivable
                  
                  
                  571,881
                  
                  
                  
                  2,006,848Other
      receivables
                  
                  
                  143,855
                  
                  
                  
                  419,642Notes
      receivable from related parties, current
                  
                  
                  5,481,930
                  
                  
                  
                  10,197,016Advance
      to a related party
                  
                  
                  32,635,336
                  
                  
                  
                  21,733,471Other
      current assets
                  
                  
                  470,970
                  
                  
                  
                  991,768Total current
    assets
                  
                  
                  42,332,311
                  
                  
                  
                  41,924,129Toll
      road infrastructures, net
                  
                  
                  442,861,491
                  
                  
                  
                  443,672,007Plant
      and equipment, net
                  
                  
                  15,896,488
                  
                  
                  
                  15,943,451Land
      use rights, net
                  
                  
                  48,196,008
                  
                  
                  
                  49,066,392Long-term
      investment
                  
                  
                  1,458,959
                  
                  
                  
                  1,455,223Notes
      receivable from related parties, long-term
                  
                  
                  139,608,658
                  
                  
                  
                  139,872,158Deferred
      taxes
                  
                  
                  6,341,826
                  
                  
                  
                  6,059,721Total long-term
      assets
                  
                  
                  654,363,430
                  
                  
                  
                  656,068,952TOTAL
      ASSETS
                  
                  $
                  696,695,741
                  
                  
                  $
                  697,993,081




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’ EQUITY





December 31,
                  2008
                
                
                June 30,
                  2008(Unaudited)CURRENT
      LIABILITIESOther
      payables and accrued liabilities
                
                $
                2,147,847
                
                
                $
                4,840,299Current
      portion of long-term loans
                
                
                13,139,389
                
                
                
                10,678,425Payable
      to contractors
                
                
                26,979,635
                
                
                
                24,224,039Deferred
      taxes
                
                
                9,893,237
                
                
                
                8,556,534Other
      current liabilities
                
                
                59,405
                
                
                
                225,915Total
      current liabilities
                
                
                52,219,513
                
                
                
                48,525,212LONG-TERM
      LIABILITIESLong-term
      portion of bank loans
                
                
                457,488,839
                
                
                
                466,512,413Deferred
      revenue
                
                
                6,608,414
                
                
                
                6,627,828Total
      long-term liabilities
                
                
                464,097,253
                
                
                
                473,140,241TOTAL
      LIABILITIES
                
                
                516,316,766
                
                
                
                521,665,453CONTINGENCIESSHAREHOLDERS’
      EQUITYCommon
      stock, $.001 par value, 150,000,000 shares authorized,80,000,000
      shares issued and outstanding as of December 31, 2008 and June 30, 2008,
      respectively
                
                
                80,000
                
                
                
                80,000Additional
      paid-in capital
                
                
                140,573,673
                
                
                
                140,573,673Accumulated
      other comprehensive income
                
                
                27,276,777
                
                
                
                26,818,531Retained
      earnings
                
                
                12,448,525
                
                
                
                8,855,424Total
      Shareholders’ Equity
                
                
                180,378,975
                
                
                
                176,327,628TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                
                $
                696,695,741
                
                
                $
                697,993,081





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 31,2008
                
                
                2007
                
                
                2008
                
                
                2007REVENUES
                
                $
                12,101,788
                
                
                $
                13,954,729
                
                
                $
                27,502,808
                
                
                $
                28,558,742OPERATING
      COSTS
                
                
                2,466,673
                
                
                
                2,446,018
                
                
                
                3,671,134
                
                
                
                2,969,505DEPRECIATION
      AND AMORTIZATION
                
                
                1,792,717
                
                
                
                1,597,684
                
                
                
                3,892,036
                
                
                
                3,362,476GROSS
      PROFIT
                
                
                7,842,398
                
                
                
                9,911,027
                
                
                
                19,939,638
                
                
                
                22,226,761General
      and administrative expenses
                
                
                1,501,042
                
                
                
                1,495,916
                
                
                
                2,842,944
                
                
                
                2,426,903INCOME
      FROM OPERATIONS
                
                
                6,341,356
                
                
                
                8,415,111
                
                
                
                17,096,694
                
                
                
                19,799,858OTHER
      INCOME (EXPENSES)Interest expense,
      net
                
                
                (6,149,805
                )
                
                
                (5,604,709
                )
                
                
                (12,643,359
                )
                
                
                (11,515,933
                )Other income,
    net
                
                
                185,226
                
                
                
                94,580
                
                
                
                440,838
                
                
                
                291,399INCOME
      FROM OPERATIONS BEFORE INCOME TAXES
                
                
                376,777
                
                
                
                2,904,982
                
                
                
                4,894,173
                
                
                
                8,575,324INCOME
      TAX EXPENSE
                
                
                (94,194
                )
                
                
                (721,329
                )
                
                
                (1,301,072
                )
                
                
                (2,138,950
                )NET
      INCOME
                
                
                282,583
                
                
                
                2,183,653
                
                
                
                3,593,101
                
                
                
                6,436,374OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain
                
                
                29,394
                
                
                
                4,121,417
                
                
                
                458,246
                
                
                
                6,203,197OTHER
      COMPREHENSIVE INCOME, NET
                
                
                29,394
                
                
                
                4,121,417
                
                
                
                458,246
                
                
                
                6,203,197COMPREHENSIVE
      INCOME
                
                $
                311,977
                
                
                $
                6,305,070
                
                
                $
                4,051,347
                
                
                $
                12,639,571WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
                
                
                80,000,000
                
                
                
                55,000,000
                
                
                
                80,000,000
                
                
                
                55,000,000NET
      INCOME PER COMMON SHARE, BASIC AND DILUTED
                
                $
                0.00
                
                
                $
                0.04
                
                
                $
                0.04
                
                
                $
                0.12




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 31,2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                
                $
                3,593,101
                
                
                $
                6,436,374Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                4,189,806
                
                
                
                3,631,049Deferred
      taxes
                
                
                1,054,598
                
                
                
                1,846,700Deferred
      revenue
                
                
                (301,840
                )
                
                
                (277,357
                )Imputed
      interest
                
                
                265,453
                
                
                
                246,399Loss
      from disposal of plant and equipment
                
                
                -
                
                
                
                100,283Changes
      in operating assets and liabilities:(Increase)
      Decrease In:Accounts
      receivable
                
                
                1,434,967
                
                
                
                (1,239,838
                )Other
      receivables
                
                
                275,787
                
                
                
                (254,749
                )Other
      current assets
                
                
                520,797
                
                
                
                (599,852
                )Increase
      (Decrease) In:Other
      payables and accrued liabilities
                
                
                (2,692,452
                )
                
                
                (310,552
                )Other
      current liabilities
                
                
                (166,510
                )
                
                
                (8,444
                )Net
      cash provided by operating activities
                
                
                8,173,707
                
                
                
                9,570,013CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of construction in progress
                
                
                (848,587
                )
                
                
                (4,285,727
                )Purchases
      of plant and equipment
                
                
                (311,068
                )
                
                
                (488,341
                )Proceeds
      from disposition of plant and equipment
                
                
                -
                
                
                
                59,365Increase
      in payable to contractors
                
                
                2,755,596
                
                
                
                4,170,003Decrease
      (increase) in notes receivable from related parties for
      interest
                
                
                5,464,629
                
                
                
                (4,479,271
                )(Increase)
      decrease in advance to a related party
                
                
                (10,967,399
                )
                
                
                8,897,185Net
      cash (used in) provided by investing activities
                
                
                (3,906,829
                )
                
                
                3,873,214CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from long-term bank loans
                
                
                17,913,556
                
                
                
                133,890,317Repayments
      of long-term bank loans
                
                
                (25,691,501
                )
                
                
                (134,136,675
                )Repayments
      of short- term bank loans
                
                
                -
                
                
                
                (10,711,225
                )Repayments
      of notes payable
                
                
                -
                
                
                
                (5,366,324
                )Net
      cash used in financing activities
                
                
                (7,777,945
                )
                
                
                (16,323,907
                )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                
                
                (3,511,067
                )
                
                
                (2,880,680
                )Effect
      of exchange rate changes on cash
                
                
                (65,748
                )
                
                
                1,866,956Cash
      and cash equivalents at beginning of period
                
                
                5,769,344
                
                
                
                5,830,962CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                2,192,529
                
                
                $
                4,817,238SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                
                $
                17,913,556
                
                
                $
                15,386,442Income
      taxes paid
                
                $
                -
                
                
                $
                669,452





See
accompanying notes to the condensed consolidated financial
statements.





F-4





CHINA
INFRASTRUCTURE INVESTMENT CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)




SUPPLEMENTAL
NON-CASH DISCLOSURES:




1.
            During
      the six months ended December 31, 2008 and 2007, $848,587 and $4,285,727
      were transferred from construction in progress to toll road
      infrastructures, respectively.





See
accompanying notes to the condensed consolidated financial
statements.





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, 2008 AND 2007
(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. Effective April 5, 2008, the Company
changed its name to China Infrastructure Investment Corporation.




On
February 8, 2008, the Company entered into a Share Exchange Agreement (the
“Exchange Agreement”) with Color Man Holdings Limited, a British Virgin Islands
company (“CMH”) and Joylink Holdings Limited, a British Virgin Islands company
and the sole stockholder of CMH (the “Stockholder”). As a result of the share
exchange, CIIC acquired all of the issued and outstanding securities of CMH, an
inactive holding company, from the Stockholder in exchange for 54,400,000
newly-issued shares of CIIC’s common stock, par value $0.001 per share (“Common
Stock”), representing 68% of CIIC’s issued and outstanding Common Stock (the
“Exchange”). The Company effectuated a 2-1 reverse split of its Common Stock
effective on December 3, 2007 effectively reducing the number of issued and
outstanding shares of Common Stock to 25,000,000 shares. On January 22, 2008,
the Company completed a dividend distribution to its shareholders of record as
of January 18, 2008 in the amount equal to five percent (5%) (1,250,005 shares)
of the then issued and outstanding Common Stock. There were 26,250,005 shares
outstanding in CIIC immediately before the Share Exchange Transaction and the
cancellation of 650,005 shares at the time of the Exchange. The Exchange was
intended to constitute a tax-free reorganization pursuant to the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. As a
result of the Exchange, CMH became a wholly-owned subsidiary of CIIC. Generally
accepted accounting principles require that a company whose shareholders retain
the majority interest in a combined business be treated as the acquirer for
accounting purpose, resulting in a reverse acquisition. Accordingly, the share
exchange transaction has been accounted for as a recapitalization of
CIIC.




CMH was
formed on April 11, 2005 as a British Virgin Islands company with authorized
capital of US$50,000 divided into 50,000 shares, each having a par value of
US$1.00.  Wise On China Limited (“WOCL”) was established and
incorporated on November 2, 2005 with authorized share capital of HK$10,000
(approximately US$1,279.44) divided into 10,000 shares, each having a par value
of HK$1.00 (approximately US$0.13).  CMH’s sole business is to act as
a holding company for WOCL, and WOCL’s sole business is to act as a holding
company for the Company.  CMH owns one share of WOCL approximately
equal to US$0.13 in registered capital.




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, 2008 AND 2007
(UNAUDITED)




1.           ORGANIZATION
AND PRINCIPAL ACTIVITIES (CONTINUED)




Pingdingshan
Pinglin Expressway Co., Ltd (“Ping”) was incorporated under the laws of the
People’s Republic of China (“PRC”) on May 12, 2003 by four investors, namely,
Henan Shengrun Venture Investment Management Co., Ltd. (“SVIC”), Henan
Pingdingshan Zhongya Road and Bridge Construction Co., Ltd. (“PZRB”),
Pingdingshan Expressway Construction Co., Ltd. (“PECC”), and Zhongyuan Trust
& Investment Co., Ltd. (“ZTIC”). At establishment, the percentage of each
party’s equity interests was 46%, 18%, 18% and 18% respectively. On May 21,
2007, PZRB, PECC, and ZTIC transferred their equity interests in Ping to SVIC
and LI, Xi Peng. As a result, Ping is held by SVIC and Li, Xi Peng with equity
interests of 95% and 5%, respectively. Ping’s approved operation tenure is 30
years from May 21, 2007. On July 30, 2007, Ping’s shareholders completed an
acquisition and exchange transaction with WOCL. After the transfer, WOCL owned
100% interest of Ping.




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)
            Basis
      of Presentation




The
unaudited condensed consolidated financial statements of China Infrastructure
Investment Corporation and subsidiaries have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information
and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they
do not include all the information and footnotes required by accounting
principles generally accepted in the United States of America for annual
financial statements. However, the information included in these interim
financial statements reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary for
the fair presentation of the consolidated financial position and the
consolidated results of operations. Results shown for interim periods are not
necessarily indicative of the results to be obtained for a full year. The
condensed consolidated balance sheet information as of June 30, 2008 was derived
from the audited consolidated financial statements included in the Company’s
Annual Report on Form 10-K.  These interim financial statements should be
read in conjunction with that report.




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, 2008 AND 2007
(UNAUDITED)




2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




(b)
            Principles
      of Consolidation




The
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.





(c)
            Concentrations




The
location of the toll road and the operations of the Company are solely in the
Henan Province, PRC for the six months ended December 31, 2008 and
2007.




(d)
            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.




(e)
            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.




Management
makes these estimates using the best information available at the time the
estimates are made.  Actual results could differ materially from those
estimates.




(f)
            Fair
      Value of Financial Instruments




The
Company’s financial instruments include restricted cash, accounts receivable,
notes receivable, due from related parties, other receivables, other current
assets, notes payable, other payables and accrued liabilities, short-term bank
loans, payable to contractors, other current liabilities and deferred taxes.
Management has 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, 2008.




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, 2008 AND 2007
(UNAUDITED)




2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




(g)
            Cash
      and Cash Equivalents




For
financial reporting purposes, the Company considers all highly liquid
investments purchased with original maturity of three months or less to be cash
equivalents. The Company maintains no bank accounts in the United States of
America.




(h)
            Construction
      in Progress




Construction
in progress represents costs incurred in the construction of expressways and
bridges. The costs includes 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.




(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, 2008 and 2007, 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 Statement of
Financial Accounting Standards (“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, 2008 and 2007.




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, 2008 AND 2007
(UNAUDITED)




2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




(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)
            Deferred
      Revenue




The
Company rents four gas stations to Petro China Company Limited (“PCCL”)
Pingdingshan branch from January 1, 2006 for 30 years. The Company received the
entire 30 year rental fee net of the business tax of $5,372,708 from PCCL in
2006.




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, 2008 and 2007 is $301,840 and $277,357 respectively.
The imputed interest for the six months ended December 31, 2008 and 2007 is
$265,453 and $246,399, respectively.




(n)
            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, 2008 and 2007.





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, 2008 AND 2007
(UNAUDITED)




2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




(o)
            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,
                        2008
                      
                      
                      December 31,
                        2007Periods
      ended RMB:  US$ exchange rate
                      
                      
                      6.8542
                      
                      
                      
                      7.3141Average
      RMB:  US$ exchange rate for the three months
    ended
                      
                      
                      6.8547
                      
                      
                      
                      7.4151Average
      RMB:  US$ exchange rate for the six months ended
                      
                      
                      6.8630
                      
                      
                      
                      7.4688





(p)
            Recent
      Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 141 (R), Business Combinations.
SFAS No. 141 (R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired. SFAS No. 141
(R)  is effective for financial statements issued for fiscal years
beginning after December 15, 2008. Early adoption is prohibited. The
Company has not yet determined the effect on our consolidated financial
statements, if any, upon adoption of SFAS No. 141 (R) . SFAS 141
(R) will significantly affect the accounting for future business
combinations and we will determine the accounting as new combinations
occur.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements. SFAS No. 160 establishes accounting and
reporting standards that require the ownership interests in subsidiaries’
non-parent owners be clearly presented in the equity section of the balance
sheet; requires the amount of consolidated net income attributable to the parent
and to the noncontrolling interest be clearly identified and presented on the
face of the consolidated statement of income; requires that changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently; requires that when a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value and the gain or loss
on the deconsolidation of the subsidiary be measured using the fair value of any
noncontrolling equity; requires that entities provide disclosures that clearly
identify the interests of the parent and the interests of the noncontrolling
owners. SFAS No. 160 is effective as of the beginning of an entity’s first
fiscal year that begins after December 15, 2008. The Company has not
determined the impact, if any, SFAS No. 160 will have on its 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, 2008 AND 2007
(UNAUDITED)




2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




(p)
            Recent
      Accounting Pronouncements
(continued)




In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities" ("SFAS No. 161"), which amends SFAS No.133 and expands
disclosures to include information about the fair value of derivatives, related
credit risks and a company's strategies and objectives for using derivatives.
SFAS No. 161 is effective for fiscal periods beginning on or after November 15,
2008. The Company is currently in the process of assessing the impact that SFAS
No. 161 may have on the disclosures in its financial statements.





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, 2008 AND 2007
(UNAUDITED)




3.           NOTES
RECEIVABLE




Notes
receivable is from unrelated companies and consists of the
following:




December 31,
                            2008
                          
                          
                          June 30,
                            2008(Unaudited)Notes
      receivable from unrelated companies
                          
                          $
                          806,631
                          
                          
                          $
                          776,936





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. Interest
income for the six months ended December 31, 2008 and 2007 was $27,665 and
$18,711, respectively. The Company is now negotiating with Pingdingshan Traffic
Administration for the renewal of such agreement.




4.           NOTES
RECEIVABLE FROM RELATED PARTIES




December 31,
                        2008
                      
                      
                      June 30,
                        2008(Unaudited)Tai Ao Expressway Co., LtdPrincipal
                      
                      $
                      70,033,872
                      
                      
                      $
                      69,854,502Interest
      receivable
                      
                      
                      2,741,826
                      
                      
                      
                      4,935,18972,775,698
                      
                      
                      
                      74,789,691Xinyang Expressway Co., LtdPrincipal
                      
                      
                      69,574,786
                      
                      
                      
                      70,017,656Interest
      receivable
                      
                      
                      2,740,104
                      
                      
                      
                      5,261,82772,314,890
                      
                      
                      
                      75,279,483Total
      notes receivable from related parties
                      
                      
                      145,090,588
                      
                      
                      
                      150,069,174Less:
      current portion
                      
                      
                      5,481,930
                      
                      
                      
                      10,197,016Long-term
      portion
                      
                      $
                      139,608,658
                      
                      
                      $
                      139,872,158





The notes
receivable were provided to these companies for their construction working
capital. The above two companies are related to the Company through a common
shareholder of the Company. The notes receivable are interest bearing and
unsecured. The interest rate is 7.83% and 7.20% per annum for the six months
ended December 31, 2008 and 2007, respectively. Interest income was $5,474,905
and $4,632,906 for the six months ended December 31, 2008 and 2007,
respectively.




F-13




CHINA
INFRASTRUCTURE INVESTMENT CORPORATION


(FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF DECEMBER 31, 2008 (UNAUDITED)




4.           NOTES
RECEIVABLE FROM RELATED PARTIES (CONTINUED)




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 to Tai Ao was
extended to June 29, 2010 with a 7.83% interest rate per annum. Interest is paid
annually.




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.




The
repayment schedule for the notes receivable from related parties is as
follows:




December
      31, 2009
                  
                  $
                  5,481,930December
      31, 2010
                  
                  
                  139,608,658Total
                  
                  $
                  145,090,588




5.           ADVANCE
TO A RELATED PARTY




December 31,
                        2008
                      
                      
                      June 30,
                        2008(Unaudited)Tai
      Ao Expressway Co., Ltd
                      
                      $
                      32,635,336
                      
                      
                      $
                      21,733,471




The
Company made advances to suppliers on behalf of Tai Ao Expressway Co., Ltd. for
the purchase of construction materials, amounting to approximately $33 million,
in order to develop a strategic relationship with such expressway company for
the purpose of advancing the future business development of the Company. The
balances of $32,635,336 and $21,733,471 at December 31, 2008 and June 30, 2008,
respectively, are unsecured, interest free and due on demand.




F-14




CHINA
INFRASTRUCTURE INVESTMENT CORPORATION


(FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF DECEMBER 31, 2008 (UNAUDITED)




6.           TOLL
ROAD INFRASTRUCTURES, NET




Toll road
infrastructures consist of the following:




December 31,
                          2008
                        
                        
                        June 30,
                          2008(Unaudited)At
      cost:
                        
                        $
                        455,043,119
                        
                        
                        $
                        453,825,417Less:  Accumulated
      depreciation
                        
                        
                        12,181,628
                        
                        
                        
                        10,153,410Toll
      road infrastructures, net
                        
                        $
                        442,861,491
                        
                        
                        $
                        443,672,007





Depreciation
expense for the six months ended December 31, 2008 and 2007 was $2,795,850 and
$2,356,055, respectively.




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 10.




7.           PLANT
AND EQUIPMENT, NET




Plant and
equipment consist of the following:




December 31, 2008
                  
                  
                  June 30, 2008(Unaudited)At
      cost:Toll
      station and ancillary facilities
                  
                  $
                  10,257,690
                  
                  
                  $
                  10,114,007Communication
      and monitoring equipment
                  
                  
                  5,749,445
                  
                  
                  
                  5,675,065Motor
      vehicles
                  
                  
                  1,464,473
                  
                  
                  
                  1,460,723Machinery
                  
                  
                  297,278
                  
                  
                  
                  296,516Office
      equipment
                  
                  
                  564,875
                  
                  
                  
                  429,82418,333,761
                  
                  
                  
                  17,976,135Less:  Accumulated
      depreciationToll
      station and ancillary facilities
                  
                  
                  968,246
                  
                  
                  
                  801,811Communication
      and monitoring equipment
                  
                  
                  481,832
                  
                  
                  
                  388,473Motor
      vehicles
                  
                  
                  714,119
                  
                  
                  
                  623,733Machinery
                  
                  
                  92,202
                  
                  
                  
                  73,989Office
      equipment
                  
                  
                  180,874
                  
                  
                  
                  144,6782,437,273
                  
                  
                  
                  2,032,684Plant
      and equipment, net
                  
                  $
                  15,896,488
                  
                  
                  $
                  15,943,451





Depreciation
expense for the six months ended December 31, 2008 and 2007 was $398,857 and
$360,609, respectively.




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, 2008 AND 2007
(UNAUDITED)




8.           LAND
USE RIGHTS




Land use
rights consist of the following:




December 31,
                      2008
                    
                    
                    June 30,
                      2008(Unaudited)Cost
                    
                    $
                    53,644,340
                    
                    
                    $
                    53,506,947Less:
      Accumulated amortization
                    
                    
                    5,448,332
                    
                    
                    
                    4,440,555Land
      use rights, net
                    
                    $
                    48,196,008
                    
                    
                    $
                    49,066,392





Amortization
expense for the six months ended December 31, 2008 and 2007 was $497,549 and
$457,192, respectively.




Amortization
expense for the next five years and thereafter is as follows:




December
      31, 2009
                        
                        $
                        1,992,751December
      31, 2010
                        
                        
                        1,992,751December
      31, 2011
                        
                        
                        1,992,751December
      31, 2012
                        
                        
                        1,992,751December
      31, 2013
                        
                        
                        1,992,751Thereafter
                        
                        
                        38,232,253Total
                        
                        $
                        48,196,008




9.           LONG-TERM
INVESTMENT




December 31, 2008
                        
                        
                        June 30, 2008(Unaudited)Ownership
                          Interest
                        
                        
                        Net Book
                          Value
                        
                        
                        Ownership
                          Interest
                        
                        
                        Net Book
                          ValueAt
      cost:Pingdingshan
      City Credit Co., Ltd.
                        
                        
                        3
                        %
                        
                        $
                        1,458,959
                        
                        
                        
                        3
                        %
                        
                        $
                        1,455,223





On March
29, 2006, Ping entered into a share purchase agreement with Pingdingshan City
Credit Co., Ltd., a local financial institution.  Pursuant to the
agreement, Ping obtained 3% of the total equity interest of Pingdingshan City
Credit Co., Ltd. with the consideration amounting to Rmb10 million
(approximately US$1.3 million).  Management of the Company adopted the
cost method for the accounting of such investment as the Company obtained a
minor interest in Pingdingshan City Credit Co., Ltd.




F-16




CHINA
INFRASTRUCTURE INVESTMENT CORPORATION


(FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF DECEMBER 31, 2008 (UNAUDITED)




10.         BANK
LOANS




Bank
loans consist of the following:




December 31,
                2008
              
              
              June 30,
                2008(Unaudited)Loan
      from National Development Bank of China Henan Branch, due May 20, 2017,
      bearing a 7.83% 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.
              
              $
              96,291,326
              
              
              $
              98,955,150Loan
      from Agricultural Bank of China, due November 20, 2011, bearing a 7.83%
      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.
              
              
              29,179,189
              
              
              
              29,104,456Loan
      from Agricultural Bank of China, due March 20, 2012, bearing a 7.83%
      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.
              
              
              29,179,189
              
              
              
              29,104,456Loan
      from Industrial and Commercial Bank of China Pingdingshan Branch, due
      November 19, 2019, 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.
              
              
              170,082,577
              
              
              
              174,504,497Loan
      from National Development Bank of China Henan Branch, due November 22,
      2022, bearing a 7.83% 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.
              
              
              145,895,947
              
              
              
              145,522,279Total
      bank loans
              
              
              470,628,228
              
              
              
              477,190,838Less:
      current portion
              
              
              13,139,389
              
              
              
              10,678,425Long-term
      portion
              
              $
              457,488,839
              
              
              $
              466,512,413




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, 2008 AND 2007
(UNAUDITED)




10.         LONG-TERM
BANK LOANS (CONTINUED)




For the
six months ended December 31, 2008 and 2007, interest expense was $17,913,556
and $15,503,345, 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, 2008 and June 30, 2008.  The repayment
schedule for the long-term bank loans is as follows:




December
      31, 2009
                  
                  $
                  13,139,389December
      31, 2010
                  
                  
                  30,165,446December
      31, 2011
                  
                  
                  39,905,459December
      31, 2012
                  
                  
                  54,495,054December
      31, 2013
                  
                  
                  27,247,527Thereafter
                  
                  
                  305,675,353Total
                  
                  $
                  470,628,228




11.         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, 2008
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.




Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
(“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN
48"). — AN INTERPRETATION OF FASB STATEMENT NO. 109, ACCOUNTING FOR 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. FIN 48 also provides guidance on recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. As of December 31, 2008, the Company did not
have a liability for unrecognized tax benefits.




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, 2008 AND 2007
(UNAUDITED)




11.         INCOME
TAX (CONTINUED)




Income
tax expense is summarized as follows:




Six months ended
                      December 31,2008
                    
                    
                    2007(Unaudited)
                    
                    
                    (Unaudited)Current
                    
                    $
                    254,229
                    
                    
                    $
                    267,320Deferred
                    
                    
                    1,046,843
                    
                    
                    
                    1,871,630Income
      tax expense
                    
                    $
                    1,301,072
                    
                    
                    $
                    2,138,950




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 31,2008
                  
                  
                  2007(Unaudited)
                  
                  
                  (Unaudited)Computed
      “expected” expense
                  
                  $
                  1,301,072
                  
                  
                  $
                  2,138,950Permanent
      differences
                  
                  
                  -
                  
                  
                  
                  -Income
      tax expense
                  
                  $
                  1,301,072
                  
                  
                  $
                  2,138,950




12.         CONTINGENCIES




Litigation:




(a)    On
June 27, 2007, China railway No. 5 bureau, the contractor who won the bid in the
Pinglin Expressway No. 2 road connection project, was sued by the subcontractors
Hujianting and Hefeiyue for postponing the commencing date of construction for
more than 10 months. The total damage claimed in this case was $647,364, and the
Company, as the 5th defendant, was brought into this case by the plaintiff. The
case is currently ongoing and the Company believes the claims against them are
without substance and they plan to vigorously defend themselves. As such, there
was no contingency accrual for this case at December 31, 2008.




(b)   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 as collateral for loans to the cement
factory.  Pingdingshan No. 3 Cement Factory went bankrupt and the
company that 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 the lending company
$485,851. The amount was paid in August 2006 and was netted against Other
Income, Net in the statement of income for the year ended June 30, 2007. 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 the lending company was rejected. Currently, the Company is in the progress
of pursuing the amount paid. No receivable for the contingency was recorded as
of December 31, 2008.




F-19




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 of China Infrastructure Investment
Corporation (the “Company”) 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
(also referred to herein as the “Expressway”) toll road 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 (6) 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 national trunk, the Nanjing to Luoyang expressway (also referred to
herein as the Nanluo Expressway).   The Nanluo Expressway links
the north-western regions to the south-eastern coastal regions of the People’s
Republic of China (the “PRC”). The construction of Pinglin Expressway started in
October 23, 2003 and was completed in two (2) phases. The first phase of the
construction which covered the part with a length of approximately 86
kilometers, linking Ruzhou and Pingdingshan in Henan Province, began commercial
operations in December 31, 2005.  On May 31, 2006, the second phase of
the construction, with the length of approximately 21 kilometers, linking
Pingdingshan and Yexian in Henan Province was completed. With the operation of
Pinglin Expressway, the key transport artery, national trunk Nanluo Expressway
was entirely put into operations.




The Pinglin Expressway is a dual
carriageway four (4) lane expressway, the toll section of which is 106 km in
length. Toll revenue from the passing vehicles through the Expressway’s six (6)
toll gates (South Pingdingshan, Pingdingshan New Town, Baofeng, Xiaotun, Ruzhou
and Wenquan) is the primary source of the Company’s earnings.  The
Expressway is also located between two (2) key cities, Luoyang and Luohe. The
Expressway extends from east to west, from Shilipu (the end of the
Luohe-Pingdingsha expressway), through Yexian and Pingdingshan and then to New
Xiying village at the joint of Pingdingshan and Luoyang.  The road is
lined with the Lianhuo (Lianyungang-Huoerguosi) national highway through the
ringroad in Luoyang, and then extends to the southeast of Luohe City and
connects with the Beijing-Zhuhai national highway into a network 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 Lianhuo high
way to Zhengzhou then to Beijing-Zhuhai national highway to alter to
Luoyang-Luohe section of Luonan route.  Furthermore, the Expressway
extends east to link the highway network of the Jiangsu and Anhui provinces and
also links the sea ports, including Shanghai.




The Company’s operating income is
achieved through toll charges on vehicles that go 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 charges system and clearing center which calculates and allocates toll charge
income according to the charge standards and the miles of travel of vehicles in
the expressway). The Company is specialized in the operation and management of
expressways. The maintenance projects are outsourced to professional road
construction enterprises.


4


The Company began generating operating
revenue in January 2006.  The Company had not yet started full
operation of the Expressway prior to June 2006, therefore the operating income
was at a low level and the growth was moderate. With the full operation of the
Expressway in June 2006, the operating income had seen sustained rapid growth at
that time.




After several years of operations, the
social awareness of the Expressway gradually increased, and passenger and
commercial vehicles is increasing rapidly. We believe that along with income
growth in the future, the profit earning capacity of the Company will improve
steadily.




Enterprise
Strategy




Henan is a 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, demands for infrastructure, the
expressway and other transportation infrastructure, urban facilities such as
heating, water supply, and sewerage treatment are also growing rapidly. The
existing infrastructure can no longer meet the needs of social
development.




Because the Chinese government’s
financial revenue growth is limited, the financial investment of the government
alone is unable to build huge infrastructure projects in a relatively short
period. In order to attract social funds, 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 enterprise to recover
their early input. In addition, the government will also give preferential
treatment on charges.




To seize the historic opportunity of
rapid development of infrastructure of China and Henan, to rapidly strengthen
and expand the Company’s infrastructure industries, to create advantages on
scale, thereby to further reduce the cost of operation, the Company plans to
invest in construction of purchase additional expressways, thermoelectricity,
water supply or sewage treatment facilities and other infrastructure assets with
good profit prospects in the next few years. Because the amount of investment in
infrastructure is often relatively large, and the investment funds need to be in
position within two (2) or three (3) years, the accumulated capital from the
Company’s operation alone cannot meet the demand for investment in the future.
The Company desires to actively participate in the capital markets, to use
various channels of financing to enhance its ability to raise funds, thus to
promote and achieve these 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 construction or purchase of
infrastructure assets and to exploit all the advantages in management,
government relationship and stockholder support to make the Company a
professional, continuously-growing infrastructure investment
operator.




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




Significant
Accounting Policies




We prepare our financial statement in
accordance with generally accepted accounting principles in the United States,
which requires 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
condensed consolidated financial statements included herein.


5


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 similar nature and functions and the practice in similar industry. 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, note 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, 2008 and
2007.




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, 2008 and 2007 or for the six months ended
December 31, 2008 and 2007.




Contingencies




In 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, 2008 and 2007 or for the six months ended
December 31, 2008 and 2007.


6




Recent
Accounting Pronouncements




In December 2007, the FASB issued SFAS
No. 141 (R), Business Combinations. SFAS No. 141 (R) requires an
acquirer to measure the identifiable assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree at their fair values on the
acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. SFAS No. 141 (R) is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
adoption is prohibited. The Company has not yet determined the effect on our
consolidated financial statements, if any, upon adoption of SFAS No. 141
(R) . We are aware that our accounting for minority interest will change
and we are considering those effects now but believe the effects will only be a
reclassification of minority interest from mezzanine equity to our stockholder’s
equity section in the balance sheet. SFAS 141 (R) will significantly affect
the accounting for future business combinations and we will determine the
accounting as new combinations occur.




In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements. SFAS No. 160 establishes accounting and reporting standards that
require the ownership interests in subsidiaries’ non-parent owners be clearly
presented in the equity section of the balance sheet; requires the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; requires that changes in a parent’s ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently; requires that when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary be
initially measured at fair value and the gain or loss on the deconsolidation of
the subsidiary be measured using the fair value of any noncontrolling equity;
requires that entities provide disclosures that clearly identify the interests
of the parent and the interests of the noncontrolling owners. SFAS No. 160 is
effective as of the beginning of an entity’s first fiscal year that begins after
December 15, 2008. The Company has not determined the impact, if any, SFAS
No. 160 will have on its financial statements.




In March 2008, the FASB issued SFAS No.
161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS
No. 161"), which amends SFAS No.133 and expands disclosures to include
information about the fair value of derivatives, related credit risks and a
company's strategies and objectives for using derivatives. SFAS No. 161 is
effective for fiscal periods beginning on or after November 15, 2008. The
Company is currently in the process of assessing the impact that SFAS No. 161
will have on the disclosures in its financial statements.




Results
of Operations




Results
of Operations for the Three (3) Months Ended December 31, 2008 Compared to
the Three (3) Months Ended December 31, 2007




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




Three Months Ended
                  December 31
                  (Unaudited)
              
              
              Three Months Ended
                  December 31
                  (Unaudited)2008
              
              
              2007
              
              
              2008
              
              
              2007Revenues
              
              $
              12,101,788
              
              
              $
              13,954,729
              
              
              
              100.0
              %
              
              
              100.0
              %Operating
      costs
              
              
              2,466,673
              
              
              
              2,446,018
              
              
              
              20.4
              %
              
              
              17.5
              %Depreciation
      and amortization
              
              
              1,792,717
              
              
              
              1,597,684
              
              
              
              14.8
              %
              
              
              11.5
              %Gross
      profit
              
              
              7,842,398
              
              
              
              9,911,027
              
              
              
              64.8
              %
              
              
              71.0
              %General
      and administrative expenses
              
              
              1,501,042
              
              
              
              1,495,916
              
              
              
              12.4
              %
              
              
              10.7
              %Income
      from operations
              
              
              6,341,356
              
              
              
              8,415,111
              
              
              
              52.4
              %
              
              
              60.3
              %Interest
      expense, net
              
              
              6,149,805
              
              
              
              5,604,709
              
              
              
              50.8
              %
              
              
              40.2
              %Other
      income, net
              
              
              185,226
              
              
              
              94,580
              
              
              
              1.5
              %
              
              
              0.7
              %Income
      from operations before income taxes
              
              
              376,777
              
              
              
              2,904,982
              
              
              
              3.1
              %
              
              
              20.8
              %Income
      tax expense
              
              $
              94,194
              
              
              $
              721,329
              
              
              
              0.8
              %
              
              
              5.2
              %Net
      income
              
              $
              282,583
              
              
              $
              2,183,653
              
              
              
              2.3
              %
              
              
              15.6
              %




7




Revenues




Our revenues are derived from the
operation of the Expressway. Our revenues decreased approximately US$1.9
million, or 13.3% from approximately US$14.0 million for the three months ended
December 31, 2007 to approximately US$12.1 million for the three months
ended December 31, 2008. The decrease was mainly attributable to the
decrease of the traffic volume of commercial vehicles and a toll free policy
introduced by the Chinese government.




On December 26, 2005, the first phase
of the Expressway with a length of approximately 86 kilometers was completed and
commenced toll operation. On May 31, 2006, with the completion of the remaining
part of approximately 21 kilometers, the entire Expressway was put into
operation. A key transport artery, the national trunk Nanluo Expressway,was
entirely put into operation as well, which increased the importance of the
Expressway to those vehicles passing through. During the three months ended
December 31, 2008 and 2007, the converted average daily traffic volume, a guide
line to evaluate the operation performance specially used in the toll road
industry, remained stable at 13,349 units and 13,335 units,
respectively.




Although overall traffic volume
remained at the same level, our revenues from the operation of toll road
decreased during the three months ended December 31, 2008 due to the factors
mentioned as follows:




Commercial vehicles, especially coal
trucks, are one of the main categories of our passing vehicles with a high toll
rate. During the three months ended December 30, 2008, due to the spread of
the subprime mortgage crisis throughout the world, China’s coal market
decreased. On the other hand, incidents of coal mine accidents in China lead to
a suspension of operations of coal mines in Henan province. As a result, the
traffic volume of commercial vehicles as a component of our total traffic volume
decreased approximately 4.8% from approximately 73.8% for the three months ended
December 31, 2007 to approximately 69.0% for the three months ended
December 31, 2008.




In year 2008, the Chinese government
introduced regulations with an objective of slowing down increases in the market
price of certain products. It was prescribed that a toll free policy should be
enjoyed by those vehicles with fruits, vegetables, fowls, marine products, eggs
and milk transportation. As a result, a portion of our traffic volume was toll
free.




Due to these factors, our revenues for
the three months ended December 31, 2008 decreased 13.3% compared to the same
period of year 2007.




Operating
Costs




Our operating costs mainly represent
the road maintenance cost, road management cost, direct construction cost and
labor cost associated with the toll operations. The operating costs nearly
remained consistent during the three months ended December 31, 2008 and
2007.




Depreciation
and Amortization




Our total depreciation and amortization
related to toll operations increased approximately $0.2 million, or 12.2%, from
approximately $1.6 million for the three months ended December 31, 2007 to
approximately $1.8 million for the three months ended December 31,
2008.




Depreciation of toll
road infrastructures is calculated to write off the cost on a
units-of-usage basis whereby the Company depreciated and 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.




Gross
Profit




Our gross profit decreased
approximately US$2.1 million, or 20.9%, from approximately US$9.9 million for
the three months ended December 31, 2007 to approximately US$7.8 million
for the three months ended December 31, 2008.




Gross profit as a percentage of
revenues decreased from 71.0% for the three months ended December 31, 2007
to 64.8% for the there months ended December 31, 2008. Such percentage
decrease is primarily due to the decrease in revenues during this
period.


8




General
and Administrative Expenses




General and administrative expenses
mainly represent the employee payroll and welfare, traveling expenses, vehicle
gasoline and maintenance cost, entertainment expense, consulting fee, provision
for doubtful debts, depreciations and miscellaneous taxes, etc. Our general and
administrative expenses nearly remained consistent during the three months ended
December 31, 2008 and 2007.




Interest
Expense, Net




Net interest expense increased
approximately US$0.5 million, or 9.7%, from approximately US$5.6 million for the
three months ended December 31, 2007 to approximately US$6.1 million for
the three months ended December 31, 2008. This increase is primarily due to
the increased interest rate of our loans.  The People’s Bank of China
frequently adjusted the benchmark of the interest rate for long term loan during
the three months ended December 31, 2008 and 2007, accordingly, our lenders
adjusted the interest rate to some degree. As a result, the interest rate for
our long term loans increased from approximately 6.69% in average for the three
months ended December 31, 2007, to approximately 7.47% in average for the three
months ended December 31, 2008.




Income
Tax Expense




Income tax expense decreased
approximately US$0.6 million, or 86.9%, from approximately US$0.7 million for
the three months ended December 31, 2007 to approximately US$0.1 million
for the three months ended December 31, 2008, as a result of the decrease
in our operation income. Our effective tax rate was 25% for both the three
months ended December 31, 2008 and 2007.




Net
Income




Our net income decreased approximately
US$1.9 million, or 87.1%, from approximately US$2.2 million for the three months
ended December 31, 2007 to approximately US$0.3 million for the three
months ended December 31, 2008. This decrease is primarily due to the
decrease in our revenues and the increase in our interest expense during the two
(2) reporting periods.


9




Results
of Operations for the Six (6) Months Ended December 31, 2008 Compared to
the Six (6) Months Ended December 31, 2007




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




Six Months Ended
                  December 31
                  (Unaudited)
              
              
              Six Months Ended
                  December 31
                  (Unaudited)2008
              
              
              2007
              
              
              2008
              
              
              2007Revenues
              
              $
              27,502,808
              
              
              $
              28,558,742
              
              
              
              100.0
              %
              
              
              100.0
              %Operating
      costs
              
              
              3,671,134
              
              
              
              2,969,505
              
              
              
              13.3
              %
              
              
              10.4
              %Depreciation
      and amortization
              
              
              3,892,036
              
              
              
              3,362,476
              
              
              
              14.2
              %
              
              
              11.8
              %Gross
      profit
              
              
              19,939,638
              
              
              
              22,226,761
              
              
              
              72.5
              %
              
              
              77.8
              %General
      and administrative expenses
              
              
              2,842,944
              
              
              
              2,426,903
              
              
              
              10.3
              %
              
              
              8.5
              %Income
      from operations
              
              
              17,096,694
              
              
              
              19,799,858
              
              
              
              62.2
              %
              
              
              69.3
              %Interest
      expense, net
              
              
              12,643,359
              
              
              
              11,515,933
              
              
              
              46.0
              %
              
              
              40.3
              %Other
      income, net
              
              
              440,838
              
              
              
              291,399
              
              
              
              1.6
              %
              
              
              1.0
              %Income
      from operations before income taxes
              
              
              4,894,173
              
              
              
              8,575,324
              
              
              
              17.8
              %
              
              
              30.0
              %Income
      tax expense
              
              $
              1,301,072
              
              
              $
              2,138,950
              
              
              
              4.7
              %
              
              
              7.5
              %Net
      income
              
              $
              3,593,101
              
              
              $
              6,436,374
              
              
              
              13.1
              %
              
              
              22.5
              %




Revenues




Our revenues are derived from the
operation of the Expressway. Our revenues decreased approximately US$1.1
million, or 3.7% from approximately US$28.6 million for the six months ended
December 31, 2007 to approximately US$27.5 million for the six months ended
December 31, 2008. The decrease was mainly attributable to the decrease of
the traffic volumes of commercial vehicles and a toll free policy introduced by
Chinese government.




On December 26, 2005, the first phase
of the Expressway with a length of approximately 86 kilometers was completed and
commenced toll operation. On May 31, 2006, with the completion of the remaining
part of approximately 21 kilometers, the entire Expressway was put into
operation. A key transport artery, the national trunk Nanluo Expressway, was
entirely put into operation as well, which increased the importance of the
Expressway to those vehicles passing through. The converted average daily
traffic volume, a guide line to evaluate the operation performance specially
used in the toll road industry, steadily increased 1,220 units, or 8.8% from
13,867 units for the six months ended December 31, 2007 to 15,087 units for the
six months ended December 31, 2008.




Although the traffic volumes retained
in the same level, our revenues from the operation of toll road decreased during
the six months ended December 31, 2008 due to the factors mentioned as
follows:




Commercial vehicles, especially coal
trucks, are one of the main categories of our passing vehicles with a high toll
rate. During the six months ended December 30, 2008, due to the spread of
the subprime mortgage crisis throughout the world, China’s coal market
decreased. On the other hand, incidents of coal mine accidents in China lead to
a suspension of operations of coal mines in Henan province. As a result, the
traffic volume of commercial vehicles as a component of our total traffic volume
decreased approximately 3.7%, from approximately 75.0% for the six months ended
December 31, 2007 to approximately 71.3% for the six months ended
December 31, 2008.




In year 2008, the Chinese government
introduced regulations with an objective of slowing down increases in the market
price of certain products. It was prescribed that a toll free policy should be
enjoyed by those vehicles with fruits, vegetables, fowls, marine products, eggs
and milk transportation. As a result, a portion of our traffic volumes was toll
free.




Due to these factors, our revenues for
the six months ended December 31, 2008 decreased 3.7% compared to the same
period of year 2007.


10




Operating
Costs




Our operating costs mainly represent
the road maintenance cost, road management cost, direct construction cost and
labor cost associated with the toll operations. For the six months ended
December 31, 2008, the operating costs increased approximately US$0.7
million, or 23.6%, to approximately US$3.7 million, compared to approximately
US$3.0 million for the six months ended December 31, 2007. This increase is
mainly due to the effect of the change of exchange rate.




Depreciation
and Amortization




Our total depreciation and amortization
related to toll operations increased approximately $0.5 million, or 15.7%, from
approximately $3.4 million for the six months ended December 31, 2007 to
approximately $3.9 million for the six months ended December 31,
2008.




Depreciation of toll
road infrastructures is calculated to write off their cost on a
units-of-usage basis whereby the Company depreciated and 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.




Gross
Profit




Our gross profit decreased
approximately US$2.3 million, or 10.3%, from approximately US$22.2 million for
the six months ended December 31, 2007 to approximately US$19.9 million for
the six months ended December 31, 2008.




Gross profit as a percentage of
revenues decreased from 77.8% for the six months ended December 31, 2007 to
72.5% for the six months ended December 31, 2008. Such percentage decrease
is primarily due to the decrease in revenues during this period.




General
and Administrative Expenses




General and administrative expenses
mainly represent the employee payroll and welfare, traveling expense, vehicle
gasoline and maintenance cost, entertainment expense, consulting fee, provision
for doubtful debts, depreciations and miscellaneous taxes, etc. General and
administrative expenses increased approximately US$0.4 million, or 17.1%, from
US$2.4 million for the six months ended December 31, 2007 to approximately
US$2.8 million for the six months ended December 31, 2008. The increase in
our administration expenses was mainly due to the increase in our consulting fee
approximately amounted to US$0.8 million partially offset by the decrease in
miscellaneous taxes, provision for doubtful debts and traveling
expense.




Interest
Expense, Net




Net interest expense increased
approximately US$1.1 million, or 9.8%, from approximately US$11.5 million for
the six months ended December 31, 2007 to approximately US$12.6 million for
the six months ended December 31, 2008. This increase is primarily due to
the increased interest rate of our loans.  The People’s Bank of China
frequently adjusted the benchmark of the interest rate for long term loan during
the six months ended December 31, 2008 and 2007, accordingly, our lenders
adjusted the interest rate to some degree. As a result, the interest rate for
our long term loans increased from approximately 7.1% in average for the six
months ended December 31, 2007, to approximately %7.62 in average for the six
months ended December 31, 2008.




Income
Tax Expense




Income tax expense decreased
approximately US$0.8 million, or 39.2%, from approximately US$2.1 million for
the six months ended December 31, 2007 to approximately US$1.3 million for
the six months ended December 31, 2008, as a result of the decrease in our
income from operations. Our effective tax rate was 27% and 25% for the six
months ended December 31, 2008 and 2007, respectively.




Net
Income




Our net income decreased approximately
US$2.8 million, or 44.2%, from approximately US$6.4 million for the six months
ended December 31, 2007 to approximately US$3.6 million for the six months
ended December 31, 2008. This decrease is primarily due to the decrease in
our revenues and the increase in our interest expense during the two (2)
reporting periods.


11




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
(“WOCL”). During the reporting years, 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.




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




Six Months Ended December 31
                      (Unaudited)2008
                  
                  
                  2007Net
      cash provided by operating activities
                  
                  $
                  8,173,707
                  
                  
                  $
                  9,570,013Net
      cash (used in) provided by investing activities
                  
                  
                  (3,906,829
                  )
                  
                  
                  3,873,214Net
      cash used in financing activities
                  
                  
                  (7,777,945
                  )
                  
                  
                  (16,323,907
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  (3,511,067
                  )
                  
                  
                  (2,880,680
                  )Effect
      of exchange rate changes on cash
                  
                  
                  (65,748
                  )
                  
                  
                  1,866,956Cash
      and cash equivalents at beginning of period
                  
                  
                  5,769,344
                  
                  
                  
                  5,830,962Cash
      and cash equivalents at end of period
                  
                  $
                  2,192,529
                  
                  
                  $
                  4,817,238




Operating
Activities




Net cash provided by operating
activities was approximately US$8.2 million for the six months ended
December 31, 2008, as compared to US$9.6 million for the six months ended
December 31, 2007.  The decrease is mainly due to the decrease of
net income.




Investing
Activities




Net cash used in investing activities
was approximately US$3.9 million for the six months ended December 31, 2008, as
compared to approximately US $3.9 million net cash provided by investing
activities for the six months ended December 31, 2007.  Such
change is mainly due to the following:  (i) our related company Tai Ao
started its toll operation in December 2008. At the beginning, Tai Ao was lack
of working capital to fulfill its daily operation. As a result, we provided an
additional payment on behalf of Tai Ao approximately amounted to US$11.0 million
for the six months ended December 31, 2008, as compared to a receipt from
such related party approximately amounted to US$8.9 million for the six months
ended December 31, 2007; (ii) we received interest from related party note
receivables of approximately US$10.2 million; and (iii) our payment associated
with toll road construction decreased approximately US$3.4 million during the
six months ended December 31, 2008.




Financing
Activities




Net cash used in financing activities
was US$7.8 million for the six months ended December 31, 2008, as compared
to approximately US$16.3 million for the six months ended December 31,
2007. Such change is mainly due to the repayment of short-term bank loans and
notes payable during the six months ended December 31, 2007.




Working
Capital




Our working capital deficiency
increased by approximately US$3.3 million from approximately US$6.6 million as
of June 30, 2008 to approximately US$9.9 million as of December 31,
2008, which was primarily due to our decrease in cash and cash equivalents,
accounts receivable and current portion of notes receivable from related parties
approximately amounted to US$3.6 million, US$1.4 million and US$4.7 million,
respectively, and increase in current portion of long-term loans, payable to
contractors and deferred tax liabilities of approximately US$2.5 million, US$2.8
million and US$1.3 million, respectively, and partially offset by an increase in
advance to a related party of approximately US$10.9 million, and a decrease in
other payables and accrued liabilities of approximately US$2.7 million. The
decrease in cash and cash equivalents represented the result of our operating
activities. The decrease in current portion of notes receivable from related
parties represented our settlement with related parties.


12


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 months. Also, from time to time, the Company may come up with new
expansion opportunities for which our management may consider seeking external
funding and financing.




Capital
Expenditures




We made capital expenditures of
approximately US$1.2 million and US$4.8 million for the six months ended
December 31, 2008 and 2007, respectively. The capital expenditures
principally consisted of toll road infrastructures, toll stations and ancillary
facilities, communication and monitoring equipments and other equipment related
to our toll operations. If we are permitted to construct and operate new toll
road or invest other toll road companies, we may require additional
funds.




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




The
Company maintains disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in the Company’s
filings under the Securities Exchange Act of 1934, as amended is recorded,
processed, summarized and reported within the time periods specified in the U.S.
Securities and Exchange Commission’s rules and forms. As of the end of the
period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on this evaluation, our principal
executive officer and principal financial officer concluded that our disclosure
controls and procedures are effectively designed to ensure that information
required to be disclosed or filed by us is recorded, processed or summarized,
within the time periods specified in the rules and regulations of the U.S.
Securities and Exchange Commission. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.


13


Changes
In Internal Controls




There was
no change in the Company’s internal control over financial reporting that was
identified in connection with such evaluation that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.




PART
II


OTHER
INFORMATION




ITEM
1. LEGAL PROCEEDINGS




On June
27, 2007, China Railway No. 5 bureau, the contractor who won the bid in the
Pinglin Expressway No. 2 road connection project, was sued by the subcontractors
Hujianting and Hefeiyue for postponing the commencing date of construction for
more than ten (10) months. The total damage claimed in this case was $647,364,
and the Company, as the 5th defendant, was brought into this case by the
plaintiff. The case is currently ongoing and the Company believes the claims
against them are without substance and they plan to vigorously defend
themselves. As such, there was no contingency accrual for this case at December
31, 2008.




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 as collateral for loans to the cement factory.
Pingdingshan No. 3 Cement Factory went bankrupt and the company that 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 the lending company $485,851. The amount was paid in
August 2006 and was netted against Other Income, Net in the statement of income
for the year ended June 30, 2007. 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 the lending company was rejected.
Currently, the Company is in the progress of pursuing the amount paid. No
receivable for the contingency was recorded as of December 31,
2008.




In the
normal course of business, we are named as a 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
other than as set forth above.




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, 2008, 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.


14


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, 2008.3.3
            
            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 Commercial
      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.




15




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 Commercial
      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 Exhibit 14.1 the Company’s Annual Report on Form 10-K for
      the fiscal year ended June 30, 2008 as filed with the SEC on September 29,
      2008.16.1
                    
                    Auditor
      Letter
                    
                    Incorporated
      by reference to Exhibit 16.1 to the Company’s Annual Report on Form 10-K
      for the fiscal year ended June 30, 2008 as filed with the SEC on September
      29, 2008.31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002
                    
                    Provided
      herewith.31.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                    
                    Provided
      herewith.32.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                    
                    Provided
      herewith.32.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                    
                    Provided
      herewith.99.1
                    
                    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, 2008.99.2
                    
                    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, 2008.99.3
                    
                    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.




16




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 17,
      2009
            By:
            /s/ Li XipengName:Li
      XipengIts:Chief
      Executive Officer, Principal Executive
              Officer
      and Chairman of the Board




Date:          
      February 17,
      2009
            By:
            /s/ Zhang ChunxianName:Zhang
      ChunxianIts:Chief
      Financial Officer, Principal Financial and
              Accounting
      Officer and Director




17