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 March 31, 2010
 
 OR
 
  ̈
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT
 
 For
the transition period from ______ to __________
 
 COMMISSION
FILE NUMBER: 001-34150
 
 CHINA INFRASTRUCTURE
INVESTMENT CORPORATION
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                  
                  88-0484183(State
      or other jurisdiction of incorporation or
                    organization)
                  
                  (IRS
      Employer Identification
No.)
 
 Room
D, 2F, Building 12, Xinxin Huayuan, Jinshui Road, Zhengzhou, Henan
Province
 The People’s Republic of
China
 (Address
of principal executive offices)
 
 (011)
86-375-2754377
 (Registrant’s
Telephone Number, Including Area Code)
 
 (Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
 
 Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and (2)has been
subject to such filing requirements for the past 90 days. Yes x No o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T ('232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes oNo 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 May 13, 2010, the registrant had
80,000,000 shares of common stock, par value $0.001 per share, issued and
outstanding.
  
 
 TABLE
OF CONTENTS
  PART
      I FINANCIAL INFORMATION
                  
                  
                  3ITEM
      1. FINANCIAL STATEMENTS
                  
                  
                  3ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                  
                  
                  4ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                  
                  
                  14ITEM
      4. CONTROLS AND PROCEDURES
                  
                  
                  14PART
      II OTHER INFORMATION
                  
                  
                  15ITEM
      1. LEGAL PROCEEDINGS
                  
                  
                  15ITEM
      1A. RISK FACTORS
                  
                  
                  15ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                  
                  
                  15ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                  
                  
                  15ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
                  
                  
                  15ITEM
      5. OTHER INFORMATION
                  
                  
                  15ITEM
      6. EXHIBITS
                  
                  
                  15SIGNATURES
                  
                  
                  19
  2
  PART
I
 FINANCIAL
INFORMATION
  ITEM
1. FINANCIAL STATEMENTS
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 AND
SUBSIDIARIES
 
 FINANCIAL
STATEMENTS
 TABLE
OF CONTENTS
 
 PageCONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF MARCH 31 2010 (UNAUDITED) AND JUNE 30,
      2009
                    
                    
                    F-1CONDENSED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED
      MARCH 31, 2010 AND 2009 (UNAUDITED)
                    
                    
                    F-3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE
      MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
                    
                    
                    F-4NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
      MARCH 31, 2010 AND 2009 (UNAUDITED)
                    
                    
                    F-6
  3
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  ASSETS
  March 31,
                                    2010
                                  
                                  
                                  June 30,
                                    2009(Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                                  
                                  $
                                  1,459,506
                                  
                                  
                                  $
                                  1,614,260Restricted
      cash
                                  
                                  
                                  3,506,445
                                  
                                  
                                  
                                  3,550,761Notes
      receivable, net
                                  
                                  
                                  -
                                  
                                  
                                  
                                  104,676Accounts
      receivable
                                  
                                  
                                  771,312
                                  
                                  
                                  
                                  1,089,546Other
      receivables
                                  
                                  
                                  157,649
                                  
                                  
                                  
                                  148,934Notes
      receivable from related parties
                                  
                                  
                                  77,602,569
                                  
                                  
                                  
                                  151,332,301Advance
      to a related party
                                  
                                  
                                  -
                                  
                                  
                                  
                                  32,680,154Other
      current assets
                                  
                                  
                                  198,822
                                  
                                  
                                  
                                  940,712Total current
      assets
                                  
                                  
                                  83,696,303
                                  
                                  
                                  
                                  191,461,344Notes
      receivable from a related party
                                  
                                  
                                  78,006,622
                                  
                                  
                                  
                                  -Advance
      to a related party
                                  
                                  
                                  32,721,745
                                  
                                  
                                  
                                  -Toll
      road infrastructures, net
                                  
                                  
                                  432,882,332
                                  
                                  
                                  
                                  437,178,980Plant
      and equipment, net
                                  
                                  
                                  15,270,628
                                  
                                  
                                  
                                  15,662,302Land
      use rights, net
                                  
                                  
                                  45,826,083
                                  
                                  
                                  
                                  47,264,452Long-term
      investment
                                  
                                  
                                  1,579,848
                                  
                                  
                                  
                                  1,577,840Deferred
      taxes
                                  
                                  
                                  3,533,686
                                  
                                  
                                  
                                  4,725,650Total long-term
      assets
                                  
                                  
                                  609,820,944
                                  
                                  
                                  
                                  506,409,224TOTAL
      ASSETS
                                  
                                  $
                                  693,517,247
                                  
                                  
                                  $
                                  697,870,568
 
 See
accompanying notes to the condensed consolidated financial
statements.
  F-1
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
     LIABILITIES AND SHAREHOLDERS’
EQUITY
  March 31,
                                    2010
                                  
                                  
                                  June 30,
                                    2009(Unaudited)CURRENT
      LIABILITIESOther
      payables and accrued liabilities
                                  
                                  $
                                  2,219,722
                                  
                                  
                                  $
                                  2,191,314Short-term
      bank loans
                                  
                                  
                                  14,628,224
                                  
                                  
                                  
                                  7,304,815Current
      portion of long-term bank loans
                                  
                                  
                                  17,079,914
                                  
                                  
                                  
                                  27,767,064Notes
      payable
                                  
                                  
                                  3,506,445
                                  
                                  
                                  
                                  3,521,542Payable
      to contractors
                                  
                                  
                                  15,874,834
                                  
                                  
                                  
                                  22,090,622Deferred
      taxes
                                  
                                  
                                  8,429,667
                                  
                                  
                                  
                                  7,852,128Deferred
      revenue, current
                                  
                                  
                                  83,638
                                  
                                  
                                  
                                  78,803Other
      current liabilities
                                  
                                  
                                  273,860
                                  
                                  
                                  
                                  163,130Total
      current liabilities
                                  
                                  
                                  62,096,304
                                  
                                  
                                  
                                  70,969,418LONG-TERM
      LIABILITIESLong-term
      bank loans
                                  
                                  
                                  438,694,577
                                  
                                  
                                  
                                  440,585,554Deferred
      revenue, long-term
                                  
                                  
                                  6,446,566
                                  
                                  
                                  
                                  6,502,203Total
      long-term liabilities
                                  
                                  
                                  445,141,143
                                  
                                  
                                  
                                  447,087,757TOTAL
      LIABILITIES
                                  
                                  
                                  507,237,447
                                  
                                  
                                  
                                  518,057,175CONTINGENCIESSHAREHOLDERS’
      EQUITYCommon
      stock, $.001 par value, 150,000,000 shares authorized,80,000,000
      shares issued and outstanding as of March 31, 2010 and June 30, 2009,
      respectively
                                  
                                  
                                  80,000
                                  
                                  
                                  
                                  80,000Additional
      paid-in capital
                                  
                                  
                                  141,394,003
                                  
                                  
                                  
                                  141,152,164Accumulated
      other comprehensive income
                                  
                                  
                                  27,746,478
                                  
                                  
                                  
                                  27,516,099Retained
      earnings, (restricted portion was $43,234 at March 31, 2010 and June 30,
      2009)
                                  
                                  
                                  17,059,319
                                  
                                  
                                  
                                  11,065,130Total
      Shareholders’ Equity
                                  
                                  
                                  186,279,800
                                  
                                  
                                  
                                  179,813,393TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                                  
                                  $
                                  693,517,247
                                  
                                  
                                  $
                                  697,870,568
 
 See
accompanying notes to the condensed consolidated financial
statements.
  F-2
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (UNAUDITED)
 
 Three Months Ended March 31,
                                
                                
                                Nine Months Ended March 31,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009REVENUES
                                
                                $
                                10,659,674
                                
                                
                                $
                                10,234,820
                                
                                
                                $
                                35,845,854
                                
                                
                                $
                                37,779,524OPERATING
      COSTS
                                
                                
                                1,074,027
                                
                                
                                
                                584,314
                                
                                
                                
                                3,161,795
                                
                                
                                
                                4,259,217DEPRECIATION
      AND AMORTIZATION
                                
                                
                                2,013,835
                                
                                
                                
                                1,588,909
                                
                                
                                
                                6,503,106
                                
                                
                                
                                5,489,104GROSS
      PROFIT
                                
                                
                                7,571,812
                                
                                
                                
                                8,061,597
                                
                                
                                
                                26,180,953
                                
                                
                                
                                28,031,203General
      and administrative expenses
                                
                                
                                1,293,996
                                
                                
                                
                                1,442,137
                                
                                
                                
                                3,774,174
                                
                                
                                
                                4,288,648INCOME
      FROM OPERATIONS
                                
                                
                                6,277,816
                                
                                
                                
                                6,619,460
                                
                                
                                
                                22,406,779
                                
                                
                                
                                23,742,555OTHER
      INCOME (EXPENSES)Interest
      expense
                                
                                
                                (6,867,988
                                )
                                
                                
                                (7,933,520
                                )
                                
                                
                                (21,410,205
                                )
                                
                                
                                (26,141,851
                                )Interest
      income
                                
                                
                                2,068,828
                                
                                
                                
                                2,766,151
                                
                                
                                
                                6,338,445
                                
                                
                                
                                8,312,156Other
      income, net
                                
                                
                                252,896
                                
                                
                                
                                225,553
                                
                                
                                
                                752,786
                                
                                
                                
                                667,024INCOME
      FROM OPERATIONS BEFORE INCOME TAXES
                                
                                
                                1,731,552
                                
                                
                                
                                1,677,644
                                
                                
                                
                                8,087,805
                                
                                
                                
                                6,579,884INCOME
      TAX EXPENSE
                                
                                
                                (444,093
                                )
                                
                                
                                (429,409
                                )
                                
                                
                                (2,093,616
                                )
                                
                                
                                (1,732,497
                                )NET
      INCOME
                                
                                
                                1,287,459
                                
                                
                                
                                1,248,235
                                
                                
                                
                                5,994,189
                                
                                
                                
                                4,847,387OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain
                                
                                
                                29,477
                                
                                
                                
                                221,361
                                
                                
                                
                                230,379
                                
                                
                                
                                679,607OTHER
      COMPREHENSIVE INCOME
                                
                                
                                29,477
                                
                                
                                
                                221,361
                                
                                
                                
                                230,379
                                
                                
                                
                                679,607COMPREHENSIVE
      INCOME
                                
                                $
                                1,316,936
                                
                                
                                $
                                1,469,596
                                
                                
                                $
                                6,224,568
                                
                                
                                $
                                5,526,994WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
                                
                                
                                80,000,000
                                
                                
                                
                                80,000,000
                                
                                
                                
                                80,000,000
                                
                                
                                
                                80,000,000NET
      INCOME PER COMMON SHARE, BASIC AND DILUTED
                                
                                $
                                0.02
                                
                                
                                $
                                0.02
                                
                                
                                $
                                0.07
                                
                                
                                $
                                0.06
 
 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)
 
 Nine Months Ended March 31,2010
                                    
                                    
                                    2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                    
                                    $
                                    5,994,189
                                    
                                    
                                    $
                                    4,847,387Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision
      for doubtful accounts
                                    
                                    
                                    107,714
                                    
                                    
                                    
                                    776,936Depreciation
      and amortization
                                    
                                    
                                    6,973,463
                                    
                                    
                                    
                                    5,942,194Deferred
      taxes
                                    
                                    
                                    1,769,503
                                    
                                    
                                    
                                    1,743,406Deferred
      revenue
                                    
                                    
                                    (454,432
                                    )
                                    
                                    
                                    (453,556
                                    )Imputed
      interest
                                    
                                    
                                    395,269
                                    
                                    
                                    
                                    398,881Interest
      income
                                    
                                    
                                    (6,280,071
                                    )
                                    
                                    
                                    (8,218,679
                                    )Expenses
      paid by shareholder
                                    
                                    
                                    241,839
                                    
                                    
                                    
                                    -Changes
      in operating assets and liabilities:(Increase)
      Decrease In:Accounts
      receivable
                                    
                                    
                                    318,234
                                    
                                    
                                    
                                    (61,333
                                    )Other
      receivables
                                    
                                    
                                    (8,715
                                    )
                                    
                                    
                                    153,394Other
      current assets
                                    
                                    
                                    741,890
                                    
                                    
                                    
                                    (246,106
                                    )Increase
      (Decrease) In:Other
      payables and accrued liabilities
                                    
                                    
                                    28,408
                                    
                                    
                                    
                                    (3,107,794
                                    )Other
      current liabilities
                                    
                                    
                                    110,730
                                    
                                    
                                    
                                    696,791Net
      cash provided by operating activities
                                    
                                    
                                    9,938,021
                                    
                                    
                                    
                                    2,471,521CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of construction in progress
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,693,181
                                    )Purchases
      of plant and equipment
                                    
                                    
                                    (211,923
                                    )
                                    
                                    
                                    (311,615
                                    )(Decrease)
      increase in payable to contractors
                                    
                                    
                                    (6,215,788
                                    )
                                    
                                    
                                    1,541,663Decrease
      in notes receivable from related parties for interest
                                    
                                    
                                    -
                                    
                                    
                                    
                                    11,570,359Decrease
      in notes receivable from related parties for principal
                                    
                                    
                                    2,193,710
                                    
                                    
                                    
                                    -Increase
      in advance to a related party
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (10,986,697
                                    )Net
      cash (used in) provided by investing activities
                                    
                                    
                                    (4,234,001
                                    )
                                    
                                    
                                    120,529CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayments
      of long-term bank loans
                                    
                                    
                                    (13,171,038
                                    )
                                    
                                    
                                    (7,791,632
                                    )Proceeds
      from short- term bank loans
                                    
                                    
                                    14,624,737
                                    
                                    
                                    
                                    7,298,269Repayments
      of short-term bank loans
                                    
                                    
                                    (7,312,368
                                    )
                                    
                                    
                                    -Proceeds
      from notes payable
                                    
                                    
                                    3,944,352
                                    
                                    
                                    
                                    -Repayments
      of notes payable
                                    
                                    
                                    (3,963,925
                                    )
                                    
                                    
                                    -Proceeds
      from a related party note
                                    
                                    
                                    731,294
                                    
                                    
                                    
                                    -Repayments
      of note to a related party
                                    
                                    
                                    (731,294
                                    )
                                    
                                    
                                    -Restricted
      cash
                                    
                                    
                                    44,316
                                    
                                    
                                    
                                    29,104Net
      cash used in financing activities
                                    
                                    
                                    (5,833,926
                                    )
                                    
                                    
                                    (464,259
                                    )NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                                    
                                    
                                    (129,906
                                    )
                                    
                                    
                                    2,127,791Effect
      of exchange rate changes on cash
                                    
                                    
                                    (24,848
                                    )
                                    
                                    
                                    (81,970
                                    )Cash
      and cash equivalents at beginning of period
                                    
                                    
                                    1,614,260
                                    
                                    
                                    
                                    5,769,344CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                                    
                                    $
                                    1,459,506
                                    
                                    
                                    $
                                    7,815,165
  F-4
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
  Nine Months Ended March 31,2010
                                      
                                      
                                      2009SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                                      
                                      $
                                      20,972,149
                                      
                                      
                                      $
                                      25,730,560Income
      taxes paid
                                      
                                      
                                      -
                                      
                                      
                                      
                                      43,665
  SUPPLEMENTAL
NON-CASH DISCLOSURES:
  1.
                During
      the nine months ended March 31, 2010 and 2009, $0 and $1,694,502 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 NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  1.
                ORGANIZATION
      AND PRINCIPAL ACTIVITIES
  China
Infrastructure Investment Corporation (Formerly Learning Quest Technologies,
Inc.) and subsidiaries (“CIIC” or the “Company”) was incorporated under the laws
of the State of Nevada on January 11, 2001.
  With the
approval from Henan Transportation Bureau and the State Development and
Revolution Committee of China [NO. 2003-1784], the Company is permitted to
construct and operate the toll road from Pingdingshan to Linru, Henan, China,
for 30 years from 2003. Pursuant to the permission from Henan Transportation
Bureau and Henan Development and Revolution Committee [NO. 2005-1885], the
Company is entitled to operate 6 toll gates. All the rates applicable to the
automobiles are defined by the Henan Transportation Bureau and Henan Development
and Revolution Committee.
  The
principal activities of the Company are investment, construction, operation, and
management of the Pingdingshan – Linru section (“Pinglin Expressway”), and the
rent of petrol stations and service districts along the toll
roads.  Currently, all the operations of the Company are in the
People’s Republic of China (“PRC”).
   2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
  (a)
                Basis
      of presentation
  The
accompanying condensed financial statements of the Company have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures made are adequate to make the information
presented not misleading. The condensed consolidated balance sheet information
as of June 30, 2009 was derived from the audited consolidated financial
statements included in the Company’s Annual Report on Form 10-K. These condensed
financial statements should be read in conjunction with the consolidated
financial statements and related footnotes included in the Company’s latest
Annual Report on Form 10-K. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of March 31, 2010, and the statements of
its operations for the three months and nine months periods ended March 31, 2010
and 2009 and statements of cash flows for the nine months periods ended March
31, 2010 and 2009 have been included. The results of operations for interim
periods are not necessarily indicative of the results which may be realized for
the full year.
  F-6
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009
(UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (b)
                Principles
      of Consolidation
  On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB statement No. 162). ASC 105-10 establishes the FASB
ASC as the source of authoritative accounting principles recognized by the FASB
to be applied in preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America. The
adoption of this standards had no impact on the Company’s condensed consolidated
financial statements.
  The
condensed consolidated financial statements include the accounts of China
Infrastructure Investment Corporation and the following
subsidiaries:
  (i)
                Color
      Man Holdings Limited (“CMH”) (An inactive holding company, 100% subsidiary
      of CIIC).
 
 (ii)
                Wise
      On China Limited (“WOCL”) ( An inactive holding company,100% subsidiary of
      CMH)
 
 (iii)
                Pingdingshan
      Pinglin Expressway Co., Ltd. (“Ping”) ( 100% subsidiary of
      WOCL)
 
 Inter-company
accounts and transactions have been eliminated in consolidation.
 
 (c)
                Concentrations
  The
location of the toll road and the operations of the Company are solely in the
Henan Province, PRC.
  The
Company has a concentration of related party receivables from Tai Ao Expressway
Co., Ltd. and Xinyang Expressway Co., Ltd. as of March 31, 2010 and June 30,
2009. Also see Note 4.
  (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.
  F-7
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (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.
  A
significant estimate of the Company is the estimate of future total traffic
volume. This estimate is used for the calculation of depreciation relating to
the toll road. Also see Note 2(h).
  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
  ASC
820-10 (formerly SFAS No. 157, fair value measurement)
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. The hierarchy prioritizes the inputs into three levels
based on the extent to which inputs used in measuring fair value are observable
in the market.
  These
tiers include:
  •
Level 1—defined as observable inputs such as quoted prices in active
markets;
 •
Level 2—defined as inputs other than quoted prices in active markets that
are either directly or indirectly observable; and
 •
Level 3—defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
 
 Cash and
cash equivalents consist primarily of highly rated money market funds at a
variety of well-known institutions with original maturities of three months or
less. The original cost of these assets approximates fair value due to their
short term maturity. The Company does not maintain any bank accounts in the
United States of America.
 
 The
Company’s financial instruments include restricted cash, accounts receivable,
notes receivable, due from related parties, other receivables, other payables
and accrued liabilities, short-term bank loans, payable to contractors, other
current liabilities and deferred taxes. We estimated that the carrying amount
approximates fair value due to their short-term nature. The fair value of the
Company’s long-term bank loans and deferred revenue are estimated based on the
current rates offered to the Company for debt of similar terms and maturities.
The Company’s fair value of long-term bank loans and deferred revenue was not
significantly different from the carrying value at March 31, 2010
and  June 30, 2009.
  F-8
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (g)
                Plant
      and Equipment
  Plant and
equipment is carried at cost less accumulated depreciation and impairment
losses. Depreciation is provided over the estimated useful lives, using the
straight-line method.  Estimated useful lives of the plant and
equipment are as follows:
  Motor
      vehicles
                      8
      yearsMachinery
                      8
      yearsOffice
      equipment
                      6
      yearsToll
      stations and ancillary facilities
                      27
      yearsCommunication
      and monitoring equipment
                      10
      years
  The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to expense as
incurred, whereas significant renewals and betterments are
capitalized.
  (h)
                Toll
      Road Infrastructures
  Toll road
infrastructures are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization of the toll road infrastructures are
calculated to write off their cost, commencing from the date of commencement of
commercial operation of the toll roads, based on the ratio of actual traffic
volume compared to the total expected traffic volume of the toll roads as
assessed by management each year. The total expected traffic volume is derived
from a traffic projection report prepared by an independent PRC organization.
Also see Note 2(e).
  (i)
                Construction
      in Progress
  Construction
in progress represents costs incurred in the construction of expressways and
bridges. The costs include development expenditures and other direct costs,
including interest cost on the related borrowed funds during the construction
period attributable to the development of plant and equipment and toll road
infrastructures. Construction in progress is transferred to the appropriate
category of plant and equipment and toll road infrastructures when completed and
ready for intended use. Depreciation commences when the assets are ready for
their intended use.
  F-9
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (j)
                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 nine months ended March 31, 2010 and 2009, since
construction was completed.
  (k)
                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.
  (l)
                Impairment
      of Long-Term Assets
  Long-term
assets of the Company are reviewed annually as to whether their carrying value
has become impaired, pursuant to the guidelines established in ASC 360-10
(formerly SFAS No. 144). The Company considers assets to be impaired if the
carrying value exceeds the future projected cash flows from the related
operations.  The Company also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. There were no impairments for the nine months ended March 31,
2010 and 2009.
  (m)
                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.
  (n)
                Rental
      Income
  The
Company rents gas stations, advertising booths and toll road service districts
to lessees. Rental income is measured at the fair value of the consideration
receivable and represents amounts receivable for services provided in the normal
course of business, net of discounts and sales tax. Also see Note
12.
  F-10
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009
(UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (o)
                Retirement
      Benefits
  Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to operations as
incurred.  Retirement benefits amounting to $210,490 and $92,422 were
charged to operations for the nine months ended March 31, 2010 and
2009.
  (p)
                Income
      Taxes
  Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain.  Also see Note 13.
  (q)
                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 nine months ended March
31, 2010 and 2009.
  F-11
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009
(UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (r)
                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.
  March 31,
                              2010
                            
                            
                            June 30,
                              2009
                            
                            
                            March 31,
                              2009Periods
      ended RMB: US$ exchange rate
                            
                            
                            6.8361
                            
                            
                            
                            6.8448
                            
                            
                            
                            -Average
      RMB:  US$ exchange rate for the three months
    ended
                            
                            
                            6.8360
                            
                            
                            
                            -
                            
                            
                            
                            6.8466Average
      RMB:  US$ exchange rate for the nine months
      ended
                            
                            
                            6.8377
                            
                            
                            
                            -
                            
                            
                            
                            6.8509
 
 (s)
                Comprehensive
      Income
  Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income should be reported in
a financial statement that is presented with the same prominence as other
financial statements. The Company’s only component of comprehensive income is
the foreign currency translation adjustment.
  (t)
                Recent
      Accounting Pronouncements
  In April 1, 2009, the
FASB approved ASC 805-20 (formerly FSP FAS 141(R)-1, Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies, which amends Statement 141(R) and eliminates the
distinction between contractual and non-contractual contingencies. Under ASC
805-20, an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to
determine whether the contingency should be recognized
as of the acquisition date or after it. The adoption of ASC 805-10 did not have
an impact on the Company’s financial
statements.
  F-12
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (t)           Recent
Accounting Pronouncements (continued)
 
 ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2, amend the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. The adoption of ASC
320-10 did not have an impact on the Company’s financial
statements.
 
 On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by ASC 825-10, Interim Financial Reporting. We are required
to adopt this ASC for our interim and annual reporting periods ending after
June 15, 2009. This ASC does not require disclosures for periods presented
for comparative purposes at initial adoption.  The adoption of ASC
825-10 did not have an impact on the Company’s financial
statements.
 
 In
February 2008, the FASB issued ASC 820-10 (formerly FSP SFAS 157-2, Effective
Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157,
Fair Value Measurement (“SFAS No. 157”), for all non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. ASC 820-10 partially defers the effective date of
SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. The
adoption of SFAS No. 157 for all non-financial assets and non-financial
liabilities is effective for us beginning July 1, 2009. It’s not expected that
this adoption will have a material impact on the Company’s financial
statements.
 
 In April
2009, the FASB updated guidance related to fair-value measurements to clarify
the guidance related to measuring fair-value in inactive markets, to modify the
recognition and measurement of other-than-temporary impairments of debt
securities, and to require public companies to disclose the fair values of
financial instruments in interim periods. This updated guidance became effective
for the Company beginning June 1, 2009. The adoption of this guidance did not
have an impact on the Company’s consolidated financial position or results of
operations.
 
 In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires disclosure of transfers of assets and liabilities between Level 1 and
Level 2 of the fair value measurement hierarchy, including the reasons and the
timing of the transfers and information on purchases, sales, issuance, and
settlements on a gross basis in the reconciliation of the assets and liabilities
measured under Level 3 of the fair value measurement hierarchy. This guidance is
effective for the Company beginning March 1, 2010. The Company does not expect
the adoption will have an impact on its consolidated financial position or
results of operations.
  F-13
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009
(UNAUDITED)
  2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
  (t)           Recent
Accounting Pronouncements (continued)
 
 In May
2009, the FASB issued ASC 855-10 (formerly SFAS No. 165, Subsequent Events.) ASC
855-10 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. ASC 855-10 is effective for interim and
annual periods ending after June 15, 2009. It’s not expected that this adoption
will have a material impact on the Company’s financial statements.
 
 In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167, Amendments to FASB Interpretation
No. 46(R)). ASC 810-10 requires an enterprise to perform an analysis and
ongoing reassessments to determine whether the enterprises variable interest or
interests give it a controlling financial interest in a variable interest entity
and amends certain guidance for determining whether an entity is a variable
interest entity. It also requires enhanced disclosures that will provide users
of financial statements with more transparent information about an enterprises
involvement in a variable interest entity. ASC 810-10 is effective as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009 and for all interim reporting periods after that. The
Company believes the adoption of ASC 810-10 has no effect on the
Company.
  3.
                NOTES
      RECEIVABLE
  A)
Current notes receivable from unrelated companies consist of the
following:
  March 31,
                                  2010
                                
                                
                                June 30,
                                  2009(Unaudited)Notes
      receivable from unrelated companies
                                
                                $
                                888,842
                                
                                
                                $
                                884,677Less:
      Provision for doubtful accounts
                                
                                
                                888,842
                                
                                
                                
                                780,001$
                                -
                                
                                
                                $
                                104,676
 
 On June
20, 2007, the Company loaned to Pingdingshan Traffic Administration $655,403.
The note is unsecured and was due December 20, 2007, bearing a 5.85% interest
rate per annum. On December 20, 2007, the Company entered into a renewal
agreement with Pingdingshan Traffic Administration, whereby the note was
extended to December 20, 2008 with a 7.47% interest rate per annum. Considering
the aging of the note receivable has exceeded two years and the Company has
never received the interest or principal from the note, the Company’s management
believes there is uncertainty as to collection of the note and stopped accruing
interest income from April 1, 2009. A full provision amounting to $780,001 was
provided by the Company as of March 31, 2010.
  F-14
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  3.
                NOTES
      RECEIVABLE (CONTINUED)
  On
January 22, 2009, the Company loaned to Pingdingshan Expressway Construction
Co., Ltd. $104,676. The note is unsecured and is due January 21, 2010, and bears
a 5.31% interest rate per annum. Considering the Company has never received the
interest or principal from the note, the Company’s management believes there is
uncertainty as to collection of the note and stopped accruing interest income
from the due date. A full provision amounting to $108,841 was provided by the
Company as of March 31, 2010.
  Interest
income for the nine months ended March 31, 2010 and 2009 was $3,038 and $37,661,
respectively.
  4.
                NOTES
      RECEIVABLE FROM RELATED PARTIES
  March 31,
                                        2010
                                        (Unaudited)
                                      
                                      
                                      June 30,
                                        2009B)
      Current notes receivable from related parties:Tai Ao Expressway Co., Ltd.Principal
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      70,130,050Interest receivable
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,664,700-
                                      
                                      
                                      
                                      74,794,750Xinyang Expressway Co.,
Ltd.Principal
                                      
                                      
                                      69,759,000
                                      
                                      
                                      
                                      69,670,334Interest receivable
                                      
                                      
                                      7,752,408
                                      
                                      
                                      
                                      4,650,23777,511,408
                                      
                                      
                                      
                                      74,320,571Henan Ruijia Industry Co.,
    Ltd.Principal
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,191,445Interest receivable
                                      
                                      
                                      68,290
                                      
                                      
                                      
                                      25,53568,290
                                      
                                      
                                      
                                      2,216,980Henan Hairun Trade Co.,
Ltd.Interest receivable
                                      
                                      
                                      22,871
                                      
                                      
                                      
                                      -Total
      notes receivable from related parties
                                      
                                      $
                                      77,602,569
                                      
                                      
                                      $
                                      151,332,301C)
      Long-term note receivable from a related party:Tai Ao Expressway Co., Ltd.Principal
                                      
                                      $
                                      70,219,302
                                      
                                      
                                      $
                                      -Interest receivable
                                      
                                      
                                      7,787,320
                                      
                                      
                                      
                                      -78,006,622
                                      
                                      
                                      
                                      -$
                                      155,609,191
                                      
                                      
                                      $
                                      151,332,301
  F-15
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (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 from
Tai Ao was extended to June 29, 2010 with a 7.83% interest rate per annum.
Interest shall be paid annually and the principal shall be repaid at maturity.
Thenote
receivablefrom Tai Ao isclassified asanon-current assetbecausetheCompanyexpects to purchase a
controlling interest in Tai Ao and the receivable will be part of the cost of
acquiring the ownership interest. Also see
September 27, 2009 letter of intent below.
  On June
26, 2008, Xinyang Expressway Co., Ltd. (“Xinyang”) entered into a renewal
agreement with the Company. Pursuant to the agreement, the note receivable to
Xinyang was extended to June 29, 2010 with a 7.83% interest rate per annum.
Interest is paid annually and the principal is repaid at maturity. Also see
September 27, 2009 letter of intent below.
  On April
12, 2009, Henan Ruijia Industry Co., Ltd. (“Ruijia”) entered into an agreement
with the Company. Pursuant to the agreement, the Company provided a note
receivable for $2,191,445 to Ruijia. Such note receivable is due April 11, 2010,
and bears a 5.31% interest rate per annum. The principal and the interest are
repaid at maturity. On November 12, 2009, the Company received the principal of
such note receivable.
  On July
28, 2009, Henan Hairun Trade Co., Ltd. (“Hairun”) entered into an agreement with
the Company. Pursuant to the agreement, the Company provided a note receivable
for $1,462,501 to Hairun. Such note receivable is due July 27, 2010, and bears a
5.31% interest rate per annum. The principal and the interest are repaid at
maturity. On November 12, 2009, the Company received the principal of such note
receivable.
  The notes
receivable were provided to these companies for their construction and operation
working capital. Tai Ao, Xinyang and Ruijia are related to the Company through a
common shareholder of the Company. Hairun is a trading company substantially
controlled by Lin Jie, the vice president of operations of the Company. The
notes receivable are interest bearing and unsecured. Interest income was
$6,277,033 and $8,218,679 for the nine months ended March 31, 2010 and 2009,
respectively.
  On
September 27, 2009, the board of directors of the Company approved a share
purchase resolution. Pursuant to a letter of intent dated September 27, 2009,
the Company shall purchase at least 51% of Tai Ao. The consideration for such
purchase will be settled first with the note receivable from Xinyang of
$77,511,408, and the remainder in cash. If the Company successfully negotiates
with Tai Ao’s shareholders, the consideration will be determined in accordance
with the audited net assets of Tai Ao at the purchase date. If the Company
consummates such transaction, the transaction is expected to be accounted for as
an acquisition of a company under common control. Also see Note
5.
  F-16
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  5.
                ADVANCE
      TO A RELATED PARTY
 
 March 31,
                                    2010
                                    (Unaudited)
                                  
                                  
                                  June 30,
                                    2009Tai
      Ao Expressway Co., Ltd.
                                  
                                  $
                                  32,721,745
                                  
                                  
                                  $
                                  32,680,154
  The
Company made advances to suppliers on behalf of Tai Ao for the purchase of
construction materials commencing in 2006 in order to assist Tai Ao with its
working capital needs.
  The
balances of $32,721,745 and $32,680,154 at March 31, 2010 and June 30, 2009,
respectively, are unsecured, interest free and due on demand.
  The
advance to Tai Ao is classified as a non-current asset because the
Company plans to acquire a controlling interest in Tai Ao. Also see Note
4.
  6.
                TOLL
      ROAD INFRASTRUCTURES, NET
  Toll road
infrastructures consist of the following:
  March 31,
                                  2010
                                  (Unaudited)
                                
                                
                                June 30,
                                  2009At
      cost:
                                
                                $
                                457,092,873
                                
                                
                                $
                                456,511,890Less:  Accumulated
      depreciation
                                
                                
                                24,210,541
                                
                                
                                
                                19,332,910Toll
      road infrastructures, net
                                
                                $
                                432,882,332
                                
                                
                                $
                                437,178,980
 
 Depreciation
expense for the nine months ended March 31, 2010 and 2009 was $4,851,869 and
$3,841,639, respectively. Also see Notes 2(e) and 2(h).
  The
Company financed its construction of the toll road infrastructures substantially
through long-term loans from banks. These bank loans were secured by the toll
road operating right owned by the Company. Also see Note
11.
  F-17
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  7.
                PLANT
      AND EQUIPMENT, NET
  Plant and
equipment consist of the following:
  March 31,
                                2010
                                (Unaudited)
                              
                              
                              June 30,
                                2009At
      cost:Toll
      station and ancillary facilities
                              
                              $
                              10,514,846
                              
                              
                              $
                              10,422,227Communication
      and monitoring equipment
                              
                              
                              5,799,951
                              
                              
                              
                              5,757,340Motor
      vehicles
                              
                              
                              1,527,497
                              
                              
                              
                              1,466,485Machinery
                              
                              
                              298,065
                              
                              
                              
                              297,686Office
      equipment
                              
                              
                              611,313
                              
                              
                              
                              572,39518,751,672
                              
                              
                              
                              18,516,133Less:  Accumulated
      depreciationToll
      station and ancillary facilities
                              
                              
                              1,392,013
                              
                              
                              
                              1,136,852Communication
      and monitoring equipment
                              
                              
                              716,382
                              
                              
                              
                              575,571Motor
      vehicles
                              
                              
                              943,199
                              
                              
                              
                              804,005Machinery
                              
                              
                              137,621
                              
                              
                              
                              110,376Office
      equipment
                              
                              
                              291,829
                              
                              
                              
                              227,0273,481,044
                              
                              
                              
                              2,853,831Plant
      and equipment, net
                              
                              $
                              15,270,628
                              
                              
                              $
                              15,662,302
 
 Depreciation
expense for the nine months ended March 31, 2010 and 2009 was $623,432 and
$605,281, respectively.
  F-18
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  8.
                LAND
      USE RIGHTS
  Land use
rights consist of the following:
  March 31,
                                2010
                                (Unaudited)
                              
                              
                              June 30,
                                2009Cost
                              
                              $
                              53,786,375
                              
                              
                              $
                              53,718,010Less:
      Accumulated amortization
                              
                              
                              7,960,292
                              
                              
                              
                              6,453,558Land
      use rights, net
                              
                              $
                              45,826,083
                              
                              
                              $
                              47,264,452
 
 Amortization
expense for the nine months ended March 31, 2010 and 2009 was $1,498,162 and
$1,495,274, respectively.
  Amortization
expense for the next five years and thereafter is as follows:
  March
      31, 2011
                          
                          $
                          1,998,027March
      31, 2012
                          
                          
                          1,998,027March
      31, 2013
                          
                          
                          1,998,027March
      31, 2014
                          
                          
                          1,998,027March
      31, 2015
                          
                          
                          1,998,027Thereafter
                          
                          
                          35,835,948Total
                          
                          $
                          45,826,083
  F-19
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  9.
                LONG-TERM
      INVESTMENT
  March 31, 2010
                                      (Unaudited)
                                    
                                    
                                    June 30, 2009Ownership
                                      Interest
                                    
                                    
                                    Net Book
                                      Value
                                    
                                    
                                    Ownership
                                      Interest
                                    
                                    
                                    Net Book
                                      ValueAt
      cost:Pingdingshan
      City Credit Corporation
                                    
                                    
                                    2.39
                                    %
                                    
                                    $
                                    1,579,848
                                    
                                    
                                    
                                    2.39
                                    %
                                    
                                    $
                                    1,577,840
 
 The
Company invested in Pingdingshan City Credit Corporation (“PCCC”), a commercial
banking corporation established in 2005. The Company deposited Rmb20 million
(approximately $2.5 million) in December 2005 and then purchased 3% of the total
equity interest in PCCC in exchange for Rmb10 million (approximately $1.3
million) in 2007. As a consequence, Rmb10 million (approximately $1.3 million)
was refunded to the Company in 2007. As of September 30, 2009 and June 30, 2009,
the Company does not have more than a 20% interest in the investment and does
not exercise significant influence over the investee. The Company accounts for
the investment under the cost method.  Investment income is recognized
by the Company when the investee declares a dividend and the Company believes it
is collectible.  No dividend income was recognized for the nine months
ended March 31, 2010 and 2009.
  On March
29, 2006, Ping entered into a share purchase agreement with PCCC, a local
financial institution.  Pursuant to the agreement, the Company
obtained 3% of the total equity interest of PCCC with the consideration
amounting to Rmb10 million (approximately US$1.3 million). After PCCC increased
its share capital, the Company’s share of the total equity interest of the total
equity interest in PCCC was diluted to 2.39%. Management of the Company adopted
the cost method for the accounting of such investment.
  F-20
  CHINA INFRASTRUCTURE INVESTMENT
CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  10.
                SHORT-TERM
      BANK LOAN
  Short-term
bank loan consist of the following:
 
 March 31,
                          2010
                          (Unaudited)
                        
                        
                        June 30,
                          2009Loan
      from China Minsheng Banking Corp., Ltd., due March 23, 2010, monthly
      interest only payments at 5.31% per annum, co-secured by Tai Ao Expressway
      Co., Ltd., the chief executive officer Mr. Li Xipeng and the expressway
      toll right owned by the Company.
                        
                        $
                        -
                        
                        
                        $
                        7,304,815Loan
      from China Minsheng Banking Corp., Ltd., due March 22, 2011, monthly
      interest only payments at 5.841% per annum, co-secured by the chief
      executive officer Mr. Li Xipeng, Henan Shengrun Venture Investment
      Management Co., Ltd. and accounts receivable owned by the
      Company.
                        
                        
                        7,314,112
                        
                        
                        
                        -Loan
      from China Citic Bank, due January 11, 2011, monthly interest only
      payments at 5.31% per annum, co-secured by Tai Ao Expressway Co., Ltd.,
      and the chief executive officer Mr. Li Xipeng.
                        
                        
                        7,314,112
                        
                        
                        
                        -Total
      short-term bank loans
                        
                        $
                        14,628,224
                        
                        
                        $
                        7,304,815
 
 Interest
expense for the nine months ended March 31, 2010 and 2009 was $374,245 and
$9,305, respectively.
  As of
March 31, 2010, accounts receivable with a carrying amount of $771,312 were
pledged as collateral for the bank loan from China Minsheng Banking Corp.,
Ltd.
  On March
22, 2010, Henan Shengrun Venture Investment Management Co., Ltd., a company
under common control of Li Xipeng, the chief executive officer of the Company,
entered into an guarantee agreement with China Minsheng Banking Corp., Ltd..
Pursuant to the agreement, Henan Shengrun Venture Investment Management Co.,
Ltd. provided corporate guarantees for bank loan to the Company, with a debt
ceiling of Rmb50 million (approximately $7,314,112). The guarantee period is
from March 22, 2010 to March 22, 2011.
  On
January 12, 2010, Tai Ao Expressway Co., Ltd. entered into an guarantee
agreement with China Citic Bank. Pursuant to the agreement, Tai Ao Expressway
Co., Ltd. provided corporate guarantees for bank loan to the Company. The
guarantee period is from January 11, 2011 to January 11, 2013.
  F-21
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  11.
                LONG-TERM
      BANK LOANS
  Long-term
bank loans consist of the following:
 
 March 31,
                            2010
                            (Unaudited)
                          
                          
                          June 30,
                            2009Loan
      from National Development Bank of China Henan Branch, due May 20, 2017,
      bearing a 5.94% interest rate per annum, secured by the toll road
      operating right owned by the Company.  Principal is repaid every
      6 months in 20 unequal installments from November 2007, and interest is
      paid quarterly.
                          
                          $
                          90,694,987
                          
                          
                          $
                          93,501,636Loan
      from Agricultural Bank of China, due July 20, 2017, bearing a 5.94%
      interest rate per annum, secured by the toll road operating right owned by
      the Company.  Principal is to be repaid every year in 2 equal
      installments from February 2010, and interest is paid
    monthly.
                          
                          
                          27,793,625
                          
                          
                          
                          29,219,261Loan
      from Agricultural Bank of China, due February 20, 2019, bearing a 5.94%
      interest rate per annum, secured by the toll road operating right owned by
      the Company.  Principal is to be repaid on maturity, and
      interest is paid monthly.
                          
                          
                          27,793,625
                          
                          
                          
                          29,219,261Loan
      from Industrial and Commercial Bank of China Pingdingshan Branch, due July
      21, 2020, bearing a 5.35% interest rate per annum, secured by the toll
      road operating right owned by the Company.  Principal is repaid
      every year in 13 unequal installments from November 2007, and interest is
      paid monthly.
                          
                          
                          163,210,017
                          
                          
                          
                          170,316,152Loan
      from National Development Bank of China Henan Branch, due November 28,
      2022, bearing a 5.94% interest rate per annum, secured by the toll road
      operating right owned by the Company.  Principal is to be repaid
      every 6 months in 12 unequal installments from May 2017, and interest is
      paid quarterly.
                          
                          
                          146,282,237
                          
                          
                          
                          146,096,308Total
      long-term bank loans
                          
                          
                          455,774,491
                          
                          
                          
                          468,352,618Less:
      current portion
                          
                          
                          17,079,914
                          
                          
                          
                          27,767,064Long-term
      portion
                          
                          $
                          438,694,577
                          
                          
                          $
                          440,585,554
  F-22
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  11.
                LONG-TERM
      BANK LOANS (CONTINUED)
  For the
nine months ended March 31, 2010 and 2009, interest expense was $20,634,555 and
$25,730,560, 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. As of March 31, 2010, the Company provided a corporate
guarantee for Tai Ao’s bank loan. The guarantee did not exceed 70% of the
Company’s total assets. Also see Note 14.
  The
repayment schedule for the long-term bank loans is as follows:
  March
      31, 2011
                        
                        $
                        17,079,914March
      31, 2012
                        
                        
                        32,697,006March
      31, 2013
                        
                        
                        29,771,361March
      31, 2014
                        
                        
                        33,170,960March
      31, 2015
                        
                        
                        33,170,960Thereafter
                        
                        
                        309,884,290Total
                        
                        $
                        455,774,491
  F-23
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  12.
                DEFERRED
      REVENUE
  March 31, 2010
                              (Unaudited)
                            
                            
                            June 30, 2009Deferred
      revenue
                            
                            $
                            15,605,898
                            
                            
                            $
                            16,040,024Imputed
      interest discount
                            
                            
                            (9,075,694
                            )
                            
                            
                            (9,459,018
                            )Total
                            
                            
                            6,530,204
                            
                            
                            
                            6,581,006Less:
      current portion
                            
                            
                            83,638
                            
                            
                            
                            78,803Long-term
      portion
                            
                            $
                            6,446,566
                            
                            
                            $
                            6,502,203
  The
Company rents four gas stations to Petro China Company Limited Pingdingshan
Branch (“PCCL”) from January 1, 2006 for 30 years. The Company received the
entire 30 year rental fee of $5,372,708 from PCCL in 2006. The amount received
was net of business tax.
  The
Company imputed interest on the amount using an 8% discount rate, under the
effective interest rate method. The rental income recognized during the nine
months ended March 31, 2010 and 2009 was $454,432 and $453,556 respectively. The
imputed interest for the nine months ended March 31, 2010 and 2009 was $395,269
and $398,881, respectively.
  13.
                INCOME
      TAX
  On March
16, 2007, the National People’s Congress of China approved the Corporate Income
Tax Law of the People’s Republic of China (the “new CIT Law”), which was
effective on January 1, 2008.Under the new CIT Law, the corporate income tax
rate applicable to the Company starting from January 1, 2008 will be 25%. The
new CIT Law has an impact on the deferred tax assets and liabilities of the
Company. The Company adjusted deferred tax balances as of December 31, 2009
based on their best estimates and will continue to assess the impact of such new
law in the future. The effects arising from the enforcement of the new CIT law
have been reflected in the accounts.
  The
Company uses ASC 740-10 (formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes). The Interpretation addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return should be recorded in
the financial statements. Under FIN 48, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. ASC 740-10 also provides guidance on recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. As of March 31, 2010, the Company did not have a
liability for unrecognized tax benefits.
  F-24
  CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  13.
                INCOME
      TAX (CONTINUED)
  Income
tax expense is summarized as follows:
  Nine Months Ended
                            March 31,2010
                          
                          
                          2009(Unaudited)
                          
                          
                          (Unaudited)Current
                          
                          $
                          (13,656
                          )
                          
                          $
                          -Deferred
                          
                          
                          2,107,272
                          
                          
                          
                          1,732,497Income
      tax expense
                          
                          $
                          2,093,616
                          
                          
                          $
                          1,732,497
  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:
  Nine Months Ended
                              March 31,2010
                              (Unaudited)
                            
                            
                            2009
                              (Unaudited)Computed
      “expected” expense
                            
                            $
                            2,021,951
                            
                            
                            $
                            1,644,971Valuation
      allowance
                            
                            
                            71,665
                            
                            
                            
                            87,526Income
      tax expense
                            
                            $
                            2,093,616
                            
                            
                            $
                            1,732,497
  F-25
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  13.
                INCOME
      TAX (CONTINUED)
  The tax
effects of temporary differences that give rise to the Company’s net deferred
tax assets and liabilities are as follows:
  March 31,
                                                                                                                        2010
                                                                                                                        (Unaudited)
                                                                                                                      
                                                                                                                      
                                                                                                                      June 30,
                                                                                                                        2009Current portion:G&A
      expenses
                                                                                                                      
                                                                                                                      $
                                                                                                                      377,534
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      349,858Road
      maintenance costs
                                                                                                                      
                                                                                                                      
                                                                                                                      289,944
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      438,142Other
      expenses
                                                                                                                      
                                                                                                                      
                                                                                                                      125,902
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      125,742U.S.
      loss carry forward
                                                                                                                      
                                                                                                                      
                                                                                                                      71,665
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Valuation
      allowance
                                                                                                                      
                                                                                                                      
                                                                                                                      (71,665
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      -PRC
      loss carry forward
                                                                                                                      
                                                                                                                      
                                                                                                                      755,907
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      413,130Total
      deferred tax assets
                                                                                                                      
                                                                                                                      
                                                                                                                      1,549,287
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1,326,872Sales
      cut-off
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,509,032
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (999,885
                                                                                                                      )Interest
      income
                                                                                                                      
                                                                                                                      
                                                                                                                      (8,405,667
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (7,478,740
                                                                                                                      )Interest
      expense
                                                                                                                      
                                                                                                                      
                                                                                                                      (23,916
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (533,679
                                                                                                                      )Consulting
      fees
                                                                                                                      
                                                                                                                      
                                                                                                                      (9,320
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (124,968
                                                                                                                      )Other
      expenses
                                                                                                                      
                                                                                                                      
                                                                                                                      (31,019
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (41,728
                                                                                                                      )Total
      deferred tax liabilities
                                                                                                                      
                                                                                                                      
                                                                                                                      (9,978,954
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (9,179,000
                                                                                                                      )Net
      deferred tax liabilities
                                                                                                                      
                                                                                                                      $
                                                                                                                      (8,429,667
                                                                                                                      )
                                                                                                                      
                                                                                                                      $
                                                                                                                      (7,852,128
                                                                                                                      )Non-current
      portion:Rental
      income
                                                                                                                      
                                                                                                                      $
                                                                                                                      154,269
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      112,064Capitalized
      interest
                                                                                                                      
                                                                                                                      
                                                                                                                      2,236,949
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      2,234,106Amortization
                                                                                                                      
                                                                                                                      
                                                                                                                      1,990,073
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1,613,390Bad
      debts
                                                                                                                      
                                                                                                                      
                                                                                                                      2,695,250
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      2,691,824Total
      deferred tax assets
                                                                                                                      
                                                                                                                      
                                                                                                                      7,076,541
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      6,651,384Depreciation
                                                                                                                      
                                                                                                                      
                                                                                                                      (3,542,855
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,925,734
                                                                                                                      )Total
      deferred tax liabilities
                                                                                                                      
                                                                                                                      
                                                                                                                      (3,542,855
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,925,734
                                                                                                                      )Net
      deferred tax assets
                                                                                                                      
                                                                                                                      $
                                                                                                                      3,533,686
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      4,725,650
 
 As of
March 31, 2010, the PRC loss carry forward of $755,907 represents the net
operating loss of the Company’s subsidiary Ping. According to the new CIT Law of
China, such loss can be carried forward to the succeeding years, but the limit
of the carrying forward may not exceed five years. The net operating loss carry
forward expires in year 2015.
  F-26
 
 CHINA
INFRASTRUCTURE INVESTMENT CORPORATION
 (FORMERLY
LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)
  14.
                CONTINGENCIES
  Litigation
  The
Company entered into an agreement to purchase a land use right from Pingdingshan
No. 3 Cement Factory for $1,843,646. However, the Company was not informed that
such land use right was pledged by the cement factory as collateral for loans
from Pingdingshan Suburb Huancheng Credit Corporation
(“PSHCC”).  Pingdingshan No. 3 Cement Factory went bankrupt and PSHCC
who loaned them money then sued the Company for the loss of the collateral. On
July 13, 2006, judgment was made by the Henan Pingdingshan Intermediary Court in
which the Company was required to pay PSHCC $485,851. The amount was paid in
August 2006. The Company appealed the ruling to Henan Pingdingshan Intermediary
Court again. Pursuant to the final judgment made on April 25, 2008, the
compensating claim from PSHCC was rejected. Currently, the Company is in the
progress of pursuing receipt of the amount paid. While during the pursuing
progress, PSHCC appealed such final judgment to Henan Higher Court and is
waiting for the judgment. No receivable for the contingency was recorded as of
March 31, 2010 or June 30, 2009.
  Guarantee
  On
September 18, 2009, the Company entered into an guarantee agreement with China
Citic Bank Zhenzhou Branch (the “Bank”). Pursuant to the agreement, the Company
provided corporate guarantees for bank loans to Tai Ao, with a debt ceiling of
Rmb65 million (approximately $9,508,345). The guarantee period is from September
18, 2009 to September 17, 2010.  Associated with the corporate guarantee,
Tai Ao also provided a cross guarantee for the bank loans of $7,314,112 the
Company borrowed from the Bank. Also see Note 10.
 
 The
Company’s management considered the risk of default by Tai Ao is remote and
therefore no liability for the guarantor's obligation under the guarantee was
recognized as of March 31, 2010. No fee was paid to Tai Ao for their
guarantee.
  15.
                CONTRIBUTED
      CAPITAL
  Included
in additional paid-in capital is a contribution from a shareholder of the
Company. Long Triumph Investments Limited (“LTII”) paid certain expenses on
behalf of the Company. The expenses of $241,839 were considered as a capital
contribution by LTII for the nine months ended March 31, 2010.
  F-27
  ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
 
 Forward
Looking Statements
  The
following discussion of our financial condition and results of operations is
based upon and should be read in conjunction with our consolidated financial
statements and their related notes included in this Report. This Report contains
forward-looking statements. Generally, the words “believes”, ”anticipates”,
“may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar
expressions or the negative thereof or comparable terminology are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, including the matters set forth in this report or other
reports or documents we file with the SEC from time to time, which could cause
actual results or outcomes to differ materially from those projected. Undue
reliance should not be placed on these forward-looking statements which speak
only as of the date hereof. We undertake no obligation to update these
forward-looking statements.
  Business
Overview
 
 The Company is engaged in the
investment, construction, operation and management of the Pinglin Expressway
toll road in the Province of Henan, China (the “Expressway”) and the rental of
petrol stations and service districts along the toll roads.
  With the approval from Henan
Communications Bureau and the State Development and Reform Committee of China
[NO. 2003-1784], the Company is permitted to construct and operate the
Pinglin Expressway in Henan, China for thirty (30) years from 2003. Pursuant to
the permission from Henan Communications Bureau and Henan Development and Reform
Committee [NO. 2005-1885], the Company is entitled to operate six toll
gates. All the rates applicable to the automobiles are defined by the Henan
Communications Bureau and Henan Development and Reform Committee.
  The Pinglin Expressway is a significant
part of the Nanluo Expressway, a key national trunk highway in China which
connects Nanjing to Luoyang.  The Nanluo Expressway links the
northwestern regions to the southeastern coastal regions of China. The
construction of the Pinglin Expressway started on October 23, 2003 and was
completed in two (2) phases. The first phase of the construction (covering a
section of approximately 86 kilometers in length) linking Ruzhou and
Pingdingshan in Henan Province, began commercial operations on December 31,
2005.  On May 31, 2006, the second phase of the construction (covering
a section of approximately 21 kilometers in length) linking Pingdingshan to
Yexian in Henan Province was completed. With the operation of Pinglin Expressway
the Nanluo Expressway became completely operational.
  The Pinglin Expressway is a dual
carriageway four lane expressway, the toll section of which is 106 km in length.
Toll revenue from vehicles passing through the Expressway’s six toll gates
(South Pingdingshan, Pingdingshan New Town, Baofeng, Xiaotun, Ruzhou and
Wenquan) is the primary source of the Company’s revenue.  The
Expressway is also located between two key cities, Luoyang and Luohe. The
Expressway extends from east to west, from Shilipu (the end of the
Luohe-Pingdingshan expressway), through Yexian and Pingdingshan and then to New
Xiying village at the joint of Pingdingshan and Luoyang. The road is linked with
the Lianhuo (Lianyungang-Huoerguosi) national highway in Luoyang, and then
extends to the southeast of Luohe City and connects with the Beijing-Zhuhai
national highway to form a convenient channel between Luoyang and Luohe. In
addition to the traffic flow of the line itself, we believe it also attracts the
traffic flow from the Lianhuo highway to Zhengzhou and then to the
Beijing-Zhuhai national highway to alter the route of the Pinglin
Expressway.  Furthermore, the Expressway extends east to link the
highway network of the Jiangsu and Anhui provinces and also links seaports,
including Shanghai.
  4
  The Company’s operating revenue is
generated through toll charges on vehicles that pass through the toll gate. The
standard of toll charges is approved and set by the provincial price
administrative bureau. The Company’s revenue is equal to the relevant standard
toll rate for the types of vehicles, multiplied by the relative miles of travel
through the Expressway which the Company is operating, and is cleared by the
Henan Expressway System Toll Collection Center each month (Henan Expressway has
a system of charges and a clearing center which calculates and allocates toll
charge income according to the charge standards and the miles of vehicle travel
in the Expressway). The Company specializes in the operation and management of
expressways, and maintenance projects are outsourced to professional road
construction enterprises.
  The Company began generating operating
revenue in January 2006.  The Expressway was not fully operational
until June 2006, therefore our operating income was low and growth was moderate.
After several years of operations, awareness of the Expressway and passenger and
commercial vehicle traffic has gradually increased. We believe that along with
income growth in the future, the profit earning capacity of the Company will
improve steadily.
  Enterprise
Strategy
  Henan is the province with the largest
population in China.  However, its urbanization rate is far below the
national average level. With rapid economic and social development and the
accelerated process of urbanization in Henan, demand is growing rapidly for
infrastructure, such as the Expressway and other transportation infrastructure,
urban facilities such as heating, water supply, and sewerage treatment. The
existing infrastructure can no longer meet the needs of the region’s social
development.
  Because the Chinese government’s
financial revenue growth is limited, its investment alone is unable to build
huge infrastructure projects in a relatively short period of time. In order to
attract other funding, local governments are willing to grant to commercial
companies the right to invest in the construction and operation of projects, or
directly sell the equity of the established enterprises to recover their early
input.
  The Company plans to invest in the
construction and purchase of additional expressways, thermoelectricity, water
supply, sewage treatment facilities and other infrastructure assets with good
profit prospects in the next few years. In doing so, it intends to seize the
current historic opportunity of rapid development of infrastructure in China and
Henan.  We believe that this will rapidly strengthen and expand the
Company’s place in infrastructure industries.  This should also create
advantages of scale thereby further reducing costs of operation.  The
amount of investment in infrastructure is often relatively large, and investment
funds need to be in position within two or three years in advance, therefore the
amount of capital from the Company’s operations alone cannot meet the demand for
investment in the future. The Company desires to actively participate in the
capital markets and to use various channels of financing to enhance its ability
to raise funds, thereby promoting and achieving its long-term development
strategies.
  Based on the operation and management
of the Expressway, the Company desires to take full advantage of free cash flow
and capital market instruments to invest in the construction or purchase of
infrastructure assets and to exploit all the advantages in management,
government relationships and stockholder support to make the Company a
professional, continuously-growing infrastructure investment
operator.
  In addition, the Company intends to
energetically push forward its standard management, human-based services,
establish an information management platform and continue to improve the road
conditions and traffic capacity so as to provide travelers with a smooth, safe
and comfortable traveling environment. With the increasing influence of the
Expressway on the substitution and division of other transportation lines in the
context of the great macroeconomic environment which is resulting in continuous
and rapid growth in China and given the specific area where the roads are
located, we believe that the Company’s income from toll and profits will
increase.
  5
  Significant
Accounting Policies and Estimates
  We prepare our financial statements in
accordance with generally accepted accounting principles in the United States,
which require us to make estimates and assumptions that affect the reported
amounts of our assets and liabilities, to disclose contingent assets and
liabilities on the date of the financial statements, and to disclose the
reported amounts of revenues and expenses incurred during the financial
reporting period. We continue to evaluate these estimates and assumptions that
we believe to be reasonable under the circumstances. We rely on these
evaluations as the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Since
the use of estimates is an integral component of the financial reporting
process, actual results could differ from those estimates. Some of our
accounting policies require higher degrees of judgment than other in their
application.
  This section should be read together
with the Summary of Significant Accounting Policies included as Note 2 to the
consolidated financial statements included herein.
  We determine the estimated useful lives
and related depreciation charges for our toll road infrastructures, property,
plant and equipment. This estimate is based on the historical experience of the
actual useful lives of toll road infrastructures, property, plant and equipment
of a similar nature and functions and the practice in similar industries. Toll
road infrastructures, property, plant and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation and amortization of the
toll road infrastructures are calculated to write off their cost, commencing
from the date of commencement of commercial operations of the toll roads, based
on the ratio of actual traffic volume compared to the total expected traffic
volume of the toll roads as estimated by reference to traffic projection reports
prepared by an independent PRC organization each year. It could change
significantly as a result of technical innovations and competitor actions in
response to severe industry cycles. Other properties, plant and equipment are
depreciated or amortized over their estimated useful lives, using the
straight-line method. We will increase the depreciation charge where useful
lives are less than previously estimated lives, or we will write-off or
write-down technically obsolete or non-strategic assets that have been abandoned
or sold.
  Revenue
Recognition
  The Company’s revenue represents toll
revenue net of business tax, and is recognized when all of the following
criteria are met:
  ·
              The
      amount of revenue can be measured
reliably;
  ·
              It
      is probable that the economic benefits associated with the transaction
      will flow to the enterprise;
  ·
              The
      costs incurred or to be incurred in respect of the transaction can be
      measured reliably; and
  ·
              Collectibility
      is reasonably assured.
  The rental income is measured at the
fair value of the consideration receivable and represents amounts receivable for
services provided in the normal course of business, net of discounts and sales
tax.
  Fair
Value of Financial Instruments
  The Company’s financial instruments
include restricted cash, accounts receivable, notes receivable, due from related
parties, other receivables, other payables and accrued liabilities, short-term
bank loans, payable to contractors, other current liabilities and deferred
taxes. We estimated that the carrying amount approximates fair value due to
their short-term nature. The fair value of the Company’s long-term bank loans
and deferred revenue are estimated based on the current rates offered to the
Company for debt of similar terms and maturities.  The Company’s fair
value of long-term bank loans and deferred revenue was not significantly
different from the carrying value at March 31, 2010 and 2009.
  6
  Depreciation
of Toll Road Infrastructures
 
 Toll road
infrastructures are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization of the toll road infrastructures are
calculated to write off their cost, commencing from the date of commencement of
commercial operation of the toll roads, based on the ratio of actual traffic
volume compared to the total expected traffic volume of the toll roads as
assessed by management each year.  The total expected traffic volume
is derived from a traffic projection report prepared by an independent PRC
organization.
  Impairment
of Long-Lived Assets
  We review periodically the carrying
amounts of long-lived assets including toll road infrastructures, property,
plant and equipment, land use rights, construction in progress, long-term
investment and long-term deferred assets with finite useful lives or beneficial
periods, to assess whether they are impaired. We evaluate these assets for
impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable such as a change of business plan or a
period of continuous losses. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its projected future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the assets. In determining estimates of
future cash flows, significant judgment in terms of projection of future cash
flows and assumptions is required. There were no impairments for the three
months ended December 31, 2010 and 2009 or for the nine months ended
December 31, 2010 and 2009.
  Contingencies
  In the normal course of business, we
are subject to contingencies, including legal proceedings and claims arising out
of the business that relate to a wide range of matters. We recognize a liability
for such contingency if we determine that it is probable that a loss has
incurred and a reasonable estimate of the loss can be made. We may consider many
factors in making these assessments, including past history and the specifics of
each matter. As we have not become aware of any toll related claim since
operations commenced, we have not recognized such a liability for the three
months ended December 31, 2010 and 2009 or for the nine months ended
December 31, 2010 and 2009.
  Recent
Accounting Pronouncements
  In
December 2008, the Financial Accounting Standards Board (“FASB”) approved ASC
715-20 (formerly FSP No. FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets, which provides guidance on an
employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. These disclosures include how investment allocation
decisions are made, information about major categories of plan assets,
significant concentrations of risks within plan assets, and fair value
measurements of plan assets. Our effective date is June 30, 2009. The
adoption of ASC 715-20 did not have an impact on the Company’s financial
statements.
  In
April 1, 2009, the FASB approved ASC 805-20 (formerly FSP FAS 141(R)-1,
Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from
Contingencies, which amends Statement 141(R) and eliminates the
distinction between contractual and non-contractual contingencies. Under ASC
805-20, an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to
determine whether the contingency should be recognized as of the acquisition
date or after it. The adoption of ASC 805-10 did not have an impact on the
Company’s financial statements.
  7
  ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2, amend the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. The adoption of ASC
320-10 did not have an impact on the Company’s financial
statements.
 
 On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by ASC 825-10, Interim Financial Reporting. We are required
to adopt this ASC for our interim and annual reporting periods ending after
June 15, 2009. This ASC does not require disclosures for periods presented
for comparative purposes at initial adoption.  The adoption of ASC
825-10 did not have an impact on the Company’s financial
statements.
 
 In
February 2008, the FASB issued ASC 820-10 (formerly FSP SFAS 157-2, Effective
Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157,
Fair Value Measurement (“SFAS No. 157”), for all non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). ASC
820-10 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. ASC 820-10 partially defers the effective date of
SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. The
adoption of SFAS No. 157 for all non-financial assets and non-financial
liabilities is effective for us beginning July 1, 2009. It’s not expected that
this adoption will have a material impact on the Company’s financial
statements.
 
 In May
2009, the FASB issued ASC 855-10 (formerly SFAS No. 165, Subsequent Events). ASC
855-10 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. ASC 855-10 is effective for interim and
annual periods ending after June 15, 2009. It’s not expected that this adoption
will have a material impact on the Company’s financial statements.
 
 In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167, Amendments to FASB
Interpretation No. 46(R)). ASC 810-10 requires an enterprise to perform an
analysis and ongoing reassessments to determine whether the enterprises variable
interest or interests give it a controlling financial interest in a variable
interest entity and amends certain guidance for determining whether an entity is
a variable interest entity. It also requires enhanced disclosures that will
provide users of financial statements with more transparent information about an
enterprises involvement in a variable interest entity. ASC 810-10 is effective
as of the beginning of each reporting entity’s first annual reporting period
that begins after November 15, 2009 and for all interim reporting periods after
that, and is not anticipated to have any material impact on the Company’s
consolidated financial statements. The Company is currently evaluating the
impact of the adoption of ASC 810-10.
 
 Results
of Operations
  Results
of Operations for the Three Months Ended March 31, 2010 Compared to the
Three Months Ended March 31, 2009
  The following table sets forth a
summary of certain key components of our results of operations for the periods
indicated, in dollars and as a percentage of revenues.
  8
  Three Months Ended
                    March 31
                    (Unaudited)
                
                
                Three Months Ended
                    March 31
                    (Unaudited)2010
                
                
                2009
                
                
                2010
                
                
                2009Revenues
                
                $
                10,659,674
                
                
                $
                10,234,820
                
                
                
                100
                %
                
                
                100
                %Operating
      costs
                
                
                1,074,027
                
                
                
                584,314
                
                
                
                10.1
                %
                
                
                5.7
                %Depreciation
      and amortization
                
                
                2,013,835
                
                
                
                1,588,909
                
                
                
                18.9
                %
                
                
                15.5
                %Gross
      profit
                
                
                7,571,812
                
                
                
                8,061,597
                
                
                
                71.0
                %
                
                
                78.8
                %General
      and administrative expenses
                
                
                1,293,996
                
                
                
                1,442,137
                
                
                
                12.1
                %
                
                
                14.1
                %Income
      from operations
                
                
                6,277,816
                
                
                
                6,619,460
                
                
                
                58.9
                %
                
                
                64.7
                %Interest
      expense, net
                
                
                4,799,160
                
                
                
                5,167,369
                
                
                
                45.0
                %
                
                
                50.5
                %Other
      income, net
                
                
                252,896
                
                
                
                225,553
                
                
                
                2.4
                %
                
                
                2.2
                %Income
      from operations before income taxes
                
                
                1,731,552
                
                
                
                1,677,644
                
                
                
                16.3
                %
                
                
                16.4
                %Income
      tax expense
                
                
                444,093
                
                
                
                429,409
                
                
                
                4.2
                %
                
                
                4.2
                %Net
      income
                
                
                1,287,459
                
                
                
                1,248,235
                
                
                
                12.1
                %
                
                
                12.2
                %
  Revenues
  Our revenues are derived from the
operation of the Expressway. Our revenues increased by approximately $0.4
million, or 4.2%, from approximately $10.2 million for the three months ended
March 31, 2009 to approximately $10.6 million for the three months ended
March 31, 2010. The increase was mainly attributable to the recovery of the
Chinese economy.  As a result of the improvement in the economy, the
converted average daily traffic volume on the Expressway increased 493 units, or
4.4%, from 11,269 units for the three months ended March 31, 2009 to 11,762
units for the three months ended March 31, 2010.
  Operating
Costs
  Our operating costs mainly represent
road maintenance costs, road management costs, direct construction costs and
labor costs associated with toll operations. For the three months ended
March 31, 2009, our operating costs sharply increased by approximately $0.5
million, or 83.8%, to approximately $1.1 million, compared to approximately $0.6
million for the three months ended March 31, 2009. The increase is mainly
due to the increase in our road maintenance costs amounting to approximately
$0.4 million.
  Depreciation
and Amortization
  Our total depreciation and amortization
related to toll operations increased by approximately $0.4 million, or 26.7%,
from approximately $1.6 million for the three months ended March 31, 2009
to approximately $2.0 million for the three months ended March 31, 2010.
The increase is mainly due to the increase in depreciation.
  Depreciation of toll
road infrastructures is calculated on a units-of-usage
basis.  The Company recorded the depreciation based on the ratio of
the actual traffic volume during the period compared to the total expected
traffic volume of the toll roads during the operation licensing period, as
estimated.
  Management
assesses the future total expected traffic volume at each period end.
Considering the current economic environment and the actual traffic volume
evolvement during the year ended June 30, 2009, compared to prior years’
estimate, management believed there was a significant decline in future
total anticipated volume. Based on such estimation, the depreciation for
the three months ended March 31, 2010 increased 38.6% compared to the three
months ended March 31, 2009.
  9
  Gross
Profit
  Our gross profit decreased by
approximately $0.5 million, or 6.1%, from approximately $8.1 million for the
three months ended March 31, 2009 to approximately $7.6 million for the
three months ended March 31, 2010.  Such gross profit decrease is
primarily due to the increase in our operating costs and depreciation, partially
offset by the increase in our revenues.
  Gross profit as a percentage of
revenues decreased from 78.8% for the three months ended March 31, 2009 to
71.0% for the three months ended March 31, 2010.
  General
and Administrative Expenses
  Our general and administrative expenses
mainly represent employee payroll and welfare, traveling expenses, vehicle
gasoline and maintenance costs, entertainment expenses, consulting fees,
provisions for doubtful accounts, depreciation and miscellaneous taxes. General
and administrative expenses decreased by approximately $0.1 million, or 10.3%,
from approximately $1.4 million for the three months ended March 31, 2009 to
approximately $1.3 million for the three months ended March 31, 2010. Such
decrease is primarily due to the decrease in the provision for doubtful accounts
amounting to approximately $0.7 million, partially offset by the increase in our
consulting fees amounting to approximately $0.6 million.
  Interest
Expense, Net
  Net interest expense decreased by
approximately $0.4 million, or 7.1%, from approximately $5.2 million for the
three months ended March 31, 2009 to approximately $4.8 million for the
three months ended March 31, 2010. This decrease is primarily due to the
decrease in our loan principal. Our loan principal decreased approximately $8.1
million from March 31, 2009 to March 31, 2010.
  Income
Tax Expense
  Income tax expense was consistent
during the three months ended March 31, 2010 and 2009. Our effective tax
rate was 26% for both the three months ended March 31, 2010 and
2009.
  Net
Income
  Our net income was consistent during
the three months ended March 31, 2010 and 2009, which is primarily due to
the increase in our revenues and the decrease in general and administrative
expenses and interest expense, partially offset by the increase in operating
costs and depreciation.
  Results
of Operations for the Nine Months Ended March 31, 2010 Compared to the Nine
Months Ended March 31, 2009
  The following table sets forth a
summary of certain key components of our results of operations for the periods
indicated, in dollars and as a percentage of revenues.
  Nine Months Ended
                    March 31
                    (Unaudited)
                
                
                Nine Months Ended
                    March 31
                    (Unaudited)2010
                
                
                2009
                
                
                2010
                
                
                2009Revenues
                
                $
                35,845,854
                
                
                $
                37,779,524
                
                
                
                100
                %
                
                
                100
                %Operating
      costs
                
                
                3,161,795
                
                
                
                4,259,217
                
                
                
                8.8
                %
                
                
                11.3
                %Depreciation
      and amortization
                
                
                6,503,106
                
                
                
                5,489,104
                
                
                
                18.2
                %
                
                
                14.5
                %Gross
      profit
                
                
                26,180,953
                
                
                
                28,031,203
                
                
                
                73.0
                %
                
                
                74.2
                %General
      and administrative expenses
                
                
                3,774,174
                
                
                
                4,288,648
                
                
                
                10.5
                %
                
                
                11.4
                %
  10
  Nine Months Ended
                  March 31
                  (Unaudited)
              
              
              Nine Months Ended
                  March 31
                  (Unaudited)2010
              
              
              2009
              
              
              2010
              
              
              2009Income
      from operations
              
              
              22,406,779
              
              
              
              23,742,555
              
              
              
              62.5
              %
              
              
              62.8
              %Interest
      expense, net
              
              
              15,071,760
              
              
              
              17,829,695
              
              
              
              42.0
              %
              
              
              47.2
              %Other
      income, net
              
              
              752,786
              
              
              
              667,024
              
              
              
              2.1
              %
              
              
              1.8
              %Income
      from operations before income taxes
              
              
              8,087,805
              
              
              
              6,579,884
              
              
              
              22.6
              %
              
              
              17.4
              %Income
      tax expense
              
              
              2,093,616
              
              
              
              1,732,497
              
              
              
              5.9
              %
              
              
              4.6
              %Net
      income
              
              
              5,994,189
              
              
              
              4,847,387
              
              
              
              16.7
              %
              
              
              12.8
              %
  Revenues
  Our revenues are derived from the
operation of the Expressway. Our revenues decreased by approximately $2.0
million, or 5.1%, from approximately $37.8 million for the nine months ended
March 31, 2009 to approximately $35.8 million for the nine months ended
March 31, 2010. The decrease was mainly due to an unprecedented heavy snow
storm in November 2009. Severe weather, harsh cold, heavy snow and freezing rain
disrupted air, road and rail transportation, which caused the Pinglin Expressway
to close for a long time. As a result, the converted average daily traffic
volume decreased 934 units, or 6.8% from 13,833 units for the nine months ended
March 31, 2009 to 12,899 units for the nine months ended March 31,
2010.
  Operating
Costs
  Our operating costs mainly represent
road maintenance costs, road management costs, direct construction costs and
labor costs associated with toll operations. For the nine months ended
March 31, 2010, our operating costs decreased by approximately $1.1
million, or 25.8%, to approximately $3.2 million, compared to approximately $4.3
million for the nine months ended March 31, 2009. The decrease is mainly
due to the decrease in our road maintenance costs. Due to the decline in our
revenues during the nine months ended March 31, 2010, costs related only to
routine maintenance and improvement of traffic signs and road surfaces were
incurred.
  Depreciation
and Amortization
  Our total depreciation and amortization
related to toll operations increased by approximately $1.0 million, or 18.5%,
from approximately $5.5 million for the nine months ended March 31, 2009 to
approximately $6.5 million for the nine months ended March 31, 2010. The
increase is mainly due to the increase in depreciation.
  Depreciation of toll
road infrastructures is calculated on a units-of-usage basis. The
Company recorded the depreciation based on the ratio of actual traffic volume
during the period compared to the total expected traffic volume of the toll
roads during the operation licensing period, as estimated.
  Management
assesses the future total expected traffic volume at each period end.
Considering the current economic environment and the actual traffic volume
evolvement during the year ended June 30, 2009, compared to prior years’
estimate, management believed that there was a significant decline in future
total anticipated volume. Based on such estimation, the depreciation for
the nine months ended March 31, 2010 increased 25.3% compared to the nine months
ended March 31, 2009.
  11
  Gross
Profit
  Our gross profit decreased by
approximately $1.8 million, or 6.6%, from approximately $28.0 million for the
nine months ended March 31, 2009 to approximately $26.2 million for the
nine months ended March 31, 2010. Such gross profit decrease is primarily
due to the decrease in our revenues and the increase in our depreciation and
amortization, partially offset by the decrease in our operating
costs.
  Gross profit as a percentage of
revenues decreased from 74.2% for the nine months ended March 31, 2009 to
73.0% for the nine months ended March 31, 2010.
  General
and Administrative Expenses
  Our general and administrative expenses
mainly represent employee payroll and welfare, traveling expenses, vehicle
gasoline and maintenance costs, entertainment expenses, consulting fees,
provisions for doubtful accounts, depreciation and miscellaneous taxes. General
and administrative expenses decreased by approximately $0.5 million, or 12.0%,
from approximately $4.3 million for the nine months ended March 31, 2009 to
approximately $3.8 million for the nine months ended March 31, 2010. Such
decrease is primarily due to the decrease in the provision for doubtful accounts
and office expenses amounting to approximately $0.7 million and $0.1 million,
respectively, partially offset by the increase in our consulting fees amounting
to approximately $0.3 million.
  Interest
Expense, Net
  Net interest expense decreased by
approximately $2.8 million, or 15.5%, from approximately $17.8 million for the
nine months ended March 31, 2009 to approximately $15.0 million for the
nine months ended March 31, 2010. This decrease is primarily due to the
decreased interest rate of our loans and the decrease in our loan
principal.  The People’s Bank of China decreased the benchmark of the
interest rate for long-term loans over five years from 7.83% for the nine months
ended March 31, 2009 to 5.94% for the nine months ended March 31, 2010.
Accordingly, our lenders decreased their interest rates to some degree. Also,
our loan principal decreased approximately $8.1 million from March 31, 2009 to
March 31, 2010, which also decreased our interest expense.
  Income
Tax Expense
  Income tax expense increased by
approximately $0.4 million, or 20.8%, from approximately $1.7 million for the
nine months ended March 31, 2009 to approximately $2.1 million for the nine
months ended March 31, 2010, as a result of the increase in our income from
operations. Our effective tax rate was 26% for both the nine months ended March
31, 2010 and 2009.
  Net
Income
  Our net income increased by
approximately $1.2 million, or 23.7%, from approximately $4.8 million for the
nine months ended March 31, 2009 to approximately $6.0 million for the nine
months ended March 31, 2010. This increase is primarily due to the decrease
in our costs and expenses, partially offset by the decrease in our revenues and
the increase in depreciation.
  Liquidity
and Capital Resources
  We generally finance our operations
through, to a substantial extent, operating profit and a combination of
borrowings from banks and capital contributions from Wise On China Limited.
During the reporting periods, we arranged a number of bank loans to satisfy our
financing needs. As of the date of this report, we have not experienced any
difficulty in raising funds by bank loans, and we have not experienced any
liquidity problems in settling our payables in the normal course of business and
repaying our bank loans when they fall due.
  12
  The following table sets forth the
summary of our cash flow, in dollars, for the periods indicated:
  Nine Months Ended March 312010
                
                
                2009Net
      cash provided by operating activities
                
                $
                9,938,021
                
                
                $
                2,471,521Net
      cash (used in) provided by investing activities
                
                
                (4,234,001
                )
                
                
                120,529Net
      cash used in financing activities
                
                
                (5,833,926
                )
                
                
                (464,259
                )Net
      (decrease) increase in cash and cash equivalents
                
                
                (129,906
                )
                
                
                2,127,791Effect
      of exchange rate changes on cash
                
                
                (24,848
                )
                
                
                (81,970
                )Cash
      and cash equivalents at beginning of period
                
                
                1,614,260
                
                
                
                5,769,344Cash
      and cash equivalents at end of period
                
                $
                1,459,506
                
                
                $
                7,815,165
  Operating
Activities
  Net cash provided by operating
activities was approximately $9.9 million for the nine months ended
March 31, 2010, as compared to $2.5 million for the nine months ended
March 31, 2009.  This increase is primarily due to the increase
in our net income and to a lesser extent, the delay of payment of relevant
expenditures.
  Investing
Activities
  Net cash used in investing activities
was approximately $4.2 million for the nine months ended March 31, 2010 as
compared to approximately $0.1 million net cash provided by investing activities
for the nine months ended March 31, 2009.  This decrease is
primarily due to the fact that we settled more payables with our contractors
during the nine months ended March 31, 2010, as compared to the nine months
ended March 31, 2009, which resulted in a net cash outflow of approximately $7.8
million during the periods, partially offset by a decrease in capital
expenditures of approximately $1.8 million and a repayment from a related party
of approximately $2.2 million during the period ended March 31,
2010.
  Financing
Activities
  Net cash used in financing activities
was $5.8 million for the nine months ended March 31, 2010, as compared to
approximately $0.5 million for the nine months ended March 31, 2009. Such
change is primarily due to the fact that we repaid more long-term bank loans
during the nine months ended March 31, 2010, as compared to the nine months
ended March 31, 2009.
  Working
Capital
  Our working capital decreased by
approximately $98.9 million from approximately $120.5 million as of
June 30, 2009 to approximately $21.6 million as of March 31,
2010.  This was primarily due to a decrease in current notes
receivable from a related party, an advance to a related party, and accounts
receivable of approximately $73.7 million, $32.7 million and $0.3 million,
respectively, and an increase in short-term bank loans of approximately $7.3
million, partially offset by an decrease in current portion of long-term bank
loans and payable to contractors of approximately $10.7 million and $6.2
million, respectively.
  The Company currently generates its
cash flow through operations and the Company believes that its cash flow
generated from operations will be sufficient to sustain operations for the next
twelve (12) months. From time to time, the Company may explore new expansion
opportunities and funding sources from which our management may consider seeking
external funding and financing.
  13
  Capital
Expenditures
  We made capital expenditures of
approximately $0.2 million and $2.0 million for the nine months ended
March 31, 2010 and 2009, respectively. Capital expenditures principally
consisted of toll road infrastructures, toll stations and ancillary facilities,
communication and monitoring equipment and other equipment related to our toll
operations. If we are permitted to construct and operate a new toll road or
invest other toll road companies, we may require additional funds.  We
have no current plans to construct or invest in any new toll road companies at
this time.
  Off-Balance
Sheet Arrangements
  We do not have any outstanding
derivative financial instruments, off-balance sheet guarantees, interest rate
swap transactions or foreign currency forward contracts. Furthermore, we do not
have any retained or contingent interest in assets transferred to an
unconsolidated entity that serves as credit, liquidity or market risk support to
such entity. We do not have any variable interest in an unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or that
engages in leasing, hedging or research and development services
with us.
  ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest
Rate Risk
  Our
exposure to interest rate risk for changes in interest rates relates primarily
to the interest expense incurred by the bank loans and the interest income
generated by the loans to our related parties or bank deposits. We have not used
any derivative financial instruments in our investment portfolio or for cash
management purposes. Interest-earning instruments carry a degree of interest
rate risk. We have not been exposed nor do we anticipate being exposed to
material risks due to changes in interest rates. However, our future interest
expense or interest income may increase of expectations due to changes in
interest rates in the PRC.
  Foreign
Exchange Risk
  We do not
hold any derivative instruments and do not engage in any hedging activities.
Because most of our purchases and sales are made in RMB, any exchange rate
change affecting the value of the RMB relative to the U.S. dollar could have an
effect on our financial results as reported in U.S. dollars. If the RMB were to
depreciate against the U.S. dollar, amounts reported in U.S. dollars would be
correspondingly reduced. If the RMB were to appreciate against the U.S. dollar,
amounts reported in U.S. dollars would be correspondingly
increased.
  ITEM
4. CONTROLS AND PROCEDURES
  Disclosure
Controls and Procedures
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rule 13a-15(e) under the Exchange
Act. Based on this evaluation, our management, including our principal executive
officer and our principal financial officer, concluded that our disclosure
controls and procedures were effective as of the fiscal quarter covered by this
Report, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act (i) is recorded, processed,
summarized and reported within the time period specified in SEC rules and forms,
and (ii) is accumulated and communicated to our management, including our
principal executive officer and our principal financial officer, as appropriate
to allow appropriate decisions on a timely basis regarding required
disclosure.
   14
  Internal
Control over Financial Reporting
 
 There
were no changes in internal control over financial reporting that occurred
during the fiscal quarter covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
   PART
II
 OTHER
INFORMATION
  ITEM
1. LEGAL PROCEEDINGS
  In the
normal course of business, we are named as defendant in lawsuits in which claims
are asserted against us. In our opinion, the liabilities, if any, which may
ultimately result from such lawsuits, are not expected to have a material
adverse effect on our financial position, results of operations or cash flows.
As of the date hereof, there is no outstanding litigation with the Company
except as set forth below.
   ITEM
1A. RISK FACTORS
  Not
required for a “smaller reporting company”.
  ITEM
2. UREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  During
the quarter ended March 31, 2010, the Company had no unregistered sales of
equity securities.
  ITEM
3. DEFAULTS UPON SENIOR SECURITIES
  None.
  ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
  None.
  ITEM
5. OTHER INFORMATION
 
 None.
 
 ITEM
6. EXHIBITS
  (a)           Exhibits
  EXHIBIT NO.
                        
                        DESCRIPTION
                        
                        LOCATION3.1
                        
                        Articles
      of Incorporation of Learning Quest Technologies, Inc.
                        
                        Incorporated
      by reference to Exhibit 3.01 to the Company’s Form 10-SB as filed with the
      SEC on December 17, 2004.3.2
                        
                        Amended
      and Restated Bylaws of China Infrastructure Investment Corporation, dated
      as of May 21, 2008.
                        
                        Incorporated
      by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K as
      filed with the SEC on May 22,
2008.
  15
 
 3.3
                                  
                                  Certificate
      of Incorporation of Color Man Holdings Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.4
                                  
                                  Certificate
      of Incorporation of Wise On China Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.5
                                  
                                  Certificate
      of Incorporation of Pingdingshan Pinglin Expressway Co.,
    Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.6
                                  
                                  Company
      Charter of Color Man Holdings Limited (Memorandum of Association and
      Articles of Association
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.7
                                  
                                  Company
      Charter of Wise On China Limited
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.3.8
                                  
                                  Articles
      of Association of Pingdingshan Pinglin Expressway Co.,
Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.1
                                  
                                  Share
      Exchange Agreement, dated February 8, 2008, by and among Learning Quest
      Technologies, Inc., Color Man Holdings Ltd. and Joylink Holdings
      Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.2
                                  
                                  Chartered
      Rights Agreement on Pingdingshan-Linru Expressway Project, dated April 10,
      2003, by and between Pingdingshan Pinglin Expressway Co., Ltd. and
      Pingdingshan Bureau of Communications
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.3
                                  
                                  Loan
      Contract of the Year 2004, dated December 28, 2004, by and between the
      China Development Bank and Pingdingshan Pinglin Expressway Co.,
      Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.4
                                  
                                  Loan
      Contract of the Fixed Assets (No. YBZ No. 0054, 2005), dated July 29,
      2005, by and between The Pingdingshan Branch of Industrial and Commerical
      Bank of China and Pingdingshan Pinglin Expressway Co.,
Ltd.
                                  
                                  Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11,
2008.
  16
  10.5
                                        
                                        Loan
      Contract, dated February 25, 2005, by and between the Agricultural Bank of
      China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin
      Expressway Co., Ltd.
                                        
                                        Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.6
                                        
                                        Loan
      Contract of the Year 2007, dated September 28, 2007, by and between the
      China Development Bank and Pingdingshan Pinglin Expressway Co.,
      Ltd.
                                        
                                        Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.7
                                        
                                        Loan
      Contract, dated June 7, 2005, by and between the Agricultural Bank of
      China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin
      Expressway Co., Ltd.
                                        
                                        Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.8
                                        
                                        General
      Loan Contract, dated November 29, 2004, by and between the China
      Development Bank and Pingdingshan Pinglin Expressway Co.,
    Ltd.
                                        
                                        Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.10.9
                                        
                                        Loan
      Contract of the Fixed Assets (No. YBZ No. 0051, 2005), dated July 29,
      2005, by and between The Pingdingshan Branch of Industrial and Commerical
      Bank of China and Pingdingshan Pinglin Expressway Co.,
Ltd.
                                        
                                        Incorporated
      by reference to that Company’s Current Report on Form 8-K as filed with
      the SEC on February 11, 2008.14.1
                                        
                                        Code
      of Ethics
                                        
                                        Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on September 29, 200816.1
                                        
                                        Auditor
      Letter
                                        
                                        Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on September 29, 200831.1
                                        
                                        Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002
                                        
                                        Provided
      herewith31.2
                                        
                                        Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                                        
                                        Provided
      herewith32.1
                                        
                                        Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                                        
                                        Provided
      herewith
  17
  32.2
                      
                      Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002
                      
                      Provided
      herewith99.1
                      
                      Audit
      Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22, 200899.2
                      
                      Compensation
      Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22, 200899.3
                      
                      Corporate
      Governance and Nominating Committee Charter of the Company
                      
                      Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on May 22,
2008
  18
  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: May
      14, 2010
                By:
                /s/
      Li XipengName:Li
      XipengChief
      Executive Officer, Principal
                  ExecutiveOfficer
      and Chairman of the Board
  Date: May
      14, 2010
                By:
                /s/
      Zhang ChunxianName:Zhang
      ChunxianChief
      Financial Officer, Principal
                  Financial
      andAccounting
      Officer and Director
  19